Enea AB
STO:ENEA
US |
Fubotv Inc
NYSE:FUBO
|
Media
|
|
US |
Bank of America Corp
NYSE:BAC
|
Banking
|
|
US |
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
|
US |
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
|
CN |
NIO Inc
NYSE:NIO
|
Automobiles
|
|
US |
Fluor Corp
NYSE:FLR
|
Construction
|
|
US |
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
|
US |
TopBuild Corp
NYSE:BLD
|
Consumer products
|
|
US |
Abbott Laboratories
NYSE:ABT
|
Health Care
|
|
US |
Chevron Corp
NYSE:CVX
|
Energy
|
|
US |
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
|
US |
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
|
US |
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
|
US |
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
|
US |
PayPal Holdings Inc
NASDAQ:PYPL
|
Technology
|
|
US |
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
52 Week Range |
45
105
|
Price Target |
|
We'll email you a reminder when the closing price reaches SEK.
Choose the stock you wish to monitor with a price alert.
Fubotv Inc
NYSE:FUBO
|
US | |
Bank of America Corp
NYSE:BAC
|
US | |
Palantir Technologies Inc
NYSE:PLTR
|
US | |
Uber Technologies Inc
NYSE:UBER
|
US | |
NIO Inc
NYSE:NIO
|
CN | |
Fluor Corp
NYSE:FLR
|
US | |
Jacobs Engineering Group Inc
NYSE:J
|
US | |
TopBuild Corp
NYSE:BLD
|
US | |
Abbott Laboratories
NYSE:ABT
|
US | |
Chevron Corp
NYSE:CVX
|
US | |
Occidental Petroleum Corp
NYSE:OXY
|
US | |
Matrix Service Co
NASDAQ:MTRX
|
US | |
Automatic Data Processing Inc
NASDAQ:ADP
|
US | |
Qualcomm Inc
NASDAQ:QCOM
|
US | |
PayPal Holdings Inc
NASDAQ:PYPL
|
US | |
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
Welcome to the Enea Q1 presentation. [Operator Instructions] Now I will hand the conference over to the CEO, Jan Haglund. Please go ahead.
Thank you very much. This is Jan Haglund, and I'll be joined in this call by Ola Burmark, our CFO. We thank you for listening to this summary of the interim report January to March 2023. We will, in this call, as usual, summarize the key events of the quarter, go through the financial results. Ola will do that. And then towards the end, we'll point at way forward, trends in our industry and also give an outlook of our business. There will be a Q&A session at the end. So, to summarize the quarter from a financial point of view, we came in at net sales of SEK 248 million in the quarter with an EBITDA margin of 38% to good and strong results where a license deal in our legacy business operating systems had a significant contribution. Net debt at the end of the quarter was SEK 263 million, which is lower than previous quarters. Earnings per share was positive at 0.47. And here, there was an impact of, of course, higher interest rates that we all experienced. But we also had some special effects on revaluations of the debt in foreign currency as well as uneven distribution of profit between our different legal companies. Operating cash flow came in strong at SEK 97.5 million expected also as we communicated in the fourth quarter. And the R&D ratio was 26%, and that's the R&D spend in total in the company versus our net sales. So, looking back at an eventful quarter. I think a key news that also contributed to our financial results was the fact that we have now closed multiyear contracts with both our key customers in our legacy operating system business that provides stability and predictability in recurring revenue for years to come, which, of course, is good for us to plan the business. Another key news recently, in fact, after the quarter was the disappointing news that a customer in 5G cloud network data layer decided to communicate to us that they will stop the project, and therefore, we see a risk that the contract will be terminated. This is, of course, disappointing, but we continue to work with other lead customers and even this project has helped us to have the market-leading solution in network data layer. Quarter 1 in our industry is heavily influenced by the trade show Mobile World Congress. We increased our participation and saw a lot of activity, including security. Security is a key area growing in terms of attention in the industry, and we also have made good progress and see our business developing well one of the external events we had here was as a speaker in the Mobile World Congress Security Conference. And I'll be also coming back to the fact that at Mobile World Congress, several of the hyperscalers, so those are providers of cloud platforms, including Microsoft, are taking steps into telecom industry. And we are proud to be a partner in the Microsoft program that they called Nexus, which hopefully will for them and for us open doors into other customers. AT&T was a key proponent and endorser at the Mobile World on – So, a bit more details about the operating system business. As mentioned, we closed contracts, long-term contracts with both our key customers. They are a little bit different in nature with one key customer. It's a 3-year contract valued at SEK 60 million or corresponding SEK 20 million per year, and that replaces previous contracts that terminated in December last