AI assistant
Ericsson — Interim / Quarterly Report 2021
Jul 16, 2021
2911_ffr_2021-07-16_76c06033-1eff-45e3-b654-e0588100d4b3.zip
Interim / Quarterly Report
Open in viewerOpens in your device viewer
6-K 1 d171371d6k.htm 6-K 6-K
Table of Contents
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
July 16, 2021
Commission File Number 000-12033
LM ERICSSON TELEPHONE COMPANY
(Translation of registrants name into English)
Torshamnsgatan 21, Kista
SE-164 83, Stockholm, Sweden
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. Form 20-F ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
Announcement of LM Ericsson Telephone Company, July 16, 2021 regarding Second quarter report 2021.
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| T ELEFONAKTIEBOLAGET L M E RICSSON (publ) | |
|---|---|
| By: | /s/ XAVIER DEDULLEN |
| Xavier Dedullen | |
| Senior Vice President, Chief Legal Officer | |
| By: | /s/ CARL MELLANDER |
| Carl Mellander | |
| Senior Vice President, Chief Financial Officer |
Date: July 16, 2021
Table of Contents
Second quarter report 2021
Stockholm, July 16, 2021
Second quarter highlights
Group organic sales grew by 8% YoY, despite a sales decline in Mainland China of SEK -2.5 b. YoY and an IPR revenue decline of SEK -0.5 b. YoY. Reported sales were SEK 54.9 (55.6) b.
Gross margin excl. restructuring charges improved to 43.4% (38.2%) driven mainly by operational leverage in Networks. Q2 2020 was negatively impacted by inventory write-down and initial 5G deployments in Mainland China. Reported gross margin was 43.4% (37.6%).
EBIT excluding restructuring charges improved to SEK 5.8 b. (10.6%) from SEK 4.5 b. (8.2%) YoY driven by Networks. Reported EBIT was SEK 5.8 (3.9) b.
Organic sales in Networks grew by 11% YoY, driven by market share gains. Sales in Mainland China were SEK -2.0 b. lower YoY. Reported EBIT margin was 21.7% (13.2%).
Organic sales in Digital Services were stable YoY, despite a sales decline in Mainland China of SEK -0.5 b. YoY. Reported EBIT (loss) was SEK -1.6 (-0.7) b., impacted by a write-down of SEK -0.3 b. for pre-commercial product investments for the Chinese market.
Reported net income was SEK 3.9 (2.6) b.
Free cash flow before M&A was SEK 4.1 (3.2) b. supported by higher incoming IPR payments. Net cash per June 30, 2021 was SEK 43.7 (37.5) b.
The RAN market outlook for 2021 has been updated to 10% growth YoY, compared with previously 3% growth. Source: DellOro.
| SEK b. — Netsales | 54.9 | 55.6 | -1 % | 49.8 | 10 % | 104.7 | 105.3 | -1 % |
|---|---|---|---|---|---|---|---|---|
| Sales growth adj. for comparable units and currency ¹ | | | 8 % | | | | | 9 % |
| Gross margin ¹ | 43.4 % | 37.6 % | | 42.8 % | | 43.1 % | 38.6 % | |
| EBIT | 5.8 | 3.9 | 51 % | 5.3 | 11 % | 11.1 | 8.2 | 36 % |
| EBIT margin ¹ | 10.6 % | 6.9 % | | 10.6 % | | 10.6 % | 7.7 % | |
| Net income | 3.9 | 2.6 | 51 % | 3.2 | 23 % | 7.1 | 4.9 | 45 % |
| EPS diluted, SEK | 1.10 | 0.74 | 49 % | 0.96 | 15 % | 2.06 | 1.39 | 48 % |
| Measures excl. restructuring charges¹ | ||||||||
| Gross margin excluding restructuring charges | 43.4 % | 38.2 % | | 42.9 % | | 43.2 % | 39.3 % | |
| EBIT excluding restructuring charges | 5.8 | 4.5 | 29 % | 5.3 | 9 % | 11.2 | 9.1 | 22 % |
| EBIT margin excluding restructuring charges | 10.6 % | 8.2 % | | 10.7 % | | 10.7 % | 8.7 % | |
| Free cash flow before M &A | 4.1 | 3.2 | 26 % | 1.6 | 161 % | 5.6 | 5.6 | 1 % |
| Net cash, end of period | 43.7 | 37.5 | 16 % | 43.0 | 2 % | 43.7 | 37.5 | 16 % |
1 Non-IFRS financial measures are reconciled at the end of this report to the most directly reconcilable line items in the financial statements.
1 Ericsson | Second quarter report 2021
Table of Contents
CEO comments
Our strong business performance continued, with an organic sales 1 growth of 8% in the quarter. This was despite a sales decline of SEK -2.5 b. YoY in Mainland China. Networks continued to grow market shares in the quarter with some significant wins. Group gross margin 2 increased to 43.4% (38.2%). We are well positioned to take advantage of continued market momentum with our competitive 5G product portfolio and cost structure. However, it is prudent to forecast a materially lower market share in Mainland China for Networks and Digital Services as the earlier decision to exclude Chinese vendors from the Swedish 5G networks might influence market share awards.
Networks sales 1 grew organically by 11%, despite lower volumes from delayed 5G deployment in Mainland China. This growth reflects the continued high activity levels in most markets. The North East Asia market outside Mainland China saw strong growth in 5G volumes. Gross margin 2 improved to 47.9% (40.5%). Through proactive and continuous measures for supply chain resilience we have accelerated production to meet customer demand, and we are well prepared for any challenges in the future. Our increased R&D investments have accelerated product development. We strengthened our Cloud RAN portfolio further with 5G mid-band and massive MIMO support for increased network performance. Cloud RAN will enable service providers to seamlessly evolve their networks towards cloud-native technologies and open network architectures, meeting demand for more deployment flexibility. We continue on the successful path of 5G wins in North America. We have signed another 5-year contract, this one amounting to USD 8.3 b. (SEK 71 b.), with a leading customer. This is the single largest deal in the history of Ericsson.
In Digital Services the strong momentum in 5G Core continued and we are ramping up R&D investments in the cloud native 5G portfolio. Organic sales were stable in the quarter. However, excluding the reduced sales in Mainland China, sales 1 grew by 5%. Gross margin 2 decreased to 37.9% (43.6%) YoY, mainly due to a write-down of SEK -0.3 b. related to pre-commercial product investments for the Chinese market. A material loss of market share in Mainland China, which contributed 5.4% of Digital Services sales in 2020, would cause a delay in reaching the EBIT margin target for 2022. A significantly reduced volume would lead to a limited loss in 2022 in Digital Services. Improvements are skewed towards the year end 2022, as we expect to see a gradual increase in Core revenues. Based on our strong portfolio, we expect to exceed our original EBIT margin target of 4-7%, as sales in other markets over time will compensate for the reduction in Mainland China. We see strong demand for our OSS, BSS and 5G core offerings, positioning us well for longer-term profitability.
The new IPR agreement with Samsung reaffirms the significant value of our patent portfolio and with this agreement in place we are well positioned to conclude pending and future
patent license renewals. One additional agreement was signed in July. There is currently high activity in renewal negotiations. As new contracts are concluded, revenues will include retroactive payments for the unlicensed period prior to signing.
Whilst many markets are returning to normal following the COVID-19 pandemic, we continue to see rising numbers of cases in South East Asia, which may result in a slower recovery for impacted countries.
We continue to invest in compliance to fully embed our commitments to ethical business practice, in all areas across the organization. Ensuring all decisions are taken with integrity is a driving force in our culture-change journey.
The opportunity from enterprise for 5G provides an exciting growth path for Ericsson. Building on the strong foundations of our core business we will continue to take a stepwise approach to investing in growth in Dedicated Networks, IoT and the wireless portfolio acquired with Cradlepoint. We foresee 20-30% annual market growth in enterprise, with opportunities in automation, remote operations and safety management across whole industry sectors such as smart manufacturing, ports and airports, energy, mining, health and agriculture. Enterprise use cases in 5G and the continuing growth in 4G will drive the digital transformation of business globally combining the high performance, low latency and security benefits of wireless over traditional fixed networks. We are confident that wireless will be the first-choice connection for global business in the 5G era.
Stay healthy and well.
Börje Ekholm
President and CEO
1 Sales adjusted for comparable units and currency
2 Excluding restructuring charges
2 Ericsson | Second quarter report 2021 CEO Comments
Table of Contents
Financial highlights
Net sales development
| SEK b. — Net works | 39.9 | 39.8 | 0 % | 11 % | 36.3 | 76.1 | 75.0 | 2 % | 13 % |
|---|---|---|---|---|---|---|---|---|---|
| Digital Services | 7.9 | 8.6 | -8 % | 0 % | 6.9 | 14.8 | 15.9 | -7 % | 1 % |
| M managed Services | 5.1 | 5.6 | -8 % | -2 % | 4.9 | 10.0 | 11.3 | -12 % | -5 % |
| Emerging Business and Other | 2.1 | 1.6 | 29 % | 13 % | 1.7 | 3.8 | 3.2 | 20 % | 11 % |
| Total | 54.9 | 55.6 | -1 % | 8 % | 49.8 | 104.7 | 105.3 | -1 % | 9 % |
1 Sales growth adjusted for comparable units and currency. Non-IFRS financial measures are reconciled at the end of this report to the most directly reconcilable line items in the financial statements.
Group reported sales were SEK 54.9 b. Sales adjusted for comparable units and currency grew by 8% YoY, with double-digit currency adjusted growth in three of the five market areas. Sales in North East Asia remained stable despite a sales decline in Mainland China of SEK -2.5 b. YoY in Networks and Digital Services. Sales in the Middle East and Africa declined YoY.
IPR licensing revenues decreased to SEK 2.3 (2.8) b. Revenues from the new contract with Samsung, attributable to both Q1 and Q2, were offset by expired contracts under renewal negotiations, lower volumes with one licensee and a weaker USD.
Networks sales adjusted for comparable units and currency increased by 11% YoY driven primarily by growth in market areas Europe and Latin America, South East Asia, India and Oceania as well as in North East Asia except Mainland China. Sales in Mainland China were SEK -2.0 b. lower YoY. Excluding Mainland China, sales in Networks grew by 17%, adjusted for comparable units and currency. Networks accounted for 73% (72%) of total sales.
Digital Services sales adjusted for comparable units and currency were stable YoY, with double-digit growth in North America and in Europe and Latin America. Excluding Mainland China, where revenues were SEK -0.5 b. lower YoY, sales in Digital Services grew by 5% adjusted for comparable units and currency. Digital Services share of total sales was 14% (15%).
Managed Services sales adjusted for comparable units and currency decreased by -2% YoY, mainly due to reduced variable sales in a large contract in North America, post the merger between two large operators. Managed Services share of total sales was 9% (10%).
Emerging Business and Other sales adjusted for comparable units and currency increased by 13%, driven by growth in Emerging Business. Emerging Business and Other share of total sales was 4% (3%).
Income and margin development
| SEK b. — Netsales | 54.9 | 55.6 | -1 % | 49.8 | 10 % | 104.7 | 105.3 | -1 % |
|---|---|---|---|---|---|---|---|---|
| Gross income | 23.9 | 20.9 | 14 % | 21.3 | 12 % | 45.2 | 40.7 | 11 % |
| Gross margin | 43.4 % | 37.6 % | | 42.8 % | | 43.1 % | 38.6 % | |
| Research and development (R&D) expenses | -10.5 | -10.0 | | -9.6 | | -20.1 | -19.2 | |
| Selling and administrative expenses | -7.0 | -7.1 | | -6.2 | | -13.2 | -13.3 | |
| Impairment losses on trade receivables | 0.1 | 0.0 | 138 % | -0.2 | | -0.1 | -0.1 | |
| Other operating income and expenses | -0.6 | 0.1 | | 0.0 | | -0.6 | 0.2 | |
| EBIT | 5.8 | 3.9 | 51 % | 5.3 | 11 % | 11.1 | 8.2 | 36 % |
| of which Networks | 8.6 | 5.3 | 65 % | 7.2 | 19 % | 15.9 | 11.1 | 43 % |
| of which Digital Services | -1.6 | -0.7 | | -1.5 | | -3.1 | -2.1 | |
| of which Managed Services | 0.4 | 0.3 | 58 % | 0.333 % | | 0.7 | 0.79 % | |
| of which Emerging Business &Other | -1.7 | -1.0- | | -0.8- | | -2.4 | -1.5- | |
| EBIT margin | 10.6 % | 6.9 % | | 10.6 % | | 10.6 % | 7.7 % | |
| Financial income and expenses, net | -0.5 | 0.3 | | -0.5 | | -1.0 | -0.6 | |
| Income tax | -1.5 | -1.6 | | -1.6 | | -3.0 | -2.7 | |
| Net income | 3.9 | 2.6 | 51 % | 3.2 | 23 % | 7.1 | 4.9 | 45 % |
| Restructuring charges | 0.0 | -0.7 | | -0.1 | | -0.1 | -1.0 | |
| Measuresc excl. restructuring charges and other items affecting com parability¹ | ||||||||
| Grossmarg in excluding restructuring charges | 43.4 % | 38.2 % | | 42.9 % | | 43.2 % | 39.3 % | |
| EBIT margin excluding restructuring charges | 10.6 % | 8.2 % | | 10.7 % | | 10.7 % | 8.7 % | |
| EBITA excluding restructuring charges | 6.1 | 4.8 | 28 % | 5.6 | 9 % | 11.7 | 9.7 | 21 % |
| EBITA margin excluding restructuring charges | 11.1 % | 8.6 % | | 11.3 % | | 11.2 % | 9.2 % | |
1 Non-IFRS financial measures are reconciled at the end of this report to the most directly reconcilable line items in the financial statements.
Gross margin Reported gross margin was 43.4% (37.6%). Gross margin excluding restructuring charges increased to 43.4% (38.2%) driven mainly by improvements in Networks. Networks gross margin in the quarter was supported by strong operational leverage, while in Q2 2020 Networks gross margin was negatively impacted by both a write-down of pre-commercial product inventory and initial 5G deployments in Mainland China. Managed Services gross margin improved mainly as an effect of efficiency gains, while Digital Services margin was negatively impacted by a write-down of SEK -0.3 b. for pre-commercial product investments for the Chinese market.
3 Ericsson | Second quarter report 2021 Financial highlights
Table of Contents
Sequentially, reported gross margin increased to 43.4% from 42.8%, mainly driven by continued strong operational leverage in Networks and a positive impact of two quarters of IPR revenues related to the patent agreement signed in the quarter.
Research and development (R&D) expenses
R&D expenses amounted to SEK -10.5 (-10.0) b. R&D expenses increased in Digital Services due to increased investments in the cloud-native 5G portfolio and in Emerging Business and Other as a result of the acquisition of Cradlepoint.
Selling and administrative (SG&A) expenses
SG&A expenses were SEK -7.0 (-7.1) b. Increased investments in compliance and security and the consolidation of Cradlepoint were offset by lower discretionary spending in other areas.
Revaluation of customer financing was SEK 0.1 (0.0) b.
Impairment losses on trade receivables
Impairment losses on trade receivables were SEK 0.1 (0.0) b.
Other operating income and expenses
Other operating income and expenses was SEK -0.6 (0.1) b., negatively impacted by SEK -0.8 b. as a result of the Nokia settlement related to the 2019 resolution with the U.S. Department of Justice (DOJ) and the U.S. Securities and Exchange Commission (SEC).
Share in earnings of JVs and associated companies was SEK -0.1 (-0.2) b.
Restructuring charges
Restructuring charges amounted to SEK 0.0 (-0.7) b.
EBIT
Reported EBIT improved to SEK 5.8 (3.9) b. YoY. EBIT excluding restructuring charges was SEK 5.8 (4.5) b. corresponding to an EBIT margin excluding restructuring charges of 10.6% (8.2%). The increase was driven mainly by improved gross margin in Networks.
Sequentially, reported EBIT increased to SEK 5.8 b. from SEK 5.3 b. driven by increased revenues and gross income primarily in Networks.
EBITA
EBITA improved to SEK 6.1 (4.1) b. YoY. EBITA excluding restructuring charges was SEK 6.1 (4.8) b. corresponding to an EBITA margin excluding restructuring charges of 11.1% (8.6%).
Financial income and expenses, net
Reported financial net was SEK -0.5 (0.3) b. The weakened USD to SEK resulted in a positive currency hedge effect. The currency hedge effect was SEK 0.1 b. in the quarter compared with SEK 0.6 b. in Q2 2020.
Sequentially, financial net was stable at SEK -0.5 b. with the currency hedge effect up from SEK -0.4 b. in the first quarter 2021. The USD weakened against the SEK between March 31, 2021 (SEK/USD rate 8.71) and June 30, 2021 (SEK/USD rate 8.51).
Taxes
Taxes were SEK -1.5 (-1.6) b. The effective tax rate in Q2 was 27% compared with 33% in Q1 2021, mainly due to the market mix in the quarter.
Net income
Net income improved to SEK 3.9 (2.6) b. and EPS diluted improved to SEK 1.10 (0.74) YoY driven by stronger EBIT.
Employees
The number of employees on June 30, 2021, was 101,624 compared with 101,113 on March 31, 2021. The increase derives mainly from research and development.
Financial highlights, year to date (Jan-June) development
Reported sales decreased by -1%. Sales adjusted for comparable units and currency increased by 9% driven primarily by sales in market areas North America and Europe and Latin America. Networks sales adjusted for comparable units and currency increased by 13%, Emerging Business and Other and Digital Services grew by 11% and 1% respectively, while Managed Services declined by -5%.
Reported gross margin increased to 43.1% (38.6%) driven by improvements primarily in Networks, which showed strong operational leverage. Q2 2020 was negatively impacted by both a write-down of pre-commercial product inventory and initial 5G deployments in Mainland China.
Reported EBIT increased YoY to SEK 11.1 (8.2) b. as a result of improved gross income.
Reported EBITA increased to SEK 11.7 (8.7) b. YoY. EBITA excluding restructuring charges was SEK 11.7 (9.7) b. corresponding to an EBITA margin excluding restructuring charges of 11.2% (9.2%).
Net income year to date improved to SEK 7.1 (4.9) b. with the improved gross income impacted by a more negative financial net and higher taxes.
4 Ericsson | Second quarter report 2021 Financial highlights
Table of Contents
Planning assumptions
Market related
The global RAN equipment market is estimated to grow by 10% (3%) in 2021, with Mainland China expected to grow by 11% (4%), North America by 12% (2%) and Europe by 9% (3%). Source: DellOro Mobile RAN report, May 2021. (Previous forecast within brackets)
Ericsson related
Net sales
Three-year average reported sales seasonality between Q2 and Q3 is 5%, however, with large variations depending on timing of deployments and currency impact.
In Q2 2021, sales in Mainland China were SEK 1.5 (4.1) b. In Q3 2020, sales in Mainland China were SEK 5.2 b. In Q4 2020, sales in Mainland China were SEK 4.8 b.
The annual revenues from the current portfolio of IPR contracts is approximately SEK 7 b.
