Enea AB (publ)

Welcome to the NEA Q3 presentation 2026. During the questions and answers 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 Taimou Salmi and CFO Ulf Stigberg. Please go ahead.

Good morning, everyone. From Stockholm, here is Temo Salmi speaking. And in the room as well, I have the CFO of Enea, Ulf Stigberg. We will take you through the Q3 earnings call this morning, and it will be more or less the usual way as it has been the past quarters. We will do a high-level summary of quarter three and do a deep dive into financial results, and then at the end, talk about our way forward. So we'll get straight into it and look at the takeaways from Q3. And let's start with the disappointments. I'm not happy at all with the situation where we are today, where we in the short term have had headwinds when it comes to our net sales development, where we in the quarter are reporting a 4.8% decline in our net sales. The most Imminent reasons for that are twofold. First of all, we have the volatility and the war in the Middle East that is creating uncertainty in time to close our deals in that regions. We see a delay with customer decision making in the Middle East that has an impact on our earnings. And the second thing we see as well is that the increased price of memory and hardware in general on the market is leading to also that longer decision time making on our customer sides. Now, having said this, we don't see a necessary loss of business, but we see that the decision taking time is longer than usual. So our sales cycles are becoming a bit longer than they have been in the past. Good things about the quarter is that our strong operational cash flow continues. We have had a very strong focus on that and I'm happy to see that that pays off. For the second consecutive quarter we are showing very strong operational cash flow. And that in turn has made the board to have an intention to start to share buyback program with a value of 20 million SEK under the grants given by the NGO general meeting earlier on this year. If we continue to look a little bit more about the market and business development in the quarter, as I said, we have the decline in Q3 from a net sales perspective. Good things is that we continue to sign new customers. We have eight new customers signed in the quarter, where of seven are in our growth portfolio. So definitely we have the traction in the growth portfolio that we want. We unfortunately see a little bit of faster decline in parts of our classic portfolio that we did not foresee earlier on in the year. We'll come back to the details when Ulf takes us through the results on that level. We are working with strengthening partnerships to become even stronger and more relevant. And we will see more of that coming in the future of Enea as well. In the quarter, we reported a partnership with Fox IO. Fox IO is a company that develops fingerprinting and it strengthens our offering, our DPI offering by integrating the fingerprints from Fox IO into our Cosmos IX engine. This will make our world-class DPI even better and our offering to the market even stronger. So our customers, they will be able to get the faster threat detection, even greater visibility than we have today, and stronger support for zero trust and our AI-driven security tool development. So that's good. We will see more partnerships coming in the future as well. And I will come back to that in later earnings calls as well. Then finally, I would like to also say that our strategy execution, it is on track. We launched that in November last year, where we have three major focus areas. We call them market acceleration, we call them offering evolution, and we call it vertical expansion. So in the market acceleration, which is mainly focused on strengthening our sales organization, I'm happy to say that we are more or less there. We still have very few activities to do there to strengthen our sales organization. In the offering evolution, we see continued good traction in the government space and in the defense space, and I would say in the public security domain in general. And offering evolution I'm going to talk a little bit about on the next slide and what we are doing now in particular with artificial intelligence that is taking our portfolio forward in the right direction. We said all the beginning from the beginning when it comes to launching a strategy for 26 to 28 that 2026 will be a year of investment and that we will not see the imminent growth in the year of 2026, but it will accelerate from 2027 and 2028 onwards. That's what we said from the beginning, and that's what we also see happening right now. So if we look at the rolling 12 months, for instance, on NetSafe's development, we do have an FX-adjusted growth of 2% for the company, right? So we are kind of on track what we promised on the short term for 2026. Acceleration will start next year. Coming back to our product and our offering and also what we in general do with artificial intelligence within Enea. I want to start by saying that we have been working years already with artificial intelligence, so this is nothing new for us. We are taking now the next steps in that journey, I would say. We already have several AI offerings in our products, both on automation and augmentation. Of course, working with data like we do in real time, handling gigabytes, terabytes, petabytes of data in real time. IT'S IMPOSSIBLE TO DO MANUALLY BY HUMAN. SO WE ALREADY HAVE A LOT OF AUGMENTED AND AUTOMATED AI-DRIVEN PROCESSES AND SOLUTIONS AND CAPABILITIES IN OUR TOOLS. AND WE WILL CONTINUE TO DEVELOP THAT. AND ONE GOOD EXAMPLE OF THAT IS THAT OUR NEXT FIREWALL RELEASE THAT WILL COME RELEASE 11 WILL HAVE A MAJORITY PART OF THAT RELEASE WILL BE AI-DRIVEN CAPABILITIES THAT WE WILL DELIVER TO THE MARKET AND OUR CUSTOMERS. And we will see a bigger proportion of all our solution having AI capabilities as part of the releases moving ahead. We have already worked many years with development and troubleshooting based on AI. And obviously there we have been able to take our troubleshooting from days to minutes with the help of AI driven tools. We have also now as a next step, what we are now doing is that we are investing in an AI center of excellence. And I just want to say that this AI Center of Excellence is not a theoretical Center of Excellence. It's a very practical Center of Excellence where we dedicate a few people with good AI capabilities to strengthen our product development teams. So bringing AI capabilities and bringing the learnings from our different product areas to other product areas so we can actually accelerate and be even faster to market. with AI capabilities and also ensure that we stay ahead as a leading AI driven security company as we are. Then finally, before I hand over to Ulf, coming back to the key numbers of the quarter, we have a net sales reported of 202 million Swedish krona, which is a drop of 4.8% year over year. We have a margin of 23% in the quarter. A good thing is that our operating cash flow is actually putting our leverage in a much better position. We have been able to lower our net debt. So it has been coming down now significantly over the past 12 months. We report an earnings per share of 0.35 Swedish krona. And like I said, operating cash flow of 66 million in the quarter continues to be strong. And the R&D investment, obviously in relation to the net sales, it looks high here. We have not increased our investments in R&D, but it's just the fact that the relation between cost in R&D and our net sales reported in the quarter makes that number look a little bit high. If you look at the year-to-date numbers to the right, you can see that it is in the vicinity where we expect it to be 25-26% of our turnover. On the year, we report 643 million in sales, which is pretty much on par with last year. And we have a strong cash position of 108 million Swedish krona. With that, I will leave over the details of our financials to Ulf. So Ulf, please.

