Continued revenue growth in Q3
Q3 Highlights
- ARR increased to MSEK 48.0 (43.6), an annual growth of 10%.
- Net revenue amounted to MSEK 19.1 (16.1), of which software revenues were MSEK 12.3 (10.9).
- EBIT amounted to MSEK -11.5 (-15.9), including development costs of MSEK 11.4 (13.1).
- Net income amounted to MSEK -11.6 (-15.9).
- Earnings per share amounted to SEK -1.05 (-1.45) before dilution.
Comments from the CEO
Continued revenue growth in Q3
We are pleased to report continued growth of net revenues by 19% in the third quarter, while delivering slower growth in Annual Recurring Revenue (ARR), which grew by 10%, reaching 48.0 (43.6) MSEK at the end of the quarter.
Our flagship cloud platform Modelon Impact remains the strategic growth driver with the multi-platform Modelon Library Suite an entry-level product. The Library Suite is a subset of the full Modelon Impact cloud product, with a future migration path to the full offering. We see a larger share of our Modelon Library Suite in the product business mix in the third quarter with both new accounts and upsell. As previously reported, the ongoing transition from on-premise installations of Modelon Impact to more streamlined and managed cloud services is temporarily extending sales cycles, reducing the Modelon Impact contribution to ARR growth. Our outlook remains that this transition will continue through 2023 and then transition to shorter sales cycles in 2024, which we expect to drive faster growth.
Customer wins and testimonials
Pipeline activity in the quarter was steady, with stable marketing lead generation in our focus industry segments and regions.
Notable new and upsell customers in Q3 include:
- US national energy research lab
- Indian multinational engineering consulting company
- French multinational aerospace company
- European multinational commercial aircraft manufacturer
- Korean multinational automotive manufacturer
- Chinese thermal power research institute
- Spanish provider of marine vessels and systems
The publication of customer testimonials and success stories continues to demonstrate how Modelon solutions enable technology companies to innovate and develop green and sustainable technologies. During the quarter, we published two new customer testimonials from ENGIE and R2M Solution.
ENGIE is a French multi-national energy company with ambitious goals in carbon neutrality that uses Modelon Impact for a model-based approach to efficient and optimal asset performance in solar power farms. Real-time model-based simulations with Modelon Impact enable ENGIE to make informed and reliable decisions for remote diagnostics.
R2M Solution is an Italian multinational research and innovation company with a focus on commercializing disruptive sustainability technologies through collaborative research across Europe, with applications in energy, buildings and smart grids. R2M Solution uses Modelon Impact for performance analysis and optimization of building energy systems and appreciates how the ease-of-use enables fast onboarding and quick engineering decision making.
Continued transition to the cloud
During the quarter we have had full focus on development and execution of the cloud transition. We are moving towards a continuous release model and multiple drops with improvements have been released to SaaS customers on Modelon Impact since the 2023.2 release in Q2. Substantial new capabilities that will enable more streamlined and scalable on-premise deployments are ready for pilot customer testing. The cloud transition also includes information security initiatives to meet demanding market requirements.
Despite geopolitical and macroeconomic uncertainty, we remain confident in the system simulation market and our growth potential. System simulation is critical for technology industries worldwide in addressing urgent global challenges. We are eager to complete the current cloud transition activities and resume higher ARR growth. Our financial targets remain to turn cash flow positive in the short term, reach an ARR growth of 35% in the medium term, and exceed profit levels of 20% in the long term.
-Magnus Gäfvert, CEO Modelon
Investor presentation
Modelon invites investors to a presentation of the Q3 interim report at 10.00am CET on November 10, 2023. CEO Magnus Gäfvert and CFO Jonas Eborn will present the Q3 earnings in a webcast. Register here.
The complete Q3 interim report is attached to this press release and is also made available on the company webpage: http://www.modelon.com/investor-relations/#FinancialReports.