Gross margin
Gross margin will vary by quarter depending on business mix and seasonality; thus, a rolling four quarter gross margin gives a more relevant view of the margin development.
R&D and SG&A expenses
Operating expenses typically decrease between Q2 and Q3 due to seasonality, however, with large variations.
EBIT
Digital Services: Considering the uncertainty in Mainland China and the fact that 2021 is an investment year, a similar earnings level is expected in Q3 2021 as in Q2 2021 and a break-even is expected in Q4 2021 isolated.
Restructuring charges
Restructuring charges are estimated to be approximately 1% of sales per year on average.
Currency exposure
Rule of thumb: A change by 10% of USD to SEK would have an impact of approximately +/-5% on net sales and approximately +/-1 percentage point on EBIT margin.
Cradlepoint
Cradlepoint is fully consolidated into segment Emerging Business and Other.
Group EBIT margin is expected to be negatively impacted by approximately -1 percentage point until the end of 2022.
5 Ericsson | Second quarter report 2021 Planning assumptions
Table of Contents
Market area sales
| SEK b. — South East Asia, Oceania and India | 7.1 | 6.6 | 8 % | 14 % | 6.7 | 6 % | 13.8 | 10 % |
|---|---|---|---|---|---|---|---|---|
| North EastAsia | 7.1 | 7.8 | -9 % | 1 % | 6.5 | 10 % | 13.6 | 16 % |
| North Am erica | 18.0 | 18.4 | -2 % | 11 % | 17.1 | 5 % | 35.0 | -4 % |
| Europe and Latin America | 14.0 | 13.1 | 7 % | 14 % | 12.6 | 11 % | 26.7 | 5 % |
| Middle East and Africa | 4.5 | 5.4 | -18 % | -10 % | 4.4 | 2 % | 8.9 | -21 % |
| Other² | 4.3 | 4.3 | 0 % | | 2.5 | 73 % | 6.8 | -18 % |
| Total | 54.9 | 55.6 | -1 % | 8 % | 49.8 | 10 % | 104.7 | -1 % |
1 Sales growth adjusted for currency.
2 Market area Other includes primarily IPR licensing revenues and the major part of segment Emerging Business and Other.
Sales breakdown by market area by segment is available at the end of this report.
Three market areas showed double-digit organic growth.
North East Asia grew organically by 69% excluding sales in Mainland China.
After a period of decline, Latin America showed organic growth.
South East Asia, Oceania and India
Currency adjusted sales increased by 14% YoY. Networks sales increased YoY primarily driven by continued investments in LTE, mainly in India, and as a result of timing of project milestones in South East Asia. Sales decreased YoY in Digital Services due to timing of orders and project milestones. Managed Services sales increased YoY, mainly as a result of a new contract signed in the second half of 2020. Reported sales increased by 8%.
North East Asia
Currency adjusted sales increased by 1% YoY. Despite lower 5G volumes in Mainland China, sales in Networks grew, driven by continued 5G momentum in the other parts of the market area. Digital Services sales declined in Mainland China. Reported sales declined by -9%.
North America
Currency adjusted sales increased by 11% YoY. Sales growth was driven by strong demand for 5G solutions in Networks and for 5G Core and cloud-native solutions in Digital Services. Reported sales declined by -2%.
Europe and Latin America
Currency adjusted growth was 14% YoY with 12% growth in Europe and 28% in Latin America. Sales in both Networks and Digital Services continued to grow as a result of market share gains, while sales decreased in Managed Services YoY due to earlier decisions on contract exits and rescoping of contracts. Reported sales increased by 7%.
Middle East and Africa
Currency adjusted sales declined by -10% YoY. Sales declined YoY in Networks and Digital Services primarily due to lower 5G investments in the Middle East and uncertain macroeconomic conditions in Africa, which are likely to prevail for some time. Managed Services sales were stable. Reported sales decreased by -18%.
Other
IPR licensing revenues decreased to SEK 2.3 (2.8) b. Revenues from the new contract with one licensee were offset by expired contracts under renewal negotiations, lower volumes with one licensee and a weaker USD.
Sequentially, IPR licensing revenues increased to SEK 2.3 (0.8) b. mainly due to the new agreement with Samsung.
6 Ericsson | Second quarter report 2021 Market area sales
Table of Contents
Segment results
Segment Networks
| SEK b. — Net sales | 39.9 | 39.8 | 0 % | 36.3 |
|---|---|---|---|---|
| Of which IPR licensing revenues | 1.92.3 | -17 % | 0.7 | |
| Sales growth adj. for comparable units and FX | | | 11 % | |
| Gross income | 19.1 | 16.0 | 19 % | 16.7 |
| Gross margin | 47.9 % | 40.2 % | | 46.1 % |
| EBIT | 8.6 | 5.3 | 65 % | 7.2 |
| EBIT margin | 21.7 % | 13.2 % | | 20.0 % |
| Restructuring charges | 0.0 | -0.4 | | 0.0 |
| Measures excl. restructuring charges | ||||
| Gross margin excl. restructuring charges | 47.9 % | 40.5 % | | 46.0 % |
| EBIT excl. restructuring charges | 8.7 | 5.6 | 54 % | 7.2 |
| EBIT margin excl.restructuring charges | 21.7 % | 14.1 % | | 19.9 % |
Breakdown of sales into products, services and IPR licensing is available in note 3.
Sales adjusted for comparable units and currency grew by 11% with growth in four of the five market areas.
Strengthened Cloud RAN portfolio with 5G mid-band and massive MIMO support.
EBIT margin at 21.7% driven by operational leverage.
Net sales
Sales adjusted for comparable units and currency grew by 11% YoY, with growth in four of the five market areas. Sales in Mainland China declined by SEK -2.0 b. YoY. Sales declined in market area Middle East and Africa primarily due to lower 5G investments in the Middle East and uncertain macroeconomic conditions in Africa. IPR revenues were SEK -0.4 b. lower YoY. Reported sales were stable YoY.
Sequentially, reported sales increased by 10%, driven primarily by growth in Europe and Latin America as well as in North East Asia outside of Mainland China.
Gross margin
Reported gross margin increased to 47.9% (40.2%) YoY. Gross margin in the quarter was supported by strong operational leverage, which more than offset the lower IPR revenues YoY. Q2 2020 was negatively impacted by a write-down of pre-commercial product inventory and by initial 5G deployments in Mainland China. Gross margin excluding restructuring charges was 47.9% (40.5%).
Reported gross margin increased QoQ to 47.9% from 46.1% with continued strong operational leverage and a positive impact of two quarters of IPR revenues related to the patent agreement signed in the quarter.
EBIT
Reported EBIT increased to SEK 8.6 (5.3) b. YoY, which increased the EBIT margin to 21.7% (13.2%). The increase was driven by improved gross income. EBIT margin excluding restructuring charges increased to 21.7% (14.1%)
Sequentially, reported EBIT increased by SEK 1.4 b. EBIT margin increased to 21.7% from 20.0%, due to seasonally higher sales and improved gross income.
Net sales rolling four quarters were SEK 167.2 b. and EBIT margin rolling four quarters excluding restructuring charges was 21.5%.
Segment Digital Services
| SEK b. — Net sales | 7.9 | 8.6 | -8 % | 6.9 |
|---|---|---|---|---|
| Of which IPR licensing revenues | 0.40.5 | -17 % | 0.1 | |
| Sales growth adj. for comparable units and FX | | 0 % | | |
| Gross income | 3.0 | 3.7 | -20 % | 3.0 |
| Gross margin | 37.9 % | 43.6 % | | 43.5 % |
| EBIT (loss) | -1.6 | -0.7 | | -1.5 |
| EBIT margin | -19.9 % | -8.1 % | | -22.0 % |
| Restructuring charges | 0.0 | 0.0 | | 0.0 |
| Measures excl. restructuring charges | ||||
| Gross margin excl. restructuring charges | 37.9 % | 43.6 % | | 43.6 % |
| EBIT excl. restructuring charges | -1.6 | -0.7 | | -1.5 |
| EBIT margin excl. restructuring charges | -19.8 % | -8.5 % | | -21.9 % |
Breakdown of sales into products, services and IPR licensing is available in note 3.
Sales adjusted for comparable units and currency were stable YoY despite a decrease of SEK -0.5 b. YoY in Mainland China.
Double-digit sales growth in North America and in Europe and Latin America.
The write-down related pre-commercial product investments for the Chinese market impacted gross margin by -3.6 p.p.
Net sales
Sales adjusted for comparable units and currency were stable YoY, with double-digit growth in North America and in Europe and Latin America, while sales declined in the other three market areas. Sales in Mainland China decreased by SEK -0.5 b. YoY. IPR revenues were SEK -0.1 b. lower YoY. Reported sales decreased by -8% YoY.
Reported sales increased by 14% QoQ, with growth in all market areas except in North East Asia.
Gross margin
Reported gross margin decreased to 37.9% (43.6%) YoY. There is a high risk regarding future market share in Core in Mainland China and the Company has made a write-down of SEK -0.3 b. for pre-commercial product investments for the Chinese market. The impact of the write-down on gross margin was -3.6 percentage points. Gross margin was also negatively impacted by lower IPR revenues YoY.
Reported gross margin decreased to 37.9% from 43.5% QoQ as a result of the write-down related to the Chinese market. The write-down more than offset the positive impact of two quarters of IPR revenues from the patent agreement signed in the quarter.
EBIT (loss)
Reported EBIT (loss) was SEK -1.6 (-0.7) b. with an EBIT margin of -19.9% (-8.1%). Operating expenses increased to SEK -4.6 b. mainly due to acceleration of R&D investments in the cloud native 5G portfolio.
Sequentially, reported EBIT decreased by SEK -0.1 b. to SEK -1.6 b. due to the above-mentioned write-down.
Net sales rolling four quarters were SEK 36.2 b. and EBIT margin rolling four quarters excluding restructuring charges was -8.5%.
7 Ericsson | Second quarter report 2021 Segment results
Table of Contents
Segment Managed Services
| SEK b. — Net sales | 5.1 | 5.6 | -8 % | 4.9 |
|---|---|---|---|---|
| Sales growth adj. for comparable units and FX | | -2 % | | |
| Gross income | 1.0 | 1.0 | 2 % | 0.9 |
| Gross margin | 19.0 % | 17.1 % | | 19.4 % |
| EBIT | 0.4 | 0.3 | 58 % | 0.3 |
| EBIT margin | 8.1 % | 4.7 % | | 6.4 % |
| Restructuring charges | 0.0 | 0.0 | | -0.1 |
| Measures excl. restructuring charges | ||||
| Gross margin excl. restructuring charges | 19.0 % | 17.2 % | | 21.0 % |
| EBIT excl. restructuring charges | 0.4 | 0.3 | 57 % | 0.4 |
| EBIT margin excl. restructuring charges | 8.1 % | 4.8 % | | 8.1 % |
Sales declined YoY mainly due to lower variable sales in North America. Continued investments in automation, analytics and AI-driven offerings supporting 5G and efficiency in service delivery. EBIT margin increased to 8.1% driven by efficiency gains.
Net sales
Sales adjusted for comparable units and currency decreased by -2% YoY, due to reduced variable sales in a large contract in North America, post the merger between two operators, and lower sales mainly in Europe due to earlier decided contract exits. Sales in Network Optimization showed growth mainly in Europe and Latin America. Sales in Managed Services IT&ADM showed growth mainly in North America. Reported sales declined by -8% YoY.
Gross margin
Reported gross margin increased to 19.0% (17.1%) YoY. Gross margin excluding restructuring charges increased to 19.0% (17.2%) YoY, mainly due to efficiency gains and higher variable sales.
Reported gross margin decreased slightly to 19.0% from 19.4% QoQ. Gross margin excluding restructuring charges decreased to 19.0% from 21.0% QoQ, due to seasonally lower costs in Q1.
EBIT
Reported EBIT was SEK 0.4 (0.3) b. EBIT margin excluding restructuring charges increased to 8.1% (4.8%) YoY, driven by efficiency gains and higher variable sales.
EBIT excluding restructuring charges was stable at SEK 0.4 b. QoQ.
Net sales rolling four quarters were SEK 21.3 b. and EBIT margin rolling four quarters excluding restructuring charges was 8.0%.
Segment Emerging Business and Other
| SEK b. — Net sales | 2.1 | 1.6 | 29 % | 1.7 |
|---|---|---|---|---|
| Sales growth adj. for comparable units and FX | | | 13 % | |
| Gross income | 0.8 | 0.2 | | 0.6 |
| Gross margin | 37.9 % | 12.6 % | | 36.6 % |
| EBIT (loss) | -1.7 | -1.0 | | -0.8 |
| EBIT margin | -81.1 % | -60.5 % | | -44.4 % |
| Restructuring charges | 0.0 | -0.3 | | 0.0 |
| Measures excl. restructuring charges | ||||
| Gross margin excl. restructuring charges | 38.1 % | 25.3 % | | 36.8 % |
| EBIT (loss) excl. restructuring charges | -1.7 | -0.6 | | -0.8 |
| EBIT margin excl. restructuring charges | -81.5 % | -39.6 % | | -43.7 % |
Continued sales and gross margin growth in Emerging Business, driven mainly by Cradlepoint. Positive impact of SEK 0.1 b. (Net sales, GM and EBIT) from final PPA for Cradlepoint. Negative impact of SEK -0.8 b. (Other op income) from Nokia settlement related to 2019 resolution with the U.S. authorities
Net sales
Sales adjusted for comparable units and currency increased by 13%. Reported sales increased by 29% YoY, driven mainly by the acquired Cradlepoint business.
Gross margin
Reported gross margin increased to 37.9% (12.6%) YoY. Gross margin excluding restructuring charges increased to 38.1% (25.3%). The increase in Emerging Business was driven mainly by Cradlepoint and new businesses.
Reported gross margin increased to 37.9% from 36.6% QoQ. Gross margin excluding restructuring charges increased to 38.1% from 36.8% QoQ. The improvement was driven by Cradlepoint.
EBIT (loss)
Reported EBIT (loss) was SEK -1.7 (-1.0) b.
EBIT was negatively impacted by SEK -0.8 b. in the quarter, as a result of the Nokia settlement related to the 2019 resolution with the U.S. authorities. Adjusted for this settlement, reported EBIT (loss) was SEK -0.9 (-1.0) b.
The positive impact from the changes between the preliminary and final PPA (Purchase Price Allocation) for Cradlepoint was SEK 0.1 b.
Net sales rolling four quarters were SEK 7.1 b. and EBIT margin rolling four quarters excluding restructuring charges was -47.9%.
8 Ericsson | Second quarter report 2021 Segment results
Table of Contents
Cash flow and financial position
| Free cash flow bridge, SEK b. — EBIT excl. restructuring charges | 5.8 | 4.5 | 5.3 | 11.2 | 9.1 |
|---|---|---|---|---|---|
| Depreciation, am ortization and in pairm entbsses | 2.1 | 2.2 | 1.9 | 4.0 | 4.3 |
| Restructuring charges | 0.0 | -0.7 | -0.1 | -0.1 | -1.0 |
| Changes in working capital¹â¾ | 0.2 | -0.2 | -3.9 | -3.6 | -0.4 |
| Interestpaid/received,taxespaid,and other | -2.2 | -0.4 | -0.1 | -2.3 | -2.2 |
| Cash flow from operating activities | 5.9 | 5.4 | 3.2 | 9.1 | 9.8 |
| Capexnet and other investing activities | -1.3 | -1.6 | -1.1 | -2.4 | -3.0 |
| Repaym entoflease liabilities | -0.6 | -0.6 | -0.5 | -1.2 | -1.2 |
| Free cash flow before M &A | 4.1 | 3.2 | 1.6 | 5.6 | 5.6 |
| M&A | -0.1 | 0.0 | 0.0 | -0.1 | -0.3 |
| Free cash flow after M &A | 4.0 | 3.2 | 1.6 | 5.6 | 5.3 |
| Cash flow from operating activities | 5.9 | 5.4 | 3.2 | 9.1 | 9.8 |
| Cash flow from investing activities | -7.1 | -0.5 | -0.9 | -8.1 | -5.5 |
| Cash flow from financing activities | 4.3 | -4.6 | -6.2 | -1.9 | -3.1 |
| SEK b. — Grosscash | 77.1 | 75.4 | 68.6 |
|---|---|---|---|
| -Borrow ings, current | 11.7 | 15.3 | 2.4 |
| -Borrow ings, non-current | 21.7 | 22.6 | 23.3 |
| Netcash | 43.7 | 37.5 | 43.0 |
| Equity | 91.7 | 78.5 | 88.1 |
| Total assets | 281.0 | 276.8 | 270.3 |
| Capitalturnover(times) | 1.3 | 1.3 | 1.3 |
| Return on capitalem ployed (% ) | 13.5 % | 9.9 % | 13.3 % |
Non-IFRS financial measures are reconciled at the end of this report to the most directly reconcilable line items in the financial statements.
1 Defined as Changes in operating net assets
Free cash flow before M&A was SEK 4.1 (3.2) b. supported by higher incoming IPR payments. The average maturity of long-term borrowings increased to 4 years through an 8-year bond and a 7-year loan from EIB.
Cash flow from operating activities
Reported cash flow from operating activities was SEK 5.9 (5.4) b. Continued business momentum with increased profit and higher incoming IPR payments supported cash flow. Cash flow from operating activities in Q2 2020 was impacted by a payment of SEK -1.0 b. into the Swedish Pension Trust. Operating net assets were stable in the quarter and key movements include an increase in contract liabilities with a positive impact of SEK 4.6 b. relating to a combination of customer contracts and incoming IPR payments. This was offset by an increase in trade receivables and contract assets of SEK -4.0 b. as a result of the sales growth in Networks in the quarter. Taxes paid/received were SEK -1.9 b.
Free cash flow
Free cash flow before M&A was SEK 4.1 (3.2) b. Capex net and other investing activities was SEK -1.3 (-1.6) b., primarily related to investment in Networks. Repayment of lease liabilities was stable at SEK -0.6 b. YoY and free cash flow after M&A was SEK 4.0 (3.2) b.
Cash flow from investing and financing activities
Reported cash flow from financing activities was SEK 4.3 (-4.6) b. including repayment of lease liabilities. In the quarter, Ericsson issued a EUR 0.5 b. (SEK 5.0 b.) bond maturing in 2029 and drew on its credit commitment with the European Investment Bank (EIB) of USD 0.3 b. (SEK 2.6 b.) maturing in 2028. Dividends of SEK -3.3 b. were paid out in the quarter, and an additional SEK 1.00 per share (SEK -3.3 b.) will be paid out in October.
Reported cash flow from investing activities was SEK -7.1 (-0.5) b. mainly due to purchases of interest-bearing securities.
Financial position
Net cash improved QoQ to SEK 43.7 b. from SEK 43.0 b. due to the positive cash flow, partly offset by dividends paid. Gross cash increased by SEK 8.5 b. QoQ, driven by the issuing of a EUR 0.5 b. (SEK 5.0 b.) senior unsecured 8-year bond and the utilization of the USD 0.3 b. (SEK 2.6 b.) credit commitment with the EIB. Current borrowings increased due to reclassification of the USD 1.0 b. (SEK 8.5 b.) bond from non-current borrowings as it becomes due in Q2 2022. The average maturity of long-term borrowings was 4.0 years as of June 30, 2021, an increase from 2.2 years 12 months earlier.
