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Ericsson — Regulatory Filings 2022
Apr 14, 2022
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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
April 14, 2022
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, April 14, 2022 regarding First quarter report 2022.
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 LM E RICSSON (publ) | |
|---|---|
| By: | /s/ STELLA MEDLICOTT |
| Stella Medlicott | |
| Senior Vice President, | |
| Chief Marketing and Communications Officer | |
| By: | /s/ CARL MELLANDER |
| Carl Mellander | |
| Senior Vice President, Chief Financial Officer |
Date: April 14, 2022
Table of Contents
First quarter report 2022
Stockholm, April 14, 2022
First quarter highlights
Group organic sales grew by 3% YoY driven by Networks in North America and in Europe and Latin America. Reported sales were SEK 55.1 (49.8) b.
Reported gross margin was 42.3% (42.8%) impacted by proactive investments in supply chain resilience in Networks. Rolling four quarter gross margin was 43.2%.
Due to the indefinite suspension of affected business in Russia, a provision for impairment of assets and other extraordinary costs of SEK -0.9 b. was booked in the quarter as other operating expenses in segment Networks. Around one third of this amount will impact cash flow.
EBIT amounted to SEK 5.9 b. with an EBIT margin of 10.7% when excluding the provision and a revaluation of Ericsson Ventures investments of SEK -0.3 b. Reported EBIT was SEK 4.7 (5.3) b.
EBITA amounted to SEK 6.1 b. with an EBITA margin of 11.0% when excluding the provision and the revaluation of Ericsson Ventures investments. Reported EBITA was SEK 4.9 (5.5) b.
Networks EBIT margin was 18.7% when excluding the provision related to Russia. In addition, EBIT was negatively impacted by timing of software sales in a large contract as well as by increased R&D. Reported EBIT margin was 16.6% (20.0%).
Organic sales in Emerging Business and Other grew by 15% YoY driven by Cradlepoint.
Reported net income was SEK 2.9 (3.2) b.
Free cash flow before M&A was SEK -1.7 (1.6) b. impacted primarily by proactive inventory build-up for supply chain resilience. Net cash on March 31, 2022, was SEK 65.2 b. compared with SEK 43.0 b. on March 31, 2021.
| SEK b. — Net sales | 55.1 | 49.8 | 11 % | 71.3 | -23 % |
|---|---|---|---|---|---|
| Sales growth adj. for comparable units and currency ¹ | | | 3 % | | |
| Gross margin ¹ | 42.3 % | 42.8 % | | 43.2 % | |
| EBIT | 4.7 | 5.3 | -10 % | 11.9 | -60 % |
| EBIT margin ¹ | 8.6 % | 10.6 % | | 16.6 % | |
| Net income | 2.9 | 3.2 | -8 % | 10.1 | -71 % |
| EPS diluted, SEK | 0.88 | 0.96 | -8 % | 3.02 | -71 % |
| Measures excl. restructuring charges¹ | |||||
| Gross margin excluding restructuring charges | 42.3 % | 42.9 % | | 43.5 % | |
| EBIT excluding restructuring charges | 4.8 | 5.3 | -10 % | 12.3 | -61 % |
| EBIT margin excluding restructuring charges | 8.7 % | 10.7 % | | 17.3 % | |
| Free cash flow before M&A | -1.7 | 1.6 | | 13.5 | |
| Net cash, end of period | 65.2 | 43.0 | 52 % | 65.8 | -1 % |
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 | First quarter report 2022
Table of Contents
CEO comments
We continue to execute on our strategy to be a leading mobile infrastructure provider and to establish a focused enterprise business. We see strong business momentum and our investments in technology and a resilient supply chain have allowed us to continue to win market share and deliver on customer commitments in spite of global supply chain challenges. In the quarter, we saw organic sales 1 growth of 3%. Gross margin at 42.3% (42.8%) indicates underlying stability while absorbing cost increases in the supply chain. Our EBITA margin was 11.0%, adjusted for revaluation of holdings and provision related to Russia.
Russias invasion of Ukraine and the resulting humanitarian disaster is a major setback for the world. While mobile infrastructure is essential for communications in Russia, it has been clear from the start of the invasion that business in Russia would have to be reconsidered. Following current sanctions, we have announced an indefinite suspension of our affected business in Russia and recorded a provision for impairment of assets and other extraordinary costs of SEK -0.9 b. in Q1. We will continue to monitor and respond to the situation day by day, with priority on the safety and well-being of our people.
