Hello and welcome to the Enea interim report for January to September 2022. For the first part of this call, all participants will be in listen-only mode, and afterwards there will be a question and answer session. Today, I'm pleased to present the CEO, Jan Häglund, and the CFO, Ola Burmark. Please begin.
Thank you very much, and thank you for listening to this conference about Enea's Q3 report. I'm Jan Häglund, CEO of Enea, and I'm joined in this conference by our CFO, Ola Burmark. We will in this conference summarize the quarter from a financial point of view, as well as the key events that have affected the quarter. Ola will go through in detail the financial results, and we'll end with a way forward, strategy direction, and also a bit of how we see the market. On page three, we summarize Enea's financial results for the third quarter, as well as the period January to September 2022. Our net sales in the quarter came in at SEK 229 million, and our operating margin was 18%.
Both of these are significantly stronger than the first quarter this year, the two first quarters this year. Operating cash flow was also strong in the third quarter, SEK 92 million, contributing to a lower net debt. Net debt is now down to SEK 283 million of the company, which also gives the net debt to EBITDA lower than 1.93. Earnings per share came in at 2.42 in the quarter, where part of this, 0.73, came from the final part of the divestiture of our services business, which was executed and decided earlier this year. Finally, we are an innovation company focusing on software products for telecom and cybersecurity, and we continue to invest in R&D. 28% of our sales were reinvested in R&D, either as expensed R&D or as balance capitalized R&D.
As mentioned before, the first two quarters this year were weaker than the third quarter. For the period, we came in at SEK 657 million, an operating margin of 13% and earnings per share at SEK 8.61, where SEK 3.24 were the part of continuing business. Operating cash flow for the period was SEK 169 million. Let me summarize a bit on the next page the key developments in this quarter. We're really happy to see that we continue to win business in our key areas, in cybersecurity, in traffic management, and in 5G. In particular this quarter, we had two major contracts in North America that we're very pleased with. We saw an increase in net sales, operating profit and cash flow compared with previous quarters this year.
We did see also a stable and in fact, increasing base of recurring revenue from support and maintenance. We have a broad and strong customer base where customers rely on our services and software in order to maintain critical operations of telecom and Cybersecurity. Network Solutions is by far the dominating product group of our company, 88%, in fact, of the turnover, and it grew 4% organically. While the smaller product group, 12% of our turnover, Operating Systems declined 23%. That is an expected decline, has been going on for several years, but it's also a smaller part of the company now, so the total impact is smaller. As previously decided, we continue to invest in a stronger sales force in selected regions.
We do that because we believe that through stronger presence, we have the opportunity to sell a broader portfolio and to expand already strong customer relations in regions like North America, Europe, and partly in other places of the world also. Cybersecurity is our newest business area through the acquisition of AdaptiveMobile Security last year, and we continue to see strong development, solid development of that business area and of course, a high attention on the market on cybersecurity enhanced by the geopolitical environment. Having said that, we also see challenges of the market. Energy prices, inflation, higher interest rates do create pressure for customers, and this does affect the investment climate. Let me say a bit more about some of our key deals this quarter.
On the next page, we summarize the deal that was taken in September and August about messaging security, where we closed a $5.9 million messaging security win with a North American communication platform as a service provider. An existing customer that chose to expand their business and continue to rely on us for the secure delivery, in particular of application to person traffic, which is growing in terms of traffic, growing in terms of volume, but also growing in terms of impact on society. This deal was important from a strategic point of view because it expands the relation with an important customer. Also important financially, where software licenses contributed with a $1.8 million in the quarter. The overall agreement does increase our recurring revenue for the three-year period.
The next page will summarize a product launch we did. We launched the product already in July for Traffic Management. Traffic Management, as some of you may know, is an important market and also an area where Enea has a leading position since several years. Now, Traffic Management continues to be important, in particular with 5G coming, because traffic will increase with 5G, and 5G will, for several years, coexist with 4G. That's why our new solution, the Service Engine, the 5G Service Engine, is designed for dual-mode 4G and 5G Traffic Management. We're in fact first to the market with a cloud-native commercial product with this kind of support. Traffic Management is important because it does give the opportunity to improve subscriber's quality of experience.