Liabilities for post-employment benefits decreased slightly in the quarter, to SEK 31.4 b. from SEK 31.9 b. The Swedish defined benefit obligation (DBO) was calculated using a discount rate based on the Swedish government bond yield-curve. If the discount rate had been based on Swedish covered mortgage bonds, the liability for post-employment benefits would have been approximately SEK 17.7 b. (SEK 13.7 b. lower than current DBO).
Return on capital employed (ROCE) was 13.5% (9.9%).
9 Ericsson | Second quarter report 2021 Cash flow and financial position
Table of Contents
Parent Company
Income after financial items JanJune 2021 was SEK 5.7 (2.3) b.
At the end of the quarter, gross cash (cash, cash equivalents, short-term investments and interest-bearing securities, non-current) amounted to SEK 62.9 (63.3) b.
There was an increase in intercompany lending of SEK 2.5 b. and in intercompany borrowing of SEK 0.2 b. in the second quarter.
The Parent Company has recognized dividends from subsidiaries of SEK 5.2 (1.0) b. in the quarter. There was a negative impact of SEK -0.8 b. (Other operating income) in the quarter, as a result of the Nokia settlement related to the 2019 resolution with the U.S. Department of Justice (DOJ) and the U.S. Securities and Exchange Commission (SEC).
In accordance with the conditions of the long-term variable compensation program (LTV) for Ericsson employees, 1,629,894 shares from treasury stock were distributed or sold to employees in the second quarter. The holding of treasury stock on June 30, 2021 was 4,414,066 Class B shares.
10 Ericsson | Second quarter report 2021 Parent Company
Table of Contents
Other information
Ericsson and Samsung signed global patent license agreement
On May 7, 2021, Ericsson and Samsung reached a multi-year agreement on global patent licenses between the two companies, including patents relating to all cellular technologies. The cross-license agreement covers sales of network infrastructure and handsets from January 1, 2021.
Furthermore, Ericsson and Samsung agreed on technology cooperation projects to advance the mobile industry in open standardization and create valuable solutions for consumers and enterprises.
This settlement ends complaints filed by both companies before the United States International Trade Commission (USITC) as well as the ongoing lawsuits in several countries and confirms the value of the strong patent portfolios of both companies. The details of the agreement are confidential and will not be disclosed.
Ericssons IPR licensing revenues continue to be affected by several factors, mainly expired patent license agreements pending renewal, geopolitical impact on the handset market, technology shift from 4G to 5G, and possible currency effects going forward.
Over several decades, Ericsson has made significant investments in R&D and in developing global mobile standards and is committed to licensing its standard-essential patents on fair, reasonable and non-discriminatory (FRAND) terms for the benefit of consumers and enterprises everywhere. The FRAND system allows access to technology and intellectual property, developed by inventors like Ericsson, and also rewards those inventors for their major up-front investment in R&D in each mobile generation.
The value of Ericssons IP portfolio extends to more than 57,000 granted patents and is strengthened by annual investment in R&D of approx. SEK 40 b. With a leading global position in 5G, the company is confident of growing its IPR revenues long term, thereby further maximizing the value of the overall patent portfolio.
Ericsson announced settlement with impact in second quarter 2021
On May 12, 2021, Ericsson announced that the Company had reached an agreement with Nokia for settling a damages claim against Ericsson. The settlement relates to events that were the subject of 2019 resolutions with the U.S. Department of Justice (DOJ) and U.S. Securities and Exchange Commission (SEC) of investigations into Ericssons violations of the U.S. Foreign Corrupt Practices Act (FCPA).
As communicated in 2019, the resolution with DOJ related to criminal charges of books and records and internal controls violations of the FCPA in five countries including in Djibouti and a guilty plea to one instance of bribery in Djibouti. The resolution with the SEC related to allegations of violations of the books and records and internal controls provision of the FCPA in six countries and of the bribery provision of the FCPA in three of these six countries.
The agreement with Nokia contemplates the payment by Ericsson of a total settlement amount of EUR 80 m (SEK 0.8 b. equivalent). The amount reflects uncertainty, risk, expense, and potential distraction from business focus associated with a potentially lengthy and complex litigation. The settlement will have an impact of EUR 80 m. on EBIT and EUR 26 m. on cash flow in Q2 2021. The remainder of the settlement amount will be made in similar installments in 2022 and 2023 respectively, impacting cash flow. The settlement amount will be recorded as Other operating expenses under Segment Emerging Business and Other. Further details of the terms of the settlement are confidential.
Ericsson has a zero-tolerance policy for corruption and has in recent years worked hard to strengthen its Ethics and Compliance program and to build a culture of compliance.
Ericsson updated risk factors for Euro corporate bond prospectus
On May 24, 2021, Ericsson announced that the Company was in the process of issuing a EUR 500 million unsecured 8-year bond under its EMTN program. In connection with this proposed issue, Ericsson updated the risk factors in its prospectus regarding geopolitical and trade uncertainty.
The reason for the update was as previously disclosed by Ericsson in its Q4 2020 financial report and in its 2020 Annual Report, that there is a risk that the decision by the Post and Telecommunication Authority (PTS) to exclude Chinese vendors products from the 5G auction in Sweden may adversely impact the economic interests of Sweden and Swedish industry, including those of Ericsson.
This risk has been included in the risk factors in Ericssons EMTN prospectus. The update coincides with Ericssons proposed issue under the EMTN program and the change in relation to the risk factor, as shown in the Q4 report, is reflected in the italicized text below.
Extract of text from Q4 report
Ongoing geopolitical and trade uncertainty from a range of factors may have a material adverse impact on our business, operations, business prospects and consequently on operating results, financial conditions and our ability to meet our targets.
[ ]
There are uncertainties for the future bilateral trading relationships between China and several countries as a result of restrictions to wards Chinese vendors in national 5G networks.
[ ]
In Sweden, the Post and Telecommunication Authority (PTS) has taken a decision to exclude Chinese vendors products from the 5G auction. Of special relevance for Ericsson in this context is the trade relationship between Sweden and China, since Ericsson, even though it is a global company with a presence on all global markets, has its headquarters in Sweden and therefore risks collateral damages from a weakened Swedish-Chinese relationship as a result of this decision. There is a risk that the above leads to measures taken by China that are targeted at the economic interests of Sweden and Swedish industry, including those of Ericsson. While Ericsson is invited to various ongoing tender processes in China, the final outcome remains uncertain and it is the companys current assessment that the risk has increased that Ericsson will in those tenders be allocated a significantly lower market share than its current market share.
[...]
The geopolitical situation can have consequences on the entire industry, with an increased likelihood of further industry split, separation of global value chains and separation of global standards for mobile telecommunications. This overall development has also led to several countries evaluating how to ensure uninterrupted access to telecommunication network infrastructure, for example through promoting disaggregation of the Radio Access Network and support of national communication network infrastructure champions as alternative to the established global vendors such as Ericsson although the timing and extent of this remains unclear.
11 Ericsson | Second quarter report 2021 Other information
Table of Contents
All of the above may have a material and potentially lasting adverse impact on our business, including sales, market share, market access and supply chain and R&D activities, our financial condition and results of operations.
COVID-19 update
Despite the effective deployment of vaccines in many markets we continue to take the utmost care to ensure the health and well-being of our colleagues in respect of the COVID-19 pandemic.
We remain cautiously optimistic as 2021 progresses that control over the spread of the virus is increasing due to vaccination, public education and continued restrictions on movement in areas of heightened infection risk. It will still take time before the full effects of this strategy are seen. Therefore, we continue to advocate working from home for the majority of our employees throughout 2021.
Travel restrictions for non-critical cross-border business travel will remain throughout 2021
Event restrictions are extended accordingly for the rest of the year
The mandate on mask wearing in our office locations continues until further notice.
In preparation for a phased return to the office, our Workplace of the Future program planning continues to enable future work flexibility and increased opportunities to connect and collaborate in the office, once it is deemed safe to do so.
We continue to operate efficiently and profitably and believe that tax-payers money is better used to target the health and economic effects of COVID-19, accordingly we have not sought public funding during the pandemic. The proactive approach to business continuity management in full alignment with customers at the beginning of the pandemic continues to pay off. Quality in Ericssons operations and customers networks are maintained. The dual mode production strategy and regionalized supply chains make it possible to keep performing to high levels across the supply chain.
POST-CLOSING EVENTS
Ericsson and Verizon ink landmark multi-year USD 8.3 b. 5G deal
On July 16, 2021, Ericsson announced a landmark multi-year agreement with Verizon to provide its industry-leading 5G solutions to accelerate the deployment of Verizons world-class next-generation 5G network in the U.S.
Under this USD 8.3 billion agreement, Verizon will deploy Ericssons 5G MIMO C-band, low-band, and millimeter wave (mmWave) solutions to enhance and expand Verizons 5G Ultra Wideband coverage, network performance, and user experience. Ericssons technology solutions, including Massive MIMO, Ericsson Spectrum Sharing, and Ericsson Cloud RAN, complement the high-performing Ericsson Radio System portfolio to support 5G services. Ericssons industry-leading software functionality provides end-users with the speed and performance they expect from 5G networks.
In 2020, Verizon was the first communications service provider to receive a commercial 5G mmWave Street Macro base station from Ericssons award-winning new state-of-the-art U.S. smart factory in Lewisville, Texas. Ericsson is committed to building and accelerating the nationwide build-out of 5G across the country.
12 Ericsson | Second quarter report 2021 Other information
Table of Contents
Risk factors
Ericsson is exposed to a number of risks in its activities. To stimulate identification and support cross-functional treatment within the Ericsson Group, risks are grouped in a number of categories, including for example risks relating to technology, IPR, compliance, project execution, operations, products and services, treasury and accounting, the geopolitical environment, M&A, cyber security and occupational health and safety.
Ericssons risk management is embedded into strategy development and operational processes and is a part of the Ericsson Group Management System to ensure accountability, effectiveness, efficiency, business continuity and compliance. Risks are defined in both a short-term and long-term perspective and are related to long-term objectives as per the strategic direction as well as to short-term objectives.
Risk factors and uncertainties of relevance to Ericsson are described in the Annual Report 2020. Updates to these risk factors and uncertainties observed by Ericsson that are deemed of short-term relevance include, but are not limited to, the following:
Pandemics, such as for example the one caused by the novel Coronavirus, COVID-19, could severely impact our local and global operations
The COVID-19 pandemic has caused challenges and risks relating to travel and lockdowns limiting access to sites, transportation and logistics and impacting the flow of goods, as well as having major parts of the workforce working remotely. With an increasing infection rate in some of Ericssons markets, there is an increased risk for negative impact and disturbances in the Companys operations, including in network deployments in those markets, impacting corresponding revenues. As previously mentioned, disturbances from the pandemic may have material adverse effects on our business and financial position.
This report has not been reviewed by Telefonaktiebolaget LM Ericsson auditors.
Date for next report: October 19, 2021
13 Ericsson | Second quarter report 2021 Risk factors
Table of Contents
Board assurance
The Board of Directors and the President and CEO certify that the financial report for the six months gives a fair view of the performance of the business, position and profit or loss of the Company and the Group, and describes the principal risks and uncertainties that the Company and the companies in the Group face.
Stockholm, July 16, 2021
Telefonaktiebolaget LM Ericsson (publ)
Org. Nr. 556016-0680
| Helena Stjernholm | Ronnie Leten | Jacob Wallenberg |
|---|---|---|
| Deputy Chair | Chair | Deputy Chair |
| Jon Fredrik Baksaas | Jan Carlson | Nora Denzel |
| Member of the Board | Member of the Board | Member of the Board |
| Eric A. Elzvik | Kurt Jofs | Kristin S. Rinne |
| Member of the Board | Member of the Board | Member of the Board |
| Börje Ekholm | ||
| President, CEO and member of the Board | ||
| Torbjörn Nyman | Anders Ripa | Kjell-Åke Soting |
| Member of the Board | Member of the Board | Member of the Board |
14 Ericsson | Second quarter report 2021 Board assurance
Table of Contents
Editors note
Media and analyst briefing
Ericsson invites media, investors and analysts to a conference call and live video webcast at 9:00 AM CEST on July 16, 2021.
Link to the webcast, dial-in to audio conference, supporting material and replay will be available at:
www.ericsson.com/investors and
www.ericsson.com/newsroom
For further information, please contact:
Carl Mellander, Senior Vice President, Chief Financial Officer
Phone: +46 72 583 88 70
E-mail: [email protected] or
Stella Medlicott, Senior Vice President, Chief Marketing and Communications Officer Phone: +46 73 095 65 39
E-mail: [email protected] or
Telefonaktiebolaget LM Ericsson
Org. number: 556016-0680
Torshamnsgatan 21
SE-164 83 Stockholm
Phone: +46 10 719 00 00
www.ericsson.com
Investors
Peter Nyquist, Vice President,
Head of Investor Relations
Phone: +46 70 575 29 06
E-mail: [email protected]
Lena Häggblom, Director,
Investor Relations
Phone: +46 72 593 27 78
E-mail: [email protected]
Stefan Jelvin, Director,
Investor Relations
Phone: +46 70 986 02 27
E-mail: [email protected]
Media
Kristoffer Edshage, , Director of Corporate Media
Phone: +46 72 220 44 46
E-mail: [email protected]
Corporate Communications
Phone: +46 10 719 69 92
E-mail: [email protected]
15 Ericsson | Second quarter report 2021 Editors note
Table of Contents
Forward-looking statements
This report includes forward-looking statements, including statements reflecting managements current views relating to the growth of the market, future market conditions, future events, financial condition, and expected operational and financial performance, including, the following:
Our goals, targets, strategies, planning assumptions and operational or financial performance expectations, such as the investor day key messages and our targets and strategies as described in the introductory bullets, the CEO comments, the Segment descriptions and in Other information
Industry trends, future characteristics and development of the markets in which we operate
Our future liquidity, capital resources, capital expenditures, cost savings and profitability
The expected demand for our existing and new products and services as well as plans to launch new products and services including research and development expenditures
The ability to deliver on future plans and to realize potential for future growth
The expected operational or financial performance of strategic cooperation activities and joint ventures
The time until acquired entities and businesses will be integrated and accretive to income
Technology and industry trends including the regulatory and standardization environment in which we operate, competition and our customer structure.
The words believe, expect, foresee, anticipate, assume, intend, likely, projects, may, could, plan, estimate, forecast, will, should, would, predict, aim, ambition, seek, potential, target, might, continue, or, in each case, their negative or variations, and similar words or expressions are used to identify forward-looking statements. Any statement that refers to expectations, projections or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements.
We caution investors that these statements are subject to risks and uncertainties many of which are difficult to predict and generally beyond our control that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements.
Important factors that could affect whether and to what extent any of our forward-looking statements materialize include, but are not limited to, the factors described in the section Risk Factors, and in Risk Factors in the Annual Report 2020.
These forward-looking statements also represent our estimates and assumptions only as of the date that they were made. We expressly disclaim a duty to provide updates to these forward-looking statements, and the estimates and assumptions associated with them, after the date of this report, to reflect events or changes in circumstances or changes in expectations or the occurrence of anticipated events, whether as a result of new information, future events or otherwise, except as required by applicable law or stock exchange regulation.
16 Ericsson | Second quarter report 2021 Forward-looking statements
Table of Contents
Financial statements and other information
Contents
| Financial statements (unaudited) | 18 |
|---|---|
| Condensed consolidated income statement | 18 |
| Condensed statement of comprehensive income (loss) | 18 |
| Condensed consolidated balance sheet | 19 |
| Condensed consolidated statement of cash flows | 20 |
| Condensed consolidated statement of changes in equity | 21 |
| Condensed consolidated income statement isolated | |
| quarters | 21 |
| Condensed consolidated statement of cash flows isolated | |
| quarters | 22 |
| Condensed Parent Company income statement | 23 |
| Condensed Parent Company statement of comprehensive income | |
| (loss) | 23 |
| Condensed Parent Company balance sheet | 24 |
| Accounting policies and Explanatory notes (unaudited) | 25 |
| Note 1 Accounting policies | 25 |
| Note 2 Critical accounting estimates and judgements | 25 |
| Note 3 Segment information | 26 |
| Note 4 Provisions | 30 |
| Note 5 Financial risk management | 31 |
| Note 6 Cash flow | 32 |
| Note 7 Contingent liabilities and Assets pledged as | |
| collateral | 32 |
| Note 8 Share information | 33 |
| Note 9 Employee information | 33 |
| Note 10 Business combinations | 33 |
| Alternative performance measures (unaudited) | 34 |
| Sales growth adjusted for comparable units and currency | 34 |
| Items excluding restructuring charges | 35 |
| EBITA and EBITA margin / EBITA and EBITA margin excluding restructuring charges | 36 |
| Rolling four quarters of net sales and EBIT margin excluding restructuring charges | |
| (%) | 36 |
| Gross cash and net cash, end of period | 37 |
| Capital employed | 37 |
| Capital turnover | 37 |
| Return on capital employed | 38 |
| Equity ratio | 38 |
| Return on equity | 38 |
| Adjusted earnings per share | 39 |
| Free cash flow before M&A / Free cash flow after M&A | 39 |
| Sales growth by segment adjusted for comparable units and | |
| currency | 40 |
| Sales growth by market area adjusted for comparable units and | |
| currency | 40 |
| Gross margin by segment by quarter | 41 |
| EBIT margin by segment by quarter | 41 |
| Restructuring charges by function | 42 |
| Restructuring charges by segment | 42 |
| Gross income and gross margin excluding restructuring charges by | |
| segment | 43 |
| EBIT and EBIT margin excluding restructuring charges by | |
| segment | 44 |
| Rolling four quarters of net sales by segment | 44 |
| Rolling four quarters of EBIT margin excluding restructuring charges by segment | |
| (%) | 44 |
| EBITA and EBITA margin by segment by quarter | 45 |
| Other ratios | 45 |
17 Ericsson | Second quarter report 2021 Financial statements and other information
Table of Contents
Financial statements (unaudited)
Condensed consolidated income statement
| SEK million | Note | Q2 — 2021 | 2020 | Change | Jan-Jun — 2021 | 2020 |
|---|---|---|---|---|---|---|
| Net sales | 3 | 54,941 | 55,578 | -1 % | 104,719 | 105,328 |
| Cost of sales | -31,084 | -34,661 | -10 % | -59,567 | -64,623 | |
| Gross income | 3 | 23,857 | 20,917 | 14 % | 45,152 | 40,705 |
| Research and development expenses | -10,480 | -10,035 | 4 % | -20,056 | -19,180 | |
| Selling and administrative expenses | -6,972 | -7,052 | -1 % | -13,160 | -13,290 | |
| Impairment losses on trade receivables | 100 | 42 | 138 % | -112 | -118 | |
| Operating expenses | -17,352 | -17,045 | 2 % | -33,328 | -32,588 | |
| Other operating income and | ||||||
| expenses 1) | -579 | 131 | -542 % | -566 | 220 | |
| Share in earnings of JV and associated companies | -103 | -152 | -32 % | -174 | -180 | |
| Earnings before financial items and income tax (EBIT) | 3 | 5,823 | 3,851 | 51 % | 11,084 | 8,157 |
| Financial income and expenses, net | -454 | 292 | -255 % | -987 | -610 | |
| Income after financial items | 5,369 | 4,143 | 30 % | 10,097 | 7,547 | |
| Income tax | -1,469 | -1,558 | -6 % | -3,029 | -2,682 | |
| Net income | 3,900 | 2,585 | 51 % | 7,068 | 4,865 | |
| Net income (loss) attributable to: | ||||||
| Owners of the Parent Company | 3,679 | 2,452 | 6,866 | 4,608 | ||
| Non-controlling interests | 221 | 133 | 202 | 257 | ||
| Other information | ||||||
| Average number of shares, basic (million) | 8 | 3,329 | 3,322 | 3,329 | 3,320 | |
| Earnings per share, basic (SEK) | ||||||
| ² ) | 1.10 | 0.74 | 2.06 | 1.39 | ||
| Earnings per share, diluted (SEK) | ||||||
| ³ ) | 1.10 | 0.74 | 2.06 | 1.39 |
1) Includes cost of SEK -0.8 b. in Q2 2021 as a result of the Nokia settlement related to the 2019 resolutions with SEC and DOJ.