In our core mobile infrastructure business , we foresee a longer investment cycle compared with previous mobile generations as 5Gs broad application usage will drive a continued need to increase capacity. Technology leadership is driving our competitiveness, and in the quarter, we invested SEK -10.7 (-9.6) b. in R&D.
Networks sales 1 grew organically by 4% in Q1 reflecting our continually strengthened market position. Gross margin was 44.7% (46.1%). Software sales vary between quarters, and a certain SEK 1 b. annual software contract that is normally recorded in Q1, is this year delayed into Q2. Gross margin was also negatively impacted by proactive investments in supply chain resilience. Hard work throughout the organization enabled us to deliver on customer commitments despite global supply chain challenges. We also continue to increase our R&D investments to extend our leadership. R&D increased by SEK -1 b. YoY and was primarily related to our Cloud RAN portfolio, which gives customers more flexible deployment options, and to next generation ASICs that provide industry-leading radio performance, energy savings and footprint reduction. We foresee long-term attractive return on our investments similar to the last few years.
Digital Services organic sales 1 were down by -2% YoY in the quarter and EBIT was SEK -1.4 b. We are building a strong platform for Digital Services and sales development in the cloud native 5G core portfolio is encouraging with double digit growth, albeit from a low base. However, the overall result in the quarter is not satisfactory. The target of a limited loss for 2022 is challenging especially in light of the increased investments in R&D in service orchestration and 5G portfolio. We now increase focus on accelerating sales growth and addressing efficiency to improve profitability.
To capture opportunities in the rapidly growing enterprise space, we are focusing on two specific areas. The first focus area is wireless networks for enterprise where we already offer easy-to-use pre-packaged solutions, with Cradlepoint showing strong growth in the first quarter as 5G coverage increases on the US C-band. We also see growing momentum for our 5G portfolio in Dedicated Networks. In addition, we are increasing investments in our enterprise go-to-market organization.
The other focus area is a Global Network Platform , which will be built on global unified interfaces, so called APIs. Developers and enterprises will be able to create new use cases and experiences, like high quality video or XR on top of the 5G network, which enable operators and the industry to monetize the network investment in new ways. Ericsson intends to play a major role in building the API platform. With our previously announced intention to acquire Vonage more than 1 million developers, 120,000 enterprise customers and a proven scaled API infrastructure we will have a strong position to deliver on this ambition.
Ericssons IPR licensing revenues in Q1 were affected by several expiring patent license agreements pending renewal and by 5G license negotiations. We are confident in our strong 5G position and leading patent portfolio, positioning us well to conclude pending and future license renewals. Revenues from current IPR licensing contracts are estimated to SEK 1.01.5 b. in Q2. The actual revenue impact will depend on timing as well as terms and conditions of new agreements.
We are currently engaging with the Department of Justice (DOJ) regarding the breach notices it issued relating to the Deferred Prosecution Agreement. The resolution of these matters could result in a range of actions by DOJ, and may likely include additional monetary payments, the magnitude of which cannot at this time be reliably estimated. As this process is ongoing, we remain limited in what we can say about the historical events covered in the Iraq investigation and our ongoing engagement on the matter. We are fully committed to co-operating with the DOJ and our work to further strengthen our Ethics and Compliance program, controls and our culture remains a top priority. It was actually our improved compliance program that allowed us to identify the misconduct in Iraq that started at least back in 2011.
In light of the global supply chain challenges, we decided to create a buffer of vital components in order to secure that we meet customer delivery commitments. In the quarter this had a material impact on inventory levels and therefore Free cash flow before M&A amounted to -1.7 (+1.6) b. We expect elevated inventory levels to remain in the next few quarters.
We are well positioned to continue our strategic journey. The mobile infrastructure business will remain our core and we will not spare any effort to strengthen our position here. Our ambition is to continue to grow and develop this business based on market growth and market share gains. In the growing enterprise space, we are seeing good traction for our established portfolio with Cradlepoint and Dedicated Networks. We continue to work towards closing the Vonage acquisition in the first half of 2022 and to start developing the Global Network Platform.
