Good morning, everyone. This is Jan Häglund, the CEO of Enea. I'm here with Björn Westberg, also CFO. Thank you for joining this call at this time. We will summarize the results of the third quarter as well as the period January to September 2020. We will go through the details of the financial results, some of the most important news during the quarter, and summarize with a way forward and outlook. Let me first on page three summarize the financial results for the quarter and the period. Our net sales came in at SEK 206 million, which is a decline from last year by 16% before currency adjustments. We have clearly seen effects of the ongoing Corona pandemic on our business. While the majority of our business remains stable, thanks to recurring revenues and stable customer contracts.
Having said that, we have been able to deliver and maintain a strong operating margin at 23%, thanks to strong gross margins as well as an effective cost structure. Our net debt to EBITDA was 0.43 at the end of September. We continue to improve and strengthen our financial position. Earnings per share for the quarter was SEK 1.44. Operating cash flow continues to be strong at SEK 83 million for the quarter. We continue to invest for the future. We see prospects and possibilities in the areas that we operate, and we set aside 26.4% of sales into R&D, which is the sum then of OpEx and capitalized R&D for the quarter. For the period, we have so far generated SEK 667 million of net sales at an operating margin before non-recurring items at 22.3%.
Earnings per share at SEK 4.43 and an operating cash flow of SEK 213 million . On the next page, we just summarize a bit of the effects that we continue to see from the Corona pandemic. As previously announced, we have seen during the year and continue to see delays in customer investments. Certain projects, large projects, for example, 5G investments, are a bit delayed on the market, postponed into next year in many cases. We've also seen some smaller projects, for example, software upgrades, being postponed either for financial or practical reasons. Enea also has a business in consultancy services, and in particular in North America, where our customers in aviation industry have suffered from the effects of the Corona pandemic. We have seen and continue to see effects on our revenues. Having said that, the majority of our business is stable.
It's supported by a high degree of recurring revenues and a broad customer base. As shown before also, we have been able to mitigate the impact on our operating profit through cost reductions, giving us an efficient cost structure also going forward. We maintain our ambition to deliver strong margins at 20% or above. On page five, we summarize some of the key events during the quarter. Perhaps the key event was on October 1st when we announced the acquisition of Aptilo, a leading provider of policy and access control solutions for carrier Wi-Fi and IoT. I'll be coming back to more details on that. Enea is a leader in video optimization, and one of my customers, Vodafone Ireland, announced that they've been able to see improvements in the delivery of their video services, and in particular, the quality of experience using our solution.
We published a survey about deep packet inspection that we did among customers. I'll be coming back to that result, but it shows the importance of our technology, which also gives us optimism going forward. We continue to win business in edge virtualization. The latest win here is with Service Provider Inc, a Pan-African cloud-based digital service provider that has selected Enea's NFV Access product for innovative security and SD-WAN services. Finally, we continue, thanks to our R&D investments, to innovate. The latest addition to our portfolio and solutions in video traffic optimization is a product called the RAN Congestion Manager. It's pleasing to see that we have results from the field where we've been able to show significant increases in 4G RAN capacity. Something important because 4G continues to be important in terms of traffic growth for most of our customers.
I'll be coming back to more details. On next page six, a summary of the acquisition of Aptilo. Aptilo is a Swedish company with international reach. It's a leading provider of policy and access control solutions for carrier Wi-Fi and IoT. It's been deployed by more than 100 top operators in 75 countries, and sales and go-to-market models is both directly and indirectly. For those of you who know Enea, you'll see that there are a lot of similarities with Enea, which is why we believe that this is a perfect match. The combination of Enea and Aptilo gives us competence, footprint, and portfolio in both 5G and Wi-Fi, in particular Wi-Fi 6, the latest standard, which creates a unique offering going forward because we believe that these standards are complementary.
It also strengthens Enea data management portfolio where we already have both products and competence in policy and access control. This is strengthened now by the acquisition of Aptilo. We add new customers and additional sales capabilities to a large extent complementary to what we have already. The next page, some of the acquisition financials are summarized. The enterprise value at the acquisition was SEK 150 million. We financed the acquisition through primarily a new bank loan, but also with own cash. We expect the acquisition to be EPS accretive from 2021. The acquisition will contribute to Enea's financials from the fourth quarter with expecting revenues above SEK 20 million. Transaction costs were SEK 4 million. They were actually booked and taken in the third quarter. Page eight summarizes Aptilo's portfolio as well as strategy.