year that last year generated around SEK 25 million. So as seen, it is a declining part of our business where we now have more long-term predictability. The other contract has a different nature. It is also over 3 years. It is valued at a total of EUR 6.6 million, of which EUR 4.8 million is license revenue that contributed to the first quarter of 2023. The remainder will be booked during a 3-year period. Now while the security part of our business develops well, we do see challenges in kind of the telecom market in general. We see also that, that has affected not only now, but during the last 2 years that our Network Solutions business has not developed as we expected. Part of the reason that we have talked about before is that 5G investments are delayed, in particular, 5G investments in the central parts of the networks called the 5G stand-alone core networks. And we do see examples of operators continuing to sweat the assets, continuing with old systems and traditional suppliers, and it does make it harder in the short term for companies like Enea to break in. And at least we believe that the stopped project in network data layer that I just talked about is an example of this. Now during the second quarter, we will be carrying out a strategic review of our telecom business to assess the market development and also the potential of our investments. It's too early to say what the results will be, but we will, of course, as usual, prioritize growth areas and take necessary steps to secure profitability also in this area I mentioned Mobile World Congress. All of us did not have the chance to be there. I was there together with a strong team from EA 90,000 visitors were at the conference. It's almost at the same level as before the pandemic has started. And to share, there were a number of trends that I think were quite visible. One was the fact that big hyperscalers or cloud providers are stepping into telecoms industry. That will create a new dynamic and also more competition. I regard that as positive for us being a cloud-native software provider. I think another king was energy efficiency. It's on everyone's agenda. And we had strong messages and solutions to help service providers on rationalizing and being more efficient on energy. And then perhaps finally, I'd like to mention security where many people, not only vendors but also service providers governments and authorities are talking about security and how that part of our industry needs to have more attention and how mobile industry, in fact, is a national concern in terms of security. We had a higher participation than previous years. We had significant media attention. We had a lot of customer meetings, and we launched a few new products One of the key things that was public at Mobile World Congress was, in fact, an initiative by Microsoft. We all know Microsoft from enterprise business and from our computers, but Microsoft also have taken significant steps in the telecom industry, and they launched a program now called Nexus which is essentially taking their Azure cloud operating system into telecoms industry. They're creating an initiative now whereby vendors can certify or pre-certify their software on this platform. And we're proud to say that we are one of the first to be on that platform. And we can do that and we could do that, thanks to being cloud native, thanks to having products really adapted not only to one cloud environment, but several. And as you see here on the picture, this was endorsed at the show by AT&T, and we're proud members of a select group of partners in this program. And what this means is that we will be part of kind of a marketplace that will be offered also by Microsoft for other telecom service providers that want to take the steps into using this environment and ecosystem of applications. A lot has happened in security during the quarter. I will not be able to go through all of them, but some of the highlights include the security conference at the Mobile World Congress, where we were one of the keynote speakers, a lot of attention and audience at that one. Another interesting event during the quarter was a parliamentary hearing at the EU parliament. It's called PEGA, an inquiry into the use of SPYWARE. And again, we were called as experts into that public hearing. It can be seen and read about in -- on the web. Australia have taken initiatives to strengthen their national security also there where we invited as a contributor to their long-term strategy. There are numerous conference going on, and we were invited to for speaking spots at 2 different conferences of the mobile ecosystem forum, and there is industry activity also around awards. And we have during the quarter 1 or less than 3 awards. So, all of this in one quarter is pretty impressive to see. And as mentioned, we do see a good development of our security business and on the back of investments we have done and previous acquisitions in this space. So, with that said, we should go a little bit more into details of financial results, and I'll hand it over to our CFO, Ola Burmark. Ola, please go ahead.
