Interim report January – March 2019
Stockholm, Sweden, April 24, 2019 Enea® (Nasdaq Stockholm: ENEA)
New year, new records
First quarter 2019
- Revenue in the first quarter was SEK 240.9 (170.3) million, equivalent to a 41 percent increase.
- Operating profit excluding non-recurring items for the first quarter increased to SEK 65.7 (35.1) million, corresponding to an operating margin excluding non-recurring items of 27.3 (20.6) percent.
- Operating profit for the first quarter increased to SEK 62.2 (27.0) million, equivalent to an operating margin of 25.8 (15.9) percent.
- Earnings per share increased to SEK 2.14 (0.94) for the first quarter.
- Cash flow from operating activities was SEK 93.3 (8.0) million for the quarter.
- Cash and cash equivalents and financial investments amounted to SEK 142.7 (140.6) million at the end of the quarter.
- During the quarter, Enea came to a settlement agreement with the large customer regarding historic royalty payments which generated SEK 20 million in revenue.
- Enea Software AB acquired a business unit from Atos Convergence Creators in the quarter through an asset acquisition. This business unit was consolidated into Enea effective 1 March, with operations then integrated into the Network Solutions product group.
- On 8 January, Enea announced the appointment of Jan Häglund as its new CEO. Jan will take up his position at Enea’s AGM on 6 May 2019.
January - March 2019
(First quarter previous year in brackets)
- Revenue, SEK 240.9 (170.3) million
- Revenue growth, 41 (19) %
- Revenue growth, currency adjusted, 34 (21) %
- Operating profit excluding non-recurring items, SEK 65.7 (35.1) million
- Operating profit, SEK 62.2 (27.0) million
- Operating margin excluding non-recurring items, 27.3 (20.6) %
- Operating margin, 25.8 (15.9) %
- Net profit after tax, SEK 41.4 (18.2) million
- Earnings per share, SEK 2.14 (0.94)
- Cash flow (from operating activities), SEK 93.3 (8.0) million
- Cash and cash equivalents and financial investments, SEK 142.7 (140.6) million
Anders Lidbeck, President and CEO comments:
New year, new records
The first quarter was a strong start to 2019. Revenue was up by as much as 41 percent on the first quarter 2018, with operating profit up by a fantastic 130 percent on the first quarter one year previously. Operating profit before non-recurring items increased by all of 87 percent year over year. To bring some perspective to these numbers, it’s worth remembering that when we presented our operating profit before non-recurring items a year ago, this was the best first-quarter operating profit in Enea’s history. Earnings per share set another new record for a first quarter, and we were able to report EPS of over SEK 2 for the second consecutive quarter. But we should note that in the quarter, we reached a settlement that provided us with SEK 20 m of revenue. We were in a long-term dispute with one of our major customers on historical royalty payments. As previously reported, most of this dispute was settled by in an arbitration procedure in January 2018. The arbitration agreement concluded all outstanding issues in this protracted dispute. This enables us to look forward, and focus on rebuilding trust and endeavoring to create new partnerships in attractive segments with this customer.
In the first quarter, we were also able to complete the acquisition of a business unit from Atos Convergence Creators, as we announced late last year. This operation was integrated as a new business unit in the quarter, focusing on policy management, authentication and access management within Enea’s organization, and we’ve added new sales and development offices in Austria, Germany and Croatia. This new acquisition offers Enea new potential to address fourth and fifth-generation mobile core networks. These operations were consolidated into Enea’s accounts effective March of the past quarter, and are already making a positive contribution to our EPS.
Our global software business grew very robustly overall in the first quarter of the year, increasing by 75 percent year over year. Sales in the segment we designate Network Solutions, which will also include the recently acquired operation, grew by a total of 95 percent overall on the corresponding quarter of the previous year. Our Operating System Solutions business also grew by 15 percent on the corresponding quarter of the previous year. In this latter case, growth was driven by the above conciliation settlement. It bears repeating that we should be aware that our traditional business on Key Accounts is contracting with more widespread use of open source. This underlying trend is unchanged.