With our investments in both our core and enterprise businesses, as well as in our culture, we are determined to continue to make Ericsson a stronger, more resilient company while at the same time put it on a higher growth trajectory. Our key focus is to accelerate the pace towards reaching our long-term target of an EBITA margin of 1518% and our ambition is to reach this target no later than in 23 years.
Börje Ekholm
President and CEO
1 Sales adjusted for comparable units and currency
2 Ericsson | First quarter report 2022 CEO comments
Table of Contents
Financial highlights
Net sales development
| SEK b. — Networks | 40.7 | 36.3 | 12 % | 4 % | 51.1 | -20 % |
|---|---|---|---|---|---|---|
| Digital Services | 7.2 | 6.9 | 5 % | -2 % | 12.7 | -43 % |
| Managed Services | 4.9 | 4.9 | 2 % | -5 % | 5.4 | -8 % |
| Emerging Business and Other | 2.2 | 1.7 | 26 % | 15 % | 2.1 | 2 % |
| Total | 55.1 | 49.8 | 11 % | 3 % | 71.3 | -23 % |
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 55.1 (49.8) b. Sales adjusted for comparable units and currency increased by 3% YoY, with growth in North America and in Europe and Latin America.
IPR licensing revenues increased to SEK 1.4 (0.8) b. driven by renewal of patent license agreements expired in 2021, partly offset by agreements expired in 2022.
Networks sales adjusted for comparable units and currency increased by 4% YoY. Sales increased in North America as well as in Europe and Latin America. Networks accounted for 74% (73%) of total sales.
Digital Services sales adjusted for comparable units and currency decreased by -2% YoY. Sales grew in North America. Digital Services share of total sales was 13% (14%).
Managed Services sales adjusted for comparable units and currency decreased by -5% YoY, due to reduced variable sales and contract rescoping. Reported sales increased by 2% YoY. Managed Services share of total sales was 9% (10%).
Emerging Business and Other sales adjusted for comparable units and currency increased by 15%. Reported sales increased by 26% YoY, driven mainly by Cradlepoint. Emerging Business and Other share of total sales was 4% (3%).
Income and margin development
| SEK b. — Net sales | 55.1 | 49.8 | 11 % | 71.3 | -23 % |
|---|---|---|---|---|---|
| Gross income | 23.3 | 21.3 | 9 % | 30.8 | -24 % |
| Gross margin | 42.3 % | 42.8 % | | 43.2 % | |
| Research and development (R&D) expenses | -10.7 | -9.6 | | -11.9 | |
| Selling and administrative expenses | -6.6 | -6.2 | | -7.6 | |
| Impairment losses on trade receivables | -0.2 | -0.2 | | 0.1 | |
| Other operating income and expenses | -1.1 | 0.0 | | 0.4 | |
| Share in earnings of JV and associated companies | 0.0 | -0.1 | | 0.0 | |
| EBIT | 4.7 | 5.3 | -10 % | 11.9 | -60 % |
| of which Networks | 6.7 | 7.2 | -7 % | 11.8 | -43 % |
| of which Digital Services | -1.4 | -1.5 | | 0.3 | |
| of which Managed Services | 0.6 | 0.3 | 89 % | 0.4 | 68 % |
| of which Emerging Business & Other | -1.2 | -0.8 | | -0.6 | |
| EBIT margin | 8.6 % | 10.6 % | | 16.6 % | |
| Financial income and expenses, net | -0.6 | -0.5 | | -0.9 | |
| Income tax | -1.2 | -1.6 | | -0.8 | |
| Net income | 2.9 | 3.2 | -8 % | 10.1 | -71 % |
| Restructuring charges | 0.0 | -0.1 | | -0.5 | |
| Measures excl. restr. Charges and other items affecting com parability | |||||
| ¹ | |||||
| Gross margin excluding restructuring charges | 42.3 % | 42.9 % | | 43.5 % | |
| EBIT margin excluding restructuring charges | 8.7 % | 10.7 % | | 17.3 % | |
| EBITA excluding restructuring charges | 5.0 | 5.6 | -11 % | 12.8 | -61 % |
| EBITA margin excluding restructuring charges | 9.1 % | 11.3 % | | 17.9 % | |
1 Non-IFRS financial measures are reconciled at the end of this report to the most directly reconcilable line items in the financial statements.
