Enea AB (publ)

Thank you so much, and good morning, everyone. This is Teemu Salmi speaking, CEO of Enea.

And with me in the room, I have Ulf Stigberg, CFO as well. Today's agenda is going to be very similar to the way we have presented the previous quarter since I joined Enea after Q1 this year.

A short introduction and summary of the quarter. We will do a more deep dive into our financial results.

And then we will talk about the way forward and our outlook as well at the end of the presentation. And obviously, there will be time for questions and answers as well at the end of the presentation.

But let's get straight into it and talk about the key numbers of third quarter, where we are reporting a net sales of SEK 213 million, which in reported currency is a decrease with 1.8% from last year, but in constant currency is a growth of 3% year-over-year. Our margin is coming in at 33%.

Our net debt is at SEK 212 million and our cash flow coming in a little bit increased year-over-year at SEK 21 million. What I would say that we have spent quite a lot of time on the last 2 quarters is to clean up our balance sheet to ensure that the items that are impacting the financial net in our result is being handled.

So the exposure from those have been taken down, and we can also see a clear improvement on our earnings per share with SEK 1.77 as a result in the quarter compared to SEK 0.18 in quarter 3 last year. We're going to come back to these key numbers in depth when Ulf takes you through the financial summary as well.

Obviously, last but not least, we continue to invest in R&D, which is the key fundament for making sure that Enea stays relevant and ahead of the curve and competitive on the market. So 25% of our turnover is invested back into R&D.

Some highlights from the market and business development in the quarter. I think that we see the continued trend that we reported in the second quarter as well that the geopolitical developments are fueling the need of increased Security Solutions in communication, and that has not -- it has accelerated, I would say, in the quarter, and I'm going to come back shortly to tell you about a couple of incidents in the quarter that actually are also fueling the need for the Enea solutions.

We also see a good continued momentum for our traffic management business. The need for increased network intelligence is there and it's accelerating as well.

So that's good. So fundamentally, we see traffic management business continue to grow.

And then in the short term, at least in this year, year-to-date, the continued strengthening of the Swedish krona with more than 16% stronger currency or exchange rate today compared to the beginning of the year is creating pressure on us when it comes to our top line. So I'm actually very pleased to say that we show 3% growth in constant currencies in the quarter, even though this strengthening of the currency is impacting our reported top line result.

On the business side, we have a good underlying business, and we have also a good and solid pipeline, which gives us confidence that we are well positioned to reach our ambitions. We see also from a market point of view that the business in Middle East and North America is developing well from a regional perspective.

And those are also the regions where we made 2 press releases of new deals during the quarter for 2 different Tier 1 operators, respectively, and also for traffic management solutions. On top of that, we also see our Deep Packet Inspection developing well in the Security core area according to plan or maybe even a little bit ahead of the same.

When we look at the new customers that we have acquired in the quarter, we have 5 in total, and they are all in the Security area. We have 3 new customers when it comes to our firewall solutions, and we have 2 new customers when it comes to Deep Packet Inspection, and they are spread across the world, as you can see on this slide.

Then if we continue to look at, as I said on the previous slide, of course, the geopolitical development is just continuing to accelerate, not always in the most positive side. But on the other hand, it's good for Enea and our solutions become even more relevant than they have been before.

I'm highlighting here 3 examples of incidents or happenings in Q3 that we see -- where we see an increased trend. For instance, when it comes to massive SIM farms, there are more and more of those out in the world that are being revealed.

And of course, these pose a big threat to national infrastructure from many different perspectives and is used for fraudulent activities. Here, our firewalls can counter such threats by detecting and blocking fraudulent traffic in real time.

Another thing that we see developing as well is that there's a lot of leaked location data that's been exposed and where users' movements into sensitive areas and private movements can be tracked. And then these movements are tracked by different apps that we all of us download from App Store or from Google Store and where we just accept the terms and conditions.

And our location data is being saved when it comes to how we move and how we act. And that data is then in turn being sold to different actors in the world.