Aptilo is a well-established offering in the market of both business to consumer Wi-Fi offload, as well as operator business to business Wi-Fi with installations across the world by more than 100 service providers. This is in places, for example, public places, shopping malls, airports, et cetera, where service providers choose to offload in high traffic situation to Wi-Fi, adding additional capacity and additional spectrum. Aptilo has also more recently taken significant steps into the IoT, Internet of Things market, offering them smooth and zero-touch solutions for onboarding IoT devices on Wi-Fi as well as cellular access. These are quite promising advances and something that we believe will pave the way for potential growth going forward.
On page nine, summarizing our vision then, together with the assets we already have in 4G and 5G, both portfolio and customer footprint, and now the addition of technology and customer relations in Wi-Fi, we have a unique position to deliver on a vision for a 5G core and in particular, data management solutions for all kind of wireless technologies as well as all types of mobile endpoints. This gives Enea a unique position on the market where we actually have a foot and competency in all kinds of technologies, which we believe is exactly what the market will be looking for going forward, since these different technologies are complementary.
On page 10, we show that Aptilo's customer base, which is primarily through strong relations with several service providers across the world, that it actually complements in a good way Enea's customer base, which also is based on both direct contact with operators as well as indirect sales channels through large system vendors. Aptilo will further strengthen our largest segment network solutions, making that segment even more important than before. In the quarter, even before the Aptilo acquisition, network solutions was about two-thirds of our revenues, and with the Aptilo revenues coming in, it will be an even larger share going forward. That's what I intended to say about Aptilo here. Two words about other development, other positive development in network solutions.
On the next page 11, I'm coming back to what I mentioned about the survey that we did among customers for traffic intelligence. Enea is a leader in traffic intelligence, where we have a unique portfolio of classifying and identifying different kind of both applications and traffic types. We went out and asked customers how important they believe this is, in particular for cybersecurity. The response was quite overwhelming. 100% of those asked said that it's critical to be able to identify applications in order to build future-proof cybersecurity solutions. Some 80% said that different types of traffic, for example, video, audio, file transfer, et cetera, must also be able to identify in order to build efficient cybersecurity solutions. This is good news for us since we are the leader in software for traffic identification.
We have a portfolio of identifying more than 3,000 different internet protocols. We are then optimistic to continue to win terrain with customers that need to have this embedded into their software in order to identify different kind of traffic. Another news on page 12 is our innovation in traffic management. The latest addition to that portfolio is a product or a software called the RAN Congestion Manager. What we've been able to show now in real field operation is how this software can actually increase the capacity of 4G networks.
While 5G, of course, is important and will be growing, we should also note that 4G traffic will continue to grow, in all analyst estimates that we've seen, probably until 2025 or beyond. That's the reason why it's so important to continue to get as much capacity out of the current networks as possible. We've been able to show in real live operation how more than 15% can be gotten out of the network, in particular in highly loaded situations. Which is a way for operators to prolong the life of 4G networks without additional hardware investment. With that, I'd like to hand over to Björn to give us the details of the financial results. Björn?
Thank you, Jan. This slide 14 shows net sales for the most recent five quarters. Net sales amounted to SEK 206 million, which was 30% lower versus last year, excluding currency effect of 3%. There was an effect of the COVID pandemic, as some customers have delayed certain projects, both large investments like in 5G and also upgrade projects. Next slide 15, starting with operating systems. As previously communicated, revenue continued to decline. Decline was 32%, mainly due to less sales for our two key accounts, Ericsson and Nokia. That decrease is expected as they both are in the past few years building their solutions based on open source software. Network solution, by far the largest product group now representing 2/3 of total sales, decreased by 11%, driven by some customers delayed certain products, both large and small.
