Annual Report
2023
ANNUAL REPORT 2023 | 1 |
Content
ENEA IN BRIEF
A WORD FORM THE CEO
BUSINESS CONCEPT AND STRATEGY
THE MARKET
PRODUCTS AND SERVICES GLOSSARY EMPLOYEES
THE ENEA SHARE DIRECTORS' REPORT SUSTAINABILITY REPORT RISKS AND RISK MANAGEMENT
CORPORATE GOVERNANCE REPORT
FINANCIAL REPORT
04
06
08
12
14
17
18
20
24
30
46
50
60
30.
SUSTAINABILITY
REPORT
- Sustainability in our business
- Governance, standards and priorities
37. The UN global goals for sustainable development
38. | Overview goals and performance indicators |
39. Sustainability in focus
41. EU taxonomy regulation
60.
FINANCIAL REPORT
70. Notes
- Declaration by the board of directors and CEO
- Audit report
- Five year summary
- Financial definitions
ANNUAL REPORT 2023 | 3 |
04.
ENEA IN BRIEF
913
SEK Million
Sales
34
percent
EBITDA margin
25
percent
Research and Development
Headquarters: Stockholm, Sweden Founded: 1968, Sweden Workforce: 463
Stock exchange: NASDAQ Stockholm
4 | ANNUAL REPORT 2023 |
ABOUT ENEA
Our vision is simple, namely to make the world's communication safer and more efficient.
We develop, sell and deliver innovative and reliable solutions that improve the security, performance and intelligence of communications. We offer firewalls to protect mobile networks against cyber attacks, products for classifying traffic, for optimizing video traffic as well as products that protect and carrier Wi-Fi networks. Our customers are more than 100 suppliers of communication services and products worldwide. This means that roughly 4.5 billion people worldwide rely on our technology every day, when they connect to mobile networks or use the internet.
Enea was founded in 1968 in Sweden and has a long experience of technical innovation and development, something that is of great importance to the company even today. Among other things, Enea was involved in sending Sweden's first email and was involved in developing the first mobile version of HTML. The product portfolio and global market position have been strengthened in recent years through a number of acquisitions. Enea is currently present in over 20 markets worldwide and has its headquarters in Kista, Stockholm, Sweden. The company has more than 30 nationalities among its 463 employees, with the largest Enea offices in Sweden, Ireland, United Kingdom, France and Croatia. Enea is listed on NASDAQ Stockholm.
ENEA IN BRIEF
Enea's vision is to make the world's communication safer and more efficient.
HEADQUARTERS
Region | Country | City | Product | Sales |
development | support | |||
Africa | South Africa | Johannesburg | ||
Europe | France | Paris | ||
" | Ireland | Dublin | ||
" | Croatia | Osijek | ||
" | Romania | Bucharest | ||
" | Spain | Madrid | ||
" | United Kingdom | Belfast | ||
" | Sweden | Stockholm | ||
" | Czech | Wien | ||
" | Republic | Brno | ||
" | Germany | Berlin | ||
" | Austria | Vienna | ||
Region | Country | City | Product | Sales |
development | support | |||
Middle East | United Arab | Dubai | ||
Emirates | ||||
North America | Canada | Toronto | ||
" | USA | Dallas | ||
" | USA | Redwood city | ||
" | USA | Washington | ||
DC | ||||
Northeast Asia | Japan | Tokyo | ||
Southeast Asia | India | Hyderabad | ||
" | India | Pune | ||
" | Malaysia | Kuala Lumpur | ||
" | Singapore | Singapore | ||
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06.
A WORD FROM THE CEO
During"the year, threats to cybersecurity have escalated from already high levels globally, and with it a strong increase in public awareness and action by regulatory authorities worldwide. Enea has both the products and the expertise to address these challenges.
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DEAR SHAREHOLDERS
We have a turbulent year behind us. 2023 was another year of war in our surrounding world and a stressful economic climate. Even for Enea, 2023 was troublesome. At the beginning of the second quarter, one of our major telecom customers announced that it intended to cancel a project that was important to us. The announcement came unexpectedly and immediately burdened our income statement but also our plans and we needed to review our operations in the telecom business. Within the framework of this review, it became clear that we also needed to consider deteriorating macroeconomic prospects with increased required rates of return (WACC), delays in the 5G market and consequences of the canceled project. In connection with this, the board also decided that a change in the position of CEO needed to be made and I reentered as acting CEO of Enea.