2) Based on net income attributable to owners of the Parent Company.
3) Potential ordinary shares are not considered when their conversion to ordinary shares would increase earnings per share.
Condensed statement of comprehensive income (loss)
| SEK million | Q2 — 2021 | 2020 | Jan-Jun — 2021 | 2020 |
|---|---|---|---|---|
| Net income | 3,900 | 2,585 | 7,068 | 4,865 |
| Other comprehensive income (loss) | ||||
| Items that will not be reclassified to profit or loss | ||||
| Remeasurements of defined benefits pension plans incl. asset ceiling | 595 | 1,482 | 6,641 | -3,201 |
| Revaluation of borrowings due to change in creditrisk | 39 | -1,032 | -16 | 693 |
| Tax on items that will not be reclassified to profit or loss | -93 | -146 | -1,326 | 559 |
| Items that have been or may be reclassified to profit or loss | ||||
| Cash flow hedge reserve | ||||
| Gains/ losses arising during the period | -123 | 146 | -154 | -95 |
| Reclassification adjustments on gains/ losses included in profit or loss | -24 | 71 | -48 | 141 |
| Translation reserves | | |||
| Changes in translation reserves | -476 | -3,591 | 1,245 | -1,380 |
| Reclassification to profit and loss | -9 | -99 | -9 | -99 |
| Share of other comprehensive income (loss) of JV and associated companies | -4 | -90 | 31 | -2 |
| Tax on items that have been or may be reclassified to profit or loss | 31 | -44 | 42 | -9 |
| Total other comprehensive income, net of tax | -64 | -3,303 | 6,406 | -3,393 |
| Total comprehensive income | 3,836 | -718 | 13,474 | 1,472 |
| Total comprehensive income attributable to: | ||||
| Owners of the Parent Company | 3,597 | -916 | 13,352 | 1,246 |
| Non-controlling interests | 239 | 198 | 122 | 226 |
18 Ericsson | Second quarter report 2021 Financial statements
Table of Contents
Condensed consolidated balance sheet
| SEK million | Jun 30 — Note | 2021 | Dec 31 — 2020 |
|---|---|---|---|
| Assets | |||
| Non-current assets | |||
| Intangible assets | |||
| Capitalized development expenses | 3,798 | 3,857 | |
| Goodwill | 10 | 36,436 | 34,945 |
| Intellectual property rights, brands and other intangible assets | 4,272 | 4,805 | |
| Property, plant and equipment | 13,739 | 13,383 | |
| Right-of-use assets | 7,985 | 7,980 | |
| Financial assets | |||
| Equity in JV and associated companies | 1,116 | 1,274 | |
| Other investments in shares and participations | 5 | 1,499 | 1,519 |
| Customer finance, non-current | 5 | 545 | 1,221 |
| Interest-bearing securities, non-current | 5 | 20,998 | 21,613 |
| Other financial assets, non-current | 5 | 5,329 | 4,842 |
| Deferred tax assets | 25,175 | 26,296 | |
| 120,892 | 121,735 | ||
| Current assets | |||
| Inventories | 30,515 | 28,097 | |
| Contract assets | 11,811 | 11,273 | |
| Trade receivables | 5 | 45,192 | 42,063 |
| Customer finance, current | 5 | 1,973 | 1,916 |
| Other current receivables | 14,534 | 16,014 | |
| Interest-bearing securities, current | 5 | 12,855 | 6,820 |
| Cash and cash equivalents | 5 | 43,273 | 43,612 |
| 160,153 | 149,795 | ||
| Total assets | 281,045 | 271,530 | |
| Equity and liabilities | |||
| Equity | |||
| Stockholders equity | 93,331 | 86,674 | |
| Non-controlling interest in equity of | |||
| subsidiaries | -1,636 | -1,497 | |
| 91,695 | 85,177 | ||
| Non-current liabilities | |||
| Post-employment benefits | 31,411 | 37,353 | |
| Provisions, non-current | 4 | 1,922 | 2,886 |
| Deferred tax liabilities | 975 | 1,089 | |
| Borrowings, non-current | 5 | 21,673 | 22,218 |
| Lease liabilities, non-current | 7,111 | 7,104 | |
| Other non-current liabilities | 1,596 | 1,383 | |
| 64,688 | 72,033 | ||
| Current liabilities | |||
| Provisions, current | 4 | 7,310 | 7,580 |
| Borrowings, current | 5 | 11,737 | 7,942 |
| Lease liabilities, current | 2,203 | 2,196 | |
| Contract liabilities | 36,621 | 26,440 | |
| Trade payables | 5 | 29,638 | 31,988 |
| Other current liabilities | 37,153 | 38,174 | |
| 124,662 | 114,320 | ||
| Total equity and liabilities | 281,045 | 271,530 |
19 Ericsson | Second quarter report 2021 Financial statements
Table of Contents
Condensed consolidated statement of cash flows
| SEK million | Note | Q2 — 2021 | 2020 | Jan-Jun — 2021 | 2020 |
|---|---|---|---|---|---|
| Operating activities | |||||
| Net income | 3,900 | 2,585 | 7,068 | 4,865 | |
| Adjustments for | |||||
| Taxes | 1,230 | 1,871 | 2,814 | 3,108 | |
| Earnings/ dividends in JV and associated companies | 112 | 155 | 188 | 185 | |
| Depreciation, amortization and impairment losses | 62,097 | 2,156 | 4,032 | 4,276 | |
| Other non-cash items | 495 | -215 | 638 | 577 | |
| 7,834 | 6,552 | 14,740 | 13,011 | ||
| Changes in operating net assets | |||||
| Inventories | -701 | -1,253 | -1,936 | -1,791 | |
| Customer finance, current and non-current | 454 | 307 | 673 | 1,124 | |
| Trade receivables and contract assets | -4,034 | 0 | -2,055 | 5,559 | |
| Trade payables | 744 | 4,104 | -3,368 | 1,928 | |
| Provisions and post-employment benefits | -1,461 | -1,189 | -938 | -971 | |
| Contract liabilities | 4,603 | -1,000 | 9,057 | 2,987 | |
| Other operating assets and liabilities, net | 608 | -1,167 | -5,073 | -9,276 | |
| 213 | -198 | -3,640 | -440 | ||
| Interest received | 15 | 347 | 257 | 479 | |
| Interest paid | -261 | -513 | -553 | -903 | |
| Taxes paid/received | -1,861 | -739 | -1,659 | -2,396 | |
| Cash flow from operating activities | 5,940 | 5,449 | 9,145 | 9,751 | |
| Investing activities | |||||
| Investments in property, plant and equipment | 6 | -1,007 | -1,327 | -1,922 | -2,440 |
| Sales of property, plant and equipment | 17 | 69 | 41 | 95 | |
| Acquisitions/divestments of subsidiaries and other operations, net | -69 | -45 | -64 | -253 | |
| Product development | 6 | -266 | -211 | -470 | -473 |
| Other investing activities | | -126 | -5 | -168 | |
| Interest-bearing securities | -5,799 | 1,141 | -5,638 | -2,291 | |
| Cash flow from investing activities | -7,124 | -499 | -8,058 | -5,530 | |
| Financing activities | |||||
| Proceeds from issuance of long-term debt | 7,804 | 579 | 7,881 | 923 | |
| Repayment of long-term debt | -510 | -544 | -5,752 | -835 | |
| Dividends paid | -3,328 | -2,489 | -3,333 | -2,498 | |
| Repayment of lease liabilities | -617 | -618 | -1,165 | -1,214 | |
| Other financing activities | 940 | -1,486 | 491 | 497 | |
| Cash flow from financing activities | 4,289 | -4,558 | -1,878 | -3,127 | |
| Effect of exchange rate changes on cash | -375 | -3,084 | 452 | -518 | |
| Net change in cash and cash equivalents | 2,730 | -2,692 | -339 | 576 | |
| Cash and cash equivalents, beginning of period | 40,543 | 48,347 | 43,612 | 45,079 | |
| Cash and cash equivalents, end of period | 43,273 | 45,655 | 43,273 | 45,655 |
20 Ericsson | Second quarter report 2021 Financial statements
Table of Contents
Condensed consolidated statement of changes in equity
| SEK million | Jan-Jun — 2021 | 2020 |
|---|---|---|
| Opening balance | 85,177 | 81,878 |
| Total comprehensive income | 13,474 | 1,472 |
| Sale/repurchase of own shares | | 81 |
| Long-term variable compensation plans | 43 | 97 |
| Dividends to shareholders¹ ) | -6,873 | -5,056 |
| Transactions with non-controlling interests | -126 | |
| Closing balance | 91,695 | 78,472 |
1) SEK 1.00 per share of the total SEK 2.00 per share of the dividend approved by the AGM in March 2021 will be paid out in Q4 2021.
Condensed consolidated income statement isolated quarters
| Isolated quarters, SEK million | 2021 — Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|
| Net sales | 54,941 | 49,778 | 69,590 | 57,472 | 55,578 | 49,750 |
| Cost of sales | -31,084 | -28,483 | -41,333 | -32,710 | -34,661 | -29,962 |
| Gross income | 23,857 | 21,295 | 28,257 | 24,762 | 20,917 | 19,788 |
| Research and development expenses | -10,480 | -9,576 | -10,433 | -10,101 | -10,035 | -9,145 |
| Selling and administrative expenses | -6,972 | -6,188 | -7,402 | -5,992 | -7,052 | -6,238 |
| Impairment losses on trade receivables | 100 | -212 | 264 | -28 | 42 | -160 |
| Operating expenses | -17,352 | -15,976 | -17,571 | -16,121 | -17,045 | -15,543 |
| Other operating income and | ||||||
| expenses¹ ) | -579 | 13 | 381 | 61 | 131 | 89 |
| Share in earnings of JV and associated companies | -103 | -71 | -59 | -59 | -152 | -28 |
| Earnings before financial items and income tax (EBIT) | 5,823 | 5,261 | 11,008 | 8,643 | 3,851 | 4,306 |
| Financial income and expenses, net | -454 | -533 | -95 | 109 | 292 | -902 |
| Income after financial items | 5,369 | 4,728 | 10,913 | 8,752 | 4,143 | 3,404 |
| Income tax | -1,469 | -1,560 | -3,721 | -3,186 | -1,558 | -1,124 |
| Net income | 3,900 | 3,168 | 7,192 | 5,566 | 2,585 | 2,280 |
| Net income (loss) attributable to: | ||||||
| Owners of the Parent Company | 3,679 | 3,187 | 7,522 | 5,353 | 2,452 | 2,156 |
| Non-controlling interests | 221 | -19 | -330 | 213 | 133 | 124 |
| Other information | ||||||
| Average number of shares, basic (million) | 3,329 | 3,328 | 3,328 | 3,326 | 3,322 | 3,317 |
| Earnings per share, basic (SEK) | ||||||
| ² ) | 1.10 | 0.96 | 2.26 | 1.61 | 0.74 | 0.65 |
| Earnings per share, diluted (SEK) | ||||||
| ³ ) | 1.10 | 0.96 | 2.26 | 1.61 | 0.74 | 0.65 |
1) Includes cost of SEK -0.8 b. in Q2 2021 as a result of the Nokia settlement related to the 2019 resolutions with SEC and DOJ.
2) Based on net income attributable to owners of the Parent Company.
3) Potential ordinary shares are not considered when their conversion to ordinary shares would increase earnings per share.
21 Ericsson | Second quarter report 2021 Financial statements
Table of Contents
Condensed consolidated statement of cash flows isolated quarters
| Isolated quarters, SEK million | 2021 — Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|
| Operating activities | ||||||
| Net income | 3,900 | 3,168 | 7,192 | 5,566 | 2,585 | 2,280 |
| Adjustments for | ||||||
| Taxes | 1,230 | 1,584 | 3,846 | 3,482 | 1,871 | 1,237 |
| Earnings/ dividends in JV and associated companies | 112 | 76 | 115 | 74 | 155 | 30 |
| Depreciation, amortization and impairment losses | 2,097 | 1,935 | 2,293 | 2,105 | 2,156 | 2,120 |
| Other | 495 | 143 | 190 | -320 | -215 | 792 |
| 7,834 | 6,906 | 13,636 | 10,907 | 6,552 | 6,459 | |
| Changes in operating net assets | ||||||
| Inventories | -701 | -1,235 | 3,753 | -1,578 | -1,253 | -538 |
| Customer finance, current and non-current | 454 | 219 | -119 | -635 | 307 | 817 |
| Trade receivables and contract assets | -4,034 | 1,979 | -7,231 | -1,513 | 0 | 5,559 |
| Trade payables | 744 | -4,112 | 2,999 | -624 | 4,104 | -2,176 |
| Provisions and post-employment benefits | -1,461 | 523 | 199 | -1,897 | -1,189 | 218 |
| Contract liabilities | 4,603 | 4,454 | -2,046 | -1,501 | -1,000 | 3,987 |
| Other operating assets and liabilities, net | 608 | -5,681 | 3,768 | 3,228 | -1,167 | -8,109 |
| 213 | -3,853 | 1,323 | -4,520 | -198 | -242 | |
| Interest received | 15 | 242 | 188 | 96 | 347 | 132 |
| Interest paid | -261 | -292 | -344 | -187 | -513 | -390 |
| Taxes paid/received | -1,861 | 202 | -900 | -1,017 | -739 | -1,657 |
| Cash flow from operating activities | 5,940 | 3,205 | 13,903 | 5,279 | 5,449 | 4,302 |
| Investing activities | ||||||
| Investments in property, plant and equipment | -1,007 | -915 | -1,090 | -963 | -1,327 | -1,113 |
| Sales of property, plant and equipment | 17 | 24 | 104 | 55 | 69 | 26 |
| Acquisitions/divestments of subs. and other operations, net¹ ) | -69 | 5 | -9,256 | -89 | -45 | -208 |
| Product development | -266 | -204 | -177 | -167 | -211 | -262 |
| Other investing activities | | -5 | 668 | 301 | -126 | -42 |
| Interest-bearing securities | -5,799 | 161 | 1,189 | -246 | 1,141 | -3,432 |
| Cash flow from investing activities | -7,124 | -934 | -8,562 | -1,109 | -499 | -5,031 |
| Financing activities | ||||||
| Proceeds from issuance of long-term debt | 7,804 | 77 | 2,213 | 83 | 579 | 344 |
| Repayment of long-term debt | -510 | -5,242 | -8,036 | -160 | -544 | -291 |
| Dividends paid | -3,328 | -5 | -3,456 | -42 | -2,489 | -9 |
| Repayment of lease liabilities | -617 | -548 | -636 | -567 | -618 | -596 |
| Other financing activities | 940 | -449 | 1,436 | -200 | -1,486 | 1,983 |
| Cash flow from financing activities | 4,289 | -6,167 | -8,479 | -886 | -4,558 | 1,431 |
| Effect of exchange rate changes on cash | -375 | 827 | -2,024 | -165 | -3,084 | 2,566 |
| Net change in cash and cash equivalents | 2,730 | -3,069 | -5,162 | 3,119 | -2,692 | 3,268 |
| Cash and cash equivalents, beginning of period | 40,543 | 43,612 | 48,774 | 45,655 | 48,347 | 45,079 |
| Cash and cash equivalents, end of period | 43,273 | 40,543 | 43,612 | 48,774 | 45,655 | 48,347 |
1) Includes acquisition of Cradlepoint of SEK -9.5 b. in Q4 2020.
22 Ericsson | Second quarter report 2021 Financial statements
Table of Contents
Condensed Parent Company income statement
| SEK million | Q2 — 2021 | 2020 | Jan-Jun — 2021 | 2020 | Jan-Dec — 2020 |
|---|---|---|---|---|---|
| Net sales | | | | | |
| Cost of sales | | | | | |
| Gross income | | | | | |
| Operating expenses¹ ) | -172 | -241 | -345 | -492 | -1,378 |
| Other operating income and expenses | -178 | 354 | 436 | 1,195 | 2,866 |
| EBIT | -350 | 113 | 91 | 703 | 1,488 |
| Financial net¹ ) | 5,241 | 1,140 | 5,593 | 1,572 | 6,845 |
| Income after financial items | 4,891 | 1,253 | 5,684 | 2,275 | 8,333 |
| Transfers to (-)/ from untaxed reserves | | | | | -1,540 |
| Income tax | -137 | -144 | -263 | -318 | -408 |
| Net income | 4,754 | 1,109 | 5,421 | 1,957 | 6,385 |
1) Amounts reported for Jan-June/April-June 2020 deviate from what was reported in the Second quarter report 2020 due to incorrect allocation of financial items to operating income. This was corrected in the Third quarter report 2020.