3 Ericsson | First quarter report 2022 Financial highlights
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Gross margin
Reported gross margin was 42.3% (42.8%) negatively impacted mainly by proactive investments in supply chain resilience in Networks and higher initial deployment costs for the cloud native 5G Core portfolio. Gross margin in Managed Services and in Emerging Business and Other increased YoY.
Sequentially, reported gross margin decreased to 42.3% from 43.2% mainly due to investments in supply chain resilience and increased costs in Networks. Gross margin was negatively impacted by sequentially lower IPR licensing revenues.
Research and development (R&D) expenses
R&D expenses amounted to SEK -10.7 (-9.6) b. including a negative currency impact of SEK -0.5 b. R&D expenses increased primarily in Networks due to further investments in ASICs and Cloud RAN.
Selling and administrative (SG&A) expenses
SG&A expenses were SEK -6.6 (-6.2) b. including a negative currency impact of SEK -0.5 b.
Other operating income and expenses
Other operating income and expenses was SEK -1.1 (0.0) b. The quarter was negatively impacted by the provision of SEK -0.9 b. for impairment of assets and other extraordinary costs due to the suspension of affected business in Russia, as well as by a negative revaluation of SEK -0.3 b. related to Ericsson Ventures investments.
Restructuring charges
Restructuring charges amounted to SEK 0.0 (-0.1) b.
EBIT
Reported EBIT decreased to SEK 4.7 (5.3) b. impacted by the provision related to Russia and increased R&D investments. EBIT improved in Networks, when excluding the provision, as well as in Managed Services and Digital Services. EBIT was also impacted by revaluation of SEK -0.3 b. related to Ericsson Ventures investments in Emerging Business and Other. EBIT margin was 8.6% (10.6%).
Sequentially, reported EBIT decreased to SEK 4.7 b. from SEK 11.9 b. as a result of seasonally lower sales, the provision related to Russia and the revaluation of Ericsson Ventures investments.
Net sales rolling four quarters were SEK 237.6 b. and reported EBIT margin rolling four quarters was 13.2%.
EBITA
Reported EBITA declined to SEK 4.9 (5.5) b. corresponding to an EBITA margin of 9.0% (11.1%).
Reported EBITA margin rolling four quarters was 13.7%.
Financial income and expenses, net
Reported financial net was SEK -0.6 (-0.5) b. The strengthened USD to SEK resulted in a negative currency hedge effect of SEK -0.2 (-0.4) b.
Sequentially, financial net increased by SEK 0.3 b. to SEK -0.6 b. The currency hedge effect was SEK -0.2 b. in the quarter, versus SEK -0.3 b. in the fourth quarter 2021. The USD strengthened against the SEK between December 31, 2021 (SEK/USD rate 9.05) and March 31, 2022 (SEK/USD rate 9.32).
Income tax
Taxes were SEK -1.2 (-1.6) b. The effective tax rate in Q1 was 29% compared with 33% in Q1 2021, mainly due to market mix.
Net income
Net income declined to SEK 2.9 (3.2) b. and EPS diluted declined to SEK 0.88 (0.96) YoY, impacted by the provision related to Russia.
Employees
The number of employees on March 31, 2022, was 101,067 compared with 101,322 on December 31, 2021.
4 Ericsson | First quarter report 2022 Financial highlights
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Market area sales
| SEK b. — South East Asia, Oceania and India | 5.8 | 6.7 | -13 % | -17 % | 8.6 | -32 % |
|---|---|---|---|---|---|---|
| North East Asia | 5.4 | 6.5 | -16 % | -20 % | 9.8 | -45 % |
| North America | 20.7 | 17.1 | 21 % | 9 % | 22.3 | -7 % |
| Europe and Latin America | 15.3 | 12.6 | 21 % | 15 % | 19.2 | -21 % |
| Middle East and Africa | 4.3 | 4.4 | -2 % | -9 % | 6.9 | -38 % |
| Other ² | 3.5 | 2.5 | 40 % | | 4.5 | -22 % |
| Total | 55.1 | 49.8 | 11 % | 3 % | 71.3 | -23 % |
1 Sales growth adjusted for comparable units and 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.
Continued momentum in North America.
Networks sales in Europe continued to grow as a result of market share gains.
