Press Releases

Enea Interim Report January-June 2023

Second Quarter

  • Net sales amounted to SEK 207.7 million (216.6), equivalent to a 4 percent decrease. Net sales decreased by 10 percent compared to last year in fixed exchange rates.
  • Adjusted EBITDA amounted to SEK 48.8 million (70.8), corresponding to a margin of 23.5 percent (32.7).
  • Operating profit was SEK -605.7 million (28.3), corresponding to an operating margin of -291.6 percent (13.1).
  • Net profit after tax amounted to SEK -620.0 million (46.2).
  • Earnings per share were SEK -28.70 (6.56).
  • Earnings per share continued operations were SEK -28.70 (2.15).

January – June 2023

  • Net sales amounted to SEK 455.6 million (427.4), equivalent to a 7 percent increase. Net sales increased by 1 percent in fixed exchange rates.
  • Adjusted EBITDA amounted to SEK 143.2 million (126.9), corresponding to a margin of 31.4 percent (29.7).
  • Operating profit was SEK -558.2 million (19.3), corresponding to an operating margin of -122.5 percent (4.5).
  • Net profit after tax amounted to SEK -584.0 million (33.2).
  • Earnings per share were SEK -27.04 (6.19).
  • Earnings per share continued operations were SEK -27.04 (1.54).

Significant Events During and After the End of the Quarter

  • April 21 Enea announced that the multi-year contract for the 5G Cloud Network Data Layer signed with a leading European telecom operator in June 2020 may be terminated by the customer before final delivery from Enea has taken place.
  • July 3 Enea announced that the company is implementing efficiency improvements and cost reductions within professional services and product development. The streamlining means an improved cash flow of approximately SEK 60 million per year, with full effect from 2024, of which approximately SEK 50 million consists of reduced investments in own product development. Furthermore, the company makes a write-down with a total of approximately SEK 520 million attributable to goodwill and capitalized development costs. The workforce will be reduced by approximately 70 employees and restructuring costs in 2023 are estimated to amount to SEK 30 million, of which SEK 20 million will be charged to the second quarter. In addition, provisions are made for doubtful debts and not yet received income of SEK 66 million.
  • July 3 Enea announced that Jan Häglund resigns as CEO and that board chairman Anders Lidbeck takes over as acting CEO during the recruitment process for a new CEO. Kjell Duveblad is appointed chairman of the board.
  • July 3 Enea announced that the company signed an agreement for traffic management worth 2.0 MUSD with a telecom operator in North Africa. Software licenses corresponding to a value of 1.4 MUSD are recognized as revenue in the third quarter of 2023, while the remaining parts of the contract are delivered in the coming year.
  • July 4 Enea announced that board member Jan Frykhammar resigns from the board at his own request with immediate effect.
  • July 18 Enea announced the board's decision to start a share buyback program.

CEO’s Statement

We want to develop Enea into a leading supplier of software for cybersecurity and telecom. We want to be agile and dynamic, and challenge established competitors with open, innovative, and robust solutions. Customer focus is crucial for us. Our customers should feel they get the best support before, during and after a deal with us. At the same time, we want to create value for our shareholders. The large and important steps we have taken over the past ten years have therefore been made with a parallel focus on high profitability and strong cash flows. In recent years, we have made important acquisitions that significantly strengthened our market position in cybersecurity. The successful sale of our services business last year sharpened our focus on software while strengthening our financial position. But we have also encountered problems that primarily affected our telecom operations, which in turn affected the growth and profitability of the whole company. This has forced us to adjust our short- and medium-term plans, and we saw significant consequences of this in the second quarter of this year.