Condensed Parent Company statement of comprehensive income (loss)
| SEK million | Q2 — 2021 | 2020 | Jan-Jun — 2021 | 2020 | Jan-Dec — 2020 |
|---|---|---|---|---|---|
| Net income | 4,754 | 1,109 | 5,421 | 1,957 | 6,385 |
| Revaluation of borrowings due to change in credit risk | 39 | -1,032 | -16 | 693 | 99 |
| Tax on items that will not be reclassified to profit or loss | -8 | 212 | 3 | -143 | -20 |
| Other comprehensive income, net of tax | 31 | -820 | -13 | 550 | 79 |
| Total comprehensive income | 4,785 | 289 | 5,408 | 2,507 | 6,464 |
23 Ericsson | Second quarter report 2021 Financial statements
Table of Contents
Condensed Parent Company balance sheet
| Jun 30 | Dec 31 | |
|---|---|---|
| SEK million | 2021 | 2020 |
| Assets | ||
| Fixed assets | ||
| Intangible assets | 11 | 26 |
| Tangible assets | 454 | 460 |
| Financial assets¹ ) | 107,805 | 104,989 |
| 108,270 | 105,475 | |
| Current assets | ||
| Receivables | 26,806 | 30,230 |
| Short-term investments | 12,648 | 6,621 |
| Cash and cash equivalents | 29,315 | 28,775 |
| 68,769 | 65,626 | |
| Total assets | 177,039 | 171,101 |
| Stockholders equity, provisions and liabilities | ||
| Equity | ||
| Restricted equity | 48,164 | 48,164 |
| Non-restricted equity | 32,686 | 33,915 |
| 80,850 | 82,079 | |
| Provisions | 274 | 343 |
| Non-current liabilities | 21,777 | 22,111 |
| Current liabilities | 74,138 | 66,568 |
| Total stockholders equity, provisions and liabilities | 177,039 | 171,101 |
| ¹ ) Of which interest-bearing | ||
| securities, non-current | 20,974 | 21,597 |
24 Ericsson | Second quarter report 2021 Financial statements
Table of Contents
Accounting policies and Explanatory notes (unaudited)
Note 1 Accounting policies
The group
This condensed consolidated interim financial report for the quarterly reporting period ended June 30, 2021, has been prepared in accordance with International Accounting Standard IAS 34 Interim Financial Reporting. The term IFRS used in this document refers to the application of IAS and IFRS as well as interpretations of these standards as issued by IASBs Standards Interpretation Committee (SIC) and IFRS Interpretations Committee (IFRIC). The accounting policies adopted are consistent with those of the annual report for the year ended December 31, 2020 and should be read in conjunction with that annual report. There are no amendments of IFRS during 2021 that are estimated to have a material impact on the result and financial position of the Company.
Changes applied as from Q1 2021
- Change in name from Operating income to EBIT
Operating income has been renamed as EBIT (Earnings before financial items and income tax) and Operating margin as EBIT margin. The definitions of EBIT and EBIT margin remains unchanged.
- Changes in presentation of cash flow statement
From Q1 2021, interests and tax cash flows are presented as a separate section within the Cash flow from operating activities. Previously, interests and tax cash flows were subsumed within various lines in the sections Adjustments to reconcile net income to cash and Changes in operating net assets, and only disclosed in note H3 Statement of cash flow of the Annual Report. All prior quarters in 2020 have been restated with this new section and other sections adjusted accordingly. There is no impact on Cash flows from operating activities for all periods in 2020.
From Q1 2021, the condensed consolidated statement of cash flow in the interim report is expanded to show Proceeds from issuance of borrowings and Repayment of borrowings separately. The Company also decided to present the net movements in collaterals received from CSA agreements and bank borrowings less than 3 months (used for short term liquidity purposes) as Other financing activities as these balances fluctuate over a short duration, therefore it is neither practical nor useful to present their gross movements on the cash flow statement.
The prior quarters in 2020 have been restated accordingly. This resulted in a reclassification between the lines Proceeds from issuance of borrowings, Repayment of borrowings and Other financing activities compared to the full year cash flow statement in the 2020 Annual Report. The Cash flow from financing activities remained unchanged for all periods in 2020.
Note 2 Critical accounting estimates and judgements
COVID-19 impacts on the Financial statements
As noted in the previous interim reports in 2020, the COVID-19 pandemic has impacted certain lines within our financial statements. Fiscal stimulus provided by governments worldwide has reduced government bond yields and resulted in the significant movement in the capital and equity markets throughout 2020.
As the global economy continues to recover in 2021, government bond yields and corporate bond yields increased to almost the pre-pandemic levels. The increase in government bond yields in Sweden, and corporate bond yields in US and UK resulted in a significant decrease in the net pensions liability.
The Company continually assesses the business performance and profitability for changes in expected future cash flows which could impact recoverability of assets such as deferred tax assets and intangible assets. Risk assessment on the business plans is carried out on a regular basis and an impairment review will be performed if conditions suggest that such assets may be impaired. The Company also monitors customer collections trends for changes in current and future conditions that may impact the expected credit losses model for trade receivables. At the end of June 2021, the Company concluded there is no evidence of material changes to recoverability risk of business assets, including deferred tax assets and trade receivables.
25 Ericsson | Second quarter report 2021 Accounting policies and Explanatory notes
Table of Contents
Note 3 Segment information
Net sales by segment by quarter
| Isolated quarters, SEK million | 2021 — Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|
| Networks | 39,875 | 36,274 | 49,366 | 41,659 | 39,827 | 35,126 |
| Of which Products | 30,414 | 27,495 | 37,523 | 30,992 | 28,966 | 24,748 |
| Of which Services | 9,461 | 8,779 | 11,843 | 10,667 | 10,861 | 10,378 |
| Digital Services | 7,887 | 6,898 | 12,671 | 8,733 | 8,575 | 7,345 |
| Of which Products | 3,989 | 3,581 | 7,430 | 4,621 | 4,598 | 3,798 |
| Of which Services | 3,898 | 3,317 | 5,241 | 4,112 | 3,977 | 3,547 |
| Managed Services | 5,119 | 4,865 | 5,815 | 5,498 | 5,573 | 5,714 |
| Emerging Business and Other | 2,060 | 1,741 | 1,738 | 1,582 | 1,603 | 1,565 |
| Total | 54,941 | 49,778 | 69,590 | 57,472 | 55,578 | 49,750 |
| 2021 | 2020 | |||||
| Sequential change, percent | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 |
| Networks | 10 % | -27 % | 19 % | 5 % | 13 % | -21 % |
| Of which Products | 11 % | -27 % | 21 % | 7 % | 17 % | -21 % |
| Of which Services | 8 % | -26 % | 11 % | -2 % | 5 % | -22 % |
| Digital Services | 14 % | -46 % | 45 % | 2 % | 17 % | -44 % |
| Of which Products | 11 % | -52 % | 61 % | 1 % | 21 % | -48 % |
| Of which Services | 18 % | -37 % | 27 % | 3 % | 12 % | -39 % |
| Managed Services | 5 % | -16 % | 6 % | -1 % | -2 % | -19 % |
| Emerging Business and Other | 18 % | 0 % | 10 % | -1 % | 2 % | -10 % |
| Total | 10 % | -28 % | 21 % | 3 % | 12 % | -25 % |
| 2021 | 2020 | |||||
| Year over year change, percent | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 |
| Networks | 0 % | 3 % | 11 % | 6 % | 5 % | 5 % |
| Of which Products | 5 % | 11 % | 20 % | 13 % | 8 % | 4 % |
| Of which Services | -13 % | -15 % | -11 % | -9 % | -2 % | 7 % |
| Digital Services | -8 % | -6 % | -4 % | -12 % | -5 % | -6 % |
| Of which Products | -13 % | -6 % | 1 % | -17 % | 0 % | -4 % |
| Of which Services | -2 % | -6 % | -10 % | -4 % | -9 % | -9 % |
| Managed Services | -8 % | -15 % | -17 % | -14 % | -12 % | -2 % |
| Emerging Business and Other | 29 % | 11 % | 0 % | -3 % | -4 % | -11 % |
| Total | -1 % | 0 % | 5 % | 1 % | 1 % | 2 % |
| 2021 | 2020 | |||||
| Year to date, SEK million | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Networks | 76,149 | 36,274 | 165,978 | 116,612 | 74,953 | 35,126 |
| Of which Products | 57,909 | 27,495 | 122,229 | 84,706 | 53,714 | 24,748 |
| Of which Services | 18,240 | 8,779 | 43,749 | 31,906 | 21,239 | 10,378 |
| Digital Services | 14,785 | 6,898 | 37,324 | 24,653 | 15,920 | 7,345 |
| Of which Products | 7,570 | 3,581 | 20,447 | 13,017 | 8,396 | 3,798 |
| Of which Services | 7,215 | 3,317 | 16,877 | 11,636 | 7,524 | 3,547 |
| Managed Services | 9,984 | 4,865 | 22,600 | 16,785 | 11,287 | 5,714 |
| Emerging Business and Other | 3,801 | 1,741 | 6,488 | 4,750 | 3,168 | 1,565 |
| Total | 104,719 | 49,778 | 232,390 | 162,800 | 105,328 | 49,750 |
| 2021 | 2020 | |||||
| Year over year change, percent | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Networks | 2 % | 3 % | 7 % | 5 % | 5 % | 5 % |
| Of which Products | 8 % | 11 % | 12 % | 9 % | 6 % | 4 % |
| Of which Services | -14 % | -15 % | -5 % | -2 % | 2 % | 7 % |
| Digital Services | -7 % | -6 % | -6 % | -8 % | -5 % | -6 % |
| Of which Products | -10 % | -6 % | -5 % | -8 % | -2 % | -4 % |
| Of which Services | -4 % | -6 % | -8 % | -7 % | -9 % | -9 % |
| Managed Services | -12 % | -15 % | -12 % | -9 % | -7 % | -2 % |
| Emerging Business and Other | 20 % | 11 % | -4 % | -6 % | -8 % | -11 % |
| Total | -1 % | 0 % | 2 % | 1 % | 2 % | 2 % |
26 Ericsson | Second quarter report 2021 Accounting policies and Explanatory notes
Table of Contents
Gross income by segment by quarter
| Isolated quarters, SEK million | 2021 — Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|
| Networks | 19,111 | 16,714 | 21,430 | 19,375 | 16,022 | 15,586 |
| Digital Services | 2,990 | 3,002 | 5,183 | 3,787 | 3,738 | 2,929 |
| Managed Services | 975 | 942 | 1,031 | 1,093 | 955 | 933 |
| Emerging Business and Other | 781 | 637 | 613 | 507 | 202 | 340 |
| Total | 23,857 | 21,295 | 28,257 | 24,762 | 20,917 | 19,788 |
| 2021 | 2020 | |||||
| Year to date, SEK million | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Networks | 35,825 | 16,714 | 72,413 | 50,983 | 31,608 | 15,586 |
| Digital Services | 5,992 | 3,002 | 15,637 | 10,454 | 6,667 | 2,929 |
| Managed Services | 1,917 | 942 | 4,012 | 2,981 | 1,888 | 933 |
| Emerging Business and Other | 1,418 | 637 | 1,662 | 1,049 | 542 | 340 |
| Total | 45,152 | 21,295 | 93,724 | 65,467 | 40,705 | 19,788 |
EBIT (loss) by segment by quarter
| Isolated quarters, SEK million | 2021 — Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|
| Networks | 8,645 | 7,240 | 10,604 | 9,165 | 5,255 | 5,827 |
| Digital Services | -1,567 | -1,519 | 499 | -591 | -697 | -1,417 |
| Managed Services | 416 | 313 | 401 | 491 | 263 | 408 |
| Emerging Business and Other | -1,671 | -773 | -496 | -422 | -970 | -512 |
| Total | 5,823 | 5,261 | 11,008 | 8,643 | 3,851 | 4,306 |
| 2021 | 2020 | |||||
| Year to date, SEK million | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Networks | 15,885 | 7,240 | 30,851 | 20,247 | 11,082 | 5,827 |
| Digital Services | -3,086 | -1,519 | -2,206 | -2,705 | -2,114 | -1,417 |
| Managed Services | 729 | 313 | 1,563 | 1,162 | 671 | 408 |
| Emerging Business and Other | -2,444 | -773 | -2,400 | -1,904 | -1,482 | -512 |
| Total | 11,084 | 5,261 | 27,808 | 16,800 | 8,157 | 4,306 |
27 Ericsson | Second quarter report 2021 Accounting policies and Explanatory notes
Table of Contents
Net sales by market area by quarter
| Isolated quarters, SEK million | 2021 — Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|
| South East Asia, Oceania and India | 7,099 | 6,676 | 9,748 | 7,801 | 6,582 | 5,917 |
| North East Asia | 7,123 | 6,491 | 12,823 | 8,814 | 7,790 | 3,907 |
| North America | 17,950 | 17,081 | 19,101 | 18,356 | 18,407 | 17,911 |
| Europe and Latin America 1) 2) | 14,011 | 12,647 | 17,125 | 13,318 | 13,061 | 12,241 |
| Middle East and Africa | 4,459 | 4,393 | 6,518 | 5,520 | 5,431 | 5,829 |
| Other 1) 2) | 4,299 | 2,490 | 4,275 | 3,663 | 4,307 | 3,945 |
| Total | 54,941 | 49,778 | 69,590 | 57,472 | 55,578 | 49,750 |
| ¹ ) Of which in Sweden | 404 | 389 | 363 | 249 | 284 | 227 |
| ² ) Of which in EU | 7,256 | 6,801 | 8,874 | 7,090 | 7,278 | 6,259 |
| 2021 | 2020 | |||||
| Sequential change, percent | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 |
| South East Asia, Oceania and India | 6 % | -32 % | 25 % | 19 % | 11 % | -36 % |
| North East Asia | 10 % | -49 % | 45 % | 13 % | 99 % | -60 % |
| North America | 5 % | -11 % | 4 % | 0 % | 3 % | 3 % |
| Europe and Latin America 1) 2) | 11 % | -26 % | 29 % | 2 % | 7 % | -30 % |
| Middle East and Africa | 2 % | -33 % | 18 % | 2 % | -7 % | -31 % |
| Other 1) 2) | 73 % | -42 % | 17 % | -15 % | 9 % | -5 % |
| Total | 10 % | -28 % | 21 % | 3 % | 12 % | -25 % |
| ¹ ) Of which in Sweden | 4 % | 7 % | 46 % | -12 % | 25 % | -3 % |
| ² ) Of which in EU | 7 % | -23 % | 25 % | -3 % | 16 % | -29 % |
| 2021 | 2020 | |||||
| Year over year change, percent | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 |
| South East Asia, Oceania and India | 8 % | 13 % | 6 % | 5 % | -5 % | -4 % |
| North East Asia | -9 % | 66 % | 32 % | 39 % | 20 % | 2 % |
| North America | -2 % | -5 % | 10 % | -3 % | 4 % | 11 % |
| Europe and Latin America | 7 % | 3 % | -2 % | -7 % | -7 % | -7 % |
| Middle East and Africa | -18 % | -25 % | -23 % | -9 % | -4 % | 8 % |
| Other 1) 2) | 0 % | -37 % | 3 % | -8 % | 10 % | -7 % |
| Total | -1 % | 0 % | 5 % | 1 % | 1 % | 2 % |
| ¹ ) Of which in Sweden | 42 % | 71 % | 54 % | 1815 % | 91 % | 18 % |
| ² ) Of which in EU | 0 % | 9 % | 1 % | -4 % | 5 % | -4 % |
| 2021 | 2020 | |||||
| Year to date, SEK million | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| South East Asia, Oceania and India | 13,775 | 6,676 | 30,048 | 20,300 | 12,499 | 5,917 |
| North East Asia | 13,614 | 6,491 | 33,334 | 20,511 | 11,697 | 3,907 |
| North America | 35,031 | 17,081 | 73,775 | 54,674 | 36,318 | 17,911 |
| Europe and Latin America 1) 2) | 26,658 | 12,647 | 55,745 | 38,620 | 25,302 | 12,241 |
| Middle East and Africa | 8,852 | 4,393 | 23,298 | 16,780 | 11,260 | 5,829 |
| Other 1) 2) | 6,789 | 2,490 | 16,190 | 11,915 | 8,252 | 3,945 |
| Total | 104,719 | 49,778 | 232,390 | 162,800 | 105,328 | 49,750 |
| ¹ ) Of which in Sweden | 793 | 389 | 1,123 | 760 | 511 | 227 |
| ² ) Of which in EU | 14,057 | 6,801 | 29,501 | 20,627 | 13,537 | 6,259 |
| 2021 | 2020 | |||||
| Year to date, year over year change, percent | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| South East Asia, Oceania and India | 10 % | 13 % | 1 % | -1 % | -5 % | -4 % |
| North East Asia | 16 % | 66 % | 26 % | 23 % | 13 % | 2 % |
| North America | -4 % | -5 % | 5 % | 3 % | 7 % | 11 % |
| Europe and Latin America 1) 2) | 5 % | 3 % | -6 % | -7 % | -7 % | -7 % |
| Middle East and Africa | -21 % | -25 % | -9 % | -2 % | 2 % | 8 % |
| Other 1) 2) | -18 % | -37 % | -1 % | -2 % | 1 % | -7 % |
| Total | -1 % | 0 % | 2 % | 1 % | 2 % | 2 % |
| ¹ ) Of which in Sweden | 55 % | 71 % | 91 % | 115 % | 50 % | 18 % |
| ² ) Of which in EU | 4 % | 9 % | 0 % | -1 % | 1 % | -4 % |
28 Ericsson | Second quarter report 2021 Accounting policies and Explanatory notes
Table of Contents
Net sales by market area by segment
| SEK million | Q2 2021 — Networks | Digital Services | Managed Services | Emerging Business and Other | Total | Jan-Jun 2021 — Networks | Digital Services | Managed Services | Emerging Business and Other | Total |
|---|---|---|---|---|---|---|---|---|---|---|
| South East Asia, Oceania and India | 5,160 | 866 | 1,059 | 14 | 7,099 | 10,003 | 1,631 | 2,120 | 21 | 13,775 |
| North East Asia | 6,215 | 697 | 159 | 52 | 7,123 | 11,606 | 1,556 | 329 | 123 | 13,614 |
| North America | 15,370 | 1,833 | 714 | 33 | 17,950 | 30,324 | 3,311 | 1,350 | 46 | 35,031 |
| Europe and Latin America | 8,738 | 2,882 | 2,285 | 106 | 14,011 | 16,695 | 5,365 | 4,394 | 204 | 26,658 |
| Middle East and Africa | 2,365 | 1,189 | 902 | 3 | 4,459 | 4,713 | 2,341 | 1,791 | 7 | 8,852 |
| Other 1) | 2,027 | 420 | 0 | 1,852 | 4,299 | 2,808 | 581 | 0 | 3,400 | 6,789 |
| Total | 39,875 | 7,887 | 5,119 | 2,060 | 54,941 | 76,149 | 14,785 | 9,984 | 3,801 | 104,719 |
| Share of total | 73 % | 14 % | 9 % | 4 % | 100 % | 73 % | 14 % | 10 % | 4 % | 100 % |
1) Includes IPR licensing revenues.
| Sequential change, percent | Q2 2021 — Networks | Digital Services | Managed Services | Emerging Business and Other | Total |
|---|---|---|---|---|---|
| South East Asia, Oceania and India | 7 % | 13 % | 0 % | 100 % | 6 % |
| North East Asia | 15 % | -19 % | -6 % | -27 % | 10 % |
| North America | 3 % | 24 % | 12 % | 154 % | 5 % |
| Europe and Latin America | 10 % | 16 % | 8 % | 8 % | 11 % |
| Middle East and Africa | 1 % | 3 % | 1 % | -25 % | 2 % |
| Other | 160 % | 161 % | | 20 % | 73 % |
| Total | 10 % | 14 % | 5 % | 18 % | 10 % |
| Year over year change, percent | Q2 2021 — Networks | Digital Services | Managed Services | Emerging Business and Other | Total | Jan-Jun 2021 — Networks | Digital Services | Managed Services | Emerging Business and Other | Total |
|---|---|---|---|---|---|---|---|---|---|---|
| South East Asia, Oceania and India | 15 % | -20 % | 3 % | 75 % | 8 % | 15 % | -12 % | 9 % | -16 % | 10 % |
| North East Asia | -3 % | -41 % | -8 % | -9 % | -9 % | 27 % | -24 % | -12 % | 0 % | 16 % |
| North America | -3 % | 6 % | -19 % | 43 % | -2 % | -2 % | 1 % | -33 % | 31 % | -4 % |
| Europe and Latin America | 12 % | 9 % | -10 % | 19 % | 7 % | 11 % | 7 % | -14 % | 17 % | 5 % |
| Middle East and Africa | -21 % | -18 % | -7 % | 0 % | -18 % | -28 % | -16 % | -4 % | -30 % | -21 % |
| Other | -15 % | -16 % | -100 % | 30 % | 0 % | -38 % | -38 % | | 21 % | -18 % |
| Total | 0 % | -8 % | -8 % | 29 % | -1 % | 2 % | -7 % | -12 % | 20 % | -1 % |
29 Ericsson | Second quarter report 2021 Accounting policies and Explanatory notes
Table of Contents
Top 5 countries in sales
| Country, percentage of net sales 1) | Q2 — 2021 | 2020 | Jan-Jun — 2021 | 2020 |
|---|---|---|---|---|
| United States | 34 % | 35 % | 35 % | 36 % |
| Japan | 5 % | 3 % | 7 % | 4 % |
| India | 4 % | 2 % | 3 % | 3 % |
| Australia | 3 % | 4 % | 3 % | 4 % |
| China | 3 % | 9 % | 3 % | 7 % |
1) Based on Jan-Jun 2021.
