Klimator AB (publ) Interim report 3, July – September 2023

Third quarter July 1 – September 30, 2023

Group

• Operating income amounted to SEK 5,720K (SEK 4,018K)
• Operating profit amounted to SEK -4,565K (SEK -7,109K)
• Net profit after income taxes amounted to SEK -4,560K (SEK -7,357K)
• Net profit per share after income taxes amounted to SEK -0.15 (SEK -0.47)

(Amounts within parentheses refer to the corresponding figures for the same period the prior year)

The first nine months January 1 – September 30, 2023

Group

• Operating revenue amounted to SEK 18,571K (13,543K).
• Operating profit amounted to SEK -16,189K (-21,671K).
• Net income amounted to SEK -16,659K (-22,013K).
• Earnings per share after tax amounted to SEK -0.58 (SEK -1.42).
• Cash flow from operating activities amounted to SEK -12,591K (-17,922K).
• Number of shares as of June 30, 2023, amounted to 28,824,751 (15,508,084).

Material events during the first nine months

• In January, Klimator becomes one of eight participants in MobilityXlab Batch 10. The program means that Klimator will work on creating future mobility solutions together with MobilityXlab's industry partners CEVT, Ericsson, Polestar, Veoneer, Volvo Cars, Volvo Group, and Zenseact.
   
• In January, Klimator receives an order for the AHEAD sensor technology from a leading Japanese vehicle manufacturer. The order comes from an existing customer who now wants to continue the collaboration with Klimator after a successful evaluation project. The purpose of the contract is to integrate the technology into the vehicle manufacturer's development vehicles for motion control and driver assistance functions. The order value amounts to the equivalent of approximately SEK 800K.

• In March, the company carried out a directed rights issue of SEK 5,800K to a new strategic investor.
   
• In April, Klimator launches a camera function on its IoT Road Weather Stations. The product has been developed at the company's development department in Odense, Denmark, where Klimator has its foremost experts in IoT solutions.
   
• In April, Kelių Priežiūra and Klimator sign a partnership agreement for dynamic winter road maintenance concepts towards the Baltic countries. The agreement includes services and products from Klimator's product portfolio such as Road Status Information (RSI) in combination with the IoT based road weather stations.
   
• In April, Klimator signs an agreement with another municipality in Denmark on smart winter road maintenance. The total order value for a three-year period is approx. SEK 850K.
   
• In April, Mitsubishi Electric Automotive America (MEAA) unveils its 2023 flagship and demonstration vehicle, which includes the latest technology innovations. One of these is Klimator's solutions for predictive and detective information about road weather conditions.
   
• In May, Klimator signed a contract with one of the largest municipalities in Denmark for a complete set of road weather stations and monitoring software for making call-out decisions on roads and bicycle lanes. The total order value for the first year is approx. SEK 600K.
   
• In May, the board approved a cost reduction program of SEK 8-9 million on an annual basis due to the slower-than-expected development of the "Automotive" sector market. The company considers "Automotive" to remain an important market for Klimator AB, but revenue from this market will be generated further down the line. The board also decided on a change of CEO, appointing Emil Danielsson, previously in charge of the winter road maintenance business area, as the new CEO.

• Klimator signs a five-year agreement with one of Norway's leading contractors within the winter maintenance industry. The deal is initially worth SEK 1.1 million and includes delivery of Klimator's decision support platform Road Status Information (RSI) and the Nordics' leading IoT-based road weather station.

Material events after the end of the period

• Klimator announces a new project with a major supplier to the automotive industry with a focus on utilizing relevant solutions, such as Klimator's proactive and unique Road Condition Data, RCD, a solution that provides adverse road weather hazards and evaluates these combined abilities.

• Klimator, a leading provider of innovative solutions for combating road ice during the winter season, is pleased to announce the appointment of Sören Pedersen as Head of Winter Maintenance at Klimator. With his extensive history within the company and substantial experience in the field, Søren is a natural successor to Emil Danielsson, who became the CEO of Klimator in May.

• Presis Vegdrift, Norway's third largest player in winter road maintenance, has chosen Klimator's solutions with a five-year contract worth 1 MSEK over five years. The deliveries include Klimator's advanced decision support system Road Status Information (RSI) and the leading IoT-based road weather station in the Nordic region.

Norway is an important market for Klimator and is characterized by a strong focus on sustainability, digital transformation, and efficient resource use. Presis Vegdrift is the third major player in the Norwegian market to choose Klimator's solutions.

