Release Date: July 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Enea AB (LTS:0RP6, Financial) reported a 14% organic growth in Q2 2024.
- The company achieved a 35% EBITDA margin for the quarter.
- Earnings per share increased to SEK1.63, significantly higher than the previous year.
- The security business saw a 15% organic growth, aligning with long-term financial ambitions.
- A significant $2.9 million license expansion deal was secured with a large North American customer.
Negative Points
- Operational cash flow decreased to SEK35 million from SEK77 million the previous year.
- Net cash flow was negative at SEK12 million compared to SEK20 million last year.
- Support revenues in the operating systems segment were lower than expected.
- The company made a provision for doubtful debt amounting to SEK8 million.
- The financial environment remains challenging, particularly in the telecom industry.
Q & A Highlights
Q: Can you elaborate on the Stratum product deal and its significance?
A: The contract with the customer, signed in 2020, involves our UDR product. The recent extension is due to the customer's need to increase license capacity for their 5G users. This deal underscores the product's competitiveness and the customer's satisfaction with it. However, it's important to note that this product is just one of many in our portfolio.
Q: How do you view the competitiveness of the Stratum product and the market trends?
A: The Stratum product remains highly competitive, especially in a multi-vendor 5G network environment. Despite market delays and economic challenges, we believe the product is well-positioned. However, the telecom industry has seen larger companies winning more business recently. We remain optimistic about our position as the market evolves.
Q: What is the outlook for your security business, given the competitive market?
A: Our security business is performing well, with 15% organic growth in Q2. We have a strong global presence, protecting telecom networks in various regions. The market for cybersecurity is critical, and our products are well-regarded, winning awards and being recognized by regulators and industry leaders.
Q: Can you provide an update on the market conditions and growth prospects for your network business?
A: The market remains challenging, but we see opportunities in cybersecurity, network monetization, and optimization. Despite the tough environment, we achieved double-digit growth in Q1 and 15% growth in our cybersecurity business in Q2. We remain cautiously optimistic about our business prospects.
Q: Are there any updates on your M&A strategy?
A: Acquisitions are part of our strategy to enhance scale and profitability, especially in regions like South America and Asia. We are not in a hurry but are actively looking for the right targets that fit our culture and strategic goals. Meanwhile, we continue to focus on shareholder value through buybacks and organic growth.
Q: Do you see further upside with the Stratum product for the specific customer involved in the recent deal?
A: The contract is staggered, meaning more subscribers will lead to larger licenses and numbers for us. While we aim to secure the total value from the 2020 contract, we advise against extrapolating this specific deal's impact on future quarters.
Q: Where are you currently recruiting, given the recent headcount increase?
A: We are recruiting mainly in India and Croatia, with some backfilling in other global operations. The increase in headcount is modest and aligns with our overall budget and operational needs.
Q: Can you explain the SEK8 million provision for doubtful debt?
A: The provision is for a customer with whom negotiations have stalled, and no payments have been made. This provision is booked under sales and marketing costs. We continue to work on collection, but the longer it takes, the more challenging it becomes.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