IPR licensing revenues by segment by quarter
| Isolated quarters, SEK million | 2021 — Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|
| Networks | 1,904 | 671 | 2,105 | 1,773 | 2,282 | 2,019 |
| Digital Services | 418 | 147 | 463 | 389 | 501 | 443 |
| Total | 2,322 | 818 | 2,568 | 2,162 | 2,783 | 2,462 |
| 2021 | 2020 | |||||
| Year to date, SEK million | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Networks | 2,575 | 671 | 8,179 | 6,074 | 4,301 | 2,019 |
| Digital Services | 565 | 147 | 1,796 | 1,333 | 944 | 443 |
| Total | 3,140 | 818 | 9,975 | 7,407 | 5,245 | 2,462 |
Note 4 Provisions
Provisions
| Isolated quarters, SEK million | 2021 — Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|
| Opening balance | 11,045 | 10,466 | 10,922 | 10,603 | 11,060 | 10,923 |
| Additions | 616 | 1,753 | 1,245 | 1,093 | 2,116 | 793 |
| Utilization/Cash out | -2,179 | -979 | -761 | -475 | -2,066 | -673 |
| Of which restructuring | -161 | -336 | -332 | -160 | -137 | -186 |
| Reversal of excess amounts | -170 | -339 | -673 | -172 | -192 | -124 |
| Reclassification, translation difference and other | -80 | 144 | -267 | -127 | -315 | 141 |
| Closing balance | 9,232 | 11,045 | 10,466 | 10,922 | 10,603 | 11,060 |
| Of which restructuring | 807 | 950 | 1,200 | 1,659 | 1,594 | 1,202 |
| 2021 | 2020 | |||||
| Year to date, SEK million | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Opening balance | 10,466 | 10,466 | 10,923 | 10,923 | 10,923 | 10,923 |
| Additions | 2,369 | 1,753 | 5,247 | 4,002 | 2,909 | 793 |
| Utilization/Cash out | -3,158 | -979 | -3,975 | -3,214 | -2,739 | -673 |
| Of which restructuring | -497 | -336 | -815 | -483 | -323 | -186 |
| Reversal of excess amounts | -509 | -339 | -1,161 | -488 | -316 | -124 |
| Reclassification, translation difference and other | 64 | 144 | -568 | -301 | -174 | 141 |
| Closing balance | 9,232 | 11,045 | 10,466 | 10,922 | 10,603 | 11,060 |
| Of which restructuring | 807 | 950 | 1,200 | 1,659 | 1,594 | 1,202 |
30 Ericsson | Second quarter report 2021 Accounting policies and Explanatory notes
Table of Contents
Note 5 Financial risk management
There have been no changes to the classification of financial instruments or fair value hierarchy categorization from that presented in the latest Annual Report. Where Level 2 and Level 3 fair value hierarchies apply, the inputs and valuation methods used remained unchanged. The book values and fair values of financial instruments are as follows:
Financial instruments
| SEK billion | ||||||||
|---|---|---|---|---|---|---|---|---|
| Fair value hierarchy level | Fair value hierarchy level | |||||||
| Carrying value | Level 1 | Level 2 | Level 3 | Carrying value | Level 4 | Level2 | Level 3 | |
| Assets at fair value through profit or loss | ||||||||
| Customer finance 1 ) | 2.5 | | | 2.5 | 3.1 | | | 3.1 |
| Interest-bearing securities | 33.6 | 33.6 | | | 28.1 | 28.1 | | |
| Cash equivalents² ) | 23.3 | | 23.3 | | 23.6 | | 23.6 | |
| Other financial assets | 1.5 | | | 1.5 | 1.5 | | | 1.5 |
| Other current assets | 0.7 | | 0.7 | | 1.5 | | 1.5 | |
| Assets at fair value through OCI | ||||||||
| Trade receivables | 45.2 | | | 45.2 | 42.1 | | | 42.1 |
| Assets at amortized costs | ||||||||
| Interest-bearing securities | 0.3 | | | | 0.4 | | | |
| Cash equivalents² ) | 3.2 | | | | 3.6 | | | |
| Other financial assets | 0.5 | | | | 0.5 | | | |
| Total financial assets | 110.8 | 104.4 | ||||||
| Financial liabilities at designated FVTPL | ||||||||
| Parent company borrowings | -30.3 | -14.1 | -16.2 | | -27.2 | -18.9 | -8.3 | |
| Financial liabilities at FVTPL | ||||||||
| Other current liabilities | -0.4 | | -0.4 | | -0.2 | | -0.2 | |
| Liabilities at amortized cost | ||||||||
| Trade payables | -29.6 | | | | -32.0 | | | |
| Borrowings | -3.1 | | | | -2.9 | | | |
| Total financial liabilities | -63.4 | -62.3 |
1) Year to date movements of customer finance receivables are as follows: additions of SEK 8.0 billion, disposals and repayments of SEK 9.1 billion and revaluation gain of SEK 0.4 billion.
2) Total Cash and cash equivalent is SEK 43.3 (43.6) billion, of which SEK 26.5 (27.2) billion relating to Cash equivalents are presented in the table above.
Exchange rates used in the consolidation
| 2021 | 2020 | 2020 | |
|---|---|---|---|
| SEK/EUR -closing rate | 10.11 | 10.50 | 10.06 |
| SEK/USD -closing rate | 8.51 | 9.37 | 8.19 |
31 Ericsson | Second quarter report 2021 Accounting policies and Explanatory notes
Table of Contents
Note 6 Cash flow
Information on investments
Investments in assets subject to depreciation, amortization, impairment and write-downs
| Isolated quarters, SEK million | 2021 — Q 2 | Q 1 | 2020 — Q 4 | Q 3 | Q 2 | Q 1 |
|---|---|---|---|---|---|---|
| Additions | ||||||
| Property, plant and equipment | 1,007 | 915 | 1,090 | 963 | 1,327 | 1,113 |
| Capitalized development expenses | 266 | 204 | 177 | 167 | 211 | 262 |
| IPR, brands and other intangible assets | 1 | 4 | 124 | | 97 | 1 |
| Total | 1,274 | 1,123 | 1,391 | 1,130 | 1,635 | 1,376 |
| Depreciation, am ortization and in pairm entlosses | ||||||
| Property, plant and equipment | 910 | 874 | 1,186 | 916 | 1,003 | 1,009 |
| Capitalized development expenses | 329 | 224 | 230 | 230 | 272 | 174 |
| Goodwill, IPR, brands and other intangible assets | 294 | 283 | 276 | 365 | 258 | 321 |
| Right-of-use assets | 564 | 554 | 601 | 594 | 623 | 616 |
| Total | 2,097 | 1,935 | 2,293 | 2,105 | 2,156 | 2,120 |
| 2021 | 2020 | |||||
| Year to date, SEK million | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Additions | ||||||
| Property, plant and equipment | 1,922 | 915 | 4,493 | 3,403 | 2,440 | 1,113 |
| Capitalized development expenses | 470 | 204 | 817 | 640 | 473 | 262 |
| IPR, brands and other intangible assets | 5 | 4 | 222 | 98 | 98 | 1 |
| Total | 2,397 | 1,123 | 5,532 | 4,141 | 3,011 | 1,376 |
| Depreciation, am ortization and in pairm entlosses | ||||||
| Property, plant and equipment | 1,784 | 874 | 4,114 | 2,928 | 2,012 | 1,009 |
| Capitalized development expenses | 553 | 224 | 906 | 676 | 446 | 174 |
| Goodwill, IPR, brands and other intangible assets | 577 | 283 | 1,220 | 944 | 579 | 321 |
| Right-of-use assets | 1,118 | 554 | 2,434 | 1,833 | 1,239 | 616 |
| Total | 4,032 | 1,935 | 8,674 | 6,381 | 4,276 | 2,120 |
Note 7 Contingent liabilities and Assets pledged as collateral
Contingent liabilities and Assets pledged as collateral
| SEK million — Contingent liabilities | 1,477 | 1,198 |
|---|---|---|
| Assets pledged as collateral | 7,555 | 6,808 |
32 Ericsson | Second quarter report 2021 Accounting policies and Explanatory notes
Table of Contents
Note 8 Share information
Number of shares and earnings per share
| 2021 | 2020 | 2021 | 2020 | |
|---|---|---|---|---|
| Number of shares, end of period (million) | 3,334 | 3,334 | 3,334 | 3,334 |
| Of which class A-shares (million) | 262 | 262 | 262 | 262 |
| Of which class B-shares (million) | 3,072 | 3,072 | 3,072 | 3,072 |
| Number of treasury shares, end of period (million) | 4 | 11 | 4 | 11 |
| Number of shares outstanding, basic, end of period (million) | 3,330 | 3,324 | 3,330 | 3,324 |
| Numbers of shares outstanding, diluted, end of period (million) | 3,333 | 3,330 | 3,333 | 3,330 |
| Average number of treasury shares (million) | 5 | 12 | 5 | 15 |
| Average number of shares outstanding, basic (million) | 3,329 | 3,322 | 3,329 | 3,320 |
| Average number of shares outstanding, diluted (million) 1) | 3,332 | 3,329 | 3,332 | 3,326 |
| Earningsper share,basic (SEK) 2) | 1.10 | 0.74 | 2.06 | 1.39 |
| Earningsper share,diluted (SEK) 1) | 1.10 | 0.74 | 2.06 | 1.39 |
1) Potential ordinary shares are not considered when their conversion to ordinary shares would increase earnings per share.
2) Based on net income attributable to owners of the Parent Company.
Note 9 Employee information
Number of employees
| End ofperiod | 2021 — Jun 30 | Mar 31 | 2020 — Dec 31 | Sep 30 | Jun 30 | Mar 31 |
|---|---|---|---|---|---|---|
| South East Asia, Oceania and India | 26,325 | 26,123 | 25,869 | 25,633 | 25,265 | 24,942 |
| North East Asia | 14,043 | 14,033 | 13,944 | 13,955 | 13,965 | 13,786 |
| North America | 10,256 | 10,161 | 10,175 | 9,537 | 9,785 | 9,718 |
| Europe and Latin America 1) | 46,616 | 46,482 | 46,580 | 46,495 | 46,521 | 46,402 |
| Middle East and Africa | 4,384 | 4,314 | 4,256 | 4,206 | 4,264 | 4,247 |
| Total | 101,624 | 101,113 | 100,824 | 99,826 | 99,800 | 99,095 |
| 1) Of which Sweden | 13,626 | 13,379 | 13,173 | 13,046 | 12,884 | 12,746 |
Note 10 Business combinations
Acquisition CradlepointFinal PPA
| SEK billion | |
|---|---|
| Total considerationincl.cash | 9.5 |
| Net assets acquired | |
| Cash and cash equivalents | 0.3 |
| Inventory | 0.6 |
| Otherassets | 0.8 |
| Intangible assets | 3.2 |
| Other liabilities 1) | -3.1 |
| Total identifiable netassets | -0.2 |
| Goodw ill | 7.5 |
| Total | 9.5 |
1) Includes deferred tax liabilities of SEK -1.0 billion.
On November 1, 2020, the Company acquired all of the shares in Cradlepoint Inc, a US-based market leader in Wireless Edge WAN 4G and 5G Enterprise solutions. The investment is key to Ericssons ongoing strategy of capturing market share in the rapidly expanding 5G Enterprise space. Cradlepoint complements Ericssons existing 5G Enterprise portfolio which includes Dedicated Networks and a global IoT platform. Goodwill in this transaction represents future customers, future technology and synergies to the sales channels and commercial model applied by Cradlepoint and is not expected to be deductible for tax purposes. In Q2 2021 the final fair values at the acquisition date of the assets acquired and liabilities assumed was finalized, see table above. The main change between the provisional and final fair values in the balance sheet is an increase in goodwill of SEK 0.5 billion with a corresponding increase of deferred revenues. This resulted in a positive impact in the income statement of SEK 0.1 billion in Q2 2021.
33 Ericsson | Second quarter report 2021 Accounting policies and Explanatory notes
Table of Contents
Alternative performance measures (unaudited)
In this section, the Company presents its Alternative Performance Measures (APMs), which are not recognized measures of financial performance under IFRS. The presentation of APMs has limitations as analytical tools and should not be considered in isolation or as a substitute for related financial measures prepared in accordance with IFRS.
APMs are presented to enhance an investors evaluation of ongoing operating results, to aid in forecasting future periods and to facilitate meaningful comparison of results between periods.
Management uses these APMs to, among other things, evaluate ongoing operations in relation to historical results, for internal planning and forecasting purposes and in the calculation of certain performance-based compensation. APMs should not be viewed as substitutes for income statement or cash flow items computed in accordance with IFRS.
As from 2021 Operating income has been renamed as EBIT and Operating margin as EBIT margin. The definitions of EBIT and EBIT margin remain unchanged. The APMs have been updated with the new names.
As from 2021 EBITA excluding restructuring charges has been added. The main reason for the update is that Ericssons long-term target is expressed as EBITA excluding restructuring charges as a percentage of net sales.
The APM Sales growth adjusted for comparable units and currency has been added with the split by market area. Previously the information was provided by segment, but as from 2021 the information is also provided by market area.
This section also includes a reconciliation of the APMs to the most directly reconcilable line items in the financial statements. For more information about non-IFRS key operating measures, see Ericsson Annual Report 2020.
Sales growth adjusted for comparable units and currency
Sales growth adjusted for the impact of acquisitions and divestments as well as the effects of foreign currency fluctuations. Also named organic growth.
| Isolated quarters, year over year change | 2021 — Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|
| Reported netsales | 54,941 | 49,778 | 69,590 | 57,472 | 55,578 | 49,750 |
| Acquired business | -450 | -225 | -206 | -415 | -422 | -319 |
| Net FX impact | 5,455 | 5,341 | 5,472 | 4,304 | -326 | -1,654 |
| Com parable net sales, excluding FX impact | 59,946 | 54,894 | 74,856 | 61,361 | 54,830 | 47,777 |
| Com parable quarter net sales adj. for acq/div business 1) | 55,578 | 49,750 | 66,373 | 57,150 | 54,810 | 48,798 |
| Sales growth adjusted for comparable units and currency (% ) | 8 % | 10 % | 13 % | 7 % | 0 % | -2 % |
| 2021 | 2020 | |||||
| Year to date, year over year change | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Reported netsales | 104,719 | 49,778 | 232,390 | 162,800 | 105,328 | 49,750 |
| Acquired business | -675 | -225 | -1,362 | -1,156 | -741 | -319 |
| Net FX impact | 10,796 | 5,341 | 7,796 | 2,324 | -1,980 | -1,654 |
| Com parable net sales, excluding FX impact | 114,840 | 54,894 | 238,824 | 163,968 | 102,607 | 47,777 |
| Com parable quarter net sales adj. for acq/div business 1) | 105,328 | 49,750 | 227,132 | 160,758 | 103,608 | 48,798 |
| Sales growth adjusted for comparable units and currency (% ) | 9 % | 10 % | 5 % | 2 % | -1 % | -2 % |
1) Adjusted for acquisition of Cradlepoint in November 2020.
