Thank you very much. Good morning, everyone. This is Jan Häglund, CEO of Enea, and I will be joined in this call also by Björn Westberg, our CFO. In this call, I will give a summary of the main events during the first quarter of 2021, including the financial figures. Björn will be going more into details of the financial results, and we will end with a summary and an outlook for the year, and also open up for questions after this call. Starting with page three of the material, a summary of the financial results for our first quarter 2021. Our net sales came in at SEK 214 million, which is a 4% increase relative to the same period last year, currency adjusted, though it should be noted that this quarter, this year includes revenues of about SEK 18 million from Aptilo, an acquisition we did in October 2020.
In the first quarter, we did reach an operating margin of 20.9%, which is above our target of 20%. This corresponds to an operating profit of SEK 45 million , which is up by 21% without non-recurring items and currency adjusted relative to the same period last year. Our cash flow continues to be steady, SEK 69 million for the quarter. Earnings per share came in at SEK 2 and SEK 2.02. We improve our net debt to EBITDA relative to the previous quarter. We are now at 0.62, which gives us the opportunity also to continue investments. Enea is an R&D-intensive company, we continue to invest into growth opportunities, and I'll be talking about some of those in the next page. Our total investment in R&D, both expensed and capitalized, amounts to 28.6% of net sales.
On the next page, a summary of some of the announcements that we have done during the quarter. We have announced an offering that we call 5G MicroCore that targets the private enterprise market, which we expect is a growing opportunity during coming years. We've also launched a new offering in collaboration with hardware supplier NEXCOM, where we combine our virtualization software with NEXCOM's hardware platform and applications based on open source to create a very cost-competitive SD-WAN, Software Defined Wide Area Networks offering. Also, for our virtualization platform, we have extended the software with additional features and services, which gives us the opportunity to target a wider market beyond SD-WAN. We also see the opportunity to go into carrier Wi-Fi, private 5G, as well as video analytics.
Enea has a world-leading position in traffic intelligence, and one in a row of customers is NetQ PRO, a Polish company delivering services for service assurance in the mobile industry. We're very happy to get yet another customer on board. Finally, our latest addition to the company, Aptilo, has a growth investment in IoT, the Internet of Things. We're very happy to be part of a solution that recently was launched by Swedish operator Telia. Let me go a little bit deeper into the first and the last of these two announcements. Starting on the next page with our launch of the 5G MicroCore. Enea is a software company where our software for 4G and 5G is completely built for cloud native, which has a number of benefits. Completely multi-vendor. There is no lock-in in what we do. We are an independent software company.
It gives telco great stability, security for data storage, easy deployment, seamless integration, and a number of key features. Also the flexibility to deploy this on multiple cloud platforms. There are a number of trials taking place across the world, especially in Asia, where the market activity is particularly high. We are part of a number of trials, also together with partners and system integrators. We expect that the market for this will grow during the coming years with commercial deployments, although it should be said that the market is still in very early stages. On the next page, we also give a bit more detail on the service that we are offering through the Aptilo IoT Connectivity Control Service. It is a part of our Aptilo portfolio that enables policy control and security features for the Internet of Things.
Swedish operator Telia has recently launched a service targeting enterprises, and we're proud to be part of that service with our Aptilo IoT CCS. What we contribute here is really the opportunity to, in a very flexible way, provide secure connections for enterprises. Connections that, in fact, these enterprises can self-manage. We do this in partnership with a security provider, Fortinet, and we believe that the total solution here is competitive, and we're of course hoping that this deployment will serve as an important reference also to other operators targeting the IoT market. With that, I hand over to Björn Westberg to give more details into the financial result for the first quarter. Go ahead, Björn.
Thank you, Jan. Slide eight shows net sales for the most recent five quarters. Net sales amounted to SEK 214 million, which is 6% lower versus last year. In fixed currencies, sales increased by 4%. Aptilo contributed eight million to the total sales number. Overall, stable sales with an organic growth of 4% in our largest segment, Network Solutions. On next slide nine, starting with Operating Systems. As previously communicated, revenue continued to decline. The decline was 25%, mainly due to less sales for our two key accounts, Ericsson and Nokia, together accounting for 82% of the Operating Systems segment sales. That decrease is expected as they both are, since a few years, building their solutions based on open source software. Network Solutions, by far the largest product group now, representing 68% of total sales, increased by 12% in fixed currencies.
Driven by sales from the newly acquired Wi-Fi business, Aptilo generating 8%, an organic growth of 4%. Software development services declined by 17%, mainly due to less sales in the U.S., driven by declining customer segments being more affected by the pandemic than others. This quarter is even more evident than before, with Aptilo acquisition, that we have transformed the business from a large dependency on operating systems some years back to a company where we have a wide range of high-quality offerings in network solutions. We operate in segments we have a number one or top-tier position. This is also guidance for us when we are exploring non-organic growth opportunities. On slide 10, we present the EBIT development. The EBIT margin was 21% in the first this quarter, clearly better than the first quarter last year.