It does accelerate traffic delivery, and it also alleviates the radio network congestion, something that is already important and will continue to be important with 5G due to growing traffic. Our product is also designed with open interfaces, creating the possibility for a wider vendor ecosystem. For example, for analytics or service management products. Also an area where we differentiate, a bit different from some of the competition that have more of a closed environment. Now, this product was launched in July, and on the next page, we summarize the fact that we won our first reference with this product already in September. The reference worth CAD 4.4 million. An existing customer choosing to continue to work with us and continue to work with our product and selected our product for 5G traffic management.
This deal had an important financial impact on the quarter with CAD 3.3 million in revenue recognized in the third quarter of 2022, and the total contract value was CAD 4.4 million. It's an important deal and also serves as an important reference going forward for other opportunities, in particular 5G opportunities. Now, traffic management can be used for different things. I talked about the quality of experience. On the next page eight, we also based on recent research show how traffic management can be used for energy saving. Energy is an important part of operators' OpEx, and also a growing part due to increasing energy prices. If you look into a network, in fact, it's the Radio Access Network that consumes the majority of the energy, 73% based on independent investigations and research.
Looking into the traffic that generates and consumes all this energy, it's a lot of video traffic. In fact, it's up to 70% typically in a mobile network that is video. Video coming from applications like Facebook, YouTube, TikTok, and others. Now, traffic management can in fact be used to reduce the video consumption, the bandwidth without noticeable impact for the end users. Our research shows that without any impact on user perception, it's quite straightforward to get a 20% reduction in bandwidth, which corresponds to approximately 10% energy saving cost. If you translate that to dollars in a typical operator, it actually corresponds to very high numbers, about $10 million in just energy savings based on an operator with 10 million subscribers.
We believe that this can create business opportunities for us going forward as we see increased pressure on the operator's OpEx. Now, this was one example of thought leadership and publications we've done during the month. On page eight, we summarize a few other publications. A lot are centered around cybersecurity, where we have done research and also published to the market how cybersecurity for mobile networks is impacting and playing out now in the ongoing war in Ukraine. In particular then, how mobile networks are both affected, targeted, but also used as tools in the conflict for communication, and actions on the battlefield. We've also published reports on more enterprise cybersecurity, an area called intrusion detection, where we have important software tools, in particular based on deep packet inspection technology, that we see are gaining interest and gaining market traction going forward.
Finally, IoT, the Internet of Things, is an area where we have product offerings and where we see a nascent market. We have recently won two important awards here, Product of the Year, as well as Best IoT Platform. We're really happy about that, and we see that as a confirmation about our investments in product development and also as a confirmation of the market opportunity in IoT. With that summary of the quarter, I'll leave the word over to our CFO, Ola Burmark, to summarize the financial results a bit more in detail. Ola, over to you.
Thank you. We move into slide eleven. The third quarter came in at the same level as last year, with the net sales of SEK 229 million. In adjusting for currency variations that represent a decline by 8%. Total revenues, though, were significantly higher in the quarter and actually also during the year, but specifically during this quarter, we see big impacts of currencies in many parts of the P&L, basically. The third quarter this year versus the third quarter last year, we actually have big deviations in currencies. In other revenues, we have two parts. One is actually SEK 40 million in currency gains related to revaluation of current assets. We did also receive about SEK 10 million in a COVID-related loan from the United States that was forgiven.
That was the last outstanding loan for COVID-related financing in U.S. There are no further such applications that can be filed. If we look at the different part of the organization or the Network Solutions reported an organic growth of 4% in constant currencies, but a negative growth in constant currencies of 4%. Operating Systems continues to decline and have currency-adjusted negative growth of 24% in the quarter compared to last year. We move into next slide and look a little bit deeper in the Network Solutions and look at the revenue development. We do see licenses has grown during this year, quarter by quarter, but it's still significantly lower than it was a year ago.
We report license revenues in Network Solutions of SEK 90 million in the quarter compared to SEK 107 million last year. It is a decline by 17%, but we should then bear in mind that in the third quarter last year, we did recognize revenue related to achieved milestones in one of the larger data management projects for 4G and 5G core networks. That amounted to SEK 28.5 million. What we do see that we have successfully prolonged support and maintenance contracts, so our sort of base of recurring revenue continues to grow. Support and maintenance has grown by 27% compared to last year, and professional services has also grown. That is a consequence of the experts and analysts we have available for cybersecurity in the AdaptiveMobile Security. Year-to-date is basically very much the same trend.