Thank you. Net sales in the quarter increased by 13% currency adjusted versus the same quarter last year. We reached SEK 248 million, which is a growth of 18% in floating currencies, but 13% in comparable currencies, as I said. We had total revenues of NOK 254 million. The difference here between net sales and revenues are mainly explained by currency effects and currency gains. If we look into our 2 product segments, we see Network Solutions, which had a weak first quarter where we declined by 13% organically and currency adjusted, while the deal within OSE very much contributed to a strong quarter for our operating systems. So, if we look in depth into these 2 areas within Network Solutions, we had sales of SEK 164 million. It is a decline by 8% versus last year. And then, as I said, 13% in organic and fixed currencies. It is split in 3 different say, revenue streams, license being 58% versus 81% last year, and this is where we see the decline. Those of you that followed up last year know that we did announce a large deal in the first quarter last year and -- which was very much done -- we have a strong comparable figure here in license 2022. Support and maintenance, SEK 71 million. It is very much growing. This is, of course, recurring revenues compared to 53% last year and then professional services, which is a decline then versus last year. Network Solutions this quarter represent 66% of the net sales in the total quarter. But that's very much driven on the deal with operating systems. Going forward, Network Solutions will now -- if it was the lion part before, it will be even bigger going from second quarter and going forward -- if we look into the operating systems, which then had a positive, quite significant impact in the quarter. We did have sales of SEK 83.6 million compared to SEK 33 million same quarter last year. So, it's a hefty increase with 153%. -- and as mentioned, this is driven by license revenue from one of our key accounts. And those key accounts, of course, in the quarter stands for a very high part of the revenue in the Products segment. On the profitability side, we report an EBITDA percentage of 38% in the quarter, corresponding to SEK 94.4 million. It is an increase versus last year, where we reported SEK 56 million in nonrecurring sort of excluding nonrecurring, but including nonrecurring SEK 32 million. So, it is definitely a strong quarter in terms of profitability. There are no nonrecurring items in this quarter. EBIT, which is basically EBITDA but less depreciations and amortizations also came in stronger than last year, where we report SEK 47 million in the quarter versus SEK 14.6 million last year. Earnings per share, EUR 4.7 million compared to minus EUR 38 million last year. And we're still having sort of 2 different EPS scores since we divested our software development business in the second quarter last year. So, looking at the continuous operations last year, it was minus EUR 61 million in EPS compared with actually to be fully comparable with the 47 in EPS. We continue to delivering strong cash flow. So, the cash flow before the changes in working capital was almost SEK 70 million, much stronger than the same quarter last year. And also, after change in working capital, we actually report working capital of SEK 97 million. We have invested about SEK 32 million or NOK 33 million in our operations. It's mainly contributed to product development, a slight increase versus last year. Financial activities is mainly that we actually use the surplus cash either for investments and the remaining part to reduce our interest-bearing debts. That means we have a net cash flow for the quarter of SEK 24 million. The financial structure is still healthy with interest-bearing bank loans amounting to SEK 520 million, which is a decrease versus last year where we have almost SEK 700 million. We report cash of NOK 260 million almost in the quarter. So that means we have a net debt of SEK 263 million. And as you see, that was EUR 554 million same quarter last year. We still have unutilized credit facilities amounting to approximately SEK 350 million by leaving the quarter. Our equity ratio is 68.9%, and the sort of leverage KPI, net debt-to-EBITDA is 0.7 before.
Thank you very much, Ola. So, wrapping up and looking a bit ahead. We have, during the quarter, a uplift published book. In fact, it's a physical book, but it's also readily available on the web, and I'll use the opportunity here to point everyone at this. I encourage you reading about this. We have written about 7 trends that we believe are highly relevant for our industry, but also very much relevant for our business. You'll find a lot of details about security. Security from different angles, security in terms of signaling security into networks, messaging security that hits us as providers, security from an IoT, so Internet of Things angle because IoT devices, in fact, is a new and growing security. You'll also see how we believe that the Internet of Things market will develop after some hype that has been during the more recent years, but we believe that, that will still be an interesting market that will create business opportunities going forward. And finally, you'll be able to read also how we see data as an asset. How important it is to think about to be able to and prepare for making data an asset and the exposure of data is a key thing for anyone that wants to monetize in a world of AI and automation. So again, I'll point out the link here for more details. Our strategy stands firm. We are a software specialist where we have, from the start, focused on providing products that are cloud native, which means that they are prepared for many or any cloud environment. And the proof point now during the first quarter in the announcement on the first with Microsoft Nexus is a clear example of how we have benefited from that. We aim at leading positions to be really good at what we do. We specialize and our best-of-breed in areas like mobile core and security for mobile networks. And we have several leading customers that we're working closely with in the development of new and market-leading products. And global presence is another cornerstone of our strategy. We have, since last year, significantly increased the presence in markets by growing selectively our sales and go-to-market organization. We believe that we now have stronger presence in many of the key markets with many of the key customers, and we also do see a growing opportunity funnel coming out of that. So, to summarize into our guidance, into our view of the business. Our goal remains that in the coming years, generate double-digit growth in Network Solutions, an EBITDA margin over 35% and strong cash flows. Over time, we also aim to make complementary acquisitions to further strengthen our market position. In the short term, we do have significant -- we do have significant uncertainty in the global environment, and we do see challenges in the telecom market, and they do affect our business. However, our objective for 2023 is to achieve a turnover and an EBITDA result in line with the previous year. With that, I thank you for listening and hand back to the moderator.
