Enea AB (publ)

Welcome to the Enea Q2 presentation 2025. During the questions and answer session, participants are able to ask questions by dialing pound key five on their telephone keypad. Now I will hand the conference over to the CEO Teemu Salmi and CFO Ulf Stigberg. Please go ahead.

Good morning, everyone. This is Teemu Salmi speaking and welcome to this interim report for Q2 for Enea in 2025. We have an agenda for today where we'll go through a bit of our numbers for the quarter and some market developments before we'll dive straight into the financial results. And we will end up with a way forward, our guidance and of course also questions and answers at the end. But let's dive straight into the result of the second quarter of 2025. Summary of the quarter can be stated in that we've had some currency headwinds. Being a company who have a majority of our revenues in US dollars and a big part of our cost in euros is not a good match for Enea. We see on top line a currency impact of 11 million SEK and we are reporting 224 million SEK in net sales for the quarter. And currency adjusted, we report 235 million, which would mean that we are flat year over year in second quarter currency adjusted. We are reporting 33% EBITDA margin for the quarter, comparability number 35 from last year. And we have a slight increase in our net debt from 145 to 187 million in the quarter. Earnings per share, heavily impacted by financial net items and the currency headwind that we are facing, ending at minus 0.43 Swedish krona per share. And we'll come back to that a little bit later on in the presentation when it comes to the details of our financial net situation. Operating cash flow ending at 5 million for the quarter and our R&D spend stays stable at 24%. And of course, to the right hand side, you have the comparability numbers for the full first half of the year. We should also bear in mind that in the second quarter, comparability wise, we have had last year in the second quarter a major contract with a North American customer, slightly skewing the net sales numbers with some 31 million SEK comparability wise. Right, that's a summary on the financials. We'll come back to the details a little bit later on. Some market developments that we have been seeing in the second quarter. Like said, we see that the macroeconomical turmoil is creating financial pressure for us in the short term. We will come back to shortly describing a little bit about how the currency development has been and how we see a direct correlation between that and the results that we have for Enea. Obviously there's a big uncertainty as well when it comes to the future development of the macroeconomics. However we have a plan for how to at least work with minimizing the exposure for Enea when it comes to the financial development on the market. The geopolitical developments, however, they are fueling the need of increased security solutions in communication and also visibility in network traffic. We have in the quarter, we'll come back to that shortly as well, a decline in our security business in the quarter itself, isolated. However, important to remember that when looking at Enea numbers, we might have a deal in one quarter that skews that. So we should look at the business over a longer period of time. Our underlying business is good and our current opportunities are supporting our ambitions which we will also communicate later on when it comes to our guidance for the rest of this year. In the quarter we have added seven new customers and we have three of them in our deep packet inspection business. One in US, one in UK and one South Korean customer. We have added one new traffic management customer and also in the firewall business we have added two customers and we have a new customer in the data management application for AAA in Norway. And like said, we see that the increased network intelligence is driving our traffic management business, which is up quite heavily in the quarter, and it's a trend that we've seen for the past quarter that that continues. We also have a good traction for our messaging firewall in North America where we are replacing competition and our deep packet inspection is also developing well with the latest additions to large language models and AI related signatures. And speaking of that we are have we have during the quarter released new signatures for our deep packet inspection solutions which we call cosmos. and we see of course that the development of generative ai and large language models is requiring new and improved cyber security needs on the market and here in the quarter we have now developed signatures that are able to detect traffic that is generated by generative ai and communication between llms And of course that is helping our customers to stay cyber secure and it's also helping us to fuel our business when it comes to our DPI solution. Regulation is also tightening up. We see a new regulation coming into verifying communication and ensuring that there is an identity verification on senders of messages, making sure that you can actually know who's behind a message that has been sent. And our firewalls have the capability of actually singling out and securing that the messages that are being passed through our firewalls are legit and we can block illegal and non-valid traffic for our customers. So those regulations are also playing us very well in hand for the future. A couple of announcements and press releases we've had in the quarter. We have communicated an extension with a leading US-based software-defined wide area network vendor. who is integrating our deep packet inspection in their SD-WAN solution. It's an existing customer. We are extending the contract both in scope and in time. And the new value of that commercial agreement is two and a half million US dollars over the period of 2026 to 2027. Another significant communication we've done in the quarter is a cooperation with Akamai. Akamai's finger bank is containing signatures when it comes to devices, mobile phones, laptops, etc. That in combination with our Cosmos DPI will give a more broader and deeper visibility of network traffic for our customers, increasing their ability to stay cyber safe and to find fraudulent traffic in their networks. And we also continue to stay relevant on the market by being close to our customers and sharing our thought leadership in the ecosystems where we operate. In the last quarter, we have participated in the flagship event in Latam when it comes to GSMA, which is called M360. It can be stated as the Mobile World Congress of Latin America. We have also continued to show our presence in Europe by being participating in the Ignite event, which draws together all the big players in the mobile communication and fixed communication ecosystems. So of course we continue to stay relevant, sharing our new developments and our new products with the markets and staying close to our customers by that. Then finally, before I hand over to Ulf when it comes to the details of our financials, looking at our net sales for the quarter. As I said in the beginning, we have a decline in our security business on 7% currency adjusted in the quarter. And we have a growth in our networks business with 5 million in the quarter. And we also actually show a growth of 5% in our legacy OS business. Should be stated that OS is still something that is in structural decline, but we are very happy to see that we are defending our positions very well there year over year in the second quarter. All in all, we report a flat business development in constant currencies and reported then 5% decrease in reported result to 224 million Swedish krona in the second quarter. A couple of things that are driving the security business negatively is that we see a transition more from perpetual license models to SaaS license models, which means that we, in the beginning of a contract period, get less revenues. But of course, over a period of time, it increases our recurring revenue. And we also see a slight delay in decision making with our customers in certain parts of the world. Not necessarily that we are losing more deals, but our customers take a bit longer time to close and make decisions on the way forward. Networks business is fueled, like I said earlier on, by a good tailwind in our traffic management solution. And we actually see a good future moving ahead in the coming quarters as well. And that development should remain. Looking at the second or the first half of the year, comparability wise, we also hear numbers are currency adjusted. We see the same trend. We have a slight dip in our security business, but we have growth in our network business and we report now 2% growth in our core business on total level. And the reasons I just went through as well, the same reasons for the first half as for the second quarter when it comes to the business development rationale. With that, a tough quarter for us. We are very happy still saying that we had a tough comparability quarter in the second quarter to report a flat growth, currency adjusted, given that we had a big one-time customer contract signed in the second quarter of last year. With this, I will hand over to Ulf to take us through the financials in a little bit more detail. So please, Ulf.