34 Ericsson | First Quarter Report 2021 Alternative performance measures
Table of Contents
Items excluding restructuring charges
Gross income, operating expenses, and EBIT are presented excluding restructuring charges and, for certain measures, as a percentage of net sales. Operating income has been renamed to EBIT and Operating margin to EBIT margin. The definition on EBIT and EBIT margin remain unchanged.
| Isolated quarters, SEK million | 2021 — Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|
| Gross income | 23,857 | 21,295 | 28,257 | 24,762 | 20,917 | 19,788 |
| Net sales | 54,941 | 49,778 | 69,590 | 57,472 | 55,578 | 49,750 |
| Gross margin (% ) | 43.4 % | 42.8 % | 40.6 % | 43.1 % | 37.6 % | 39.8 % |
| Gross income | 23,857 | 21,295 | 28,257 | 24,762 | 20,917 | 19,788 |
| Restructuring charges included in cost of sales | 6 | 62 | 5 | 73 | 312 | 335 |
| Gross income excluding restructuring charges | 23,863 | 21,357 | 28,262 | 24,835 | 21,229 | 20,123 |
| Net sales | 54,941 | 49,778 | 69,590 | 57,472 | 55,578 | 49,750 |
| Gross margin excluding restructuring charges(% ) | 43.4 % | 42.9 % | 40.6 % | 43.2 % | 38.2 % | 40.4 % |
| Operating expenses | -17,352 | -15,976 | -17,571 | -16,121 | -17,045 | -15,543 |
| Restructuring charges included in R&D expenses | -1 | | -21 | 244 | 227 | -39 |
| Restructuring charges included in selling and administrative expenses | -1 | 15 | 8 | 13 | 144 | 5 |
| Operating expenses excluding restructuring charges | -17,354 | -15,961 | -17,584 | -15,864 | -16,674 | -15,577 |
| EBIT | 5,823 | 5,261 | 11,008 | 8,643 | 3,851 | 4,306 |
| Net sales | 54,941 | 49,778 | 69,590 | 57,472 | 55,578 | 49,750 |
| EBIT margin (% ) | 10.6 % | 10.6 % | 15.8 % | 15.0 % | 6.9 % | 8.7 % |
| EBIT | 5,823 | 5,261 | 11,008 | 8,643 | 3,851 | 4,306 |
| Total restructuring charges | 4 | 77 | -8 | 330 | 683 | 301 |
| EBIT excluding restructuring charges | 5,827 | 5,338 | 11,000 | 8,973 | 4,534 | 4,607 |
| Net sales | 54,941 | 49,778 | 69,590 | 57,472 | 55,578 | 49,750 |
| EBIT margin excluding restructuring charges(% ) | 10.6 % | 10.7 % | 15.8 % | 15.6 % | 8.2 % | 9.3 % |
| Year to date, SEK million | 2021 — Jan-Jun | Jan-Mar | 2020 — Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
|---|---|---|---|---|---|---|
| Gross income | 45,152 | 21,295 | 93,724 | 65,467 | 40,705 | 19,788 |
| Net sales | 104,719 | 49,778 | 232,390 | 162,800 | 105,328 | 49,750 |
| Gross margin (% ) | 43.1 % | 42.8 % | 40.3 % | 40.2 % | 38.6 % | 39.8 % |
| Gross income | 45,152 | 21,295 | 93,724 | 65,467 | 40,705 | 19,788 |
| Restructuring charges included in cost of sales | 68 | 62 | 725 | 720 | 647 | 335 |
| Gross income excluding restructuring charges | 45,220 | 21,357 | 94,449 | 66,187 | 41,352 | 20,123 |
| Net sales | 104,719 | 49,778 | 232,390 | 162,800 | 105,328 | 49,750 |
| Gross margin excluding restructuring charges(% ) | 43.2 % | 42.9 % | 40.6 % | 40.7 % | 39.3 % | 40.4 % |
| Operating expenses | -33,328 | -15,976 | -66,280 | -48,709 | -32,588 | -15,543 |
| Restructuring charges included in R&D expenses | -1 | | 411 | 432 | 188 | -39 |
| Restructuring charges included in selling and administrative expenses | 14 | 15 | 170 | 162 | 149 | 5 |
| Operating expenses excluding restructuring charges | -33,315 | -15,961 | -65,699 | -48,115 | -32,251 | -15,577 |
| EBIT | 11,084 | 5,261 | 27,808 | 16,800 | 8,157 | 4,306 |
| Net sales | 104,719 | 49,778 | 232,390 | 162,800 | 105,328 | 49,750 |
| EBIT margin (% ) | 10.6 % | 10.6 % | 12.0 % | 10.3 % | 7.7 % | 8.7 % |
| EBIT | 11,084 | 5,261 | 27,808 | 16,800 | 8,157 | 4,306 |
| Total restructuring charges | 81 | 77 | 1,306 | 1,314 | 984 | 301 |
| EBIT excluding restructuring charges | 11,165 | 5,338 | 29,114 | 18,114 | 9,141 | 4,607 |
| Net sales | 104,719 | 49,778 | 232,390 | 162,800 | 105,328 | 49,750 |
| EBIT margin excluding restructuring charges(% ) | 10.7 % | 10.7 % | 12.5 % | 11.1 % | 8.7 % | 9.3 % |
35 Ericsson | Second quarter report 2021 Alternative performance measures
Table of Contents
EBITA and EBITA margin / EBITA and EBITA margin excluding restructuring charges
Earnings before interest, taxes, amortizations, write-downs of acquired intangibles and excluding restructuring charges also expressed as a percentage of net sales.+
EBITA and EBITA margin excluding restructuring charges has been added to the APM.
| Isolated quarters, SEK million | 2021 — Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|
| Net income | 3,900 | 3,168 | 7,192 | 5,566 | 2,585 | 2,280 |
| Taxes | 1,469 | 1,560 | 3,721 | 3,186 | 1,558 | 1,124 |
| Financial income and expenses, net | 454 | 533 | 95 | -109 | -292 | 902 |
| Amortizations and write-down sof acquired | ||||||
| intangibles | 294 | 283 | 276 | 365 | 258 | 321 |
| EBITA | 6,117 | 5,544 | 11,284 | 9,008 | 4,109 | 4,627 |
| Net sales | 54,941 | 49,778 | 69,590 | 57,472 | 55,578 | 49,750 |
| EBITA m argin (% ) | 11.1 % | 11.1 % | 16.2 % | 15.7 % | 7.4 % | 9.3 % |
| Restructuring charges | 4 | 77 | -8 | 330 | 683 | 301 |
| EBITA excluding restructuring charges | 6,121 | 5,621 | 11,276 | 9,338 | 4,792 | 4,928 |
| EBITA margin excluding restructuring charges(% ) | 11.1 % | 11.3 % | 16.2 % | 16.2 % | 8.6 % | 9.9 % |
| Year to date, SEK million | 2021 — Jan-Jun | Jan-Mar | 2020 — Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
|---|---|---|---|---|---|---|
| Net income | 7,068 | 3,168 | 17,623 | 10,431 | 4,865 | 2,280 |
| Taxes | 3,029 | 1,560 | 9,589 | 5,868 | 2,682 | 1,124 |
| Financial income and expenses, net | 987 | 533 | 596 | 501 | 610 | 902 |
| Amortizations and write-down sofacquired | ||||||
| intangibles | 577 | 283 | 1,220 | 944 | 579 | 321 |
| EBITA | 11,661 | 5,544 | 29,028 | 17,744 | 8,736 | 4,627 |
| Net sales | 104,719 | 49,778 | 232,390 | 162,800 | 105,328 | 49,750 |
| EBITA margin (% ) | 11.1 % | 11.1 % | 12.5 % | 10.9 % | 8.3 % | 9.3 % |
| Restructuring charges | 81 | 77 | 1,306 | 1,314 | 984 | 301 |
| EBITA excluding restructuring charges | 11,742 | 5,621 | 30,334 | 19,058 | 9,720 | 4,928 |
| EBITA margin excluding restructuring charges(% ) | 11.2 % | 11.3 % | 13.1 % | 11.7 % | 9.2 % | 9.9 % |
Rolling four quarters of net sales and EBIT margin excluding restructuring charges (%)
Net sales, EBIT margin and restructuring charges as a sum of last four quarters.
| Rolling fourquarters,SEK m illion | 2021 — Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|
| Net sales | 231,781 | 232,418 | 232,390 | 229,173 | 228,828 | 228,060 |
| EBIT | 30,735 | 28,763 | 27,808 | 22,925 | 10,086 | 9,974 |
| Restructuring charges | 403 | 1,082 | 1,306 | 1,641 | 1,458 | 893 |
| EBIT excl.restr. charges | 31,138 | 29,845 | 29,114 | 24,566 | 11,544 | 10,867 |
| EBIT margin excl. restr.charges(% ) | 13.4 % | 12.8 % | 12.5 % | 10.7 % | 5.0 % | 4.8 % |
36 Ericsson | Second quarter report 2021 Accounting policies and Explanatory notes
Table of Contents
Gross cash and net cash, end of period
Gross cash: Cash and cash equivalents plus interest-bearing securities (current and non-current).
Net cash: Cash and cash equivalents plus interest-bearing securities (current and non-current) less borrowings (current and non-current).
| SEK million | 2021 — Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|
| Cash and cash equivalents | 43,273 | 40,543 | 43,612 | 48,774 | 45,655 | 48,347 |
| + Interest-bearing securities, current | 12,855 | 4,599 | 6,820 | 5,552 | 5,739 | 7,834 |
| + Interest-bearing securities, non-current | 20,998 | 23,477 | 21,613 | 23,898 | 24,025 | 23,335 |
| Gross cash, end of period | 77,126 | 68,619 | 72,045 | 78,224 | 75,419 | 79,516 |
| -Borrowings, current | 11,737 | 2,353 | 7,942 | 14,587 | 15,290 | 17,759 |
| -Borrowings, non-current | 21,673 | 23,299 | 22,218 | 22,132 | 22,581 | 23,381 |
| Net cash, end of period | 43,716 | 42,967 | 41,885 | 41,505 | 37,548 | 38,376 |
Capital employed
Total assets less non-interest-bearing provisions and liabilities.
| SEK million | 2021 — Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|
| Total assets | 281,045 | 270,319 | 271,530 | 277,187 | 276,778 | 292,307 |
| Non-interest-bearing provisions and liabilities | ||||||
| Provisions, non-current | 1,922 | 2,337 | 2,886 | 2,378 | 2,240 | 2,703 |
| Deferred tax liabilities | 975 | 1,049 | 1,089 | 1,102 | 1,164 | 1,060 |
| Other non-current liabilities | 1,596 | 1,326 | 1,383 | 1,759 | 1,813 | 2,178 |
| Provisions, current | 7,310 | 8,708 | 7,580 | 8,544 | 8,363 | 8,357 |
| Contract liabilities | 36,621 | 32,054 | 26,440 | 29,393 | 31,532 | 34,265 |
| Trade payables | 29,638 | 29,135 | 31,988 | 30,704 | 32,182 | 29,840 |
| Other current liabilities | 37,153 | 40,522 | 38,174 | 37,905 | 34,834 | 40,521 |
| Capital employed | 165,830 | 155,188 | 161,990 | 165,402 | 164,650 | 173,383 |
Capital turnover
Annualized net sales divided by average capital employed.
Annualization factor of four is used for isolated quarter.
Annualization factor of four is used for Jan-Mar, two is used for Jan-Jun, 4/3 is used for Jan-Sep and one is used for Jan-Dec.
| Isolated quarters,SEK million | 2021 — Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|
| Net sales | 54,941 | 49,778 | 69,590 | 57,472 | 55,578 | 49,750 |
| Annualized net sales | 219,764 | 199,112 | 278,360 | 229,888 | 222,312 | 199,000 |
| Average capitalem ployed | ||||||
| Capital employed at beginning of period | 155,188 | 161,990 | 165,402 | 164,650 | 173,383 | 165,273 |
| Capital employed at end of period | 165,830 | 155,188 | 161,990 | 165,402 | 164,650 | 173,383 |
| Average capital employed | 160,509 | 158,589 | 163,696 | 165,026 | 169,017 | 169,328 |
| Capital turnover (tim es) | 1.4 | 1.3 | 1.7 | 1.4 | 1.3 | 1.2 |
| Yearto date,SEK million | 2021 — Jan-Jun | Jan-Mar | 2020 — Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
|---|---|---|---|---|---|---|
| Net sales | 104,719 | 49,778 | 232,390 | 162,800 | 105,328 | 49,750 |
| Annualized net sales | 209,438 | 199,112 | 232,390 | 217,067 | 210,656 | 199,000 |
| Average capitalem ployed | ||||||
| Capital employed at beginning of period | 161,990 | 161,990 | 165,273 | 165,273 | 165,273 | 165,273 |
| Capital employed at end of period | 165,830 | 155,188 | 161,990 | 165,402 | 164,650 | 173,383 |
| Average capital employed | 163,910 | 158,589 | 163,632 | 165,338 | 164,962 | 169,328 |
| Capital turnover (tim es) | 1.3 | 1.3 | 1.4 | 1.3 | 1.3 | 1.2 |
37 Ericsson | Second quarter report 2021 Accounting policies and Explanatory notes
Table of Contents
Return on capital employed
The annualized total of EBIT as a percentage of average capital employed.
Annualization factor of four is used for isolated quarter.
Annualization factor of four is used for Jan-Mar, two is used for Jan-Jun, 4/3 is used for Jan-Sep and one is used for Jan-Dec.
| Isolated quarters,SEK million | 2021 — Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|
| EBIT | 5,823 | 5,261 | 11,008 | 8,643 | 3,851 | 4,306 |
| Annualized EBIT | 23,292 | 21,044 | 44,032 | 34,572 | 15,404 | 17,224 |
| Average capital employed | ||||||
| Capital employed at beginning of period | 155,188 | 161,990 | 165,402 | 164,650 | 173,383 | 165,273 |
| Capital employed at end of period | 165,830 | 155,188 | 161,990 | 165,402 | 164,650 | 173,383 |
| Average capital employed | 160,509 | 158,589 | 163,696 | 165,026 | 169,017 | 169,328 |
| Return on capital employed (% ) | 14.5 % | 13.3 % | 26.9 % | 20.9 % | 9.1 % | 10.2 % |
| Year to date,SEK million | 2021 — Jan-Jun | Jan-M ar | 2020 — Jan-Dec | Jan-Sep | Jan-Jun | Jan-M ar |
|---|---|---|---|---|---|---|
| EBIT | 11,084 | 5,261 | 27,808 | 16,800 | 8,157 | 4,306 |
| Annualized EBIT | 22,168 | 21,044 | 27,808 | 22,400 | 16,314 | 17,224 |
| Average capital employed | ||||||
| Capital employed at beginning of period | 161,990 | 161,990 | 165,273 | 165,273 | 165,273 | 165,273 |
| Capital employed at end of period | 165,830 | 155,188 | 161,990 | 165,402 | 164,650 | 173,383 |
| Average capital employed | 163,910 | 158,589 | 163,632 | 165,338 | 164,962 | 169,328 |
| Return on capital employed (% ) | 13.5 % | 13.3 % | 17.0 % | 13.5 % | 9.9 % | 10.2 % |
Equity ratio
Equity expressed as a percentage of total assets.
| SEK million | 2021 — Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|
| Total equity | 91,695 | 88,124 | 85,177 | 82,485 | 78,472 | 79,113 |
| Total assets | 281,045 | 270,319 | 271,530 | 277,187 | 276,778 | 292,307 |
| Equity ratio (% ) | 32.6 % | 32.6 % | 31.4 % | 29.8 % | 28.4 % | 27.1 % |
Return on equity
Annualized net income attributable to owners of the Parent Company as a percentage of average stockholders equity.
Annualization factor of four is used for isolated quarter.
Annualization factor of four is used for Jan-Mar, two is used for Jan-Jun, 4/3 is used for Jan-Sep and one is used for Jan-Dec.
| Isolated quarters,SEK million | 2021 — Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|
| Net income attributable to owners of the Parent Company | 3,679 | 3,187 | 7,522 | 5,353 | 2,452 | 2,156 |
| Annualized | 14,716 | 12,748 | 30,088 | 21,412 | 9,808 | 8,624 |
| Average stockholders equity | ||||||
| Stockholders equity, beginning of period | 89,782 | 86,674 | 82,830 | 79,005 | 79,841 | 82,559 |
| Stockholders equity, end of period | 93,331 | 89,782 | 86,674 | 82,830 | 79,005 | 79,841 |
| Average stockholders equity | 91,557 | 88,228 | 84,752 | 80,918 | 79,423 | 81,200 |
| Return on equity(% ) | 16.1 % | 14.4 % | 35.5 % | 26.5 % | 12.3 % | 10.6 % |
| Yearto date,SEK million | 2021 — Jan-Jun | Jan-Mar | 2020 — Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
|---|---|---|---|---|---|---|
| Net income attributable to owners of the Parent Company | 6,866 | 3,187 | 17,483 | 9,961 | 4,608 | 2,156 |
| Annualized | 13,732 | 12,748 | 17,483 | 13,281 | 9,216 | 8,624 |
| Average stockholders equity | ||||||
| Stockholders equity, beginning of period | 86,674 | 86,674 | 82,559 | 82,559 | 82,559 | 82,559 |
| Stockholders equity, end of period | 93,331 | 89,782 | 86,674 | 82,830 | 79,005 | 79,841 |
| Average stockholders equity | 90,003 | 88,228 | 84,617 | 82,695 | 80,782 | 81,200 |
| Return on equity(% ) | 15.3 % | 14.4 % | 20.7 % | 16.1 % | 11.4 % | 10.6 % |
38 Ericsson | Second quarter report 2021 Accounting policies and Explanatory notes
Table of Contents
Adjusted earnings per share
Adjusted earnings per share, diluted, excluding amortizations and write-downs of acquired intangible assets and excluding restructuring charges.
| Isolated quarters, SEK | 2021 — Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|
| Earnings per share, diluted | 1.10 | 0.96 | 2.26 | 1.61 | 0.74 | 0.65 |
| Restructuring charges | 0.00 | 0.02 | 0.01 | 0.08 | 0.14 | 0.07 |
| Amortizations and w rite-downs of acquired | ||||||
| intangibles | 0.07 | 0.06 | 0.06 | 0.08 | 0.06 | 0.07 |
| Adjusted earnings per share | 1.17 | 1.04 | 2.33 | 1.77 | 0.94 | 0.79 |
| Yearto date, SEK | 2021 — Jan-Jun | Jan-Mar | 2020 — Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
|---|---|---|---|---|---|---|
| Earningspershare, diluted | 2.06 | 0.96 | 5.26 | 3.00 | 1.39 | 0.65 |
| Restructuring charges | 0.02 | 0.02 | 0.30 | 0.29 | 0.21 | 0.07 |
| Amortizations and write-downs of acquired | ||||||
| intangibles | 0.13 | 0.06 | 0.27 | 0.21 | 0.13 | 0.07 |
| Adjusted earnings per share | 2.21 | 1.04 | 5.83 | 3.50 | 1.73 | 0.79 |
Free cash flow before M&A / Free cash flow after M&A
Free cash flow before M&A: Cash flow from operating activities less net capital expenditures, other investments (excluding M&A) and repayment of lease liabilities.
Free cash flow after M&A: Cash flow from operating activities less net capital expenditures, other investments and repayment of
lease liabilities.
| Isolated quarters,SEK million | 2021 — Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|
| Cash flow from operating activities | 5,940 | 3,205 | 13,903 | 5,279 | 5,449 | 4,302 |
| Net capital expenditures and other investments(excl M &A) | ||||||
| Investments in property, plant and equipment | -1,007 | -915 | -1,090 | -963 | -1,327 | -1,113 |
| Sales of property, plant and equipment | 17 | 24 | 104 | 55 | 69 | 26 |
| Product development | -266 | -204 | -177 | -167 | -211 | -262 |
| Other investing activities | | -5 | 668 | 301 | -126 | -42 |
| Repayment of lease liabilities | -617 | -548 | -636 | -567 | -618 | -596 |
| Free cash flow before M &A | 4,067 | 1,557 | 12,772 | 3,938 | 3,236 | 2,315 |
| Acquisitions/ divestments of subs and other operations, net | -69 | 5 | -9,256 | -89 | -45 | -208 |
| Free cash flow after M &A | 3,998 | 1,562 | 3,516 | 3,849 | 3,191 | 2,107 |
| Yearto date,SEK million | 2021 — Jan-Jun | Jan-Mar | 2020 — Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
|---|---|---|---|---|---|---|
| Cash flow from operating activities | 9,145 | 3,205 | 28,933 | 15,030 | 9,751 | 4,302 |
| Net capital expenditures and other investments(excl M &A) | ||||||
| Investments in property, plant and equipment | -1,922 | -915 | -4,493 | -3,403 | -2,440 | -1,113 |
| Sales of property, plant and equipment | 41 | 24 | 254 | 150 | 95 | 26 |
| Product development | -470 | -204 | -817 | -640 | -473 | -262 |
| Other investing activities | -5 | -5 | 801 | 133 | -168 | -42 |
| Repayment of lease liabilities | -1,165 | -548 | -2,417 | -1,781 | -1,214 | -596 |
| Free cash flow before M &A | 5,624 | 1,557 | 22,261 | 9,489 | 5,551 | 2,315 |
| Acquisitions/ divestments of subs and other operations, net | -64 | 5 | -9,598 | -342 | -253 | -208 |
| Free cash flow after M &A | 5,560 | 1,562 | 12,663 | 9,147 | 5,298 | 2,107 |
39 Ericsson | Second quarter report 2021 Accounting policies and Explanatory notes
Table of Contents
Sales growth by segment adjusted for comparable units and currency
| Isolated quarter, year over year change, percent | 2021 — Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|
| Networks | 11 % | 15 % | 20 % | 13 % | 4 % | 0 % |
| Digital Services | 0 % | 3 % | 3 % | -5 % | -5 % | -9 % |
| Managed Services | -2 % | -8 % | -12 % | -9 % | -12 % | -5 % |
| Emerging Businessand Other¹ ) | 13 % | 9 % | -4 % | 2 % | -6 % | -8 % |
| Total¹ | 8 % | 10 % | 13 % | 7 % | 0 % | -2 % |
| Year to date, year over year change, percent | 2021 — Jan-Jun | Jan-Mar | 2020 — Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
|---|---|---|---|---|---|---|
| Networks | 13 % | 15 % | 10 % | 6 % | 2 % | 0 % |
| Digital Services | 1 % | 3 % | -3 % | -6 % | -7 % | -9 % |
| Managed Services | -5 % | -8 % | -10 % | -9 % | -9 % | -5 % |
| Emerging Businessand Other¹ ) | 11 % | 9 % | -4 % | -4 % | -7 % | -8 % |
| Total¹ ) | 9 % | 10 % | 5 % | 2 % | -1 % | -2 % |
1) Adjusted for Cradlepoint acquisition in November 2020.