Software development services, previously named Global Services, declined by 16%, mainly due to less sales in the U.S., driven by declining customer segments being more affected by the pandemic than others. This quarter, it's even more evident than before that we transformed the business from a large dependency of operating systems some years back to a company where we have a wide range of high-quality offerings in the network solutions. The operating segments, we now have a top one or top tier position. This is also a guidance for us as we are exploring non-organic growth opportunities. On slide 16, we present the EBIT development. EBIT margin was 23% in the third quarter, excluding non-recurring items, which is clearly above 20%, which is our objective. Comparing the third quarter this year versus last year, the margin was positively affected by lower OpEx and negatively affected by lower gross margin.
Starting with the gross margin, we have specified a gross margin bridge in this slide. Taking out currency effect on working capital and restructuring cost, the Q3 gross margin was 69.2% compared to 71.7% last year. The 2.5 % difference is mainly due to higher D&A related to last year's acquisitions. OpEx excluding NRI of SEK 4 million decreased by SEK 17 million compared to the third quarter last year. We see effect of the implemented efficiency programs in combination with a high level of our expense in products being capitalized as we continue to see progress in our promising development portfolio. EPS for the quarter was 1.44, negatively impacted by the lower EBIT, but positively affected by lower financing costs. Continuing to next slide. We continue to generate good cash flows.
The operating cash flow amounted to SEK 68 million , same as the second quarter despite the lower EBIT. We have now in place a very efficient financing structure that lower financing costs and a net debt to EBITDA of 0.43. Even if we add the recent financing, 1st October last year, we still have significant headroom for potential acquisitions going forward. The strong balance sheet is also reflected in the equity to assets ratio, which increased to 70% from 59% previous year. To conclude, we have a very solid financial position, making it possible to invest in both non-organic opportunities and our organic growth projects. Back to you, Jan.
Thank you, Björn. Let me just wrap up on page 19 by saying that this year there is no doubt that there is an increased uncertainty, both short-term and medium-term, due to the pandemic. While we maintain and deliver on our target on an operating margin above 20%, we see clearly that there are consequences on our sales, negative impact from the coronavirus pandemic. Having said that, we continue to have a positive outlook for software in telecom and enterprise networks. We see that these areas are more important probably than ever for people, businesses, and society. With the investments that we're doing for future growth, both in own development and also recently in acquisition, we believe that we're well-positioned for the future. With that, I thank everyone for listening and give it back to the operator for possible questions.
Thank you. Ladies and gentlemen, if you do wish to ask a question, please press zero and then one on your telephone keypad now. If you wish to withdraw your question, you may do so by pressing zero two to cancel. That was zero one if you wish to ask a question. Our first question is from Simon Granath from ABG. Please go ahead, Simon, your line is open.
Morning, Jan and Björn. Hope that all is well with you guys. Perhaps starting off, do you consider that you now have better visibility on market activity compared with a couple of quarters ago, mainly in terms of the 5G rollout?
Thank you, Simon Granath. I think we have good visibility on the market. Having said that, as we suspected a few quarters ago that there would be delays, we have seen those delays on the market. I can only continue to estimate that we will see continued effects on the market as long as the coronavirus pandemic impacts our customers, the countries, et cetera. As we all know, it's not over yet. I think there is continued uncertainty and we will continue to see uncertainty and possibly delays also both in small and large investments in the market.
Okay, fair enough. You mentioned in the report that you have made some cost reduction in your U.S. operations. Are those cost reductions sustainable going forward, or how should we think around those?
Yes. We took that decision quite early during the year because we saw that some of our customers are in industries that are heavily affected, for example, aviation industry. We took measures for those, and those cost reductions are sustainable going forward.
Okay, those cost reductions mentioned in the report, they relate to the initial cost reduction program that you mentioned in conjunction with the Q1 report?
Well, it's actually both. In the Q1 report, as you mentioned, we announced some cost reductions, mainly taking out synergies from the company. That was initiated even before the coronavirus pandemic struck, but we benefit from that more efficient cost structure now. On top of that, we took decisions then when we saw the coronavirus pandemic strike. For example, in the U.S., where we saw customers being affected, and then we did additional cost measures. We were able to do that without significant restructuring costs.
Okay, perfect. Just a final question. I've followed Enea for some time, remember that ahead of 2020, you guided for increased investments. How would you say that these activities have progressed throughout the year? I know, for instance, that R&D costs have decreased somewhat quarter-on-quarter here. Would you say that the previously mentioned investments have reached their peak for now, or could they increase further?