License revenues, as you see, year-over-year has grown, but we're not yet on the level as we were last year. Year-to-date, we have recognized revenues of SEK 257 million related to licenses. It's a decline by 7% versus last year. We're also here highlighting that this year, we have recognized SEK 29.5 million related to those milestones in data management projects. Last year, up to September, we have recognized SEK 47 million. I go to next slide. Operating systems, here we do see the trend, and the trend continues. We report sales in Network Solutions of SEK 28 million in the quarter. It's compared to SEK 36 million same quarter last year, but it's a decline by 22%-27%.
If we look into this one more deeply, we see that the currency-adjusted decline is 24%. This business basically consists of three parts. It's two key accounts plus a number of other customers. Where we see the sharpest decline is in these two key accounts, where we have a decline by 33% in the quarter. Those key accounts now represent 60% of the total sales in Operating Systems. Looking at the sort of January to September period, it is basically the same trend. The Operating Systems has generated a revenue of SEK 92 million. It's a decline of 20% versus same quarter last year and currency adjustment of 21%. In terms of the key accounts, it's very much the same trend that has continued over.
Operating Systems is very predictable and basically develops as it has during the past two years. Moving into slide 14, by this one, we actually show how the transformation of the company has been developed since 2017. In third quarter 2017, 33% of our business was Network Solutions, and basically two-thirds was Operating Systems. Operating Systems has, as we said, declined over the period while we have built all the Network Solutions. Now Network Solutions is today 88% of our total revenues. I move to slide 15. Profitability-wise, we report an EBITDA of 37% in the quarter. That means SEK 85 million compared to SEK 92 million same period last year. There are no non-recurring items in the EBITDA.
We do also see that we have a better gross margin in the quarter, and this gross margin is positively affected, mainly for even though we have slightly lower license and sales, as I said initially, we do see that support and maintenance revenues and also professional services revenues has grown, and the margin on those one has improved since same period last year. As I mentioned also initially, the forgiveness of the COVID-related loan has also positively impacted on the gross profit. If you look at the operational expenses, there is an increase of some SEK 10 million compared to last year.
Just to be explicit on that, we are basically not increasing our operational spend, but this is a result of increased depreciations and amortizations of SEK 8 million, and we do also have an unfavorable foreign exchange impact when it comes to the cost of almost SEK 8 million. If we're adjusting from the above, the operational spendings are decreasing, and they have decreased by SEK 4.5 million compared to the same quarter last year. I move to slide 16 and EBITDA. EBITDA of 18% in third quarter, and this is definitely a sequential improvement towards the first two quarters in this year. The EBIT amounted to SEK 41 million compared to SEK 54 million same quarter last year. We are at 18% compared to 24% last year.
Yeah, we're still not back on the margins we had last year, but we do see an improvement quarter-over-quarter this year. Earnings per share for the total company was 2.42 in the quarter versus 2.33 last year. For the continuing operations, it's 1.69 compared to 2.11 last year. In the quarter, we finally closed the transaction with the service business and the final holdback was settled, which also impacted sort of the total result for the group. This is now accounted for as discontinued business. What stands out in the quarter is a positive cash flow. We have successfully collected cash in the quarter, which resulted in operating cash flow of SEK 92 million compared to SEK 28 million same period last year.
As I said, we also had a cash flow from the divestment of about SEK 15 million in the quarter. The interest-bearing bank loans in total gross value amounts to about SEK 545 million, so that is significantly lower than the same period last year. We have also grown our cash, which are amounting to SEK 264 million in the quarter, versus 180 last year. Net debt has therefore decreased, and we're now looking at the net debt of SEK 283 million. Equity ratio going up 68.5%, and definitely then the net debt to EBITDA, i.e. the leverage of the company, has gone down further, and we're now below one. Thank you. I hand back to you, Jan.