Major Changes
In the beginning of the second quarter, one of our main telecom customers announced that it did not intend to continue with a project that was significant to us. The announcement came unexpectedly, but it should not be a surprise that new and innovative projects are not always completed. It's part of doing business. Unfortunately, the customer's decision not only affects our future plans, but also burdens the income statement of the second quarter. As a direct consequence, we initiated an audit of our operations in the telecom area to review and possibly adjust the future potential we believe exists in our capitalized investments. Within the scope of this review, it became clear that we also needed to factor in a worsening macroeconomic outlook with increased required rates of return (WACC) in addition to delays in the 5G market and the canceled project. This led to the board, in consultation with our auditors, reassessing future cash flows and additionally recognized assets in this area. The result is a write-down of intangible assets with a total of SEK 520 million, attributable to goodwill and capitalized development costs. In addition, we have made provisions for bad debts and unreceived income of SEK 64 million, attributable to the canceled project and to currency restrictions in Egypt. All of this burdens the second quarter. On July 3, the board also decided that a change in the position of CEO needed to be made. Until a new permanent CEO is recruited, the board appointed its chairman and the company's former CEO, Anders Lidbeck, as the new CEO. The clear mission is to implement the necessary efficiencies, focus on what works and can create results, and restore stability in the company's financial forecasts. Together, we will also develop and start implementing a concrete plan to reach the company's long-term goals. This mission has already started.

Stable cash flows
None of the above-mentioned items affect the cash flow, which is important to note. The company's cash flows are stable and the effects of the changes we are now implementing will also improve future cash flows. During the second quarter, the operating cash flow was SEK 77 million (73) and the total cash flow after investments and amortization was SEK 20 million (67). Cash at the end of the quarter was SEK 291 million (218) and our net debt was SEK 220 million (359). Based on our strong financial position, the board has decided to initiate a buyback program during the third quarter, within the framework of the mandate given at the annual general meeting in May 2023.

Efficiency Program
Revenue in the second quarter amounted to SEK 208 million (217), which is clearly lower than our plans from the beginning of the year. A large part of this is due to the prematurely canceled project and considering our high gross margins, 76 percent in the second quarter, this also hits our bottom line hard. As a direct consequence of the changes above, we are also reducing the capitalization of our development costs by SEK 13 million compared to the same period last year. This increases our operational cost, which burdens the bottom line. Despite this, our EBITDA margin in the quarter was 24 percent, while EBIT, which was further directly burdened by the canceled project, was only marginally positive.

We have already initiated measures to reduce costs and are well under way to implement efficiencies in terms of product development and services in the telecom area. This means that we close one of our development centers in India and shut down operations that were related to the canceled project. The measures affect 70 employees and external consultants and improve cash flow by approximately SEK 60 million per year, with full effect from 2024, of which approximately SEK 50 million are reduced investments in product development.

Recent years' investments in automation and the centralization of competence to our development center in Croatia create good conditions for this efficiency improvement. In fact, we plan for higher quality and more robust deliveries through these changes. During the past year, we have also strengthened our sales organization. The positive effects of this investment have been slow to come, but the clear intention is that this will pay off in the coming years.

Way Forward
Our investments in cybersecurity developed well in the second quarter. Most mobile operators have not yet invested in modern firewall protection for signaling and messaging, and with increased focus on cybersecurity in many countries, we are seeing positive momentum. Many parts of our telecom portfolio also developed well. The market for 5G core networks is lagging, and only an estimated 20 percent of operators have made major commercial deployments. We are convinced that the market will develop positively and our significant investments in product development in recent years make us very competitive.

We have highly competent employees worldwide and the demands of our market-leading customers mean that we continuously renew and improve our offering.

Our objective for the coming years has not changed. We want to achieve double-digit growth in network solutions, an EBITDA margin over 35 percent and a strong cash flow. In 2023, we also expect a strong cash flow. But after a weak first half of the year and with a difficult economic situation, 2023 will be a challenging year in terms of growth and profit.

The full Interim Report is attached to this press release and has been published on the Enea website (see references below).

Enea is pleased to invite investors, analysts, and media to a presentation of the Interim Report. The presentation will be conducted in English and will be concluded by a questions and answer session. It can be attended through a webcast or teleconference and the presentation material as well as a recording of the presentation will be published on the Enea website (see details and references below).




Anders Lidbeck, Acting President and CEO

Phone: +46 8 507 140 00
E-mail: [email protected]

About Enea

Enea is a world-leading specialist in software for telecom and cybersecurity. The company’s cloud-native solutions connect, optimize, and secure services for mobile and fixed subscribers, enterprises, and the Internet of Things. More than 100 communication service providers and 4.5 billion people rely on Enea technologies every day.

Enea has strengthened its product portfolio and global market position by integrating a number of acquisitions, including Qosmos, Openwave Mobility, Aptilo Networks, and AdaptiveMobile Security.

Enea is headquartered in Stockholm, Sweden, and is listed on Nasdaq Stockholm.

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