Annual Statement 2019

Stockholm, Sweden, January 30, 2020 Enea® (Nasdaq Stockholm: ENEA)

Enea’s revenues pass SEK 1 billion for the first time in its history

Fourth quarter 2019

Full Year 2019

Comments from Jan Häglund, President and CEO

Enea’s revenues in the fourth quarter of 2019 were SEK 260.8 million, which means that full year revenues were SEK 1,012 million. Passing SEK 1 billion of revenues is an important milestone, and a corroboration that our growth strategy is generating results. Successful acquisitions combined with new investments in product development have expanded our addressable market and added revenues from a significant base of new business customers worldwide. The fourth quarter of 2019 also demonstrates how our business model, with its high share of recurring software revenues, enables stable revenues with high profitability, without any   individual deal impacting our quarterly earnings.

Our fourth quarter operating margin was 21.8 percent (25.2 percent for the full year), which means we exceeded our ambition for the full year in every quarter of 2019. The success factors underpinning our solid profitability are software being a large share of our business, with its high gross margin, coupled with an efficient cost structure. Enea’s robust share price performance in recent months caused higher cost provisioning in the fourth quarter than previous quarters, related to our long-term incentive programs. Earnings per share for the full year were SEK 8.47, Enea´s highest ever.

Efficiency and focus

Enea is continuing its transformation, with a growing revenue share generated by the Network Solutions product group (62 percent of total revenues in the fourth quarter). We´re seeing several growth opportunities, in 5G and virtualization platforms for example, and accordingly, are upscaling R&D investments to address the standards set by early markets and customers. Our hiring is focused on our Eastern Europe R&D centers (Croatia and Romania) as well as India, because we´ve had positive experience of a high level of engineering competence for a competitive cost in these countries. We´re also phasing out a small-scale R&D presence in Germany to increase efficiency. Our total planned investments in 5G applications, data management and virtualization platforms are higher than the revenues we expect from these products 2020. Our ambition is for revenues in these segments to gather pace in the next three years, but that these investments will make a positive earnings contribution as early as in 2021. All these new products are well positioned to be key components of our organic growth through the coming years.

The Operating Systems Solutions product group remains important to Enea, although its revenues and share of total sales continue to decrease (24 percent of total revenues in the fourth quarter). This is mainly because our key accounts are growing their usage of open source software to complement and replace Enea’s OSE product. We´re continuing to realign our R&D capacity to OSE customer needs, so we can free up skills for new initiatives, in segments like virtualization platforms. We´ll also be downscaling our headcount in Operating Systems in Sweden to adjust our costs and resources to a smaller business volume.

Overall, our efficiency actions will yield estimated restructuring costs of SEK 15 million, which we´ll expense in the first quarter of 2020.

New products and customers

R&D and innovation are the foundations of Enea’s future growth, and our experts frequently create new offerings and products ahead of the competition. One great example is from as recently as November, when Enea became the world’s company to launch video optimization of the new Apple TV+ streaming service. This agility is possible because of our unique competence and flexible products that adapt readily to satisfy new market standards. Our new solution for enterprise networks, based on a combination of Enea’s NFV Access platform and application software from several other providers, is another example of our innovation, which we demoed at an industry event in October. The freedom of choice between different applications makes our solution unique and we´re noting growing interest from customers, including telecom operators, for this new generation of enterprise solutions.

A stronger brand

Enea organized a Capital Markets Day on 5 November, the first for the company in several years. We arranged the CMD to offer a deeper understanding of the company’s new direction, following the investments we´ve made in new markets and product segments over recent years. Interest in Enea is really satisfying and we´ll continue to attend and organize investor meetings, in Sweden and other countries.

The Mobile World Congress in Barcelona, the yearly gathering for the whole telecom industry, is in February. This year, the focus will be on 5G and we expect great interest in our 5G Data Management offering. Our presence at the Mobile World Congress will be under single brand – Enea – demonstrating that our recent acquisitions have now been successfully integrated.

Outlook

We´re maintaining a positive view of the market for software in telecom systems and enterprise networks, although large contracts can create variations in our financial results between individual quarters. We see potential in our new solutions for virtualization, cyber security and 5G, so we´re growing our investments in R&D and innovation to secure long-term organic growth. We´re also continuing to screen acquisition targets that can strengthen our market positioning and long-term earnings capacity.

Our goal for the full year 2020 is to achieve revenue growth on 2019, and an operating margin above 20 percent.

The full report can be found as an attachment in this press release and published on www.enea.com.

Press and analyst meeting

Press and financial analysts are invited to a press and analyst meeting where Jan Häglund, President and CEO, will present and comment on the report.

Time: Thursday January 30, 2020 at 08:30 am CET.

Link to Audiocast: https://financialhearings.com/event/11547

Phone numbers:

SE: +46856642704 UK: +443333009032 US: +18338230586

This information is information that Enea AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set below, on January 30, 2020 at 7:20 am CET.

For more information contact:

Jan Häglund, President and CEO

E-mail: jan.haglund@enea.com

Lotta Trulsson, Executive Assistant
Telephone: +46 709 710436
E-mail: lotta.trulsson@enea.com

About Enea

Enea is a world-leading supplier of innovative software components for telecommunications and cybersecurity. Focus areas are cloud-native, 5G-ready products for mobile core, network virtualization, and traffic intelligence. More than 3 billion people rely on Enea technologies in their daily lives. Enea is listed on Nasdaq Stockholm. For more information: www.enea.com   

Enea®, Enea OSE®, Netbricks®, Polyhedra®, Zealcore®, Enea® Element, Enea® Optima, Enea® LINX, Enea® Accelerator, Enea® dSPEED Platform and COSNOS® are registered trademarks of Enea AB and its subsidiaries. Enea OSE®ck, Enea OSE® Epsilon, Enea® Optima Log Analyzer, Enea® Black Box Recorder, Polyhedra® Lite, Enea® System Manager, Enea® ElementCenter NMS, Enea® On-device Management and Embedded for LeadersTM are unregistered trademarks of Enea AB or its subsidiaries. Any other company, product or service names mentioned above are the registered or unregistered trademarks of their respective owner. © Enea AB 2020