Enea AB (publ)

Welcome to the NEA Q2 presentation 2026. During the questions and answer session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. Now I will hand the conference over to the CEO Taimou Salmi and CFO Ulf Stigberg. Please go ahead.

Thank you so much, operator, and good morning, everyone, to this Q2 call for Enea. This is Teom Salmi speaking, and with me in the room I have Ulf Stigberg, our CFO, as mentioned. In the next 20 minutes, we'll take you through the Q2 and first half report and numbers, and we'll end up with some questions at the end, if there might be any, both written and verbal. But as said, already now, we have a short introduction going through, taking you through the quarter, the highlights of the quarter. We will make a deep dive into our financial result. We will end off the presentation with a way forward and our outlook as well. And it's, of course, not written here, but there is going to be time for questions at the end as well. Right, let's jump straight into it and look at the Q2 highlights. As you might remember, we have from this year started to report our offering into portfolios, our growth portfolio and our classic portfolio. And we have good development in our growth portfolio. We are growing that part of the business with 11% in the quarter. We have a very strong operational cash flow in the quarter. The operational cash flow adds up to 88 million SEK, which is actually more than the last four quarters together in total. So we have a very good development there. And then also another highlight is that our government business is continuing to grow in a very good pace as well. And we have added one new customer in the quarter as well in that domain. If we continue with a little bit more details about the market and business development for us in the quarter, we have in the first half a currency adjusted growth of 6% net sales growth and in the quarter it resembles a 1% currency adjusted decline. But still, since we had such a good start of the year with a strong quarter one, we are reporting a 6% currency adjusted growth for the first half of the year. In the quarter, we have added five new customers, where four is in our growth portfolio and one new customer in our classic portfolio. And it actually pretty much resembles the sales split that we have as well between the portfolios, which is 80-20 growth and classic growth. For the new customers, we have added two new customers in traffic management and DPI. We have added one new enterprise customer, solely DPI, and we have added one new firewall customer. Those are the four customers that we've added in the growth portfolio. And we have also added one AAA customer in our classic portfolio during the quarter. And like I said already a couple of minutes ago, our government sector is growing very well and we have a very good momentum there as well. We are definitely building a new vertical for Enea to stand on when it comes to our future growth, which is absolutely in line with our strategy as well. So we have added an Asian government customer in the quarter, which we also communicated at the end or early July separately as well. Our strategy execution is accelerating and it's going according to plan. And I would like to just take the opportunity to talk a little bit about our strategy execution and what we have actually done in the last quarter. And if you might recall, we have divided our strategy into three pillars. One we call market acceleration, which is basically about making sure that we increase our capacity to sell more. Our vertical expansion, which summarizes in the fact that we want to take our great existing solutions and bring them into new verticals. And here, government vertical is the vertical that we are betting on. And then offering evolution is our third strategy execution area, which of course has to do with the fact that we need to continuously stay ahead of the curve and be relevant to our customers and relevant to the market with our offerings. So in the market acceleration, we have in the quarter now expanded our global sales team. We have added four new sales team members and we're adding two new now in quarter three as well. And then we are pretty much done with that step change that we want to do in our global sales team. And this kind of a fundamental need in order to accelerate the growth of the company and get us to where we want to be as part of our three year strategy that we have communicated earlier.

And I'll come back to that, of course, in our outlook slide as well at the end.