This quarter compared to last year, the margin was positively affected by lower OpEx. We also see an effect of the implemented efficiency programs from 2020. EPS for the quarter was SEK 2.02, an increase by 152% versus last year, positively impacted by the increased EBIT. Continuing to next slide, we have some more details on gross margin and OpEx development. On slide 11, gross margin was not far from Q1 2020. This quarter, 68.1% versus last year, 68.9%. That's including the M&A last year. The key factors normally affecting the gross margin are level of sales, revenue mix, and changes in depreciation and amortization. We had a positive effect from the revenue mix as the software development services, which has a much higher cost of sales. That part of the total sales decreased from 17% last year to 14% this year.
D&A increased due to the impact of last year's acquisitions, with also a positive effect of last year implemented efficiency programs. OpEx decreased in spite of SEK 9 million more OpEx from Aptilo. We have effect in all OpEx lines of the implemented efficiency programs from last year, and less cost for travel and events. On slide 12, our financial position. We continue to generate good cash flows, still investing in our growth areas. The operating cash flow amounted to SEK 69 million, an increase by 11% versus quarter one last year. We have a very efficient financing structure with a low financing cost and a net debt to EBITDA of 0.62. Even after the Aptilo acquisition in October, there is still significant headroom for potential acquisitions.
The strong balance sheet is also reflected in the equity to assets ratio, which is still pretty high even after the Aptilo acquisition. To conclude, we have very solid financial position, making it possible to invest in both non-organic opportunities and our organic growth products as well. Back to Jan.
Thank you, Björn. Way forward and outlook. On page 14, we maintain a positive view of the market in telecommunications and cybersecurity. This is driven by many things, but including also the growth that 5G will generate. We've in fact done a survey together with leading analysts and leading operators during the quarter, asking the questions about the key trends that will follow during the next couple of years. Some of the things that came out from that survey was an expected growth in things like cloud gaming, group video calling, as well as private 5G that I talked about before. In fact, for the service of mobile cloud gaming, the prediction is that there's going to be a five-fold increase just in the traffic for that service.
Another parallel trend is the growth of encrypted traffic, which probably will represent about 93% of all internet traffic by the end of 2021. With this growth and also the growth of the number of devices driven by the Internet of Things, we expect that there will be continued investments into 5G core, which will also drive one of the key areas for Enea, namely data management. All in all, on the final page 15, we continue to take a positive long-term view of the market. We see growth in 5G data management, edge virtualization, IoT, and cybersecurity. As an independent software company, we are confident that we can challenge established players and increase our market shares over coming years.
Which means that we maintain our ambition to significantly grow revenues, both organically as well as through strategic acquisitions, especially then in our key area of network solutions, while maintaining an operating margin above 20%. The target that we set for ourselves in the previous quarter to reach a turnover annually of SEK 1.5 billion at the latest of the end of full year 2023, is still our ambition. For 2021, I think we all know that we're still in a situation where the market is affected by the pandemic. We do see delays in projects and investments and the risks that we have previously seen and talked about for earnings. We also see them as long as the pandemic has an impact on the market and on our customers.
Having said that, we do maintain the outlook of increasing revenue for 2021 relative to last year, and we do maintain the target of achieving an operating margin above 20%, something that we were able to achieve now as stated for the first quarter. With that, we are through our presentation, and we are ready to take questions. Thank you very much.
Thank you. If you would like to ask a question, please press zero one on your telephone keypad. If you wish to withdraw your question, you may do so by pressing zero two to cancel. There will now be a brief pause while questions are being registered. The first question comes from the line of Frank Maaø from DNB. Please go ahead. Your line is open.
Yes. Hi, good morning, everyone. My first question, at least, relates to your outlook statement, which you commented on just now, but also to the wording in the report itself in the CEO outlook commentary. There seems to be a kind of a sharpened tone around or increased reservation level, I would say, when it comes to the impact of the pandemic and the risks in the earnings related to that compared to the Q4 report at least. How should we interpret that? Do you see anything that has changed over the course of the last three months when it comes to that has made you less optimistic or more pessimistic around the risks for the remainder of 2021? That's the first question. The second question is really also in the CEO words, you talk about risks to the short-term and medium-term.
Could you please elaborate on or explain how you define medium-term here? That would be helpful. Thank you.
Thank you, Frank. Well, I'll start. Jan here, and then Björn, you can fill in. When it comes to the outlook, the intention was not to change any tone relative to the previous quarter. If that is how it's come across, then that was not the intention. I think the wording should be at least in Swedish, identical. The intention is to state that we have seen the effects of the pandemic. Everyone works from home, and although that works fine for us and most of our customers, but it does, of course, change some of the practicalities about how you can efficiently move, touch, and upgrade your networks. It has changed the priorities in the market in some way. It has also affected, to some extent, the investment climate.