Sales increase in Mainland China due to timing of project milestones.
South East Asia, Oceania and India
Currency adjusted sales decreased by -17% YoY. Networks and Digital Services sales declined due to timing of orders and project milestones. Managed Services sales remained stable. Reported sales decreased by -13%.
North East Asia
Currency adjusted sales declined by -20% YoY. Sales declined in Networks and Digital Services as a result of project timing in Japan. The decline was partly offset by increased sales in Mainland China based on project milestones. Reported sales declined by -16%.
North America
Currency adjusted sales increased by 9% YoY driven by strong demand for 5G solutions across all segments. Reported sales increased by 21%.
Europe and Latin America
Currency adjusted growth was 15% YoY with 18% growth in Europe and 2% in Latin America. Sales in Networks continued to grow as a result of market share gains. Digital Services sales were stable while sales decreased in Managed Services due to rescoping and renegotiations of contracts. Reported sales increased by 21%. As a consequence of the Russian invasion of Ukraine and related sanctions, affected business in Russia has been indefinitely suspended. In 2021, Russia accounted for SEK 4.1 b. in sales.
Middle East and Africa
Currency adjusted sales decreased by -9% YoY. Sales declined in Networks due to timing of 5G investments in the Middle East, partly compensated by growth in African markets. Sales in Digital Services were stable with a drop in the Middle East compensated by strong Core upgrade sales in Africa. Managed Services sales declined, mainly due to contract rescoping. Reported sales decreased by -2%.
Other
IPR licensing revenues increased to SEK 1.4 (0.8) b. driven by renewal of patent license agreements expired in 2021 partly offset by agreements expired in 2022.
Sequentially, IPR licensing revenues decreased to SEK 1.4 b. from SEK 2.4 b.
5 Ericsson | First quarter report 2022 Market area sales
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Segment results
Segment Networks
| SEK b. — Net sales | 40.7 | 36.3 | 12 % | 51.1 |
|---|---|---|---|---|
| Of which IPR licensing revenues | 1.1 | 0.7 | 70 % | 1.9 |
| Sales growth adj. for comparable units and FX | | 4 % | | |
| Gross income | 18.2 | 16.7 | 9 % | 23.6 |
| Gross margin | 44.7 % | 46.1 % | | 46.3 % |
| EBIT | 6.7 | 7.2 | -7 % | 11.8 |
| EBIT margin | 16.6 % | 20.0 % | | 23.0 % |
| Restructuring charges | 0.0 | 0.0 | | -0.3 |
| Measures excl. restructuring charges | ||||
| Gross margin excl. restructuring charges | 44.8 % | 46.0 % | | 46.4 % |
| EBIT excl. restructuring charges | 6.8 | 7.2 | -6 % | 12.0 |
| EBIT margin excl. restructuring charges | 16.6 % | 19.9 % | | 23.6 % |
Breakdown of sales into products, services and IPR licensing is available in note 3.
Gross margin was negatively impacted by timing of software sales in a large contract.
Operational leverage, impacted by proactive measures across the supply chain, negatively affected gross margin.
Provision related to Russia impacted EBIT margin by -2.1 percentage points.
Net sales
Sales adjusted for comparable units and currency increased by 4% YoY, driven by sales growth in North America and in Europe and Latin America, while sales in the other markets were negatively affected by timing of orders and project milestones. Reported sales increased by 12% YoY.
Sequentially, reported sales decreased by -20%, due to seasonally lower sales as well as lower IPR licensing revenues.
Gross margin
Reported gross margin decreased to 44.7% (46.1%). Operational leverage was negatively impacted by proactive investments in supply chain resilience. Gross margin was also negatively impacted by a lower share of software in the sales mix, while higher IPR licensing revenues had a positive impact on gross margin.
Reported gross margin declined QoQ as a consequence of the investments in supply chain resilience as well as increased costs. In addition, gross margin was negatively impacted by lower IPR licensing revenues as well as a lower share of software in the sales mix.
EBIT
Reported EBIT decreased to SEK 6.7 (7.2) b. with an EBIT margin of 16.6% (20.0%). The provision related to Russia of SEK -0.9 b. impacted EBIT by -2.1 percentage points. In addition, EBIT was impacted by increased investments in R&D primarily for ASICs and Cloud RAN.
