Enea AB (publ)

all right good morning everyone and welcome to this interim report q1 2025 from Enea speaking is Temo Salmi a newly joined president and ceo of Enea as of april 1st and i'm really happy to be here today to take you through together with Ulf Stigberg the cfo of Enea our result and a way forward The agenda for today is very slim and short and straight to the point. We will have a short introduction of myself and a bit on the business situation. We will go into the details of the financial results where Ulf will take us through that. And I will conclude the presentation with a short term way forward and also our outlook before we move over to questions and answers at the end. So first of all, I'm very happy to be here now after a process of recruitment started first of April now as the CEO of Enea. Myself, I have been working 30 years in predominantly IT, telco, forestry and cybersecurity. I spent almost 20 years with Ericsson during my career and five years with Stora Enso as group CIO and head of digitalization there. And then now my last three years, I've been leading a cybersecurity company listed at Nasdaq Helsinki that was actually sold during that process before I now joined Enea. My focus will be on driving a profitable growth agenda for Enea. I'm super happy and proud to be part of this great company. I think that Enea for me there's a couple of reasons why I chose to join Enea. One is of course a great vision to make the world's communication safer and more efficient. And of course, other reasons are great product portfolio, good future outlook, I would say, and relevant product portfolio for the market. And also coming back to telco, I have always enjoyed working in the telco space, even though that Enea imposes more than just telco as a business, but a predominant part of Enea business is within the telco space. Good. Enea in a brief. I think and I hope most of you who are on the call know a little bit about Enea, but if not, we take a short recap. Of course, we are listed at Nasdaq here in Stockholm. And 3 billion people every day rely on Enea technologies in order to make sure that they can communicate. And that's an impressive number, almost 50% of the world's population. Not really, but almost. We have over 200 customers in different segments where we are selling our relevant portfolio. And our latest report now actually shows that we have now broken into 100 countries with our products and offerings in 41. And the 100th country where we came in was actually in Bermuda, where we sold a AAA solution in that country. Some highlights from quarter one. We participated in the world's largest mobile event or telco event, I would say, Mobile World Congress in Barcelona that usually takes place at the last week of February, but this year is the first week of March. We had a great present there with an own big booth where we held many customer meetings. We had more customer meetings than we've ever had during Mobile World Congress. We were also participating in some of the events during Mobile World Congress, where we're sharing our thought leadership in the messaging ecosystem forum by participating in panels and doing presentations. And we also communicated some new very important wins for us during quarter one. And I will take you through three of the wins that we were communicating in Barcelona. First customer case and first win that we communicated was together with Extreme Networks. Extreme Networks have decided to integrate our embedded deep packet inspection engine that we call Enea Cosmos IX engine within its SD-WAN solution. This will help extreme networks to improve the security posture by enabling a very precise application specific rules encrypted traffic in order to also know how to steer and control the traffic in their network. Very important win for us and showing that our IX engine product is having good traction on the market. Second win was together with beyond one beyond one is a digital service provider and owner of merging mobile operations across Latin America and Middle East. They have decided to deploy our traffic management solution to fulfill a hyper personalized offering capability towards their end customers. So with our traffic management solution, they will be able to offer just that to their customer base, just showing that also our traffic management, which actually had a very good development during quarter one as a product and a solution is super relevant for the market. the final win that i would like to communicate very shortly here in this presentation is with the stc in saudi arabia stc is the largest mobile network operator in saudi arabia and and has become one of the few telco operators in the world to achieve 100 compliance using an AI adaptive signal firewall to secure the messaging, signaling messaging, so to say. And that is also a very good win for us and showing that we are committed to work with securing cybersecurity and increasing the security in the telco sector. Then I will round up with a couple of slides of the current realities. I think that no one of us will be surprised that the current global macroeconomic environment is very volatile. And we have also seen now in quarter one that macroeconomic volatility also have impacted currencies and currency fluctuation has also impacted Enea during quarter one. You will see that when we go through the financial results with Ulf in a moment. But having 60% of our income in US dollars and less than 20% of our cost in US dollars, of course, causes a bit of an impact on our P&L when the volatility is as high as it has been during the first quarter of this year. However, of course, also the volatile geopolitical environment actually fuels the needs for our solutions. Our security solutions will continue to play a very important role and our network management solutions will also continue to play a very important role for the future. So we have a relevant product portfolio that will answer for many of the challenges that we see now in the geopolitical environment. So the underlying demand in telco and cybersecurity will support the continued growth of Enea. That's how we see it. And then finally, before I hand over to Ulf for more of the details of our result in quarter one, just a short summary of what happened in quarter one. And here you can see that we had a great quarter for our networks business, which grew with 12%. And the security business stayed flat year over year. And in total, we have a 6% currency adjusted growth in quarter one for the whole company. So we are on a growth path, growth journey. We are committed to ensure that we continue this profitable growth journey throughout 2025. And with that, I will now hand over to Ulf and I will come back in the end to wrap this meeting up before we go into questions and answers. So please, Ulf.