I think we have seen some clear evidence of delays, for example, in 5G investments, the 5G auctions, et cetera. I think there is an underlying uncertainty. I think what we wanted to say in the previous quarter as well as in this quarter, is that these effects, we assume, that they will continue to be there as long as the pandemic has a significant impact on the market. Exactly how long that will be, I think, is difficult for everyone to predict, although we, as everyone, see light in the tunnel for the pandemic. The definition of short and medium term, I'm not sure we have a clear and sound definition of that, but in the outlook, we separate the long term, where we have set an ambition for the full year 2023, and then we also talk about this year, 2021.
I think those are the key points that we want to give at this time.
Okay. Thanks for the clarification.
Thank you. The next question comes from the line of Viktor Westman from Redeye. Please go ahead. Your line is open.
Thank you, and good morning. I wanted to ask firstly about status. If you can comment on the status of the network data layer area. I was expecting there to be at least some news here during the past periods. I know there's a pandemic, but comment on the status here and if your positioning and competitiveness is the same.
Sure. Yeah. Network data layer and 5G data management is an area that we've talked a lot about. It remains a key area for Enea. We continue to invest in that area. We had a number of announcements during last year of key and big contracts. We are very much in the delivery mode of those projects. Our intention is to continue to deliver on these projects as well as use these as references for other opportunities on the market also. We are working on those opportunities as we speak. Having said that, we have also previously talked about the effect on the pandemic on overall delays on the market when it comes to 5G, and in particular, 5G core, and that has a link to network data layer.
We believe that the market is still there, the opportunity is still there, but there may be some delay also caused by the pandemic that has an overall effect on the market.
Thank you. I was also curious if you could say something about the potential for the new products. I'm thinking about the Aptilo IoT Connectivity Control Service and the 5G MicroCore. Firstly, if you can say something about the deal size and addressable markets, et cetera. Maybe if you can put it into perspective with the network data layer deals that you have. If these are significantly smaller or larger, et cetera.
Well, I think they are a bit different in nature. If we talk about the private network market, it's a market in very early stages, and as I mentioned, there are a number of activities, trials, et cetera, going on across the world, including Asia, and that the expected market growth will happen during coming years. Here, perhaps the individual deal sizes can be quite limited, but there is a potential of having quite many of them on the market when this takes off, and when the adoption of private networks, and in particular, built on 5G standalone technology takes off on the market. Again, early stages, but opportunity for a growing market, I think as reported also by many analysts and many other suppliers in the field.
When it comes to IoT, I think it's the same thing there, that operators across the world have been since several years watching the IoT as a potential growth area, and many have tried. I think there are many of them that have initial offers for the Internet of Things. Now what we see is perhaps the next wave of offerings like the one from Telia with more advanced services, for example, based on eSIM, so that you more easily can provision devices for global connectivity. Also what Telia has done then as an example, is to provide a more secure and flexible way of establishing connections to your devices wherever they may be in the world. That's where we come into play. Our solution helps operators provide that self-managed, secure connectivity to different global devices.
We hope and expect that that kind of service and offering will be needed by many operators across the world. Again, the individual deal sizes may be limited, but there are many potential out there, and its market is still very early stages. Revenue potential is over a number of years.
Yeah. Maybe also last question on 5G. I know this is of course a long-term structural trend, but can you say if there are any specific inflection points to watch in the 5G market, when and what?
Well, I think what normally drives the adoption are quite fundamental things like the spectrum availability, device availability. Those are two important factors, of course, that drive the underlying need. I think the adoption into private networks is something to watch, whether industries and how fast industries adopt this new technology to cut the cable, if you want. I think those are a few things that will drive connectivity. I think another thing can also be the newcomers on the market when there's a third or a fourth or a fifth operator that may choose to leapfrog some of the previous technology to, for example, go all cloud native from day one. That will also drive technology adoption, and perhaps foster deployment of some of the new technologies, including 5G standalone.
Okay, great. Thank you so much, Jan.
Thanks Viktor.
Thank you. The next question comes from the line of Jesper Henrichsen from Redeye. Please go ahead. Your line is open.
Thanks, and good morning. Regarding your virtualization platform, you say that the coronavirus pandemic is causing market lag, but that your technology will prevail over supplier-specific systems over time. Could you give us a little bit more color on your expectations here and how you see the market evolving? Should we interpret this as operators still sticking to their old solutions?
