Enea Interim Report January-March 2023
- Net sales amounted to SEK 247.9 million (210.8), equivalent to an 18 percent increase. Net sales increased by 13 percent in fixed exchange rates.
- Adjusted EBITDA amounted to SEK 94.4 million (56.1), corresponding to a margin of 38.1 percent (26.6).
- Operating profit was SEK 47.4 million (-9.0), corresponding to an operating margin of 19,1 percent (-4.3).
- Net profit after tax amounted to SEK 10,2 million (-13.0).
- Earnings per share were SEK 0.47 (-0.38).
- Earnings per share continued operations were SEK 0.47 (-0.61).
Significant Events During and After the End of the Quarter
- On January 13, Enea announced a frame contract for support and maintenance of operating systems with one of the company´s key customers. The contract covers a period of three years and prolongs support services in former one-year agreements. The contract generates guaranteed recurring revenues of approximately SEK 20 million per year. The previous one-year agreement which expired in December 2022 yielded revenues of SEK 25 million.
- On March 31, Enea announced a contract for licenses and continued support and maintenance services for its legacy operating system OSE with another of the company´s key customers. The contract covers perpetual software licenses as well as prolonged support and maintenance services over at least three years. License revenues of EUR 4.8 million are booked in the first quarter of 2023. Service revenues of EUR 1.8 million will be recognized during a three-year period. The total contract value is EUR 6.6 million.
- In April, Enea announced that the multi-year contract for the 5G Cloud Network Data Layer, signed in June 2020 with a leading European telecom operator, may be terminated by the customer before final delivery from Enea has taken place. The total contract was initially valued to EUR 24 million and has so far generated revenues amounting to EUR 14.5 million. Enea will make reservations for reported revenues but not yet received payments attributable to 2021 and 2022 amounting to 4 MEUR in the second quarter 2023.
New long-term agreements with key customers within operating systems contribute to revenue in the quarter and create predictability in our traditional business. Sales in cybersecurity are developing well, while the telecom market remains challenging.
Net sales in the first quarter of 2023 were SEK 248 million, which is 18 percent more than the same period last year. An operating system license contract contributed to significantly higher sales for this product group. We now have new long-term agreements with both key customers in operating systems, which provides stability and predictability for a business that is a declining part of our turnover.
Operating profit before interest, taxes, depreciation, and amortization (EBITDA) amounted to SEK 94 million, corresponding to 38 percent of net sales. The operating cash flow was SEK 98 million, thanks to high invoicing of licenses and maintenance agreements. The profit per share, which was SEK 0.47 in the quarter, was negatively affected by increased interest costs and by unrealized currency effects on assets and liabilities in foreign currency.
Growth for cybersecurity
Our acquisitions and investments in cybersecurity continued to develop well during the quarter. Awareness of cyber threats is increasing in many countries, not least because of a deteriorating geopolitical situation. Telecom operators often find it difficult to protect their customers and networks from cyber-attacks, which in several countries caused authorities and politicians to react. We are well positioned to provide solutions and expertise to mobile operators to detect and eliminate intrusion attempts in communications systems. We see good conditions for winning new customers and business over time, thanks to competitive products and a larger sales and marketing organization.
Challenges in the telecom market
The telecommunications market remains challenging, which has contributed to our network solutions business, as a whole, not developing as expected over the past two years. New 5G systems are delayed, mainly because many customers do not see sufficient revenue potential to justify large investments in new technology. Instead, they continue to use old systems and traditional suppliers, making it harder for smaller companies like Enea to break in. An example is the announcement from a European customer in data management, that the contract signed in 2020 may be terminated early. It is disappointing that we will not be able to complete this project, however it has contributed to the fact that we now have the market-leading solution for 5G Network Data Layer (NDL). During the second quarter, we will carry out a strategic review of our telecom business to assess the market development and the potential of our investments. It is too early to say what this review will result in, but we will prioritize growth areas and take the necessary steps to secure profitability.
Leader in cloud technology
One of the trends at MWC, the big mobile trade fair in Barcelona, was that the major providers of cloud platforms, Microsoft, Amazon Web Services and Google, are increasing their focus on communication systems with a clear ambition to take market share in cloud infrastructure for 5G systems. This is positive for us because our software products, unlike many competitors, are built to execute on different cloud platforms. We were one of the first to start certifying telecom applications on Microsoft's new Nexus platform, launched at MWC in partnership with AT&T. The certification means that our solutions for data management and NDL will be available in Microsoft's business system for all operators who choose to use Nexus as the basis for their networks.
Our ambition is to develop Enea into the leading challenger for specialized software in the cybersecurity and telecom market. We are already established with large customers, and we gain new market shares through innovative solutions for the open, cloud-based systems of the future. We compete with large companies by being focused, faster and more agile, and we can attract the best talent. Our goal in the coming years is to generate double-digit growth in Network Solutions, an EBITDA margin over 35 percent, and strong cash flows. Over time, we also aim to make complementary acquisitions to further strengthen our market position.
Significant uncertainty in the global environment and challenges in the telecom market affect our business. However, our objective for 2023 is to achieve a turnover and an EBITDA result in line with the previous year.
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 by Jan Häglund, President and Chief Executive Officer, and Ola Burmark, Chief Financial Officer, 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).
- Date: April 27, 2023
- Time: 8.30 a.m. CEST
- If you wish to participate via webcast, please use the link below. Via the webcast you are able to ask written questions.
- If you wish to participate via teleconference, please register on the link below. After registration you will be provided phone numbers and a conference ID to access the conference. You can ask questions verbally via the teleconference.
- Webpage for Enea financial reports
- Webpage for Enea financial presentations
Ola Burmark, Chief Financial Officer
Phone: +46 8 507 140 00
E-mail: [email protected]
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 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.
For more information: www.enea.com