Thank you, Teemu. So into the financial results. In a brief, our key numbers for quarter one twenty five is first of all, we reached a net sales of two hundred and fourteen million SEK. We report an adjusted EBITDA of twenty five percent. And we report end of the quarter net debt of 145 million. As a result of effects of currency fluctuations, we have some effects on the earnings per share. We come back to that, but we report the minus 0.94 EPS for the quarter. Operating cash flow in the quarter, 36 million SEK and we spent 27% of net sales in R&D for the quarter. uh net sales growth compared year over year is seven percent and with the currency adjustments we calculate six percent growth for the quarter and uh we follow the path with seasonality over the year so uh we can see that quarter one usually are the lowest quarter and uh that will pan over the year and this is expected for this year as well Looking into the different product areas, we can see that security year-over-year has similar volume in licenses, professional service, and support and maintenance. This is based on a stable customer base with recurring revenue and additional orders in each of the quarters, of course. Looking into the networks, we can see quite a big increase in license sales. This relates partly to the new large order we signed the previous year with also some recurring revenue for license. professional service has a slight growth but when looking into support maintenance we can see decline and this relates to expiration of one of the contracts that has been with us for for a while The recurring revenue for licenses compensates partly the decline of the support maintenance recurring revenue. So we will see that in the next slide here. As a whole, we report 68% of recurring revenue on the rolling 12 months measurements and our definition of recurring revenue streams are coming from supported maintenance term-based license and also recurring services deliveries so all in all a high level of recurring revenues and as a result of the volatile market the volatility on currency we have updated our adjusted EBITDA definition so our adjusted EBITDA is calculated after adjustments of translation differences and in the bridge to the right you can see the effects of the adjusted EBITDA changes We reported last year 58 million EBITDA, but we had a gain of 4 million in translation differences. And this year reported the EBITDA is 44 million, and we had a loss of 9 million in translation differences. Cleaning those translation differences, we can see that the adjusted EBITDA is almost on the same level as previous year in Q1. So this new definition will be used for the reporting going forward in this year. That takes us into the slide of EBITDA margin for quarter one. We report an adjusted EBITDA of 52.6 compared to 53.2. six previous year that correspond to a margin of 25% compared to 27% previous year. And we can also see the seasonality effects over the year here that goes directly down to the bottom line. We have some cost increase but partly explanation of that cost increase is related to one-off items and half of the cost increase can be booked or has been booked as a one-off items. Going down to EBIT margin, we can see the same pattern here. We report 12.3 million in the first quarter. And compared to last year, we had 11.8. So it's a slight increase with adjusted EBITDA margin. This represents a margin of 6% on total compared to 6% last year. uh what uh stands out a little bit here is earnings per share which is minus 0.94 and this can be explained by this bridge uh it's a lot of numbers here but basically what has been uh affected in ER-result this quarter is the translation differences as well as the financial net in the quarter one. And this relates mostly to revaluation of balance sheet items based on the change in the US dollar Swedish krona relation. So taking away all those currency effects, we can report an adjusted a bit on the slight increase compared to last year. Cash flow for the quarter, we report 35.5 compared to 120.1 last year. Net cash flow was 46.6 compared to 51 last year. We have a net debt of 144.7 compared to 133 last year. And our equity ratio is 69% compared to 65.8. And our net debt to EBITDA 0.52 compared to 0.40. In the quarter, we bought back some 342,000 shares with a total consolidation of 32.2 million. And this is repurchased under the mandate we got from the AGM last year. And since then, we have bought back shares of the value of 83.6 million. And this program is carried out under the Safe Hard Harbor Regulation.

Good, thank you Ulf for that. To wrap up the presentation and to go into questions and answers, I would just like to take you through a little bit about the short-term way forward. and of course i'm three weeks into my job so i'm still very humble about that and and also very proud of being part of the enea family and one thing that i have already started and that we will continue to do is to make a strategic overhaul of our product portfolio and not only product portfolio from the product perspective but make a more strategic review over the commercial situation the market and have a bigger outside-in perspective on how we can take Enea to the next level. We will also look at what are the opportunities for us to grow into adjacent markets, into adjacent industries from where we are today. And we will also look at how we can complement the current product portfolio of Enea with potential white spots that could also take Enea to the next level. More about the result of this strategic overhaul will follow later, exactly when I will need to come back to. But it's a process that we have started and we will not linger on for too long with that. But more information to follow, I say, later on. couple of other things that we will focus on as well is commercial excellence anything anything that has to do from lead to order and all the activities within that process will be under review and to see how we can expedite and and improve the way we work with commercial excellence And then last but not least, always operational efficiency will be part of improvements that needs to be ongoing, so to say. But these are three focus areas that I will start executing now with the team as soon as possible. And like I said, the first one there is already ongoing. It will actually also contain the commercial excellence part. Operational efficiency we will handle in a separate activity internally. so when it comes to our long-term financial ambition and the outlook for this year we remain stable and same we communicate exactly the same as we have communicated before so our long-term ambition is to generate a double-digit growth in our focus areas an EBITDA margin exceeding 35 percent and a strong cash flow Our guidance for this year is continued growth in our focus areas and EBITDA margin in the range of 30 to 35% and a strong cash flow. This is exactly what we have been communicating before and we remain stable with that position. With that, I would like to thank you for listening to me and Ulf and we are ready to take any questions.