Thank you, Jesper. No, there are several market analysts, in particular of the market for SD-WAN, software-defined wide area networks, projecting year-over-year growth of double-digit growth during a number of years to come. I think it's quite natural that the pandemic has put a bit of a lag on that particular market. It's all about connectivity, connecting offices, perhaps connecting branches, stores, et cetera. I think we all know that with work from home and lower activity on physical, for example, shops, that might not have been the same priority as it were. But having said that, we believe that that market will come back, the SD-WAN market. What I wrote about in the interim report is that we believe that the market and the kind of technology based on open deployment, free hardware choice, and multiple choices of applications will prevail over the vendor-specific solutions.
Both because of the flexibility and also the cost efficiency of that particular solution. That's where we play, and that's where we see some of the early adopters of the market entering.
Great. Thank you very much.
Thank you. Just a reminder that if you would like to ask a question, please press zero one on your telephone keypad. The next question comes from the line of Simon Granath from ABG.
Morning, Jan and Björn. Thanks for the presentation, and I hope that all is well with you guys. Initially, could you elaborate some more on how the 5G cloud contracts are developing? You say that you are in delivery mode. Does this mean that they contributed to Q1 financials? Do you see risks for delays in delivery of these contracts due to the pandemic?
Yes. We closed a number of important contracts during last year, and they are long-term contracts, and they contribute to revenues over a number of years. We are in delivery mode of that. The kind of revenue recognition are a bit different for the different contracts depending on the criteria. For example, milestone criteria or subscriber uptake criteria, et cetera. We continue to deliver, and we do not really see that the pandemic as such has any impact on the delivery of those contracts. We have been able to change the operation of our company into work-from-home, remote delivery, et cetera, and the same with our customers. We move on with those contracts as initially planned in all essentials.
Okay. Thank you. Did Aptilo develop in line with your expectations in Q1? I know that sales came down from Q4, but I presume that is due to seasonality, or am I missing something else?
Yes. Aptilo has a very high portion of recurring revenue and a stable customer base, in particular for delivering public Wi-Fi systems, and now also with the growth opportunity in the IoT systems. There are, like in Enea's traditional business, variations between quarters. We continue to see a stable outlook for the Aptilo business.
Perfect. Thank you. As the final question, what is your plan on OpEx increases that had? Do you anticipate OpEx to grow in 2021, or will this be more so towards the latter part of the year in order to have slightly higher, for instance, workforce as the project delays situation probably fades?
I can touch on that. Jan?
Yes, please.
We see a decrease overall in OpEx compared to last year due to the efficiency programs we implemented last year. We are still investing in our growth initiatives. We are investing a bit more going forward in some, but at the same time, we are de-investing in product groups which are reducing phase, like for instance, operating systems. I wouldn't expect overall a big increase, but at around the same numbers and maybe a little bit more.
Okay. Thank you so much. All from me.
Thank you. The next question comes from the line of Frank Maaø from DNB. Please go ahead. Your line is open.
Yes. Another question from me, please. With regards to your M&A ambitions, could you give us some thoughts, please, on potential strategic direction that you would be aiming at in terms of potential bolt-on areas to complete your current product portfolio within 5G core, for instance, or applications? You move now into Wi-Fi with the latest Wi-Fi core, basically, and IoT connectivity potentially with the Aptilo acquisition. On the other hand, your 5G MicroCore offering for the private market is still very much a highly multi-vendor one where you provide the data management part of the core. Would you potentially be looking to expand into other parts of the 5G core with future acquisitions? If you could give us some idea as to what directions you are exploring, that would be helpful. Thank you.
Yeah. Thank you, Frank. If you look at the acquisitions that Enea has done, we've done one acquisition per year about during the last four years. There's been a few themes. One theme is the 5G and telecommunications, and in particular data management. Also Aptilo, in fact, contributed to that because although it's public Wi-Fi and IoT, it's still in the area of data management and policy control, so it fits nicely and complements the offering that we had. The other key theme is on cybersecurity, where we already have some position in traffic intelligence, but where we see a continued interest in growth in cybersecurity, also in the intersection of cybersecurity and telecommunication systems.
I think the kind of acquisition that we have done during recent year, which is more of a sort of established business with an established customer base, as well as a technology leading position, those are the kind of acquisitions that we have found interesting and also we've been able to successfully integrate into Enea. Going forward, I think it's reasonable to say that we would be looking at similar kind of acquisitions, when and if they would occur. We would be looking into telecommunications and cybersecurity, enriching our offering. It could be in the area of 5G and 5G core, as you say. It could also be in the area of security or securing these solutions.
It would probably be an area where we have the opportunity to get an established business and to grow and complement our installed base of customers, to also create synergies and cross-selling opportunities. That's how we've been thinking in the past, and it's still very much our acquisition strategy for strategic acquisitions going forward.
Okay. Thank you.
Thank you. As we have no further questions, I will pass back for any closing comments.
Thank you, operator. I'd just like to thank everyone for joining this call. We look forward to your continued interest in Enea. Thank you very much.