The good thing is that our total funnel, when we look at quarter two last year and quarter two this year, has grown with 29% in our growth portfolio. It just shows that we are having a relevant portfolio for both our existing customer verticals and the new customer vertical that we are building. So this is a good sign for the future and for future business to be closed. And in the vertical expansion, like I said, we have a major government win in the quarter. We have also added more leads in the government space in the quarter. And of course, we have also continued to develop our fundamental business in the telco space and it continues to develop well as well. And in the offering evolution, we are now accelerating our AI capabilities. And in particular, we're also doing some enhancements and updates and releases of new capabilities and functionality to cater for the vertical expansion into government business by adding national security and defense offerings to our portfolio. And just to give one example of those offerings that we are working with is, of course, the fact that we see the usage of UAVs increase around the world, both for civilian cases, but also for military cases. And of course, the UAV development has gone super fast the past couple of years and has been, you know, increased usage, both in warfare and civilian cases. And today, UAVs do not any longer require line of sight, but can actually be maneuvered based on command and control moving over to, for instance, mobile networks. And we have been working from an Enea perspective to build solutions where we help national security, defense and mobile operators to actually get visibility of the UAV traffic in the networks, which has not been a possibility before. So we are providing solutions that enable full visibility of UAV traffic. And with that, obviously, you can also control the traffic of UAVs in the mobile networks, which is, of course, critical in all cases. so that you can differentiate the communication for UAVs from other type of IoT connections or normal traffic in the networks. We are going to continue to develop more solutions and we already are other existing solutions with traffic management, giving traffic classification, traffic profiling to this government sector as well is going very well. And there's a huge needs of that both for criminal investigation cases and military use cases and other government cases as well. So we will definitely see that this vertical that we have entered into and we are building is going to continue to grow for Enea in the With this, I would like to end just by saying a couple of words about our numbers for the second quarter and the first half, and then I will hand over to Ulf who will take you through the details of the numbers. The net sales in the second quarter ended up at 218 million Swedish krona, which is a reported decline of 3% and a decline of 0.8% currency adjusted. So it's a pretty much a flat quarter for us in the second quarter, year over year. Our margin is declining a bit to 25% and there's a mixed bag of things there. But one major component in that is the investments we are doing in order to accelerate our strategy execution. And this is part of the plan. We have already communicated earlier that we will see a drop in our profitability in the short term. But this is needed in order to accelerate for the future growth that we're anticipating as part of our strategy period. As I said in the beginning, we had a very strong quarter when it comes to our operating cash flow, adding up at 88 million Swedish krona, which is in fact more than we've had in total in the four previous quarters. So we've had a very good and we continue to have a very good and tactical focus on securing our cash flow. And this has also led to the fact that we've been able to bring down our net debt now at 192 million Swedish krona in the quarter and also, of course, in the year. And we have significantly improved our EPS earnings per share from last year's second quarter, where it was negative 0.46 Swedish krona to positive 0.66 SEK in the second quarter of the year. And R&D spend, we continue to have the same amount of R&D spend in the company. We have to do this in order to stay relevant and to bring new capabilities to the market and beat competition. On the first half here, like I said, we have a growth in net sales, currency adjusted growth of 6%, reported growth of 1%, and our EBITDA margin is at 30% in 2026 first half compared to 29% in the first half 2025. So even though we are making the investments that we are saying, we are actually in the first half of the year still more profitable than we were in the first half last year. And then the rest, I will not comment. You can see that it's just an organic development from the first quarter to the second quarter. With that, I would like to hand over to Ulf, who will take us through a bit more of the details of the financial. So please, Ulf. Thank you, Timo.

Net sales, a slight decline of 3% reported and a minus 1% currency adjusted and the rolling 12 months increase, we report a 4% number and year to date, we can see a 6% growth for the period of six months in the year. 25% adjusted EBITDA margin for the quarter and this is a result of a bit of increased cost. We have 17.8 million higher or lower EBITDA due to a number of items here. We have some currency impacts of 1.3. We have some net sales decline of 1.8 and the total cost in fixed currency was increased by 14.7 million and 4.8 of those are referring to non-recurring items and 9.9 recurring cost and mainly related to annual salary reviews and expansions in the global sales team. We report a 9% adjusted EBIT margin and we can see the same pattern. The reported EBITDA was 11% and earnings per share improved compared to Q2 last year. And that's mostly related to the improved financial net development. Looking at the trends within our different product groups, we can see that we have a growing trend in our growth portfolios. In the classic, we have a flat development during the last quarters and a slight decline compared to the quarter two last year. and put in figures we can see that the new traffic management deals in the quarter has supported the growth within the network performance and intelligence and we can see a 20% increase in fixed currency within that product portfolio. You can also see that the DPI business continue to develop positively with both sales of current business and to new customers. The network access control business is more mature and that's depending on fewer opportunities that varies between the quarters. So in this quarter, we can see a decline of 31% in fixed currency. For the first half year, we have a similar pattern, although for this period, we see that the signaling and messaging security area has the biggest increase, and that's thanks to a very good outcome in quarter one this year. We have less exposure in financial net thanks to reduction of exposure in currency holdings, which leads us to currency net of 2.5 minus in AUD. 2.4 minus in this quarter compared to 39 previous quarter or quarter two last year. So this will actually help us when we look at the improved cash flow. The financial net as you see in the marked row two here is going from minus 39 in a year ago to minus 2.4. We also can see a significant improvement in change in working capital going from a negative quarterly reported figures to a positive of 29.6 in this quarter leaves us to a positive cash flow from operations of 88 million this quarter. This of course impacts our net debt that has developed from 187 and during the last quarters we actually This translates into our KPIs with a quite low leverage when it comes to financing for the company at this moment. And that was the end of the financial part.

