First Quarter
- Net sales amounted to SEK 242.1 million (214.0), equivalent to a 13 percent increase. Net sales increased by 8 percent in fixed exchange rates.
- Adjusted EBITDA amounted to SEK 62.5 million (75.1), corresponding to a margin of 25.8 percent (35.1).
- Operating profit was SEK -3.5 million (44.7), corresponding to an operating margin of -1.5 percent (20.9).
- Net profit after tax amounted to SEK -8.2 million (43.5).
- Earnings per share were SEK -0.38 (2.02).
Significant Events During and After the End of the Quarter
- After the end of the period, Enea announced a three-year deal with a North American mobile operator on core network applications for 5G and Wi-Fi. Revenue from software licenses of USD 2.8 million was recognized in the first quarter of 2022, and the remaining revenue will be recognized over the contract term. The total contract value is USD 5.1 million.
- On 7 April, Enea signed a deal to divest its Software Development Services business to AROBS Transilvania Software (AROBS). This transaction involves the divestment of 100 percent of the shares of Enea Software AB’s wholly owned subsidiary Enea Services Romania SRL for an enterprise value of EUR 17.9 million on a cash and debt-free basis, including normalized working capital. This transaction is scheduled for completion in the second quarter of 2022.
- In mid-April, Enea arranged a loan agreement involving a EUR 40 million fixed-term facility, and a SEK 350 million revolving facility. These new facilities will be used to refinance existing debt, finance working capital, and fund future acquisitions. The new credit facilities have a three-year term.
- During February, the number of shares and votes of Enea AB increased due to a directed share issue and repurchase of 243,000 class C shares. The number of shares of Enea AB is 21,858,231, 21,615,231 being ordinary shares with one vote each, and 243,000 being class C shares with one-tenth of a vote each. The total number of votes of the company is 21,639,531.
CEO’s Statement
The changing geopolitical situation means that cybersecurity for telecom systems is more relevant than ever. We think many countries and telecom operators need to invest in security, and accordingly, we continue the development of products and go-to-market capabilities, where costs short-term have an impact on profitability.
Sales in the first quarter of 2022 were SEK 242 million, 8 percent more than the corresponding period of the previous year, currency adjusted. AdaptiveMobile Security, which we acquired in July last year, is developing according to plan and lay behind the sales gains but has a negative impact on the gross margin, due to a larger share of services revenues than our other software development business. The currency-adjusted organic growth in the remaining company was -7 percent. This decrease is partly due to an expected downturn in our traditional Operating Systems business (-21 percent), and partly due to slow progress of the Network Solutions product group in the quarter (-4 percent). While we are not happy with this negative growth, we still have a positive outlook on business opportunities in coming quarters. Our major customer projects in data management are expected to generate revenues later this year, according to contracted delivery milestones. We’re still being affected by the obstacles to new business sales and delays on the 5G market of recent years, so I’m pleased that we were able to sign a new 5G and Wi-Fi contract worth USD 5.1 million with a major North American telecom operator. This deal means us expanding the relationship with this current customer and is a good example of sales synergies between the business segments we previously acquired as separate companies.
Operating profit excluding non-recurring items was SEK 20 million, which is 8 percent of net sales, and below our long-term ambition. Partly, this is an effect of seasonality on the telecom market, where usually, the second half-year generates more revenue and operating profit. Increased inflation in countries where we have development staff, combined with exchange rate fluctuations, were other contributors to increased reported operating expenses. Restructuring of our Operating Systems business, which went as planned in the first quarter at a cost of SEK 23 million, will take full effect from April this year. Overall, we foresee that increased revenues in combination with efficiency measures and cost control will enable higher profitability for the full year.
On 7 April, we signed a deal with Romanian company AROBS on the sale of our Software Development Services business. This deal, scheduled to complete in the second quarter, means we become a pure-play product company focused on telecom and cybersecurity software. The transaction, based on an enterprise value of EUR 17.9 million, will strengthen our financial position, generate a positive effect on the company’s gross margin and earnings per share in 2022.
We see great interest in our cybersecurity offering on the market, and deliver products and expertise that can protect countries, telecom operators and subscribers against attacks and unauthorized access attempts. Winning the Global Mobile Award (GLOMO) for Best Authentication and Security Solution for Mobile Networks at this year’s Mobile World Congress in Barcelona is yet more corroboration of our leadership in this segment.
Outlook
The market for data management in 5G and advanced cybersecurity is entering an exciting phase, where we can challenge established competitors and win market shares with innovative products and new business models. Our ambition is to increase revenues briskly, while maintaining good profitability, through organic growth in Network Solutions plus complementary strategic acquisitions that advance our market positioning.
Individual deals and licensing revenues may cause variations in revenues between individual quarters. This effect has increased as Network Solutions represent a larger share of our total net sales. Our long-term target of sales growth and an operating profit above 20 percent remains, but an uncertain macro environment and a weak first quarter means that we now judge it challenging to reach the profitability target during 2022.
The full Interim Report 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 Interim Report. The presentation will be conducted in English by Jan Häglund, President and Chief Executive Officer, and Ola Burmark, Chief Financial Officer, and will be concluded by a questions and answer session. It can be attended through a webcast or conference call 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: April 27, 2022
- Time: 8.30 a.m. CEST
- Link for webcast: https://financialhearings.com/event/43233
- Phone numbers for conference call:
+46 8 5664 2695 (Sweden)
+44 33 3300 9260 (UK)
+1 631 913 1422 PIN: 69736549# (USA)
References
Contacts
Jan Häglund, President and Chief Executive Officer
E-mail: jan.haglund@enea.com
Ola Burmark, Chief Financial Officer
E-mail: ola.burmark@enea.com
About Enea
Enea is one of the world’s leading specialists in software for telecommunications and cybersecurity. The company’s cloud-native products are used to enable and protect services for mobile subscribers, enterprise customers, and connected devices. More than 4.5 billion people rely on Enea technologies in their daily lives.
Enea is headquartered in Stockholm, Sweden, and is listed on Nasdaq Stockholm.
For more information: www.enea.com