STOCKHOLM, Oct. 23, 2018 /PRNewswire/ -- Enea® (Nasdaq Stockholm: ENEA)
A strong profit in the third quarter
Third quarter 2018
First nine months of the year
July - September 2018
(third quarter previous year in brackets)
Anders Lidbeck, President and CEO comments:
A new quarter setting new records
The third quarter was another very robust period for Enea. Revenue was up 44 percent in the quarter over the previous year, and once again, we reported a higher operating profit than ever before. Earnings per share also beat our previous record, so we have every reason to view the past quarter as one of the most successful, and the most profitable, that the company has achieved to date.
The operations of Openwave Mobility, which we acquired at the beginning of the year, continued to deliver as planned in the third quarter. They have settled in well and quickly become a positive asset to Enea, which is very satisfying. Overall, the other parts of the Network Solutions business unit also delivered somewhat above estimates, and despite the long-term challenges remaining, our traditional operating system business also made positive progress in the quarter. The successes we're enjoying now are the result of our strategy, combining work on continuously strengthening, stabilizing and streamlining our existing business, with complementary acquisitions that consolidate and advance our market position. Once again in the third quarter, we saw clear effects of these long-term efforts to create a stronger and more well-positioned company, with increasing value for our shareholders.
A development favorable to the gross margins
Our software business progressed well in Europe and the US, reporting growth year over year and quarter over quarter. We achieved more limited revenue gains in Asia compared to the corresponding quarter of the previous year. Our Worldwide Software Sales are still increasing, now representing 58 percent of total revenue. Meanwhile, our dependency on Key Accounts continue to reduce, now representing just 25 percent of total revenue.
Our European service business continued to perform well, while progress in our US service business was poor in the quarter. Despite the stabilization that we thought that we saw in our US service business in the second quarter, we have not yet found the growth we hoped to see. We continue to develop our American service business actively, with the goal of eventually laying the foundation for improved growth and profitability there. Just as in the previous quarter, our global service business also represented 17 percent of total revenue in this quarter. This is a change on the corresponding quarter a year ago, when the figure was 24 percent. As I've stated before, this change is due to the acquired companies having a higher share of software revenues, and overall, this progress is positive for our gross margins.
Our goal is to grow upward in the software stack
We continue to implement the overarching strategy communicated previously, whose goal is to grow upwards in the software stack, expand in the value chain and move closer to end-users. In a situation where the market for embedded operating systems and proprietary hardware-related software is levelling off, this is the way to achieve growth while maintaining good margins. Within this strategy, we're focusing on selected key segments where we see favorable growth potential. One example being applications in telecom, where the product portfolio we acquired with Openwave Mobility is playing a central role, and where 5G is becoming a key driver of customers' future investments. Cyber security software components, where our deep packet inspection and network intelligence portfolio is an important building block, is another example. In this segment, we have during the quarter focused on delivering the major project in the EMEA region that we announced in the previous quarter. We have also expanded our network intelligence product portfolio with new solutions that enable users to not only identify and classify network traffic itself, but also identify and classify the devices that are connected to the network.
In our operating system business unit, we developed new solutions for "accelerated" Linux in the quarter, where we combine an open Linux platform with our proprietary real-time solutions to enhance overall system characteristics. This work is in close partnership with several leading open source projects, with the OpenAMP project being an example that enables us to combine our own technology with open, Linux-based platforms. One outcome of these investments was demonstrated at a trade event with our partner Xilinx at the turn of the month between September and October. We were also able to announce a closer partnership with Advantech, a hardware manufacturer and partner on our NFV platforms.
Future prospects
Enea celebrates its 50th anniversary this year, which was marked around the world by local events and gatherings in the third quarter. 50 years is an impressive age in our sector, today we stand stronger as a company than ever before. We are expecting to see growth in our new product areas, and will continue tirelessly to build a bigger and stronger company that delivers more value for customers, employees and shareholders.
While Enea shareholders can be pleased about another very good quarter, we should also be aware that our business does vary between quarters, and that these variations have increased somewhat due to the acquisitions we've executed in recent years. The acquired entities have a higher percentage of new business, where individual contracts may be substantial, and with varying levels of recurring revenues.
Acquisitions that advance our market positioning and long-term earnings capacity are a key component of the transformation that has been ongoing in Enea for several years. This process is fundamentally positive for the company, with less dependency on a single major product and a few Key Accounts, and despite our expectation of lower revenues from Key Accounts, our objective is still to keep growing the company with good profitability and healthy cash flows.
Our objective for the full year 2018 was to achieve revenue growth and improved operating profit over 2017. After a record third quarter we have now already surpassed the 2017 numbers, but will give no further guidance for the full year 2018.
Press and analyst meeting
Press and financial analysts are invited to a press and analyst meeting where Anders Lidbeck, President and CEO, will present and comment on the report.
Time: Tuesday, October 23 at 08:30 am CEST
Link: http://www.financialhearings.com/event/10481
Telephonenumber: SE: +46856642696 UK: +442030089806
The full report is published at www.enea.com
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 October 23, 2018 at 7.20 CEST.
For more information visit www.enea.com or contact:
Anders Lidbeck, President & CEO
E-mail: anders.lidbeck@enea.com
Julia Steffensen, Executive Assistant
Phone: +46-70-971-03-33
E-mail: julia.steffensen@enea.com
About Enea
Enea develops the software foundation for the connected society. We provide solutions for mobile traffic optimization, subscriber data management, network virtualization, traffic classification, embedded operating systems, and professional services. Solution vendors, systems integrators, and service providers use Enea to create new world-leading networking products and services. More than 3 billion people around the globe already 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 2018
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