Thank you, Ulf. A couple of comments about the way forward and outlook and after that we will open up for questions as well. So I'm just going to highlight, come back to the Q2 highlights, excuse me, and reiterate them again. We see great momentum in our growth portfolio with the growth of 11% in the quarter. our strong operational cash flow. We are now working with releasing, like you see, the working capital that we have built up with investments in business in different parts of the world. And of course, we will keep on having that strong focus for the quarters to come as well. And then last but not least, our government business is growing and developing into a new customer vertical for Enea, which also then gives us better leverage and better or lower risk when it comes to the customer base that we are serving and the business that we are growing. Short-term outlook, you will recognize this from quarter one. There is just one new comment in the short-term outlook, and that's the third bullet on this slide, which is that the geopolitical challenges in the Middle East is creating a little bit of unpredictability for us. We've seen deals where we thought that they would be closed in the quarter that have slipped. Thank you very much. Your political situation in the Middle East in the discussions we're having with our customers is increasing their necessity to invest in security. But in the very short term, when you are in a tough situation from your political perspective and you're in war, the priorities might change in short term point of view. So that's kind of the only change that we made to a short term outlook. Our guidance stays firm. We have not changed our guidance. So our guidance for 2026 is that we will have single digit growth in the year. We will have an adjusted EBITDA margin over 30% and we will continue to invest in order to accelerate our growth, which is aligned with the strategy that we communicated in November 2025. And then finally, also then just mentioning a long term financial ambition also connected to our strategy that communicated in the end of last year. We have not changed that at all. We're only in the beginning of that, the acceleration and the execution of our strategy period. So our long term ambition is to over the next three year period, which starts this year and ends in 2028, to deliver an average compounded growth rate of 10% or more. And I've said that from the beginning, this will not be linear. So it will be a continuously increasing growth for the company. And it's much related to the long cycles that we have in sales, that where we're now investing in more sales capacity and capability, it will start yielding in business later on. So we will see a continuous growth of our business for the years to come. On the profitability side, we are looking at having an EBITDA over 35% at the end of this three-year period. So when we exit 2028, this profitability should be there, supported also by the growth that is mentioned in the first part of the statement on the slide. Good, Ulf. With that, we've come actually to the end of the presentation and we are now ready to take some questions.

If you wish to ask a question, please dial pound key 5 on your telephone keypad. To enter the queue, if you wish to withdraw your question, please dial pound key 6 on your telephone keypad. The next question comes from Simon Granath from ABG. Please go ahead.

Hi Timo and Ulf, I hope you are well and thank you for the presentation. Initially I would like to hear how you view the current market environment particularly in the telecom side of your business and whether you have seen any indirect impact on budgets etc. from the rising input component prices which also for example Ericsson flagged about yesterday.

Thank you, Simon. Thanks for a good and super relevant question. And of course, with our telecom customers, this is a topic that comes up, right, continuously, honestly speaking, more and more now, lately. And of course, there, we need to also be very innovative with our customers, saying that, you know, how can we look at utilizing existing hardware footprint, reutilizing an already installed base, for new deployments with our software. And at the same time, we're also spending quite a lot of money in our R&D to reduce our hardware footprint so that the hardware footprint our customers needs to deploy our solution is getting less. But to answer your question, if this is a topic that we hear in the discussion with our customers in the telco sector, yes, definitely it is. And we have not seen, we of course defend our software prices, right? So we have not seen so much impact yet. Is this a risk for us moving ahead? Of course it is. But we are trying to manage it, like I said, from many different angles in order to also defend our software prices and margins moving ahead.