[Operator Instructions] The next question comes from Simon Granath from ABG Sundal Collier.
Thank you, operator. Good morning. Jan and Ola hope all is well. Initially, on the risk of termination of the 5G contract, could you comment on potential reasons behind this development to the customer build another solution in-house? Could you look to use a product from your competitor? What comments have you received here.
Thank you Simon, for the question. I mean, we've been working closely with this and other customers in the area of network data layer since 2020. And we've made a really good progress in this project. And in fact, in other customers, we've put this product into commercial operations. Those are customers that have been faster to put this new technology into commercial operation. And so, I think we're proud to say that we have the leading solution for network data layer. I mean the customer did communicate now recently that the project will be stopped, and we assess that there is a risk that the contract may be terminated. I mean we were not expecting this to happen. We were not expecting the customer to stop the project. It's really not for us to comment on the customers' reasons, but we can only speculate that it's -- it's related to commercials in relation to the legacy vendors.
And how much customization has been entailed with these products? If there is a lot may use such achieve skills and experience and then upsell this to other customers?
This is product development. Our strategy is to develop the software products. So, the network data layer offering is a product that we develop and, in fact, deploy with several customers. And this experience even with the customer that has now decided to stop the project has helped us since 2020 to develop the market-leading product. So, we continue to work towards other customers that we have and opportunities with additional customers going forward.
And the telecom market has now been weak for some time, and you mentioned that operators are sweating assets, et cetera. Do you share the view of some of the larger players in this industry, which talks about the prospects of a better overall 5G market in H2 and then into 2024? Or is that early to say at the current stage? And I want to emphasize that we talk about the overall market here and not particularly your segments.
I've seen the reports from other large customers, and there is a different dynamic. Our focus on strategy is on software. It's on software for the central parts of the network. And the central part or sometimes it's called the core networks, has a different dynamic than the radio networks that some of the other larger players in the industry may be highly dependent on. So, we're focusing on the software for 5G core networks, in particular for 5G stand-alone networks. And there is no doubt that this market has developed slower than anticipated during the last couple of years. And that has had a negative impact on our overall network solution development. We feel now that given this, we will do sort of an overview of strategic analysis of our telecom business. We'll do it now during the second quarter. We look at the market development, and we also look at the potential of our investments. And it's really too early to say what the result will be -- what will be of that.
Okay. That's fair enough. And I believe you update on the cybersecurity business. Could you comment on the activities to order lead times? Have these shortened or gotten longer in light of recent geopolitical events?
We believe cybersecurity is not just an interesting but a necessary area for all of us as citizens and companies and countries. And I think the positive thing is that we see that the market is reacting. We see more activity. We see more activity from service providers that, of course, play an important role to protect their customers. We see more activity from authorities that play an important role in setting regulation and putting, of course, if possible requirements to the industry. And we even see more activity from politicians. What I mentioned before on the EU Parliament is a good example. I think even today, there are politicians in the press in Swedish -- leading Swedish media that are out talking about cybersecurity in one of the main newspapers [Indiscernible]. So. all of this, we hope and expect will translate also into higher business activity. And during last year, you will remember also that we did announce a number of major deals relating to cybersecurity. For example, the one we did in late quarter 4 in Northern Europe...
Perfect. And then just final from me. I note that your headcount continues to drop quarter-over-quarter. Could you give some more color on what area segments, et cetera, that this relates to? And also, on your guidance of a relatively flat EBITDA in 2023, does that include any OpEx reductions...
So, the headcount comparisons, at least year-over-year there, first of all, you need to note then that the divestment of our software development services has a major impact on the comparison. The software development services were divested last year. That was a sort of resource-intensive activity and those resources associated with that part of our business obviously went to the acquirer of the business. Having said that, I mean, we continue to rationalize, and we continue also to move resources to new and growth areas. For example, we did during last year, reduced investments and reduced activity in our legacy business. We believe that we could do that in new ways with a bit fewer people. And the corresponding, we increased resources in particular, go-to-market resources during last year to increase our presence with key customers. But those are not big numbers of people that we increase with. It's rather very experienced people that have experienced since many years of working in go-to-market activities. As I mentioned, we will now, given the challenges on the telecom market, do a strategic review during the second quarter. It's a bit too early to say what the result of that will be including our own spending.