Thank you so much, Ola. We'll jump to page number 19 with a bit of a market summary. We see that on the telecom market, the underlying factors remain strong. Traffic growth continues. We see new applications coming to light. All of this will require the higher network performance, which is the key area for us. We also see a strong movement driven by efficiency and agility towards what can be called the digital telco, where the first movers are really setting the scene now to reshaping the industry, basing operations, for example, on modern cloud technology and cloud operations. Cybersecurity is by no doubt one of the hottest areas in our industry, driven by increased geopolitical tension. We see evidence of attacks almost all the time, and we know that mobile networks are strategic and therefore potential targets.
The war in Ukraine is clear evidence of that. In particular, we see very high attention in the Americas. Now the macro environment is challenging, and we continue to see a challenging macro environment with now the energy crisis in particular affecting the operating expenses of our customers. We see currency variations as outlined by Ola. All of this together with inflation and higher interest rates does create a cautious decision-making and deferred investment. Now our strategy summarized on page 20 remains firm. Our strategy to be a software specialist, to produce cloud-native products in a world where many of our competitors have proprietary platforms. With trends then going towards openness, towards commercial cloud environments, we believe that we are very well positioned for the future for long-term growth in this area.
We also believe that our leading positions, in particular in telecom software for mobile core and security for mobile networks, are key for the future. With trends like 5G increasing cybersecurity threats, this is exactly the position to be in for the future. We have a global presence. We can still strengthen it, but with strong direct and indirect market channels supported by a distributed R&D organization, we have the possibility to serve customers in global and advanced markets. On page 21, we've chosen to summarize some of the evidence and proof points of this strategy just in this quarter, in the third quarter of 2022. The divestment of our software development services was in fact driven by our strategy to become a pure software product company.
We're really happy to do that because not only does it increase our focus, it also did contribute positively to our financials, both during the year and going forward, thanks to a positive impact on the growth margin. In terms of the leading positions, I've already talked about some of the product launches where our R&D investments, in particular in 5G and cybersecurity, have borne fruit. The 5G Service Engine is a clear example of that launched in July. The win that we have both in traffic management and messaging with leading tier one service providers also confirms our leading positions. We can beat anyone in this space. We're also happy to see the continued momentum of our most recent acquisition, AdaptiveMobile Security, well-positioned and leading in the area of security for mobile networks. Our global presence is important.
We have customers all over the world, in particular in North America and Europe. Strengthening go-to-market through investment in sales is something we initiated earlier this year, and it will continue during this year. We see the opportunity to expand our business in our key accounts, not only through stronger relations, but also through cross-selling, where we already have established relations or in fact frame contracts. Those can be used in order to close new business for a wider portfolio. We're wrapping up on page 22. We repeat our outlook for the year. We did have weaker first and second quarters, and that's the reason why we see that our long-term target for sales growth and operating profit above 20%, it remains.
An uncertain macro environment and a weak start of the year means that we judge it challenging to reach the possibility for the full year 2022. With that, I hand it back to the moderator to check if there are any questions on the presentation. Thank you very much.
Thank you. If you do wish to ask a question, please press zero one on your telephone keypads. If you wish to withdraw your question, you may do so by pressing zero two to cancel. Our first question comes from the line of Jesper von Koch of Redeye. Please go ahead. Oh, I stand corrected. We seem to have lost the line of Jesper from the queue. Just to remind everyone, if you would like to ask a question, please press zero one on your telephone keypads. We'll go to our question from the line of Jesper von Koch. Please go ahead. Your line is.
Okay. Great. Good morning, gentlemen. Let's start with capital allocation. I mean, your balance sheet has definitely improved over the last year, and no acquisitions has remained.
I mean, there is room for some actions I guess. Could you just elaborate on how you think about, I mean, M&A versus potential buybacks? I mean, considering that Enea is currently trading well below the valuation multiple that you have paid for recent acquisitions. I mean, is this an interesting option that you're evaluating?
Well, thank you, Jesper. I can start, and Ola can chime in. I mean, we're happy to see that we have strengthened the balance sheet during the year, thanks to both our own organic cash generation and on top of that, the divestment of software development services, which was driven, as I mentioned before, from a sub-strategic direction to purify as a software product company, but it did have a very positive impact on our balance sheet also. We continue as a company to seek the complementary acquisitions. We've done about one acquisition a year during the last five years, and the company you see today is very different from the one in 2017 with expansions into telecom, into 5G, into cybersecurity.
