Enea AB (publ)

Thank you and good morning to everyone and welcome to this investor call for quarter one 2036 and Enea. This is Temo Salmi speaking, CEO of Enea. I'm very happy to be with you here today. During the next 20 minutes, excuse me, we'll take you through the result and some comments about quarter one. And at the end, as usual, we leave some time for questions and answers. Let's dive straight into it. First of all, we are very happy and pleased to report that we have a solid 12% net sales growth in the quarter when counting in fixed currencies from Q1 last year. That equals 5% growth in reported numbers. So a good solid start of the year. And with that, we're also reporting a very strong improvement in our profitability, adding up at an adjusted EBITDA level of 75 million Swedish krona, or 34%, which is the highest in many years when it comes to the first quarter. And also EPS jumps up quite significantly since quarter one last year, ending up at 0.98 Swedish krona. On top of that, we also have a very good momentum for our strategy execution at the moment, and I will come back to that in just one second. As said, the growth here in the beginning of the year was quite a lot fueled by our business development, mainly in our firewalls business that had a great successful start of the year where we signed many deals, many significant deals, predominantly in Europe and North America. So that has been fueling our development in the quarter. And we have also have a strong momentum in our growth portfolio and you'll see now I'll come back to that a little bit later on in the presentation that starting quarter one this year we will also start reporting our sales a bit differently than last year and I have been getting a lot of questions and feedback about the transparency of our product portfolio and how it is developing so actually starting this year we will report our sales development in five product groups instead of the two uh areas we were reporting last year networks and security now we will have five product groups that we report to where we will report our sales against and i will come back to the structure in just a bit so uh hang with us but basically these five product areas we have one growth part of it and we have one as we call classic part of it but we've had a very good momentum in our growth portfolio and with our products that are part of that portfolio Any more relevant than ever. I mean, we see that the need of secure solution and increased security in general is pushing our business in the right direction. And we the government sector for us is showing good progress and we have a very healthy pipeline that keeps on growing. So there's a lot of opportunities for us to close in that. So we are staying strong and growing in the telco sector and also in the CPAS sector, now complementing that with the government sector, giving us another leg to stand on when it comes to our future business development. So that is good to see. and also during the first quarter we have participated in mobile world congress in barcelona which is one of the biggest telco or telecom communication affairs in the world even though we had the breakout of the war in iran which meant that no middle eastern customers were able to travel to barcelona we still had a very good result out of that and we are pleased with our participation there And saying that the war in the Middle East has also, of course, had had an impact on our business slightly. I mean, some of these we were anticipating to close in quarter one has now been postponed into the future due to our customers having other priorities in quarter one. So not losing any business, but we see a slight shift of business into the future. Momentum is picking up again in Middle East. And we're looking forward to catch up on that in the quarters to come. We also made during the quarter a press release about one customer of ours, Liberty in Costa Rica, where we had deployed our messaging firewall. In that, in combination with the threat intelligence service that we are providing, we are combating cybercrime. And the results for our customer in Costa Rica were really outstanding. And in just three weeks, we were able to, together with them, to decrease 99% of the spam and the scam that was going through their network. And on top of that, our customer could block over 30,000 scam domains that were used for scam bursts. Not only do we have the good and right products, but they also have this short time to value with our customers once we are deploying them. On top of that, also in the quarter, not only do we have good traction on the market with our customers, but we're also winning awards when it comes to our products and offerings. We have won five global awards in the quarter, three in the firewall space, one for traffic management solution, and one also for our embedded security Cosmos product in the quarter. And then when it comes to the strategy execution, it is moving on according to plan. I'm super happy to announce that we in the quarter also have now recruited our new chief commercial officer, Mattias Johansson. He has started one month ago and he's now going to take charge of accelerating one of our three pillars in our strategy, which is the market acceleration. And speaking of the market acceleration, we have also hired new sales capabilities in the security domain to push our security and government business in the right direction. And we are continuing to execute on our market acceleration activities as part of the strategy by also together with Business Sweden being part of one joint event in Taiwan later on in the quarter. because that is also one of our focus markets in Asia-Pacific. And we'll continue to execute on the other activities just as we have commented since we launched the strategy in November. So good start of the year. We are more relevant than ever and our strategy execution is going as planned and also starting to show some good payoffs and payback already now. All in all, if we look at the numbers for the quarter, our net sales ended up in reported numbers, 222, 222 million Swedish krona, which is a 12% growth in fixed currency, 4% in reported currency. Our EBITDA margin 34% or 75 million Swedish krona in absolute numbers. Our net debt has increased slightly and you can also see that our operating cash flow is slightly going down. We see the operating cash flow decrease here in the quarter. short term part of that where we anticipate that the capital that we're tying up now in quarter one, a lot of that capital, we will a big part of that capital, we will actually transfer into cash flow already in Q2. So there's very short term spikes in the working capital. There is, however, the investment we made in Middle Eastern Africa is tying up a bit of capital that we expect to be starting decreasing over the year of 2026. Earnings per share ended up at 0.98 Swedish krona per share. And our R&D investments, they continue to be on stable levels as we have presented in previous quarters as well, around 24-25%. Yes, I've already covered most of the things in the slide here. I think the thing that I want to stress is that we had a tough year in our firewall business last year, and our business can be a bit spiky over quarters because we sell the business models we have. We sell quite a lot of perpetual licenses, which means that one quarter can have a lot of sales. Other quarters can have a little bit of less of sales. We have a very strong start of the year for our firewalls where we actually have signed three major deals in the quarter with one of the largest network operators in the world and also with one of the big CPaaS players globally as well, which we are happy for because it's just showing the relevance and importance of our portfolio. And before I now hand over to Ulf for more details about the financials of the quarter, I want to come back to what I said earlier about how we will now report our sales going away from the networks and security split that we have had in our sales in the previous year. This year, we will report our sales in these five product groups, as we call it. If we start from the right, there's an old traditional known segment or group, a product group operating systems, which we have said for many years is in structural decline. We will continue to report operating systems, sales and development separately. Then the former network and security portfolio we have divided in four product groups, network performance and intelligence, signaling and messaging security, embedded network insights and security, and network access control. So if we start in the top left corner with the network performance and intelligence, basically we have our traffic management and our real-time database stratum there as the products, main products in that product category. In the signaling and messaging security, we have our firewalls. That's our firewall business that will be reported separately in one product group. we have our embedded network and of course sorry with the signaling and messaging security we also of course have our threat intelligence uh uh service that we are selling included and reported as part of sales in that product group in the embedded networks and insights and security we have a cosmos product uh basically our embedded security business that we are uh selling and then network access control is the more classical uh csp related uh products that we're selling like the aaa and the enum dns etc in in that product category and as you can see there's a color coding behind all these product groups as well there are the three ones network performance intelligence signaling messaging embedded network insights they are part of what we call the growth portfolio and then we have the classic portfolio which is then containing operating systems and network access control and the reason we are doing this is the products in these product groups have a bit of a different dynamic where Obviously, the growth portfolio is the portfolio that's going to fuel the growth of Enea for the future, where the classic portfolio have the dynamics of being focusing on profitability and generating bigger profits than the growth portfolio in the short term. And in quarter one, I can say that the net sales split between growth portfolio and classic portfolio was 80-20. So 80% of our top line is coming from the growth portfolio and 20% of our top line is coming from the classic portfolio. And this is the way you can expect to see Enea reporting our sales moving ahead. With that, I would like to hand over to Ulf Stigberg for more details about the financials in quarter one. Ulf, please. Thank you, Timo.

