Enea AB (publ)

Thank you for that. Good morning everyone. I'm here with our CFO Ulf Stigberg and we would like to thank you for giving us this opportunity to walk you through our Q2 24 results. We will follow this normal, pretty straightforward agenda, a short intro to the quarter. Discuss the financial results and then we'll finalize with talking about how we see short-term outlook and our way forward after that there will be an opportunity to ask some questions so if we look at q2 it was actually a really good quarter for us we had 14 organic growth and 35 percent ebta margin we had an earnings per share of 1.63 which is way better than q2 last year and it's really not fair to compare because due to last year we did a lot of one of MRIs. And we haven't created this result by changing any of our R&D investment. We still invested 23% in R&D and 25% in R&D for the first half year. I would like to just remind everyone that the vision of INEA is to make the world's communication safer and more efficient. And to do that, we have one of the most competitive portfolios in our industry. We have the world's most powerful DPI engine in our embedded security product group where we can identify more than 4,000 protocols and applications. That product is embedded in our traffic management solution where we promise to make your network 10% more efficient based on optimizing video traffic. On top of that, we have our data management application, our Wi-Fi services, and our UDR product, the 5G database. And we have our network security operation that keeps your network safe with the most competitive messaging, signaling, firewalls on the market, and the best voice protection use case that you can buy. To better reflect our business and to make it more transparent for investors, we have started to split our revenues slightly different from the start of this year. So we divide revenues on networks, security and operating systems. And on this slide, you can see the shading here. So the network It's the left side of the portfolio. Security is the right side of the portfolio. And OS is the future product that INEA was built on. There are many great things in Q2 that I would like to discuss here. First of all, obviously, the 14% organic growth in our total business, which we're very proud of that. The 15% organic growth in our security business is also very impressive given the conditions and very much in line with the long-term financial ambition we have for double-digit growth in our focus areas. The 35% EBITDA margin and the 25% organic growth in our network business is obviously to a large extent based on the vote of confidence we got from a very large North American customer at the very end of the second quarter, where they placed a $2.9 million license expansion deal with us. We're very grateful for this from a numbers perspective, but we're also very happy with this deal from many other perspectives as well. This is for the 5G UDR with a 5G database product. That's our stratum database, a UDR in the 5G network. That was the product that caused us some troubles 12 months ago. Now we have invested a lot. We changed the organization during 2023, and we have produced a product that today forms the basis for implementing true 5G in north america and that makes this deal very significant for us it's also testimony of the the competence of the r d organization in enea even though we're a mid-sized company we can for sure build very very competitive products and i'm very thankful for for the engineers we have in the company the customer trust and and the deals that happened in the second quarter was not only this big one, there was also a number of smaller deals below the $1 million mark that we closed in the quarter. But aside of that, we also had some very good joint activities with key customers. For example, we had a seminar with Ukraine's leading operators, Kyiv Store, on how to build a resilient telecom operation. That was very well received. We have done joint webinars. We have had speaker slots on major events. So from a customer market perspective, Q2 was actually pretty notable. From an operational perspective, quality is really important to Enea, and as you can imagine, it's also very important to the buying decisions from our customers. We've been ISO 9001 certified for a long time, and our cybersecurity operation is ISO 2701 certified. The distinction here is that 2701 is slightly more focused on cyber and IT security. But we did a recertification, you have to do that regularly. We did that in the second quarter, and we got a lot of praise from the auditor. Not only did we get the recertification, which of course was the primary target, but to hear the praise from the auditor on how we've implemented our new strategy, how our processes seemingly is there not only for the sake of the processes, but actually for creating value for our customers was very rewarding to hear. He also discussed how he found that our new values and the new strategy was well appreciated throughout the organization. And that was also nice to hear. And interestingly enough, this is a coincidence, it's not planned, we did our annual employee satisfaction survey also in Q2, and here we got some great results as well. First of all, we had 98% response rate, and I find that humbling that 98% of our employees spent the time to answer lots of questions. on how they feel working for Enea and give us good recommendation and advice on how to improve Enea as a workplace even further. EMPS is employee net promoter score. That's how likely it is you would recommend Enea to your friends. And here we had a significant up on the results 12 months ago and also on the general index. we have a significant up on an already good result 12 months ago. So that's very satisfying. And I think it's also important to the investors in India because Q2 is one quarter out of many. We've been around for 55 some years and we intend to be around for many years to come. So we are on the journey that will come good quarters, that will come less good quarters. But the things that is happening under the hood it's also important to build stability in the business going forward. And obviously, it's also very important for our customers, and it is our customers that is driving our business and the growth for us. With that, I would like to hand over to Ulf, who will take you through our financial results in some more detail. Ulf.