• From the fall of 2023, Klimator, together with Volvo Cars through FFI's (Fordonsstrategisk forskning och Innovation) Accelerate Swedish partnership program, will work with the detection of hazardous road weather conditions with a long-term goal of increasing the safety of passenger cars in difficult weather situations. The aim is to use Klimator's existing knowledge and product AHEAD with existing sensors to detect hazardous road weather conditions proactively. Klimator's project share is approximately SEK 1,200 KSEK over a period of 12 months.

• Klimator will perform a proof-of-value project through the CampX by Volvo Group startup innovation hub in the US during Q4 2023, focusing on Klimator’s road weather information solution. The project has been granted financing of approximately 200 KSEK through the program FFI Accelerate Startup Partnership. The overall goal is to provide the driver with local weather hazards to improve driver experience and enable safer routing. The information will be visualized in a map through Klimator’s predictive cloud-based solution Road Condition Data, RCD, which enables the driver to get information before they reach the critical location.

• In November 16, the company calls for an extra ordinary general meeting to decide about an incentive program for employees and member of the board.

Comment from the CEO
 

Reduced costs and higher revenues are the results in Q3 of the plan developed in May, where Klimator devoted a very strong focus on existing offerings of products and services targeted at our existing markets. Klimator´s largest business area, Winter Maintenance, contributes both with new customers and more contracts with existing ones, and now the Automotive business area is also beginning to develop positively through several new strategic deals and inquiries based on upcoming Euro NCAP requirements in the automotive industry.

Winter Maintenance.
 

Klimator further strengthens its market-leading position in Norway, Denmark, and Sweden through new business agreements. Among the new major deals, notable is Norwegian Presis Vägdrift, Norway's third-largest road maintainer, along with Veidekke and Mesta, and in Sweden, PEAB, Svevia, and Terranor expand their commitment with more operational areas. This means that in both Norway and Sweden, the three largest private contractors now use Road Status Information in combination with Klimator's IoT weather station. It is also particularly pleasing to welcome the first municipalities and a contractor in the United Kingdom, a new market where interest in Klimator's solutions is continuously growing. During the quarter, the business area also launched its new road weather station with camera functionality, which has been very well received in close cooperation with the winter industry. The camera functionality adds further possibilities to remotely assess whether interventions are required.

Automotive
 

A cooler spring has been replaced by a red-hot autumn with great interest in Klimator's technologies, where several deals have been made. Currently, the greatest interest is around Klimator's AHEAD technology and software and how it can be used in conjunction with the vehicle's existing sensors. All announced deals around AHEAD technology are important steps towards a standardized product for the automotive industry. During the summer and autumn, Euro NCAP's increased focus from 2023 within Safe Driving have generated significant interest from OEMs and Tier1s. In short, Euro NCAP's protocol partly include expanded driver support directly in the car with information about upcoming weather and road weather situations, where Klimator's Road Condition Data platform has a clear packaging and offering.

In conclusion, I can state that Klimator significantly increased its revenue in the third quarter of 2023, compared to 2022, while at the same time reducing its costs. The management maintains its strong focus on revenue and costs in combination with meeting new potential customers and focused work in preparation for an exciting 2024.

Emil Danielsson

CEO Klimator AB

About Klimator

History

Klimator is a Swedish software company that was founded in 2001 by Torbjörn Gustafsson and Jörgen Bogren. The founders have over 30 years of research experience in applied road climatology at the University of Gothenburg. Klimator’s technology is based on years of academic research into road weather conditions. In 2020, the company acquired HedeDanmark’s connected sensors (IoT) business to expand and strengthen Klimator’s product portfolio.

Business areas

To serve the market segments and customer groups addressed, Klimator’s activities are organized into two distinct business areas:

• Business Area Winter Maintenance
• Business Area Automotive

In the Winter Maintenance business area, the company offers a web-based software application, Road Status Information (RSI), based on the company’s Road Condition Data (RCD) platform. The software is customized for the needs winter contractors face when making critical decisions about when and how to implement specific measures and how much salt or sand to lay down. Klimator’s software results in significant cost savings for an industry with annual revenues of around SEK 3 billion in Sweden alone. More efficient wintertime road maintenance also brings major environmental benefits, such as lower salt usage, lower fuel consumption, and less wear and tear on roads.

The company’s IoT sensors give contractors, municipalities, and other organizations the ability to measure road surface temperature, air temperature, air humidity, rainfall, ground moisture, groundwater level, water level, and hydraulic flow in real-timI. With the help of sensors, data is collected and stored in Klimator’s IoT platform, where customers can avail themselves of a number of different services. For the customer, it’s a simple and easy introduction to a more modern, digital way to work.

The company focuses on IoT sensors connected to winter road maintenance but offers other sensors as a service to existing customers.