GREAT CUSTOMERS AND EMPLOYEES
What immediately greeted me were some of the world's most successful companies. Companies that have chosen to buy Enea's products and services because they are the best on the market. Our customers! I also got to meet again on a daily basis our fantastic employees who develop these products and who take care of our customer relations. Always ready to do their best so that our customers get the most effect from their investments and always ready to represent Enea in the best possible way. It is truly a privilege to work with all the talent and innovation power gathered in these relationships. Together, we want to develop Enea into a leading supplier of software for cybersecurity and telecoms.
ENEA IN THE CENTER OF THE EVENTS
During the year, threats to cybersecuri- ty have escalated from already high levels globally, and with it a strong increase in public awareness and action by regulatory authorities worldwide. Enea has both products
and competence to address these challenges address these challenges with. To guide authorities and telecom operators on why and how to improve communication security and safety, we have written a handbook "Why signaling security will make or break network re-silience", and published a guide on how to use traffic management for parental controls and child protection, and practical insights into proactive network protection, based on an in-depth analysis of the "hybrid warfare" observed in the Ukraine conflict. The last few years have been challenging to say the least for many of our customers, and if you add the rollout of 5G and the rapid development of AI, the future becomes even more challenging and at the same time even more exciting.
"It really is a privilege to work with all of the talent and innovation power that is collected in these relationships."
AI ACCELERATES THE MARKET
Cyber attacks based on so-called phishing, social engineering, or malware will become even more dangerous with the increasing use of artificial intelligence. It also applies to identity fraud, data breaches and distributed denial-of-service attacks. In October 2023, we launched a significant research study on the opportunities and implications of
AI in cybersecurity. The study and related industry seminars showed significant concern about the use of AI in offensive technologies, and that a majority of the cybersecurity industry intends to increase investment in AI for defensive technologies, where Enea's software plays an important role for software vendors and providers of communication services. We continue to invest in this area and in 2023 developed a ground-breaking AI- powered solution for A2P (Application to Person) messaging. This enables our CPaaS (Communications Platform
as a Service) customers to optimize their billing based on message category, and enables additional compliance with certain national regulations.
POWER OF INNOVATION In order to strengthen our market position within DPI solutions (Deep Packet Inspection) for fixed and mobile network operators, during the year we also developed new functions within our platform for traffic management. In particular, we have expanded our DPI capabilities in the areas of monetiza- tion, revenue leakage protection and fraud prevention. This will open up new and significant business opportunities.
"We want to be agile, dynamic, and challenging established competitors with open, innovative and robust solutions. Customer focus and innovation power is crucial for us."
The foundation of this feature is our own world-leading embedded DPI technology. Based on this, we have also developed another new cyber- security offering, the Enea Qosmos Threat Detection SDK. It is a software development package that paves the way for new approaches to prevent data breaches. The offering will enable us to target new market segments with the potential for new revenue as well as further strengthen our position in cybersecurity. Already at the end of 2023, we started to see positive effects of these product innovations and we will continue to invest strongly in our product development in 2024.
GOOD EARNING CAPACITY WITH STRONG CASH FLOWS We basically have a business model with high scalability and good earning
capacity. In 2023, we had a gross margin of 77 percent and an EBITDA margin of 34 (35) percent, which also shows that our long-term goal 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 in 2023 we have capitalized SEK 41 million less than we did in 2022. If you adjust for this, our EBITDA result is actually stronger than in 2022. This despite slightly lower revenues, which shows both good earning power and well- implemented efficiency measures. The recent years' investments in automation and the centralization
of competence to our development center in Croatia have created good conditions for this streamlining. In fact, we now have higher quality and more robust deliveries than before. During the fourth quarter of 2023, we also carried out further efficiencies and the cost base when we enter
2024 is approximately SEK 60 million lower than twelve months ago. This is despite the cost increases that result from the prevailing inflationary situation.
During 2023, we had an operating cash flow of SEK 263 million. Our cash at the end of the year was SEK 262 million and our net debt SEK 209 million. In other words, we have been able to implement operational efficiencies, a buyback program of our own shares and at the same time strengthen our financial position compared to the start of the year.
THE WAY FORWARD
We want to be agile, dynamic, and challenge established competitors with open, innovative and robust solutions. Customer focus and innovation are crucial for us. Our customers should feel that they get the best support before, during and after a deal with
us. We have a strong market position within exciting areas that affect many people's everyday lives in several ways. Our product portfolio is well positioned in a world where video traffic and increased demand for security solutions drive mobile development. We also have a global organization with very competent employees and, at least as important, many successful customers who constantly challenge and develop us. In combination with our earning capacity and our strong cash flows, this makes us optimistic about the future.