Very clear, thank you so much. And on the deals that you mentioned, are these deals that you anticipate to close before year-end or could it take longer than that?

Yeah, if I had the crystal ball, but honestly speaking, I mean, you know, the ones, because of course here I know exactly what we're talking about. I cannot disclose it in the call, but we also know that the customers that we're talking about here, they have a necessity to deploy what, you know, the discussions we have. So on these specific things that we discuss, I do not anticipate them to slip over the year. I do expect them still to be Very fair. I appreciate it. It's a challenging question to answer. Predictions are always hard, especially about the future.

Finally, just on free cash flow, it shows good progress here, which is, in my view, encouraging to see. Is your assessment that net working capital is now at a normalized level or could we see further improvements?

Do you want to comment, Ulf? That's a good question, Simon. We are still vetting and continue to do business in the Middle East area and the Africa area. So we will continue to see maybe longer diesels in these areas. I would predict that we are lowering our working capital during the year, but this is what we aim for and this is possible to achieve, I think, with the current conditions.

And just to add there, Simon, of course, you know, we started this acceleration actually just before I joined the company a year and a half, almost two years ago. And of course, somewhere in that cycle, you also have to start taking out things that you started with, right? So you start converting the older business into cash, you know, once the deployments are done. So of course, there's an initial step on the ladder to take, but somewhere in time, you also need to start cashing out. And I think that We are starting to see some of that coming through now. Yes.

Thank you. And I don't know if this is your final appearance, Ulf, but if so, good luck in your future endeavors and things for this time.

Thank you very much.

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. The next question comes from Rasmus Jacobson from Redeye. Please go ahead.

All right. Good morning, gentlemen. I have a follow-up on the deal slippage. I believe in Q1 you mentioned it was 10 to 15 million, and now you say 7 to 10. So I'm just curious what's going on there. Thank you.

No, I think that what we see, of course, there, Rasmus, and it's a good question, it's not always the same deal. Some deals actually come through as well, which has been a slippage, but then you see, unfortunately, new slippage that you have calculated to be monetized in the quarter, right? So I think it's a dynamic play that we're seeing, and it's super hard for us to estimate and predict based on what's happening on a daily basis in the Gulf. One week, it can look like, okay, we are now... getting to a conclusion and we are about to sign and then suddenly something else happens that is out of our control right so you know we do have new business in the gulf so it's not stable or it's not zero and nothing but but there are different deals that where we are looking at the slippage of the quarters because unfortunately this conflict has been started in February, as we remember, which had an impact on Q1 and it has continued now throughout Q2, which has now an impact on Q2 as well. So, you know, from a quarterly perspective, there are differences.

All right, that's excellent. And then I have a follow-up question on the classic segments. I believe you have had two quarters of almost a 30% decline year over year. So I'm curious if there's anything going on in the comparison quarter that is making it that particular hard comparison or if this is a growth level that is normal within the segment.

Let Ulf come back on the comparison quarter in just a bit, right? But before I hand over to Ulf on that, I mean, if we start with operating systems, that is part of, I mean, we have two parts of the classic portfolio, the operating systems and the network access control. So if we start with the operating systems, actually, we are where we're supposed to be on our budget. We have said many years before I even started that operating system is in structural decline and operating system is, I would say, performing right now where we are expecting it to be, to be fair and to be honest. On the network access control, we had anticipated a bit of a more heavy back end of the year. Having said that, we would have also anticipated to be a bit further on at this point in time in the year. So we are focusing now on accelerating the deals because we have deals in network access controls that will close in the second half of the year. So there is still a possibility for us to catch up. But I and we would have wished to be a bit further ahead with that product group and the business development in the second quarter than what we are. Ulf, can you comment on the comparability there?

If you look in the report on the trend graphs, we can actually see that quarter two last year was higher quarter than normal. So you're right, the comparability put some extra challenges when looking at the decline compared to Q2 last year. So we had a good quarter to 2025 within networks and access control. That actually turns out the decline figure looks quite high.

