Enea

Fourth Quarter

• Net sales amounted to SEK 241.5m (271.0), a decrease of 11 percent, and 13 percent at fixed exchange rates compared with the previous year.
• Adjusted EBITDA amounted to SEK 92.1m (104.0), corresponding to a margin of 38.2% (38.4)
• Adjusted EBITDA including capitalized development costs amounted to SEK 73.4m (71.5), corresponding to a margin of 30.4 percent (26.4).
• Operating profit was SEK 43.1 million (57.8), corresponding to an operating margin of 17.8 percent (21.3).
• Net profit after tax amounted to SEK 12.7(39,2).
• Earnings per share amounted to SEK 0.60 (1.82).
• Earnings per share for continuing operations amounted to SEK 0.60 (1.81).

 
Period January – December

• Net sales amounted to SEK 912.7m (927.7), a decrease of 2 percent, and 6 percent at fixed exchange rates.
• Adjusted EBITDA amounted to SEK 307.8m (316.3), corresponding to a margin of 33.7% (34.1).
• Adjusted EBITDA including capitalized development costs amounted to SEK 219.7m (194.8), corresponding to a margin of 24.1 percent (21.0).
• Operating profit/loss was SEK -499.5 million (118.1), corresponding to an operating margin of -54.7% (12.7).
• Net profit after tax amounted to SEK -550.7 million (109.0).
• Earnings per share amounted to SEK -25.8 (10.43).
• Earnings per share from continuing operations amounted to SEK -25.80 (5.05).

 
CEO’s Statement
 
Enea right in the middle of the action
In 2023, cybersecurity threats have escalated from already high levels globally, and with it, a strong increase in public awareness and action by regulators across the globe. To guide governments and telecom operators on why and how to improve communications security, Enea has written a handbook, "Why signaling security will make or break network resilience", and published a guide on how to use our parental control and child protection software. Enea has also shared practical insights on proactive network protection, based on an in-depth analysis of the "hybrid warfare" observed in the Ukraine conflict. We will continue this work in line with our new vision to make the world's communications safer and more efficient.
 
We entered the fourth quarter with relatively good business opportunities in all our business areas. Revenues for the fourth quarter landed at SEK 241 M (271), which is slightly better than we planned for when the quarter started and 12 percent growth over the third quarter. Revenues for the full year amounted to SEK 913 million (928). We have had good stability in the revenue trend during the second half of the year, with a number of smaller deals and a growing share of recurring revenues. What we haven't seen are the larger deals that could have had a further clearly positive impact on both revenue and earnings. Our long-term goal is still to deliver growth compared to the same period last year, but we are not there today. So stability and predictability are important parameters to be able to deliver good results even during a slightly sluggish market.

Basically, we have a business model with high scalability and good earnings capacity. During the quarter, we had a gross margin of 79 percent and an EBITDA margin of 38 percent, compared to an EBITDA margin of 33 percent in the second quarter. For the full year 2023, we achieved an EBITDA margin of 34 (34) percent, which shows that our long-term target of an EBITDA margin of over 35 percent on a full-year basis is well within reach. It should also be noted that this has been done despite the fact that we have capitalized SEK 41 million less in 2023 than we did in 2022. Adjusting for the lower capitalizations, the EBITDA result in the fourth quarter and for the full year 2023 is actually stronger than in the corresponding period in 2022. This is despite slightly lower revenues, which also shows both good earnings capacity and well-implemented efficiency measures. During the fourth quarter, we also implemented further efficiency improvements, which means that our cost base from a cash flow perspective has now decreased by just over SEK 60 million compared with twelve months ago. This is despite the cost increases resulting from the current inflation situation.

Strong cash flows
In 2023, we had an operating cash flow of SEK 259 million (167). Due to seasonal variations and increasing accounts receivable, cash flow in the fourth quarter was negative SEK 24 million (-2). Our cash position at the end of the quarter was SEK 262 million (231) and our net debt was SEK 209 million (320), which is a decrease of more than one hundred million during the year. In other words, we have been able to implement operational efficiency improvements, a share buyback program and at the same time strengthen our financial position compared to the start of the year. The Board of Directors does not recommend a dividend for 2023, but believes that the cash flow generated by the company will benefit the shareholders better if they stay in the company. However, based on the company's strong financial position, the Board of Directors has decided to continue with a corresponding share buyback program during the first quarter of 2024, within the framework of the mandate given at the Annual General Meeting in May 2023.