We also want to create value for our many shareholders and be a self- evident choice for those who want to invest in exciting, world-leading technology with proven cash flows. For a period, the macroeconomic climate has had a dampening effect on the demand for our products, and it is too early today to comment on a possible improved willingness to invest among our customers in 2024. But our long- term goal remains unchanged. We want to achieve double-digit growth in our focus areas and an EBITDA margin above 35 percent with strong cash flows.
"...an obvious choice for those who want to invest in exciting, world-leading technology with proven cash flows."
I would like to conclude by thanking all our shareholders for your trust. 2023 has been a particularly trying year and your trust means a lot to us - thank you!
Anders Lidbeck
Acting President and CEO
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08.
BUSINESS CONCEPT AND STRATEGY
Enea's vision is to make the world's communication safer and more efficient.
8 | ANNUAL REPORT |
BUSINESS CONCEPT AND STRATEGY
Software for telecom and cybersecurity
OUR GROWTH STRATEGY
People, businesses and societal functions all over the world are increasingly dependent on secure and reliable digital communication. The trend towards higher traffic volumes and more and more connected devices is expected to continue, which creates driving forces for new investments in technology that protect and make communication more efficient. Our business idea is to develop and sell software that protects and streamlines communication in mobile and corporate networks. Technology shifts towards cloud solutions, AI and the fifth generation mobile networks (5G) are changing the dynamics of markets that were previously dominated by a few companies. Traditional solutions, often based on components from a single supplier, are increasingly being replaced by open, cloud-based systems where different companies contribute specialized software. As a leading software supplier, we are well positioned to benefit from this development.
THE KEY AREAS
Our growth in recent years has been driven by the Network Solutions product group, whose turnover has grown thanks to a combination of our own investments and strategic acquisitions. The strategy for these investments is based on identifying and focusing on areas where there is both underlying growth and good profitability, as well as an opportunity to go from challenger to market leader. One example is traffic management in mobile networks, where a steep increase in video traffic combined with rising operating costs creates demand for video optimization among mobile operators worldwide. Another example is the classification of network traffic, a central function of most security solutions. A third example deals with cybersecurity for mobile networks, where increased traffic exchange between operators leads to new security threats.
What all these areas have in common is that today we have a world-leading position and a market-leading product portfolio.
Enea focuses on a limited number of well-selected key areas and strives for a leading position within these.
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BUSINESS IDEA AND STRATEGY
INVESTMENT AREAS
An important investment area for us is cybersecurity. Here, in recent years, we have substantially strengthened our market position at the same time as the need for improved security
in mobile networks is continuously increasing throughout the world. We are well positioned within this growing market and we will to continue our efforts to gradually broaden our offer and expand our customer base. Artificial Intelligence is an area of technology that has an accelerating importance in this market, as well as in most of our business areas.
We will therefore increase our rate of investment precisely within this technology area. Another important area of investment for us is securing the competitiveness of our products in the emerging 5G networks. Our customers must feel secure with their investment and that our products deliver regardless of the generation of the telecom network. This is an important part of our product strategy. In 2024, we will also strengthen our portfolio for traffic management, to create even greater opportunities for our customers to actively work with their traffic flows and thus also their revenue generation.
BUSINESS AND SALES MODELS
Our business model is based on the development and sale of software. Most often, the software is licensed to the customer, where recurring revenue is created with time and volume-based licenses, production licenses, as well as technical support and maintenance. We also provide software as a service (Software as a Service), where the customer pays for useage and the software is provided using cloud-based technology. This applies above all when we sell our product outside the telecom industry.
We work in parallel with two different sales models. The first is about direct sales aimed at telecom operators and service providers in key markets in North America, Europe and Asia. We have continuously strengthened our sales organization and have large-scale implementations and long-term deals with many of the world's leading telecom operators and service providers. In the second sales model, our software is delivered in collaboration with selected partners; both large system suppliers where we complement their portfolio and specialized implementation partners. This
makes it possible to offer products and solutions to customers and in markets that we would have difficulty reaching on our own.
ACQUISITION
Our strategy is based on creating long-term, organic growth within the network and security segments. At the same time, complementary acquisitions are an important way to increase the growth rate, and in recent years we have successfully acquired and integrated several companies in these areas. With a strong financial position, we have good opportunities to finance further acquisitions and potential acquisition candidates are continuously evaluated.
Business concept
Our business concept is to sell proprietary software for telecom and cybersecurity, either as a product or as a service.
10 ANNUAL REPORT 2023
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Enea AB published this content on 29 April 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 29 April 2024 12:18:39 UTC.