The first quarter of the year is usually eventful, and the past quarter was no exception. The Mobile World Congress was held in Barcelona at the end of February, and as usual, was the largest convention for the whole industry we operate in. As previously, Enea was an exhibitor, with a larger stand and greater presence than ever before. This year, we were able to present the ‘new’ Enea including Openwave Mobility, and our recently acquired business unit in policy and access management also participated under Enea’s banner and branding. We also started the year by announcing some of the largest single deals we have made for some time, including major new deals in traffic management and the DPI segment. We also received several new awards in this latter segment, with our new Qosmos Probe product winning the gold medal in ISPG’s Excellence Awards, and Cyber Defense magazine’s InfoSec Awards, as winner of the Most Innovative Product in the cyber forensics category, as well as winner of Most Cutting Edge Product in the threat hunting category. We are continuing our work on developing our positioning in cyber security, and in the past quarter, also participated as an exhibitor at RSA—the largest conference and trade fair in the security segment.
New times and a new Enea
The Enea that’s now taking shape is a completely different company to the Enea I took over as CEO of in 2011. Over the past eight years, we have evolved from being a player in services and embedded operating systems with a major regional focus on the Nordics, to becoming a global player in software for telecommunication and software components for cyber security. We’ve created unprecedented profitability within the company and embarked on a journey of growth that has taken us from the stock market’s Small Cap to Mid Cap list, to now converging on yearly revenue of SEK 1 billion. I now see a company with every prospect of continuing to develop its market positioning and set new records in terms of revenue, profitability and cash flow. Obviously, our 600-plus professionals worldwide, who work every day to build a bigger, stronger and more successful Enea, are the foundation of this fantastic progress. It’s been a privilege to serve as CEO of these outstanding people, and I offer you my humble thanks for your trust in me. When I depart as CEO in a few weeks’ time, I do so with the confident conviction that Enea has a bright future ahead, with Jan Häglund as its new CEO, leading Enea to new successes.
It’s also worth repeating that while shareholders should be pleased about another very strong quarter, we also need to be aware that our business does vary between quarters, that these variations increase with the acquisitions we have executed in recent years. Acquisitions that strengthen our market position and long-term earnings capacity are an important part of our strategy. It is also this strategy that enables us, despite decreasing revenues from Key Accounts, to maintain our ambition to keep growing the company with good profitability and healthy cash flows.
Our objective for the full year 2019 is to achieve revenue growth over 2018 and an operating margin exceeding 20 percent.
Press and analyst meeting
Press and financial analysts are invited to a press and analyst meeting where Anders Lidbeck, President and CEO, will present and comment on the report.
Time: Wednesday April 24 at 08:30 am CET.
Phone number: SE: +46850558355, UK: +443333009262
The full report is published on www.enea.com
This information is information that Enea AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency
of the contact person set below, on April 24, 2019 at 7.20 CET.
For more information visit www.enea.com/investors or contact:
Anders Lidbeck, President & CEO
Renee Johnson, Executive Assistant
Phone: +46 70 971 01 78
Enea develops the software foundation for the connected society. We provide solutions for mobile traffic optimization, subscriber data management, network virtualization, traffic classification, embedded operating systems, and professional services. Solution vendors, systems integrators, and service providers use Enea to create new world-leading networking products and services. More than 3 billion people around the globe already rely on Enea technologies in their daily lives. Enea is listed on Nasdaq Stockholm. For more information: www.enea.com
Enea®, Enea OSE®, Netbricks®, Polyhedra®, Zealcore®, Enea® Element, Enea® Optima, Enea® LINX, Enea® Accelerator, Enea® dSPEED Platform and COSNOS® are registered trademarks of Enea AB and its subsidiaries. Enea OSE®ck, Enea OSE® Epsilon, Enea® Optima Log Analyzer, Enea® Black Box Recorder, Polyhedra® Lite, Enea® System Manager, Enea® ElementCenter NMS, Enea® On-device Management and Embedded for LeadersTM are unregistered trademarks of Enea AB or its subsidiaries. Any other company, product or service names mentioned above are the registered or unregistered trademarks of their respective owner. © Enea AB 2019