Improving adjusted EBIT in Q2
Quarter, April - June
- ARR amounted to MSEK 55.5 (51.1), an annual growth of 9%.
- Net revenue amounted to MSEK 18.5 (21.9), of which software revenue was MSEK 14.4 (14.4).
- Cash flow from operations amounted to MSEK -14.6 (-14.6).
- Adjusted EBIT amounted to MSEK -9.4 (-11.4).
- Operating expenses were MSEK 33.2 (34.8), including non-recurring items of MSEK 5.2 (1.5) and development costs of MSEK 10.5 (13.5).
- Net profit amounted to MSEK -14.6 (-12.4).
- Earnings per share amounted to SEK -0.85 (-1.13) before dilution.
Period, January - June
- Net revenue amounted to MSEK 38.9 (40.2), of which software revenues were MSEK 29.6 (27.9).
- Adjusted EBIT amounted to MSEK -17.7 (-25.8).
- Operating expenses were MSEK 62.8 (68.7), including non-recurring items of MSEK 5.2 (1.5).
- Net profit amounted to MSEK -23.7 (-26.6).
- Earnings per share amounted to SEK -1.37 (-2.41) before dilution.
Comments from the CEO
Business update
Annual recurring product revenues increased by 9 percent year-over-year in constant currencies, driven by a solid 28 percent growth in Modelon Impact. Net revenue in Q2 2025 was MSEK 18.5, a decrease of 16 percent compared with the same period last year. The decline was mainly due to weaker service business and negative currency effects. The lower services revenues relate to a change in product mix, as Modelon Impact is easier to use and requires less integration and customer support than our legacy multi-platform offering. A stronger SEK against the USD reduced reported revenues, since a significant portion of our business is in North America.
We welcomed Dandelion, a U.S.-based geothermal energy specialist, as a new customer. We also secured contracts with a Japanese heat pump manufacturer, a European leader in waste-to-energy, a high-profile motorsports company, and we expanded business with large clients in automotive, aerospace, and energy industries.
Last year’s efficiency programs have reduced our cost base, contributing to improved profitability. Given the uncertain market forecast, we have implemented additional measures that will generate annual cost reductions of MSEK 15, starting from Q3 this year. The associated re-structuring costs (MSEK 5.2) were recorded in Q2. Adjusted EBIT in Q2 2025, excluding non-recurring items, was MSEK -9.4, which is an MSEK 2.0 improvement over the same quarter last year. Operating cash flow was MSEK -14.6, flat vs. last year.
Effective July 1, two management team members have new roles: Pieter Dermont has been promoted to Chief Revenue Officer, and Thomas Nilsson has been recruited as the new Chief Product & Technology Officer. I am confident that a streamlined organization, consolidated product development sites, increased test automation, and greater use of AI tools will enhance value creation for customers.
Building Simulations
In response to consistent market interest for building simulations, we have integrated the open-source buildings library from Lawrence Berkeley National Laboratories (LBNL) into Modelon Impact. This integration provides our customers with a wide range of pre-built simulation models, reducing time to results. For Modelon, it enhances our competitiveness in the building simulation market, which is expected to grow in all key geographies.
A Japanese customer, Takenaka Corporation, has selected Modelon Impact for optimizing climate control of buildings, at both design and operational stages. We are delighted with this contract and we look forward to new business opportunities based on successful initial projects with Takenaka Corporation.
New Shareholders
On July 9, we announced an agreement with Briarwood Capital Partners LP (BCP), a U.S.-based investment fund. Under this agreement and subject to shareholder approval at an EGM to be held August 20, BCP will become a minority shareholder through an initial investment of MSEK 20 at SEK 20 per share. BCP has a successful investment track record in the simulation industry and will bolster our presence in the U.S., our largest market. The capital injection will strengthen our cash position and provide opportunities for further product and go-to-market investments, including acceleration of generative AI features.
Summary and outlook
During the second quarter, we improved the company’s profitability, thanks to cost control and efficiency programs. We won new software license contracts, but also encountered customer investment delays, especially in North America. While this trend is expected to continue during the second half of the year, we judge that the underlying demand for system simulations remains healthy and that our cloud-based tools are competitive against alternatives on the market.
The integration of the open-source buildings library from LBNL opens new business opportunities and demonstrates the flexibility of our platform. The new agreement with a U.S.-based investor will strengthen our financial position and gives us opportunities to enhance the product portfolio and sales organization.
Financially, our ambition is to generate software ARR growth above 20 percent and positive free cash flow latest during 2026. Longer term, we target an EBIT margin above 20 percent.
Jan Häglund, CEO Modelon
Lund, July 24, 2025
Investor presentation
Modelon invites investors to a presentation of the Q2 interim report at 10.00am CET on July 24, 2025. CEO Jan Häglund and CFO Jonas Eborn will present the Q2 earnings in a webcast.
The complete Q2 interim report is attached to this press release and is also made available on the company webpage: http://www.modelon.com/investor-relations/#FinancialReports.
