Modelon AB Interim report Q3 2025
Significant EBIT improvement in Q3 despite flat ARR
Quarter, July – September
- ARR amounted to MSEK 53.6 (53.0), an annual growth of 1%.
- Net revenue amounted to MSEK 16.3 (20.5), of which software revenue was MSEK 13.5 (14.7).
- Cash flow from operations amounted to MSEK -16.9 (-17.6).
- Adjusted EBIT amounted to MSEK -4.0 (-12.0).
- Operating expenses were MSEK 20.4 (39.8), including non-recurring items of MSEK 0.0 (7.1) and development costs of MSEK 7.6 (13.8).
- Net profit amounted to MSEK -3.9 (-18.8).
- Earnings per share amounted to SEK -0.22 (-1.11) before dilution.
Period, January - September
- Net revenue amounted to MSEK 55.2 (60.8), of which software revenues were MSEK 43.0 (42.4).
- Adjusted EBIT amounted to MSEK -21.7 (-37.9).
- Operating expenses were MSEK 83.2 (108.5), including non-recurring items of MSEK 5.2 (8.6).
- Net profit amounted to MSEK -27.6 (-45.4).
- Earnings per share amounted to SEK -1.59 (-3.49) before dilution.
Comments from the CEO
Significant EBIT improvement despite flat ARR
Net revenue for the third quarter of 2025 amounted to MSEK 16.3 (20.5). The year-over-year decline is primarily due to reduced demand for legacy services and adverse currency effects. Annual Recurring Revenue (ARR) was flat at MSEK 53.6, with single-digit growth of Modelon Impact and a decline in sales of multi-platform libraries.
The operating loss for the quarter was MSEK -4.0 (-19.1), a significant improvement over Q3 2024. This reflects the impact of our efficiency programs and cost reduction initiatives implemented over the past 12 months. The third quarter’s costs are lower due to vacation effects as well as positive currency contributions. However, we expect the cost run-rate in coming quarters to continue below that of previous years.
In August, Briarwood Capital Partners became a shareholder through a directed share issue at a subscription price of SEK 20 per share, which represented a premium above 80 percent. The investment raised MSEK 20 of equity capital, which strengthens our balance sheet. After the period, Jason Yoo of Briarwood joined the board of directors, which brings valuable industry experience and business contacts to Modelon.
Market dynamics and customer activity
Since early 2025, we have observed extended sales cycles and reduced investment activity among certain customers, especially in North America. Notably, ARR in Q3 2025 was negatively impacted by decreased business at NASA/JPL, due to reduced funding from the US government.
On a positive note, we saw increased adoption of recurring software licenses at two of our most important US accounts – a major aerospace company and a global automotive supplier. In Korea, we welcomed a local simulation service provider as a new customer. We also won recurring software business at a large Swiss supplier of energy solutions and at an Italian company building sail boats for the 38th America’s Cup in 2027.
New customer reference: Danfoss
During the quarter, Danfoss, a global engineering leader, selected Modelon Impact for a strategic sales improvement program. The initiative focuses on shortening Danfoss’ sales cycles, generating upselling, and reducing the need for resource-intensive sales support. We are excited to support a customer’s revenue generation, and we will use the experience to replicate success at other accounts.
Danfoss has long used other system simulation tools. Their decision to adopt Modelon Impact was driven by our platform’s unique capabilities, particularly its cloud-based architecture, which facilitates easy sharing of results with non-expert users. The open interfaces and seamless integration with tools like Excel were also key factors. Danfoss exemplifies how simulation technology can scale from specialized R&D teams to broader engineering and sales functions.
Expanding sales through partners
During the quarter, we announced new partnerships with TLK Energy and EA Systems Dresden, both based in Germany. Our contract with TLK Energy includes a re-selling agreement, allowing them to distribute Modelon Impact licenses and incorporate the platform into their service offerings and training programs. The partnership with EA Systems Dresden makes their Blue Energy library available on Modelon Impact, which increases customers’ choice of simulation models. We remain committed to expanding Modelon Impact’s ecosystem of open-source and commercial libraries to grow our addressable market and drive software revenue.
AI innovation milestone
We’re proud to have delivered the only live demonstration of an integrated AI assistant at the 16th Modelica & FMI conference in Switzerland. The combination of generative AI and system simulation has the potential to accelerate time-to-value and reduce dependency on specialized domain expertise. This can accelerate adoption of system simulation in a wider part of customers’ organizations, opening new license revenue opportunities. We are prioritizing continued innovation and investment in AI, in close collaboration with our customers.
Summary and outlook
Revenue in 2025 has been below expectations, reflecting delayed or reduced investments in system simulation by several customers. Despite this, we have maintained focus on growing recurring license revenues from Modelon Impact and we have adapted through cost control and efficiency measures. These efforts have clearly improved operating income and, together with new capital, provide financial stability and enable targeted investments in go-to-market and product development.
Future growth will be driven by a combination of direct sales and indirect customer engagement through partners and resellers. We are expanding our network of value-adding partners who use Modelon Impact to deliver services and complementary software. Growth will also come from broader deployment of Modelon Impact within customer organizations. An integrated AI assistant is a promising catalyst for this expansion, lowering the expertise barrier and accelerating adoption.
Our ambition remains to achieve consistent ARR growth above 20 percent. While recent conditions have made this challenging, we expect continued improvements in profitability and cash flow through revenue growth and disciplined cost management.
Jan Häglund, CEO Modelon
Lund, October 30, 2025
Investor presentation
Modelon invites investors to a presentation of the Q3 interim report at 10.00am CET on October 30, 2025. CEO Jan Häglund and CFO Jonas Eborn will present the Q3 earnings in a webcast.
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.