So a little bit more in detail. We see a 12% growth in net sales in fixed currency. And what we're very proud of this quarter is that we can see also a change in growth over the rolling 12 months measurement. going from last year 12 months plus 1% and adjusted for currency plus 4%. We report a 34% adjusted EBITDA margin amounted to 75 million for the quarter compared to 52.6 previous year. This takes us to a level of 34% compared to 25% previous year. Reported EBITDA margin is 23% for the quarter. We have a development of cost that's almost in line with the previous year. The operating expenses spend is about 175.9 compared to 189.7 and the variation can mostly be explained by 13.4 million lower cost in relation to currency adjustments. Going over to the EBIT, we report an EBIT of 9% corresponding to 20.2 million SEK compared to 1% previous year and 1.6 million. This also drills down to earnings per share by 0.98 compared to minus 0.94 previous year. And this is a great development from last year. So going into the reporting structure, we now have presented a net sales split by product group. and also we have the split by revenue category in the bars you can see three different tones of colors this correspond to service support maintenance and software license And over the quarters, you can see that the net sales in each of the group varies and the variation depends mostly to software license revenues in the quarter. And we have different development and sales efforts, of course, in different portfolios here that creates a little bit of different performance in the different groups. You can see that we have a high share of software license revenue in our growth portfolio. to the to the left and we have also a high share of service revenues in the signaling and messaging security product group and the second group from from the left and the two classic product groups to the right as timo mentioned here represent 20 percent show some variations over the quarters and with a development of stable and a little bit of a decline in the operating system product group. Going into the details for the quarter, we can see we had a good development within the signaling and messaging security group, growing by 48% and by 56% if you adjust for the currency. So a very good growth within that group, of course. The growth within the network performance and intelligence product group was 6% and 25% if adjusted for currency. And the embedded network insight and security grew by 5% adjusted for currency and reported figures even compared to the previous year. The same measurement but over 12 months makes a little bit more sense maybe if you look at the growth, the growth portfolio growing by 4% or 12% in FX adjusted measurements. And the classic portfolio actually had a decline in reported figures by 7% and adjusted for currency by minus 5%. One area that we have been working with during the last 12 months is our exposure to financial variations. And this shows that we have less exposure in financial net for this quarter. The total financial net for quarter one 2026 was 2.6 million compared to 21.7 million previous year. And finally, we see the cash flow analysis here with the improved profit on the first line going from 1.6 to 20. We have improved the financial net from minus 21 to minus 2.6. We have the items of non-cash and taxes increasing in this quarter, mainly related to a provision that was made in the quarter by 25.7 million. And also we see the change in working capital related to mainly deals that we have closed in the quarter one. and the main part of this increase in the quarter will translate to cash within within quarter two this year we have some investments on the 29 million and we have a result of financing by 4.1 this takes us to a net cash flow of total 10.6 million negative uh we can see the debt net depth have increased over 12 months and the main explanation on this change is that we have more exposure to the business in the middle east and africa region which they have a little bit longer project lead times compared to previous and finally we have a healthy levels of equity ratio and a net depth to ebitda and for the buyback program we have bought 243 000 shares in the quarter for a total consideration of 15.6 million and all activities are related to the AGM mandate that AGM gave the board a year ago in May and the board have now almost