Thank you, Timo. In EA reports, net sales of 202 million for the quarter, which is roughly a 5% decline. With currency adjustments, we're reporting a minus 6% decline. And over the last 12 months, we can see a 2% growth with currency adjusted figures. We're reporting a 23% adjusted EBITDA for the quarter corresponding to 47.3 million compared to 70.3 million for the quarter last year. And the reason for the decline in the EBITDA margin, as we can see in the graph to the left, is first of all, we have 10 million, 10, 11 million decline in net sales. And we have some increased costs that affects our result. And the cost... includes annual salary review, some direct costs related to project deliveries, and also related to the long-term incentive program that was decided on the AGM earlier this year. And finally, we are in the plan, planning for increased costs, taking us to the growth plan in the strategy execution. Of course, we can see the same effect with the increased cost and a little bit decline of the net sales affecting our EBIT margin. So we are reporting a 6% adjusted EBIT margin corresponding to 11.4 million compared to 31.8 million a year ago. This reports down to EPS of 0.34 for the quarter compared to 1.77 for Q3 last year. If you look into our portfolios, we can see that we have a good trend in our growth portfolio if we compare the year-to-date net sales figures compared to the previous years. All three areas are increasing in net sales, whilst the classic portfolio is declining and In the operating systems, this is according to plan. And network access control is a little bit behind in the sales for this year. If we get into the details, we can see that year to date, we have a growth of 5% in the growth portfolio. And with adjusted for FX, it's 9% growth for the last nine months. In the classic portfolio, we can see that network access control is A little bit behind, as I said, with minus 16% growth compared to previous year. And the operating system reports a minus 20%, which is according to plan. And the headwind is, as we discussed earlier here, related to the delays in the closing of the deals related to the war in the Gulf, but also in the relation to the memory cost developments. Finally, we see an improved cash flow and improved net debt position. In the quarter, we reported 66 million operational cash flow compared to 20 million last Q3 last year. This results in a net debt improvements on 163 million in the balance for Q3 this year. Compared to a year ago, we were at 211.9. So we have lowered our leverage and continue to keep our cash position. Equity ratio for the quarter 71.3 and net debt EBITDA ratio 0.66.