We continue to seek acquisitions that can complement us. We're not in a hurry, I should say. It needs to be the right value, it needs to be the right area, it needs to fit not only with our product strategy, but also with our go-to-market strategy. We're happy to see the strengthening of the balance sheet, and we will carefully make sure that we use that going forward to create shareholder value.
Also about the, I mean, how you and perhaps also the board are thinking about potential buybacks. Is that something that you are thinking of?
We have not communicated anything around the potential buybacks. When and if that is a topic, we will of course communicate to the market about that.
Okay. Also regarding M&A opportunities, are you seeing that multiples are coming down also on potential acquisition objects, or how is your experience?
I think it's fair to say that the overall activity on M&A has gone down quite significantly, not just because the valuations have come down, but also due to uncertainty in valuations. We are of course part of the overall landscape of opportunities. I think the market during the recent quarter has been affected by uncertainty and difficulties in setting the right multiples. Overall direction, of course, both for traded listed companies as well as the private companies, has been down in most cases during the recent quarter. I think the private market can probably take some more time in order to stabilize.
All right. Also, I mean, talking about the 5G rollout, it seems that the signals are a bit mixed. I mean, some operators are hinting about that this is kind of starting to happen, the rollout of 5G. You're also saying that you're seeing that some of your 5G investments are starting to pay off where some regions are more hesitant. Could you just talk more about this and where you see that graph?
We see it the same way as you do. It's a mixed message. There have certainly been announcements of 5G activity, 5G rollout recently in North America. Several, including some of the biggest operators, have announced now plans for not only 5G, but also 5G Standalone, which is the most important market for Enea since we target the core networks. We believe that activity in North America is important and will be important for us and create a bigger market that creates new opportunity for us. We see also that Europe is behind. Europe has been behind since before, and the current economic crisis and economic uncertainty, I think, adds to the hesitation of new investments.
A bit of a split picture, but we're happy to see that we do have strong relations with many of the leading customers in North America, and one of the deals that we struck this quarter, I think is good evidence of that.
Yes. I was just going into that. I mean, it's a newly launched product that seems to gain traction quite fast. How would you categorize that product in relation to your other, like, 5G-related products? I mean, could it become like a major part, or should we just view it as one of many different parts?
Traffic management is an important part of our business and has been ever since the acquisition of Openwave back in 2017. It's one of those important bases where we have a broad customer base and a lot of ongoing also recurring revenue. Now, with this latest launch of the product, we position ourselves also for the 5G market and in particular then for the coexistence of 4G and 5G. We have built that product based on latest cloud technology, which is what customers demand. We're happy to have that reference in North America that we closed in September.
We believe that there is a market for traffic management driven by increased usage, driven by congestion in the networks, and now recently also driven by the need to increase the efficiency, in particular, the energy efficiency of networks. We believe that we're well-positioned for that market, which has a long-term positive outlook.
Great. Just one more. I mean, you talk about the higher share of recurring revenues in Network Solutions in the CEO letter. Could you just give any more flavor on this, except that it's like more than half of total revenues? Like, is it recurring revenues in the sense that it will also sustain in the following quarters and so on?
Yeah, we have a strong part of our revenues that are recurring. We normally estimate that more than half of our revenues are purely recurring, based on royalties or based on term-based licenses or based on support and maintenance contracts and agreements with customers. On top of that, we have what could be possibly classified as semi-recurring revenues, where we are incumbent in the networks and where it's very likely that customers will buy upgrades from us, either driven by more capacity or more features. What we did see in the quarter was an increase in what we could call the pure recurring revenue. One of the key drivers for that was successful closing and prolongment of support and maintenance contracts, in particular for our telecom and cybersecurity businesses.
I think it shows the confidence that customers are putting in us and the willingness for them to commit to going forward into our services and support.
Perfect. Thank you so much, guys. That's all for me.
Thank you, Jesper.
We have no further questions at this time. Please go ahead, speakers.
I just want to thank the audience for listening in to our report today. We thank you for your support and your continued interest in our company. We stay firm on our strategy as a software specialist producing world-leading products for 5G cybersecurity towards the global market. Thank you very much.
Thank you.