use the 50 million frame that we decided to to utilize in that mandate all right over to you timo very good wolf thank you so much uh we will start wrapping up this and uh leave some minutes for questions and answers at the end coming back to key takeaways from the quarter once again great start of the year with a solid uh growth of 12 percent in constant currencies Great improvement in our profitability and EPS and we have good momentum for our strategy execution. So we feel that we have a good start of the year and we're also well positioned for the execution of the rest of the year. And that gives us a short term outlook that, you know, we say that I mean, our market remains stable to moderately positive. That is exactly what we have said before. And we see that it is in that vicinity still. and we are super relevant still for the market and the government sector is growing well and i hope and i think looking at how the development has been in quarter two that this quarter one will be the last quarter with this heavy headwinds we have had predominantly from the us dollar uh in 2025 20 quarter two should give us a bit of leeway when it comes to the pressure of the FX headwind that we have been experiencing throughout, I would say the full 2025. That given for the 2026 guidance, we leave it unchanged. We believe we will have a single digit organic growth. We will end up north of 30% in adjusted EBITDA margin and our investments will accelerate the growth. And then also the reason why we're saying that we will also increase our costs a bit in the year is that we're investing in our strategy. And that's also why we're saying that our EBITDA margin will be above 30%. We report 34 right now, which is good, and we have a good buffer down to 30%. And we will continue to invest in the year for the strategy execution, which will have a slight impact on our cost as well. long-term ambition stays as we communicated as part of our strategy launch last year we have the ambition that we over the next three years 26 27 28 that we will grow in average 10 percent over each year in that period and that our profitability will end at the end of 2028 above 35% measured in EBITDA. So we leave this also unchanged. So both long-term and short-term guidance remains as before. Very good. With that, I think we are done with our presentation and we go over to questions and answers.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad.