No, it's correct that we decided to increase investments in some areas, in particular data management and our Stratum product in particular, where we also, thanks to that, were able to announce some quite significant and strategic customer contracts. We continue to keep up those investments. Some of the effects that you've seen here are partly due to just taking out synergies, so maintaining the capacity, maintaining the focus, but just doing it in a more efficient way. Partly, it's also the mix between what we capitalize and what we expense in terms of R&D, which is more a sign of that we invest more for the future.
Thank you for that. I will get back into the queue.
Okay. Thank you.
Next question is from Viktor Westman from Redeye. Please go ahead, your line is open.
Thank you and good morning. I was first wondering about the software upgrades you mentioned that have been delayed from the customers. Can you say something about what kind of upgrades that are particularly delayed? Are there any patterns there?
Thank you, Viktor. No, it's not any particular pattern. It's just to show what we have talked about previously, that in some cases, customers have planned to upgrade, for example, for new features or for more capacity. We have cases where some of those upgrades are delayed either into coming quarters or into next year for practical reasons because of difficulties, or possibly because there is a higher financial pressure also in general in the industry. We just wanted to highlight that it's not just the big flagship activities like 5G, which are very visible, but it can also be smaller activities that impact our financial results as long as the coronavirus pandemic continue to have an effect on our customers, both operation and willingness to invest.
Right. I saw you mentioned also increased uncertainty in the medium term from the pandemic. Can you quantify what you mean by medium term? Are we talking two years or any idea?
I don't think we put the numbers there. We say the same thing as we've been saying actually since the pandemic started. Short term is probably right now. Medium term would be probably coming quarter, coming year. That's how I would think about that. I think we all know that the economy and some of the operations is affected by the corona pandemic and exactly how quickly that will bounce back is difficult to say, and it's probably going to be different for different branches and industries also.
Okay, good. Maybe it's just me who's thinking that medium term is several years, but that's good to hear. I have a question also about Aptilo. You mentioned that IoT solutions are especially promising. Can you say something more about why you think that is?
Well, IoT is something that has gained traction and is gaining traction step by step on the market. I think we can all look around ourselves and see that more and more of things or devices are being connected, which adds benefits either to us as people, but also to industries where you can actually automate more. In order to get that, wireless connectivity is very important, and that can be either wireless connectivity through cellular systems if you have devices which are out in the field, for example.
In many cases, devices are also in short range. They could be in households or in enterprises or in stationary or semi-stationary places. There, Wi-Fi technology is actually the dominating access technology. I think many analysts and companies are predicting the continued growth for the amount of connected devices. With the acquisition of Aptilo, our intention then is to provide solutions where we can benefit from that growth of connected devices step by step.
Okay, just the last one from me. I know there was a large CPE project in the U.S. rather recently. Can you say something how you are positioned in larger CPE projects? Is this an area where you can play or want to play?
I'm not sure what project you're referring to now, Viktor, but our strategy is to deliver innovative solutions into tomorrow's CPE solutions, in particular, something called universal CPEs, which are then based on virtualization technology, where you can choose basically any hardware and you can have any kind of application. That's where our software fits in into the middle. It's kind of the middleware. Our product is called NFV Access, we enable that kind of ecosystem and choice for hardware and software. Many people refer to this as the kind of second generation of CPEs, there are projects ongoing in different parts of the world for deploying this kind of universal CPE-based technology.
Okay. Thank you so much.
Okay, just as a final reminder, if you do have any questions, please press zero one on your telephone keypad now. There are currently no further questions registered. I'll hand back to the speakers. Please go ahead.
Thank you, operator. We'd just like to thank everyone for listening and just restating that while we have a year where the corona pandemic is affecting our business as we have suspected and highlighted since the beginning of it, we're happy to see that we've been able to maintain our margin ambition. We've done that thanks to hard work, early decisions, and of course, a healthy underlying business. We also maintain an optimistic view going forward. We continue to invest for the future. We believe that we're well-positioned in areas like 5G, virtualization, cybersecurity, and with the latest addition now, the acquisition of Aptilo, we add into an area which is very complementary to us, both in terms of technology and customer footprint. Based on that, we continue to maintain a positive long-term outlook of our market. Again, thank you very much for listening.