AI accelerates the market
In October 2023, Cybersecurity Insiders launched a significant research study on the opportunities and implications for AI in cybersecurity alongside Enea, Zyxel, and Arista Networks. The study and related industry seminars revealed significant concerns about the use of AI in offensive technologies, and that the majority of the cybersecurity industry intends to increase investment in AI for defensive technologies. Enea’s software plays an important role for software providers and communication service providers.

During the quarter, we developed a groundbreaking AI-powered solution for Application to Person (A2P) messaging. This enables our Communications Platform as a Service (CPaaS) customers to optimize their billing based on message category, and enables further compliance with certain national regulations. This AI has been implemented in one of our largest CPaaS customer networks in Q4 2023.

During the year, we developed new Traffic Management functions to expand our market position in Deep Packet Inspection (DPI) for fixed and mobile network operators. In particular, we have expanded our DPI capabilities in the areas of monetization, revenue leakage protection, and fraud prevention. During the fourth quarter, we saw a positive market reaction with new customers now offering more attractive services with the help of our improved DPI solution.

Starting in 2024, we will update the reporting of our revenues in segments that reflect Enea's business in security, networks and other portfolios. These areas follow different trends and market forces, and we hope that investors will be able to follow and understand Enea's development in these markets in a better way. At the same time, we will continue to invest heavily in our product development to create the most innovative and robust products on the market.

Prospects
We have a strong market position in exciting areas that affect many people's everyday lives in many ways. Our product portfolio is well positioned in a world where video traffic and increased demand for security solutions are driving mobile development. We also have a global organization with highly competent employees and, just as importantly, many successful customers who constantly challenge and develop us.

Combined with our proven earnings capacity, this makes us cautiously optimistic about the future. For some time, the macroeconomic climate has had a dampening effect on demand for our products and it is too early to comment today on a possible improved willingness to invest among our customers. But our goal for the coming years remains unchanged. We want to achieve double-digit growth in our focus areas and an EBITDA margin above 35 percent with strong cash flows.
In 2023, we expected a strong cash flow, which was also the case with SEK 259 million in operating cash flow for the full year. After a weak first half of the year and a troublesome economy, our assessment was that 2023 would be a challenging year in terms of growth and earnings. However, our EBITDA result for 2023 landed at 34%, which, given the revenue development, can be considered clearly acceptable.

Our growth will continue to be affected by the development of the market and willingness to invest. However, for the full year 2024, we expect continued strong cash flow and an EBITDA margin of over 30%.

Anders Lidbeck
Acting President and CEO

The full Annual Statement is attached to this press release and has been published on the Enea website (see references below).
 
Presentation
Enea is pleased to invite investors, analysts, and media to a presentation of the Annual Statement. The presentation will be conducted in English by Anders Lidbeck, Acting President and Chief Executive Officer, and Ulf Stigberg, Chief Financial Officer, and will be concluded by a questions and answer session. It can be attended through a webcast or teleconference and the presentation material as well as a recording of the presentation will be published on the Enea website (see details and references below).
 
Details
Date: February 1, 2024
Time: 8.30 a.m. CET

If you wish to participate via webcast, please use the link below. Via the webcast you are able to ask written questions.
https://ir.financialhearings.com/enea-q4-report-2023
 
If you wish to participate via teleconference, please register on the link below. After registration you will be provided phone numbers and a conference ID to access the conference. You can ask questions verbally via the teleconference.
https://conference.financialhearings.com/teleconference/?id=50047268
 
References
Webpage for Enea financial reports
https://www.enea.com/investors/financial-reports/
Webpage for Enea financial presentations
https://www.enea.com/investors/presentations/
 
Contacts
Ulf Stigberg, CFO
Phone: +46 8 507 140 00
E-mail: ir@enea.com
 
About Enea
Enea is a world-leading specialist in software for telecom and cybersecurity. The company’s cloud-native solutions connect, optimize, and secure services for fixed and mobile subscribers, enterprises, and the Internet of Things. More than 100 communication service providers and 4.5 billion people rely on Enea technologies every day.
Enea has strengthened its product portfolio and global market position by integrating a number of acquisitions, including Qosmos, Openwave Mobility, Aptilo Networks, and AdaptiveMobile Security. Enea is headquartered in Stockholm, Sweden, and is listed on Nasdaq Stockholm.
 
For more information: www.enea.com