The third, I would say, trend that we see and that we hear more and more about escalating is, of course, the increased drone traffic and threats in general. I think that we've seen in the quarter, we know the warfare that's happening all around the world.

And of course, on that also the hybrid warfare with -- in the Nordic countries, many drones being, so to say, disturbing traffic around major airports in major cities in the Nordics and in Europe. And here, we -- at Enea, we are right now developing fingerprints so we can actually help our customers track drone traffic in mobile networks to make sure that we can help secure those threats in the world that we see emerging.

Two other press releases that we've done in the quarter that is not related to new deals. We have renewed our partnership with Suricata.

Suricata is an open source, rule-based framework where we contribute with our expertise from Enea, but we also use the Suricata framework for the development of our own solutions and products. We believe strategically and strongly that open source is a good way of developing and contributing to our product development for the future.

We have also announced a new customer win with a French AI-based network detect and response supplier, called Custocy. Custocy is using our Deep Packet Inspection engine in their solution.

And they have also announced a win with the French region, Haute-Garonne. It's a major department council in France, and they have chosen Custocy's MDR technology to secure their asset base that consists of more than 25,000 different assets and 1,500 subnets in their operations.

We are very happy and proud to be part of that journey from an Enea point of view. Last but not least, before I hand over to Ulf and we dive deeper into financials, we continue to be very active on the market, sharing our thought leadership.

This slide shares you 4 examples, and I will only comment one of them. I think that we focus very much on together with GSMA to impact and help the development of both existing and future standards when it comes to mobile communication.

And we are very proud to be part of that and to help that and of course, also making sure that the products that we develop for the future also support the new standards that are being brought out into the market. We want to stay at the edge.

We want to be relevant, and we want to make sure that our thought leadership is seen in different parts of the ecosystem out in the world. With that introduction, I would like to hand over to Ulf, who will take us through the more details of our financials.

Please, Ulf.

Thank you, Teemu. 3% growth in fixed currency for the quarter, and we report a 2% decline in reported net sales for quarter 3.

Over 9 months, we also reported 3% growth in fixed currency, and we are in line with the 9 months net sales previous year. We reported 33% adjusted margin for the quarter.

And for the 9 months result, we report a 30% adjusted EBITDA margin. And this is partly thanks to, of course, the net sales development, but also that our operational expenses are declining compared to previous year.

And if we exclude D&A, we are in line with the cost base that we had previous year in quarter 3. We report a 16% EBIT margin for the quarter.

Compared to last year, the reported EBIT margin was 13%. So it's a slight increase.

But the major difference compared to last year is the development of the earnings per share, which is reported now in Q3, SEK 1.77 compared to SEK 0.18. If we look into our product area, Security Solutions, we report similar revenues in the different revenue categories.

We have licenses almost at the same level. We have professional service almost at the same level and support and maintenance almost at the same level as previous year.

For Network Solutions, we can see an increase compared to Q3 previous year and a sequential decrease actually in support and maintenance. But giving the increased number of new deals and solid recurring revenue, we foresee a good development of license sales going forward as well.

If you look into the different product areas, we can see a growth of 9% within the Network area compared to Q3 previous year. And we are having a slight growth in the Security area, all in fixed currency, and we have a currency impact for the quarter of SEK 10 million.

Looking at the 9 months report, we see a slight decline for Security and a 7% growth in Networks, all in fixed currencies. And if we sum up the core, putting Security and Network together, we report a growth of 3% in fixed currency for the 9 months period.

Over to cash flow. We have an operational cash flow that's in line with Q3 previous year or a slight increase.

We also can see that the investments and the buybacks are also in line. However, we have done some amortizations higher than previous year, and we are utilizing some of our credit facilities.

That gives us a net cash flow that's better than last year, but mainly driven by financial items. We reported net debt of SEK 211.9 million, equity ratio of 71.1% and a net debt to EBITDA of 0.78.

Coming back here to the improved financial net that Teemu mentioned initially. In the quarter 3 this year, we report a financial net of SEK 87,000.

And this needs to put in perspective of that we had quite negative items in the beginning of the year. And an explanation to that is that we have a total impact for currency net of positive SEK 4 million this quarter.