After establishing the Automotive business area late in 2019, the company carried out a number of successful Proof of Concept (PoC) and developmental projects with leading European and Japanese vehicle manufacturers and suppliers. There are several highly attractive areas of application for the company’s data platform (RCD) and sensor technology (AHEAD) within the automotive industry with respect to:

• improved driver information
• improved use of Advanced Driver Assistance Systems (ADAS)
• safe and scalable Autonomous Driving technology (AD)

Product portfolio

Road Condition Data (RCD) is a cloud-based Data-as-a-Service platform (DaaS) that aggregates data from a number of different sources. Advanced climate models and Klimator’s unique classification model for the road network are used in tandem to process this data and deliver detailed real-time information and predictive forecasts about road weather conditions. This information can be applied in a number of different areas in the automotive industry, including intelligent Advanced Driver Assistance Systems (ADAS) and complex systems for autonomous vehicles (AD).

Based on RCD, Road Status Information (RSI) is a digital Software-as-a-Service (SaaS) application that provides detailed forecasts for roads, bike paths, and pedestrian walkways. These high-resolution forecasts are used by transportation agencies and winter road contractors to make critical decisions about when, where, and how to implement snow removal and de-icing measures. Klimator’s forecasts facilitate decision-making, planning, and follow-up and Ilitate more efficient use of resources, which results in significant cost savings and a lessened impact on the environment.

AHEAD is a sensor technology that analyzes road conditions and friction in front of a moving vehicle in real-time. The technology is the result of more than ten years of research and development into road condition classification. AHEAD gives vehicle system information about prevailing road conditions, which improves the functionality and utility of Advanced Driver Assistance Systems and Autonomous Driving technology.

Klimator’s IoT Road Weather Stations provides real-time information on how weather impacts local road conditions. This data will empower operators to make informed decisions on the appropriate treatments necessary. The data is easily accessible from the Road Status Information (RSI) platform. The data comes in the form of an API so can also be fed into other weather monitoring and forecasting systems if necessary.

Financial overview

Consolidated financial statements

The Interim Report relates to the group, where the parent company, Klimator AB, owns 100 percent of the shares of Klimator Danmark DK ApS (hereinafter collectively referred to as the “company”).

Accounting principles

The Interim Report has been prepared in accordance with the Annual Accounts Act (“Årsredovisningslagen”) and the BFNAR 2012:1 Annual accounts and group accounting (“K3”) general guidance from the Swedish Accounting Standards Board (BFN).

Income

Revenues

The company's total turnover increases by 42% to SEK 5,720K for the third quarter of 2023, compared to the same period in 2022 (SEK 4,018K).

The company’s revenues primarily consist of licensing income for the Road Status Information service in the Winter Maintenance business area and income via IoT sensors.

The revenues also include project income from the Automotive business area regarding Proof-of-Concept and innovation projects with vehicle manufacturers, in relation to the company’s products Road Condition Data (RCD) and AHEAD.

In the third quarter of 2023, net revenues amounted to SEK 4,609K, which is an increase of 40% compared to the prior year (SEK 3,789K). The increase is mainly attributable to the fact that the company has increased its recurring revenue (ARR) compared to 2022.

The company’s revenues from Winter Maintenance, now also including the sensor business, are normally accrued evenly throughout the year since the business model typically entails a one-year subscription.  In addition to this, the company normally charges a start-up fee. Invoices and payments are often sent or received in advance.

Capitalized developmental work and proprietary fixed assets

The company capitalizes expenses attributable to the mapping of new geographic areas in its data platform.

The company has a significant cost for the use of servers and data traffic. During the beginning of 2023, development work was initiated to make this more efficient, with the aim of reducing the company's running costs.

In the third quarter of 2023, the company capitalized SEK 180K of developmental expenses for the above-mentioned projects.

Other operating income

The company occasionally receives research and development grants from authorities such as the EU and Vinnova that are reported as Other operating income.

In the third quarter of 2023, Other operating income amounted to SEK 931K compared to SEK 189K for the same period the prior year, which is an increase of 392%. The increase is mainly attributable to extended collaboration with vehicle manufacturers and authorities within winter maintenance. The purpose is that these collaborations shall lead to commercial contracts and also to develop the products of the company.

Costs

Direct costs

Cost of sales primarily refers to data traffic, server capacity, and hardware costs associated with the sale of sensors and AHEAD systems.

In the third quarter of 2023, direct costs amounted to SEK 1,645K (1,299K). The increase is mainly attributable to initial hardware costs incurred when selling to new customers and increased deliveries of data due to more costumers.