Thank you, Teemu. Net sales, as Teemu stated, we are on a flat development, currently adjusted organic compared to the Q2 previous year. We have an increase in software sales in Q2 versus previous year, as we will see in later slides as well. And we show a 3% growth currency adjusted for the half. years looking into the security business per revenue type we can see an evenly distribution of revenue types between licenses professional service and support and maintenance and we are slightly behind previous quarter and it's very dependent on one or two deals more or less in the quarter so this is something we work on for the coming quarters with a great pipeline coming ahead. In the networks business per revenue type we can see a shift to more licenses and that's depending on first of all a reclassification of SaaS business that was reported as a professional service in the past but They're now reclassified and properly booked as a license. But on top of that, we also have closed good deals that contribute with a big license values for the quarter. When it comes to support the maintenance, we can see an increase compared to previous quarter in Q1 2025, but a lower figure compared to Q2 2024. The EBITDA margin made a jump from quarter one this year. We are now reporting 73 million for the quarter adjusted EBITDA compared to 83 million for the quarter two last year. which represents 33%, which is in the middle of our guidance between 30-35% for the year. Reported figure for the quarter is 30% compared to 32% quarter two last year. And the gross margin reporting in quarter two, 79% compared to 80% last year. uh our operational expenses have declined compared to last year with about 5 million and the operational expanding excluding in the dna is slightly behind or lower than previous year finally when the result we show an ebit margin of 13 percent reported figure which is in line with previous year and i think this this point is is we're quite happy to show this result based on the tough headwind we have the currency and so on so reported a bit more than 30 percent The adjusted margin 15% compared to previous year 17%, so a little bit of a decline there, but all in all 13% compared to previous year. And as Timo mentioned earlier, the earnings per share minus 0.43. And we will come back to that in a short while here. Cash flow for the quarter shows 5 million compared to 37 Q2 last year. uh in the cash flow analysis we can see that we have made some investments we have reduced the od utilization quite heavily in this quarter affecting the total net cash flow and we also made amortizations and we have bought back shares for 13.8 million so In the quarter, we have a negative total net cash flow, but very dependent on the reduction of the UD utilization. Net debt 187 compared to 144. And the equity ratio is 71.5% compared to 66.5. And the net debt EBITDA 0.69 compared to 0.50. So one of the big items we report in this quarter is a financial net. And we have two components in the financial net. First of all, the net interest, which shows a reduction compared to Q2 last year. we're going from six and a half to 1.9 million sec for the quarter and that's a result of our optimization our loan structure for the for the group the next one the currency net is very dependent on the the currency fluctuations on the market and this we report the 37 million negative impact on the financial net this quarter and this is dependent on revaluations of bank balances but also as a result of revaluation of intercompany loans by 11 million And to get in a better position, we are taking some actions. We are actively working with our cash pool. We are optimizing our intercompany loans, and we are also secure to optimize our global treasury, to optimize our bank balances for the operational liquidity. And as you can see to the right in the graph, the development of the Swedish krona against the US dollar. We had a big change in quarter one, but that has continued in the quarter two and that affects us negatively. Finally, The buyback program, the previous program was closed after the AGM or before the AGM in May. and in Q2 we bought back 191 000 shares for 13.8 million and since AGM last year we bought back shares for 97 million and yesterday the board decided to continue this buyback program and for the time up until AGM 2026 the board decided to buy back shares for up to 50 million and this is carried out under the safe harbor regulation all right that was the financials and over to you Timo