Thank you, Anders. INEA reports strong sales in quarter two. This is including license expansions and mainly related to upgrades and expansions from our, mainly our current customers. We report a 14% growth over Q2 last year and 13% growth adjusted for currency. And the total revenues in the quarter amounted to 239 million. compared to 2017 last year. The security solutions show growth in all three types of revenues. Licenses are up 6% related to mostly upgrades and expansions from current customers. Support is up 22% related to stable base and also as a result of additional licenses in the upgrades and expansions. And finally, the services are up 38% compared to last year related mainly to projects and deliveries within the service organization. Network solutions. show significant growth in software license revenues. As Anders explained earlier, of course, the main explanation of this growth is related to the expansion of the new deal of $2.9 million. We have a stable support revenue. generated from current customer base. It varies a little bit over the quarters, but the underlying base is stable throughout the year. We had some lower revenues related to customer projects, but that also varies a little bit between the quarters. The operating systems, develops according to plan. Licenses lower as a result of we didn't have a sizable deal this quarter as we had in 2023. And the support revenues are lower and that following our expectations in this area. Looking at the EBITDA margin, we report 35% for the quarter. and excluding non-recurring items, we reported 32% EBITDA margin. We also can see an increase in gross margin to 79%. And this is, of course, related to the mix of the revenue. And in quarter two, we see a higher share of license revenues. Of course, one of the explanations of the good margin is that we also reduce operational expenses with some 10 million lower spent equal to 7% lower cost base compared to 2023. Looking at the cash flow, during the last 12 months, our cash position has improved. In the current quarter, Q2, we have a slight lower report of operational cash flow, and that's mainly related to working capital increase as a result of the increased sales. Operational cash flow was 35 million compared to 77 last year. Net cash flow minus 12 million compared to 20 million last year. And our net debt improved to 144 million compared to 220 last year. And this drills down to an equity ratio of 66.5. And the net debt to EBITDA of 0.5. All in all, this The cash flow position gives us the opportunity to continue the buyback program. In quarter two, we bought back 358,000 shares for a total consideration of 23.4 million. And this report program are since 10th of May, within the framework of the authorization from the annual general meeting in May. That we are, we have a mandate to buy back shares up to 100 million SEC. And this is under the safe harbor regulation. Thank you.

So let me finish this presentation by taking a look at Enea going forward. And I would like to start by talking about the significant investment we're doing in product development. So during the first half year, we reinvested 25% of our revenues in R&D. If you think about that number for a second or two, it's a big number when you translate that into actual euros and dollars. It's a big number for any company. It's a big number for a 55-year-old plus company like Enea. But we're proud of it, and we will continue to invest a lot in R&D going forward. I would, though, like to underline that the difference today compared to 12 months ago is that we're not building up our balance sheet. So today, our amortization and our capitalization are very much in line. And in the quarter, we actually amortized more than we did capitalized. But the investment in R&D is obviously also not just, you know, pulling money. It's having very skilled engineers building great products. Products are not just happening. And the improvement of quality and performance of our products is also not just happening. It's the grinding day-to-day work, overnight work, over-weekend work, canceling vacation work from customers. the large group of engineers we have within the company it is the largest work you know part of our workforce and again we're proud of them they're spread in in many different countries and we have a great resource pool there going forward our stratum product it's a true 5G UDR, the way it was intended to be many years ago when the telecom industry discussed 5G, is utilizing open and standard interfaces to create the multi-vendor network that was intended by the industry. We are developing products for things that matters. So CLI spoofing attacks is very much for real. It happened to the Joe Biden campaign in the first quarter in New Hampshire, where at least it was investigated by the authorities in New Hampshire. It happens in Egypt and Telecom Egypt could tell the market that by using our products, they have lowered the number of spoof calls with 90% using our firewalls. We're taking this call over mobile video. I guess many of you are phoning in using mobile video. Mobile video today is 70% of the mobile traffic and growing significantly more than the rest. We help optimize and accelerate video traffic and by using our products. A major European customer of ours, lowered the impact. That's the reversed way of accelerating video. So by optimizing video traffic, they lowered the impact of this by 16% during peak periods. We're very proud of this product and will continue to invest a lot in traffic management going forward. We're also well positioned in the market. Again, take a second and take this slide in. This is what happened in Enea in the market during the 90 days of Q2. So we were in more than 10 events. We had the speaker slot on the regulatory event in Copenhagen discussing cybersecurity. We had a webinar together with the CTO of Kyivstar, Ukrainian Kyivstar, talking about how to build a resilient telecom operation. We won three awards, two awards, cybersecurity awards on the RSA conference in San Francisco, and one Rocco award or accolade taking our product up to tier one. And we've been in the media with many articles, many quotes, together with customers, together with partners, or on the loan, all happened in Q2. and this we will continue with during Q3 and Q4 and 2025 and going forward. Being well positioned in the market, being a thought leader, and being where the action is happening is something that's very important to Enea. With all this happening, reiterating our long-term financial ambition of double-digit growth in our focused business areas with an EBITDA margin above 35% and with strong cash flows. That's our long-term financial ambition. For 2024, we reiterate the outlook we've had since the beginning of the year. The economic circumstances within the industry will continue to impact us. But for the full year 2024, we expect strong cash flows as well as an EBITDA margin above 30%. So with that, I would like to thank you all for listening and I would like to open up for potential questions.