Other external costs

Other external costs primarily include rental costs for the premises, IT services, marketing, travel and consulting fees.

In the third quarter of 2023, other external costs amounted to SEK 1,757K, which is an decrease of 26% compared to the prior year (SEK 2,297K). The decrease is primarily attributable to that the company now hires consultants to an smaller extent.

Compensation and benefits

At the end of the third quarter, the company employed 23 individuals in business management, sales/business development, administration, and product development/project management.

In the third quarter of 2023, compensation and benefits amounted to SEK 5,816K (SEK 7 127K), which is  18% less compared to the same period previous year and due to fewer employees since May 2023.

Depreciation and amortization

The company amortizes the goodwill from the acquisition of the Danish business and OmniKlima (merged subsidiary) as well as capitalized development expenses over a period of 5 years.

In the third quarter of 2023, the company’s depreciation and amortization amounted to SEK 207K (SEK 242K).

Other items

Intangible assets

At the end of the third quarter, the company’s intangible fixed assets amounted to SEK 2,426K, which included SEK 1,400K in capitalized development, SEK 429K for patents and SEK 597K in goodwill.

The acquisition cost of an internally developed fixed asset includes all directly related expenses.

Intangible fixed assets are linearly depreciated over the estimated useful life of the asset, which is reassessed on each balance sheet date. Currently, the useful life is estimated at five years for all intangible fixed assets.

Cash and cash equivalents

At the end of the third quarter, the company had cash and cash equivalents of SEK 7,574K.

The company also has an unused bank overdraft facility of SEK 3,000K.

Cash flow

For the first nine months, cash flow from operating activities amounted to SEK -12,591K (SEK -17,922K).

Interest-bearing long-term debt

The company’s liabilities amounted to SEK 1,093K in the form of a loan from Almi Företagspartner. Of this amount, SEK 937K is long-term debt. The loan was assumed in spring 2020 in connection with the COVID-19 pandemic. The loan has a term of 60 months and an annual interest rate of 4.64 percent. Repayment of the principal began in August 2021.

Interest-bearing short-term debt

The short-term portion of the loan from Almi Företagspartner amounts to SEK 156K.

The company has received a Covid-19 related support by a temporary return of paid taxes from the tax authorities of approximately SEK 4,800K. The return payment shall be done in August 2024 and the annual interest rate is 5%.

Equity

As of September 30th, 2023, the equity of the mother company amounted to SEK 3,893K while the group equity amounted to SEK -982 by September 30th.

Equity ratio

At the end of the third quarter, the mother company equity ratio was 23 percent and the group equity ratio was -4,8 percent.

Stock-based incentive plans

At the AGM on May 18, 2021, shareholders approved an incentive plan (TO3) that will increase the number of shares by 500,000 in 2024 if all vested options are fully exercised.

Convertible notes and new share issue

No events during the period except for the repayment of convertible bonds.

Number of shares in the company

At the end of the third quarter 2023, Klimator had 28,824,751 shares outstanding, compared to 15,508,084 shares outstanding in the third quarter 2022.

During the third quarter 2023 the average number of shares amounted to 28,824,751. During the third quarter of 2022, the average number of shares amounted to 14,877,173 shares.

Profit per share

Profit per share for the third quarter amounted to SEK -0.15 (-0.47).

Auditor’s review

This Interim Report has not been reviewed by the company’s auditor.

Next report

The next report is the company's interim report Q4, which will be published on February 29th, 2024.

For further information contact:

Emil Danielsson
CEO, Klimator AB
Phone: +46 (0)70-421 04 00
E-post: emil.danielsson@klimator.se

Partner Fondkommission AB (Phone +46 (0)31-761 22 30, www.partnerfk.se) is the company’s Certified Adviser on the Nasdaq First North Growth Market.

For further information
Emil Danielsson, CEO of Klimator AB
E-mail: emil.danielsson@klimator.se
Phone: +46 (0) 70 421 04 00

Partner Fondkommission AB (phone 0046 31 761 22 30, www.partnerfk.se) is the company’s Certified Adviser on Nasdaq First North Growth Market.

About Klimator
Klimator AB is a publicly listed software company with over 30 years of research in applied road climatology. Klimator has two innovations – the data platform Road Condition Data (RCD), providing predictive high precision road weather information, and the sensor fusion solution AHEAD providing real-time detective road weather information. With these innovations, Klimator provides precise and reliable road weather information to the winter maintenance and the automotive industries creating safer roads and enabling scalable autonomous driving (AD) and intelligent driver support systems (ADAS). In 2020, Klimator acquired HedeDanmark's business operations within connected sensors to broaden and strengthen Klimator's product portfolio.

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