All right, excellent. And then I just want to ask you guys about the recurring revenue that you have started to disclose now in Q1 and now in Q2. It seems like the recurring revenue piece fell 8% quarter over quarter. How should we think about this?

Yeah, and I think, Erasmus, I said this to you before, and maybe some metrics we should not even report in that. in a quarter, because of course it has to do with what business dynamics we have in the quarter and what we're selling in the quarter. You should look at this from a longer perspective and longer timeframe. The business mix that we have in quarter two now makes our recurring revenues to be a bit lower. But in the longer run, I would not see a bigger dramatic shift there. I don't know if you want to comment on that further.

Also back to the Middle East Africa region, we have taken in quite big deals during the last couple of quarters and they tend to take long time to deploy and when these projects are deployed, we can activate the support and maintenance and that takes a little bit longer time than anticipated. We have additions that are coming in and we have some decline in older terminated agreements that works in a negative fashion to our recurring revenue figures, of course.

All right. And then the final question for me is, I believe you said that you're going to post the buybacks as you invest in your strategy. Considering that you have a very good net debt level and so on, can you comment a bit more about why you are passing the buybacks here? Thank you.

Thank you, Rasmus. I think, first of all, I think it is actually more a question to the board than to myself, honestly, the buyback topic, but I will try to shed some light on the buyback. And I mean, you know, we've said that we are investing for growth and investing You know, capital allocation is always a hard topic to decide on what to do. And with capital, of course, and a good free cash flow, you have choices, right? First of all, this quarter, what we have chosen to do with our good operating cash flow is to pay down our debts, right? You know, so we have actually come down to a debt level where we were one year ago. So honestly speaking, you know, it's it's you know, you can look at it from the perspective. It's not we're back to where we started. Right. And then we are betting now on that. There are investment topics for us to to to do. where we need some cash and we have decided now to make sure that in order to cater for the growth that we are communicating to you and to the rest of the market, we will need some cash in the short term. And that's why we have the decision that we have right now. But obviously, this can change, right? You know, it's just a pause. We've communicated a pause. And when that pause will end, I don't know. And that's something that we will need to come back to in a closer discussion with our board.

All right. Thank you very much for those details. And that's all the questions for me. And I would like to take the time to thank you for this time and good luck in your future endeavors.

Thank you.

There are no more phone questions at this time. So I hand the conference back to the speakers for any written questions and closing comments.

Thank you, operator. I see that we at this point in time, we have one or actually one person who have sent in three questions. It's about access control falling off a cliff, especially including recurring revenue. Why? I think we've answered that question already with the discussion with Simon and Rasmus. And we also, I think, answer the last question. Nice cash flow. Thank you. When will ramp up in number of employees be visible in revenues? You mentioned full effect in 2027, whereas previously you have talked about acceleration from second half 2026. And I think it's a good summary. It's exactly where we see it right now. I mean, we will see, I hope, an acceleration in the second half of 2026. But given the fact that our sales cycles are 12 to 18 months generally, even a bit longer could be in the government sector. depending on use case I would say and depending on where we stand because we've seen much shorter sales cycles as well but it will take now we have added four new sales team members in the first half of the year or actually second quarter of the year and it will take them some time to get into Enea or product portfolio and to do the sales and to conclude sales. So that's why we're saying that the full effect now when we are ready with the ramp up of our global sales team will take 12 to 18 months, thus taking us into the end of 2027 before we have the full effect in place. Does that mean that we will have no impact before that? Of course not. We will see a gradual acceleration of our sales moving into the second half of this year and also into 2027. But the full effect of our investments in sales will be visible as of 2028. We are not an IKEA. We are not an ICA with billions of transactions. We have fewer transactions, but they are larger in size and there's a longer sales cycle as well. And that's kind of the dynamics of our business. Good, we have no further questions on the call operator. So if there are nothing else, then I would like to thank you all for your participation. I would also like to take the opportunity to wish you all a great summer ahead. And if not earlier, me and Ulf, or me at least, will speak to you in the end of third quarter report as well. Thank you for now and bye bye.