Right, just waiting if there is a verbal question coming through. I don't think so. Well, please feel free, as the operator said. Meanwhile, we will jump over also to the written questions here starting with the first one around a white paper on the utility of software in drone application and the question are you recognizing revenue today from this end market how many such products are you involved in Good question. We are not not recognizing any revenue from these applications yet. We have many ongoing projects, engagement discussions, and actually we are submitting today or tomorrow, an RFP with with contents of drone applications as well. So it's still a very early markets a developing market, we are on the ball, we have relevant solutions for it. And let's see now, this first RFP that we're submitting might give us, you know, if all goes well, also the first revenues with that application. Next question. How should we think about the quarterly variations between the business segments? How should we think of growth in the longer term between growth and classic? And is there anything that sticks out in the business segments, including the CPAS deal that drives the solid organic growth in the quarter?

uh do you wanna take these uh right uh i think the quarterly variations between the business groups or or the product groups are are expected and this is a result of more transparency now uh basically you can say that the four groups have in previous years also compensated a little bit if if a group is is low or it doesn't close a large deal in one quarter one other group will so it some kind of even out the the exposure but but what we see in the longer term of course we we expect the growth product groups the three groups growing more than the classic and of course our long-term strategy targets 10 over three years so that will be north of 10 if we're gonna meet that target of course uh if any anything sticks out uh

uh i'm not sure about that uh do you want to comment on that no i no i i think it's it's it's been a solid development in the quarter of course in the firewalls business we had an exceptionally good quarter and and we communicated the cpas deal but there are many other deals that builds up the quarter not only for the firewall business but for the other segments as well And as you could see, Ulf show that if we look at the growth segment, it has had a very good development year over year. And I think it's incremental development of the business that we are doing. And also, of course, the relevance of our products and our footprint that is growing on the market. So I would say that there's nothing else. It's just organic growth, I would say, that we are working with and developing, so to say. Rasmus, we can talk more later, of course, as well, regarding this. Next question regarding AI. Can you elaborate on what solutions you are developing or selling that specifically protects against AI hacker attacks? Well, yes, we have several. I mean, let's start with messaging, for instance. I mean, in our messaging portfolio, we have been awarded this quarter as well for our AI-based restricted image detection solution. So basically, messaging, I mean, we Our customers, they handle millions of messages every hour, and you cannot parse messages manually, but you need to have a mechanism that scans the messages before you approve and read them through, and it becomes an SMS or MMS or whatnot in your phone when you receive it. Obviously, you need AI solutions there, and we've had those in place. We have many different AI solutions in place already. But one of the latest now released is this AI-based restricted image detection, where it's easy in a message to go through text and find bad language, or you can find words that would make our customers block that message from being sent. But pictures have been harder, of course, to evaluate. Now we have a solution where we, with the help of AI, for instance, also can look at pictures and determine is this picture according to what is, you know, according to the policy that can be sent through, or is it something that has a criminal intent or other malicious intent, so to say. So that's one of the latest solutions that we actually got several awards for that solution in the quarter one this year. And we have many AI capabilities already live in many of our product offerings. Next, congratulations on nice progress. Thank you, Mattias. Lots of EU grants for critical infrastructure. Are you relevant of any of these? Ulf, you want to comment on that?

I mean, this is an area that we are working into gradually, and definitely we will look into the EU grants and

we will be affected take take benefit of such grants if uh if available but we cannot share any specific at this stage thank you and i think now at least what i see the final question here from david q126 effective tax rate was 5.6 percent what tax rate should we expect for the longer term of enea

Good question. And tax area, we are a business group with many different legal entities and this is a challenge for us, but we are working on this. I don't have a figure to share as of now, but it varies a little bit between the quarters. So we have to come back to that.

All right. It's actually on the hour. I don't see any more questions in the question pane. Thank you for listening. And I and Ulf, we wish you a great day ahead. Thank you and bye bye.