It's a combination of bank revaluation -- bank balance revaluations impacting us with SEK 1 million and impact from intercompany loans revaluations of positive SEK 5 million. And in the quarter, we have been active in reducing our dollar positions.

We have optimized our cash balance. We also have worked harder with our global treasury to secure optimized operational liquidity.

And also, we are reviewing, as we speak, our balance sheet to optimize our currency exposure in all different items in the balance sheet. And this will lead to a reduced exposure when it comes to currency fluctuations in the future.

We continued with the buyback program. And in the quarter, we bought 232,000 shares for a total consideration of SEK 17.7 million.

And this is part of the program that was decided by the AGM in May, and we are executing on this decision that gives us or that is on a plan of buying back up to 50 million share -- or SEK 50 million of shares until the next AGM 2026.

Good. Thank you, Ulf, for that.

And we will conclude the presentation with a bit of a short-term outlook. We see that the market for us remains stable to moderately positive.

And we also say our portfolio is highly relevant for the markets and the segments that we serve. I have myself spent quite some time on the road meeting quite many of our customers in Middle East and the North American region in the past quarter.

And I can confirm that we are seen very strong as a partner to our customers serving both network intelligence, but also Security Solutions. We also expect to deliver on our short-term targets for the full year as we have stated since the beginning of the year.

And also, as I mentioned from the first day when I started at Enea, we have been doing updates to our strategy, and we will communicate them now in quarter 4 as promised, and that content will be focusing on an accelerated growth agenda for us as a company. So we will come back with that message later on in quarter 4 of this year.

So finally, our guidance stays exactly the same. We have not changed our long-term guidance or our short-term guidance.

So we -- in the short term, our guidance for the year is that we will see continued growth in our focus areas, Network and Security, with an EBITDA margin in the range of 30% to 35% and a stable cash flow for the conclusion of 2025. And obviously, we're going to come back also in our strategy update with more information later on in the fourth quarter.

That actually concludes our presentation, and we are now ready to take some questions. Operator, please.

All right. Thank you for that, operator.

We have actually a couple of written questions. We will take them now as we speak.

We will start with the first one. How much of cost improvement is driven by FX?

Ulf, do you want to comment?

Yes. And round figure for this quarter is that the change in FX has improved our cost level by roughly SEK 5 million.

Thank you, Ulf. We continue with the next question.

Could you please comment on the organic growth and the weakness seen despite late quarter deals, has there been any deterioration in end markets since Q2? Are deal closing extending further?

I would say, well, I mean, our business is very volatile when it comes to kind of single deals that we are signing. They might come in a quarter or they might slip out into the next quarter.

I would say that we actually see a stronger market, like I also shared in the presentation that we see a slightly moderate positive market development. That's kind of my and our assessment of where we stand right now.

Then if a deal lands in one quarter or another, that can be depending on days, right? So we still report in constant currencies 3% growth.

Under these circumstances, we are not happy, but it's an okay result, I would say. So -- and we have a strong and mature pipe that we are currently working on turning into sales as well.

So I would not say that we see a weakness in the market, slightly on the opposite, actually. Then we have another question with 25% R&D investments, why are you not able to deliver better growth in the last couple of years now?

Is 25% R&D needed to stand still? Well, I think that the answer to the question is that we have a mixed portfolio, right?

We don't only have a growth portfolio, we also have a part of our portfolio that is in structural decline that we have discussed and presented many times. I think showing our core areas that we are growing in those, not to the speed that we want and that we hope to see moving ahead that I should be clear about.

But we see a 9% growth of our Network business in the quarter, which is one of our focus areas. And then in the Security business, we see a bit of slippage when it comes to signing contracts and closing deals, not necessarily that we are losing.

So I think definitely, we are -- we need to spend those money to stay relevant and to continue to grow. And the ambition is, of course, to have an accelerated growth further than we've had over the past couple of years.

Do we have any more? I think those are actually the questions that we have in the chat.

So with that, then I would like to thank you for listening. Thank you also for your questions, and I hand it back to you, operator.

Thanks for today.