Sales growth by market area adjusted for comparable units and currency
| Isolated quarter, year over year change, percent | 2021 — Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|
| South East Asia, Oceania and India | 14 % | 21 % | 13 % | 11 % | -3 % | -6 % |
| North East Asia | 1 % | 78 % | 38 % | 49 % | 19 % | -1 % |
| North America | 11 % | 10 % | 21 % | 6 % | 1 % | 5 % |
| Europe and Latin America | 14 % | 12 % | 4 % | -1 % | -6 % | -8 % |
| MiddleEastand Africa | -10 % | -16 % | -17 % | -3 % | -5 % | 4 % |
| Total | 8 % | 10 % | 13 % | 7 % | 0 % | -2 % |
| Year to date, year over year change, percent | 2021 — Jan-Jun | Jan-Mar | 2020 — Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
|---|---|---|---|---|---|---|
| South EastAsia,Oceania and India | 17 % | 21 % | 5 % | 1 % | -4 % | -6 % |
| North EastAsia | 27 % | 78 % | 30 % | 26 % | 12 % | -1 % |
| North America | 11 % | 10 % | 8 % | 4 % | 3 % | 5 % |
| Europe and Latin Am erica | 13 % | 12 % | -2 % | -5 % | -7 % | -8 % |
| MiddleEastand Africa | -13 % | -16 % | -6 % | -1 % | -1 % | 4 % |
| Total | 9 % | 10 % | 5 % | 2 % | -1 % | -2 % |
40 Ericsson | Second quarter report 2021 Accounting policies and Explanatory notes
Table of Contents
Gross margin by segment by quarter
| Isolated quarters, as percentage of net sales | 2021 — Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|
| Networks | 47.9 % | 46.1 % | 43.4 % | 46.5 % | 40.2 % | 44.4 % |
| Digital Services | 37.9 % | 43.5 % | 40.9 % | 43.4 % | 43.6 % | 39.9 % |
| Managed Services | 19.0 % | 19.4 % | 17.7 % | 19.9 % | 17.1 % | 16.3 % |
| Emerging Business and Other | 37.9 % | 36.6 % | 35.3 % | 32.0 % | 12.6 % | 21.7 % |
| Total | 43.4 % | 42.8 % | 40.6 % | 43.1 % | 37.6 % | 39.8 % |
| Yearto date, as percentage of net sales | 2021 — Jan-Jun | Jan-Mar | 2020 — Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
|---|---|---|---|---|---|---|
| Networks | 47.0 % | 46.1 % | 43.6 % | 43.7 % | 42.2 % | 44.4 % |
| Digital Services | 40.5 % | 43.5 % | 41.9 % | 42.4 % | 41.9 % | 39.9 % |
| Managed Services | 19.2 % | 19.4 % | 17.8 % | 17.8 % | 16.7 % | 16.3 % |
| Emerging Business and Other | 37.3 % | 36.6 % | 25.6 % | 22.1 % | 17.1 % | 21.7 % |
| Total | 43.1 % | 42.8 % | 40.3 % | 40.2 % | 38.6 % | 39.8 % |
EBIT margin by segment by quarter
| Isolated quarters, as percentage of net sales | 2021 — Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|
| Networks | 21.7 % | 20.0 % | 21.5 % | 22.0 % | 13.2 % | 16.6 % |
| Digital Services | -19.9 % | -22.0 % | 3.9 % | -6.8 % | -8.1 % | -19.3 % |
| Managed Services | 8.1 % | 6.4 % | 6.9 % | 8.9 % | 4.7 % | 7.1 % |
| Emerging Business and Other | -81.1 % | -44.4 % | -28.5 % | -26.7 % | -60.5 % | -32.7 % |
| Total | 10.6 % | 10.6 % | 15.8 % | 15.0 % | 6.9 % | 8.7 % |
| Yearto date, as percentage of net sales | 2021 — Jan-Jun | Jan-Mar | 2020 — Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
|---|---|---|---|---|---|---|
| Networks | 20.9 % | 20.0 % | 18.6 % | 17.4 % | 14.8 % | 16.6 % |
| Digital Services | -20.9 % | -22.0 % | -5.9 % | -11.0 % | -13.3 % | -19.3 % |
| Managed Services | 7.3 % | 6.4 % | 6.9 % | 6.9 % | 5.9 % | 7.1 % |
| Emerging Business and Other | -64.3 % | -44.4 % | -37.0 % | -40.1 % | -46.8 % | -32.7 % |
| Total | 10.6 % | 10.6 % | 12.0 % | 10.3 % | 7.7 % | 8.7 % |
41 Ericsson | Second quarter report 2021 Accounting policies and Explanatory notes
Table of Contents
Restructuring charges by function
| Isolated quarters, SEK million | 2021 — Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|
| Cost of sales | -6 | -62 | -5 | -73 | -312 | -335 |
| Research and development expenses | 1 | 0 | 21 | -244 | -227 | 39 |
| Selling and administrative expenses | 1 | -15 | -8 | -13 | -144 | -5 |
| Total | -4 | -77 | 8 | -330 | -683 | -301 |
| Year to date, SEK million | 2021 — Jan-Jun | Jan-Mar | 2020 — Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
|---|---|---|---|---|---|---|
| Cost of sales | -68 | -62 | -725 | -720 | -647 | -335 |
| Research and development expenses | 1 | 0 | -411 | -432 | -188 | 39 |
| Selling and administrative expenses | -14 | -15 | -170 | -162 | -149 | -5 |
| Total | -81 | -77 | -1,306 | -1,314 | -984 | -301 |
Restructuring charges by segment
| Isolated quarters, SEK million | 2021 — Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|
| Networks | -9 | 24 | -19 | -272 | -380 | -75 |
| of which cost of sales | -1 | 24 | -20 | -79 | -110 | -72 |
| of which operating expenses | -8 | 0 | 1 | -193 | -270 | -3 |
| Digital Services | -3 | -8 | 14 | -87 | 34 | 20 |
| of which cost of sales | -2 | -3 | -10 | -8 | 3 | -16 |
| of which operating expenses | -1 | -5 | 24 | -79 | 31 | 36 |
| Managed Services | -1 | -79 | 0 | -11 | -2 | -245 |
| of which cost of sales | 0 | -79 | 0 | -11 | -2 | -245 |
| of which operating expenses | -1 | 0 | 0 | 0 | 0 | 0 |
| Emerging Business and Other | 9 | -14 | 13 | 40 | -335 | -1 |
| of which cost of sales | -3 | -4 | 25 | 25 | -203 | -2 |
| of which operating expenses | 12 | -10 | -12 | 15 | -132 | 1 |
| Total | -4 | -77 | 8 | -330 | -683 | -301 |
| Year to date, SEK million | 2021 — Jan-Jun | Jan-Mar | 2020 — Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
|---|---|---|---|---|---|---|
| Networks | 15 | 24 | -746 | -727 | -455 | -75 |
| of which cost of sales | 23 | 24 | -281 | -261 | -182 | -72 |
| of which operating expenses | -8 | 0 | -465 | -466 | -273 | -3 |
| Digital Services | -11 | -8 | -19 | -33 | 54 | 20 |
| of which cost of sales | -5 | -3 | -31 | -21 | -13 | -16 |
| of which operating expenses | -6 | -5 | 12 | -12 | 67 | 36 |
| Managed Services | -80 | -79 | -258 | -258 | -247 | -245 |
| of which cost of sales | -79 | -79 | -258 | -258 | -247 | -245 |
| of which operating expenses | -1 | 0 | 0 | 0 | 0 | 0 |
| Emerging Business and Other | -5 | -14 | -283 | -296 | -336 | -1 |
| of which cost of sales | -7 | -4 | -155 | -180 | -205 | -2 |
| of which operating expenses | 2 | -10 | -128 | -116 | -131 | 1 |
| Total | -81 | -77 | -1,306 | -1,314 | -984 | -301 |
42 Ericsson | Second quarter report 2021 Accounting policies and Explanatory notes
Table of Contents
Gross income and gross margin excluding restructuring charges by segment
| Isolated quarters,SEK m illion | 2021 — Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|
| Netw orks | 19,112 | 16,690 | 21,450 | 19,454 | 16,132 | 15,658 |
| DigitalServices | 2,992 | 3,005 | 5,193 | 3,795 | 3,735 | 2,945 |
| M anaged Services | 975 | 1,021 | 1,031 | 1,104 | 957 | 1,178 |
| Em erging Businessand Other | 784 | 641 | 588 | 482 | 405 | 342 |
| Total | 23,863 | 21,357 | 28,262 | 24,835 | 21,229 | 20,123 |
| 2021 | 2020 | |||||
| Isolated quarters,aspercentage ofnetsales | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 |
| Netw orks | 47.9 % | 46.0 % | 43.5 % | 46.7 % | 40.5 % | 44.6 % |
| DigitalServices | 37.9 % | 43.6 % | 41.0 % | 43.5 % | 43.6 % | 40.1 % |
| M anaged Services | 19.0 % | 21.0 % | 17.7 % | 20.1 % | 17.2 % | 20.6 % |
| Em erging Businessand Other | 38.1 % | 36.8 % | 33.8 % | 30.5 % | 25.3 % | 21.9 % |
| Total | 43.4 % | 42.9 % | 40.6 % | 43.2 % | 38.2 % | 40.4 % |
| 2021 | 2020 | |||||
| Yearto date,SEK m illion | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Netw orks | 35,802 | 16,690 | 72,694 | 51,244 | 31,790 | 15,658 |
| DigitalServices | 5,997 | 3,005 | 15,668 | 10,475 | 6,680 | 2,945 |
| M anaged Services | 1,996 | 1,021 | 4,270 | 3,239 | 2,135 | 1,178 |
| Em erging Businessand Other | 1,425 | 641 | 1,817 | 1,229 | 747 | 342 |
| Total | 45,220 | 21,357 | 94,449 | 66,187 | 41,352 | 20,123 |
| 2021 | 2020 | |||||
| Yearto date,aspercentage ofnetsales | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Netw orks | 47.0 % | 46.0 % | 43.8 % | 43.9 % | 42.4 % | 44.6 % |
| DigitalServices | 40.6 % | 43.6 % | 42.0 % | 42.5 % | 42.0 % | 40.1 % |
| M anaged Services | 20.0 % | 21.0 % | 18.9 % | 19.3 % | 18.9 % | 20.6 % |
| Em erging Businessand Other | 37.5 % | 36.8 % | 28.0 % | 25.9 % | 23.6 % | 21.9 % |
| Total | 43.2 % | 42.9 % | 40.6 % | 40.7 % | 39.3 % | 40.4 % |
43 Ericsson | Second quarter report 2021 Accounting policies and Explanatory notes
Table of Contents
EBIT and EBIT margin excluding restructuring charges by segment
| Isolated quarters,SEK million | 2021 — Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|
| Networks | 8,653 | 7,217 | 10,623 | 9,437 | 5,635 | 5,902 |
| Digital Services | -1,565 | -1,510 | 485 | -504 | -731 | -1,437 |
| Managed Services | 417 | 392 | 401 | 502 | 265 | 653 |
| Emerging Business and Other | -1,678 | -761 | -509 | -462 | -635 | -511 |
| Total | 5,827 | 5,338 | 11,000 | 8,973 | 4,534 | 4,607 |
| 2021 | 2020 | |||||
| Isolated quarters, as percentage of net sales | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 |
| Networks | 21.7 % | 19.9 % | 21.5 % | 22.7 % | 14.1 % | 16.8 % |
| Digital Services | -19.8 % | -21.9 % | 3.8 % | -5.8 % | -8.5 % | -19.6 % |
| Managed Services | 8.1 % | 8.1 % | 6.9 % | 9.1 % | 4.8 % | 11.4 % |
| Emerging Business and Other | -81.5 % | -43.7 % | -29.3 % | -29.2 % | -39.6 % | -32.7 % |
| Total | 10.6 % | 10.7 % | 15.8 % | 15.6 % | 8.2 % | 9.3 % |
| 2021 | 2020 | |||||
| Year to date, SEK million | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Networks | 15,870 | 7,217 | 31,597 | 20,974 | 11,537 | 5,902 |
| Digital Services | -3,075 | -1,510 | -2,187 | -2,672 | -2,168 | -1,437 |
| Managed Services | 809 | 392 | 1,821 | 1,420 | 918 | 653 |
| Emerging Business and Other | -2,439 | -761 | -2,117 | -1,608 | -1,146 | -511 |
| Total | 11,165 | 5,338 | 29,114 | 18,114 | 9,141 | 4,607 |
| 2021 | 2020 | |||||
| Year to date, as percentage of net sales | Jan-Jun | Jan-Mar | Jan-Dec Jan-Sep Jan-Jun Jan-Mar | |||
| Networks | 20.8 % | 19.9 % | 19.0 % | 18.0 % | 15.4 % | 16.8 % |
| Digital Services | -20.8 % | -21.9 % | -5.9 % | -10.8 % | -13.6 % | -19.6 % |
| Managed Services | 8.1 % | 8.1 % | 8.1 % | 8.5 % | 8.1 % | 11.4 % |
| Emerging Business and Other | -64.2 % | -43.7 % | -32.6 % | -33.9 % | -36.2 % | -32.7 % |
| Total | 10.7 % | 10.7 % | 12.5 % | 11.1 % | 8.7 % | 9.3 % |
Rolling four quarters of net sales by segment
| Rolling four quarters, SEK million | 2021 — Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|
| Networks | 167,174 | 167,126 | 165,978 | 161,060 | 158,662 | 156,654 |
| Digital Services | 36,189 | 36,877 | 37,324 | 37,821 | 38,969 | 39,385 |
| Managed Services | 21,297 | 21,751 | 22,600 | 23,812 | 24,673 | 25,423 |
| Emerging Business and Other | 7,121 | 6,664 | 6,488 | 6,480 | 6,524 | 6,598 |
| Total | 231,781 | 232,418 | 232,390 | 229,173 | 228,828 | 228,060 |
Rolling four quarters of EBIT margin excluding restructuring charges by segment (%)
| Rolling four quarters, SEK million | 2021 — Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|
| Networks | 21.5% | 19.7% | 19.0% | 17.0% | 15.9% | 16.1% |
| Digital Services | -8.5% | -6.1% | -5.9% | -7.0% | -6.8% | -8.2% |
| Managed Services | 8.0% | 7.2% | 8.1% | 7.4% | 7.4% | 6.9% |
| Emerging Business and Other | -47.9% | -35.5% | -32.6% | -30.5% | -196.5% | -195.5% |
| Total | 13.4% | 12.8% | 12.5% | 10.7% | 5.0% | 4.8% |
44 Ericsson | Second quarter report 2021 Accounting policies and Explanatory notes
Table of Contents
EBITA and EBITA margin by segment by quarter
| Isolated quarters, SEK million | 2021 — Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|
| Networks | 8,679 | 7,274 | 10,636 | 9,347 | 5,321 | 5,957 |
| Digital Services | -1,445 | -1,400 | 625 | -461 | -563 | -1,283 |
| Managed Services | 417 | 314 | 403 | 492 | 264 | 409 |
| Emerging Business and Other | -1,534 | -644 | -380 | -370 | -913 | -456 |
| Total | 6,117 | 5,544 | 11,284 | 9,008 | 4,109 | 4,627 |
| 2021 | 2020 | |||||
| Isolated quarters, as percentage of net sales | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 |
| Networks | 21.8 % | 20.1 % | 21.5 % | 22.4 % | 13.4 % | 17.0 % |
| Digital Services | -18.3 % | -20.3 % | 4.9 % | -5.3 % | -6.6 % | -17.5 % |
| Managed Services | 8.1 % | 6.5 % | 6.9 % | 8.9 % | 4.7 % | 7.2 % |
| Emerging Business and Other | -74.5 % | -37.0 % | -21.9 % | -23.4 % | -57.0 % | -29.1 % |
| Total | 11.1 % | 11.1 % | 16.2 % | 15.7 % | 7.4 % | 9.3 % |
| 2021 | 2020 | |||||
| Year to date, SEK million | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Networks | 15,953 | 7,274 | 31,261 | 20,625 | 11,278 | 5,957 |
| Digital Services | -2,845 | -1,400 | -1,682 | -2,307 | -1,846 | -1,283 |
| Managed Services | 731 | 314 | 1,568 | 1,165 | 673 | 409 |
| Emerging Business and Other | -2,178 | -644 | -2,119 | -1,739 | -1,369 | -456 |
| Total | 11,661 | 5,544 | 29,028 | 17,744 | 8,736 | 4,627 |
| 2021 | 2020 | |||||
| Year to date, as percentage of net sales | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Networks | 20.9 % | 20.1 % | 18.8 % | 17.7 % | 15.0 % | 17.0 % |
| Digital Services | -19.2 % | -20.3 % | -4.5 % | -9.4 % | -11.6 % | -17.5 % |
| Managed Services | 7.3 % | 6.5 % | 6.9 % | 6.9 % | 6.0 % | 7.2 % |
| Emerging Business and Other | -57.3 % | -37.0 % | -32.7 % | -36.6 % | -43.2 % | -29.1 % |
| Total | 11.1 % | 11.1 % | 12.5 % | 10.9 % | 8.3 % | 9.3 % |
Other ratios
| 2021 | 2020 | 2021 | 2020 | |
|---|---|---|---|---|
| Days sales outstanding | | | 94 | 80 |
| Inventory turn over days | 89 | 85 | 90 | 89 |
| Payable days | 86 | 82 | 94 | 88 |
45 Ericsson | Second quarter report 2021 Accounting policies and Explanatory notes