Thank you so much that's all for me.
The next question comes from Jesper Von Koch from Redeye.
Good morning, guys, and thanks for the presentation. So, let's start with operating systems, which, I mean, excluding for a one-off license fee, the revenue was still like quite significantly higher than I had estimated. Is there anything unusual in the remaining numbers there?
Operating systems is on a declining path. It is legacy business, and it has been declining step-by-step during the last couple of years. Having said that, we have 2 parts, you can say of this. We have our key customers, 2 key customers and those we talked about where we now have long-term agreements that give predictable revenues. Then there is also a longer tail of customers that rely on our operating system. And the trend during the last more recent quarters has been that, that longer tail has declined a little bit slower than our key customers because our systems are in there and our -- and those customers depend on the support and sometimes upgrade activities of our organizations. So, I think it's a continuation of the same trend that you have seen during several quarters now.
Okay. So, it should be some upgrade activities on some of the smaller ones...
Selected, yes.
Okay. Good. And then I mean as you say, like the other group of customers like except the major accounts of the Nokia Ericsson, they have been more stable. But could you just elaborate on how you view the future of this group of customers? Like how [Indiscernible] will they be dependent on this technology? Do you think...
As I said, we see that the longer tail of customers, in some cases, smaller customers are less in a hurry to use other solutions, in particular, open source, which is then what the lead customers or the key customers have been using to step-by-step replace our legacy operating system. That means that we expect this business to be there for some time for probably several years, and we expect it to continue to decline. But we will continue to serve all our customers in a good way, both from a support point of view if there are issues or questions around that they need for the development of their applications. And there may also be selected upgrades to the software to our software. That is the same trend that we have seen during the last couple of years and will continue. But I need to be clear again that with this business is on a declining path, we do not have any other expectations.
Okay. And then I mean you also talked about making a strategic review of your portfolio in Q2. Could you just elaborate on this? And is it fair to assume that there are parts of your portfolio and network solutions that do not develop well, which you could possibly divest? Or yes, what are your thoughts?
I mean, the telecom market is and has been challenging. I think we've been talking about that before in several quarters, and I see that other players in the industry are also taking from talking about it from their angles, of course. What it has and some of the underlying reasons we've also talked about before and we underline that also in this report that the movement to 5G takes significantly longer time than anticipated. And here, I'm not talking about 5G radio networks, which are deployed in many leading countries. But I'm more talking about the new 5G architecture can be called 5G stand-alone. That's primarily what we're addressing. That's the architecture where you introduce new types of software, new types of interfaces towards and between applications. You are targeting and optimizing for cloud or cloud technology, which is more suited for automation, for continuous integration, continuous deployment, all those kind of forward-looking things, which everyone agrees is the future. So, there is no doubt that the industry is moving in this direction. But having said that, if you're in a situation right now as a customer with increasing OpEx, increasing interest rates, the investment climate for doing those investments is more difficult than was expected a couple of years ago. So many customers are there for choosing to rather, as I said, sweat the assets, rather continue to use old technology for a while longer to use traditional vendors for a while longer rather than challenging with smaller innovative companies like Enea. So, it has made our business environment a bit more difficult. Having said that, we are working with lead customers with all parts of our portfolio. We continue to do that. But in our financial numbers, you have seen that the Network Solutions business has not been developing as we wanted during the last 2 years. And we attribute that primarily to the sort of pure telecom business. I mentioned before that the security business has actually been developing quite well. And that gives us reason then to do a strategic review and look more closely at the telecom market to look at the outlook. And of course, in that, we will be looking through our investments and see what is the potential of all those investments.
Okay. So, it's mainly the 5G portfolio rather than something related to cybersecurity.
Yes.
Okay. Good. All right. That's everything for me. And we like go forward.
Thank you, Jesper.
[Operator Instructions] There are no more questions at this time. So, I hand the conference back to the speakers for any closing comments.
So, we thank everyone for listening. We have just closed a quarter with a lot of activity with strong financial results, driven by successful closing of long-term contracts in operating systems and a lot of sales and marketing activities that we are confident will contribute to our business going forward. Again, we thank you for listening, and wish you a continued good day.