Sequentially, reported EBIT decreased to SEK 6.7 b. from SEK 11.8 b. due to seasonally lower sales.
Net sales rolling four quarters were SEK 172.3 b. and reported EBIT margin rolling four quarters was 21.3%.
Segment Digital Services
| SEK b. — Net sales | 7.2 | 6.9 | 5 % | 12.7 |
|---|---|---|---|---|
| Of which IPR licensing revenues | 0.3 | 0.1 | 70 % | 0.4 |
| Sales growth adj. for comparable units and FX | | | -2 % | |
| Gross income | 3.1 | 3.0 | 3 % | 5.5 |
| Gross margin | 42.9 % | 43.5 % | | 42.8 % |
| EBIT (loss) | -1.4 | -1.5 | | 0.3 |
| EBIT margin | -19.7 % | -22.0 % | | 2.4 % |
| Restructuring charges | 0.0 | 0.0 | | -0.1 |
| Measures excl. restructuring charges | ||||
| Gross margin excl. restructuring charges | 42.9 % | 43.6 % | | 43.4 % |
| EBIT (loss) excl. restructuring charges | -1.4 | -1.5 | | 0.4 |
| EBIT margin excl. restructuring charges | -19.2 % | -21.9 % | | 3.3 % |
Breakdown of sales into products, services and IPR licensing is available in note 3.
Double-digit sales growth in BSS and cloud native 5G Core products.
Continuous investment in cloud native 5G portfolio and service orchestration.
Net sales
Sales adjusted for comparable units and currency decreased by -2% YoY. Sales grew in constant currency in North America while sales declined in the other market areas due to timing of orders and project milestones. BSS and 5G Core sales showed double-digit growth. Reported sales increased by 5% YoY.
Sequentially, reported sales decreased by -43%, due to seasonally lower sales and lower IPR licensing revenues.
Gross margin
Reported gross margin decreased to 42.9% (43.5%) primarily due to initial deployment costs for the cloud native 5G Core portfolio. The impact was partly offset by higher IPR licensing revenues.
Reported gross margin was stable at 42.9% QoQ.
EBIT (loss)
Reported EBIT (loss) was SEK -1.4 (-1.5) b. with an EBIT margin of -19.7% (-22.0%). EBIT improved by SEK 0.1 b. driven by increased sales while operating expenses remained stable.
Sequentially, reported EBIT decreased to SEK -1.4 b. from SEK 0.3 b. due to seasonally lower sales.
Net sales rolling four quarters were SEK 36.5 b. and reported EBIT margin rolling four quarters was -9.6%.
6 Ericsson | First quarter report 2022 Segment results
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Segment Managed Services
| SEK b. — Net sales | 4.9 | 4.9 | 2 % | 5.4 |
|---|---|---|---|---|
| Sales growth adj. for comparable units and FX | | | -5 % | |
| Gross income | 1.1 | 0.9 | 22 % | 1.0 |
| Gross margin | 23.2 % | 19.4 % | | 18.2 % |
| EBIT | 0.6 | 0.3 | 89 % | 0.4 |
| EBIT margin | 12.0 % | 6.4 % | | 6.6 % |
| Restructuring charges | 0.0 | -0.1 | | 0.0 |
| Measures excl. restructuring charges | ||||
| Gross margin excl. restructuring charges | 23.0 % | 21.0 % | | 18.9 % |
| EBIT excl. restructuring charges | 0.6 | 0.4 | 49 % | 0.4 |
| EBIT margin excl. restructuring charges | 11.8 % | 8.1 % | | 7.4 % |
Network Optimization grew following 5G buildout.
EBIT margin increased to 12%.
Continued investments in automation, analytics and AI offerings supporting 5G and efficiency in service delivery.
Net sales
Sales adjusted for comparable units and currency decreased by -5% YoY, due to reduced variable sales and contract rescoping. Sales in Network Optimization showed growth in 4 out of 5 market areas, with an increasing share of software in the sales mix. Reported sales increased by 2% YoY.
Gross margin
Reported gross margin increased to 23.2% (19.4%) due to reduced restructuring charges, higher Network Optimization sales and timing of costs.
Reported gross margin increased to 23.2% from 18.2% QoQ due to seasonally lower costs and lower restructuring charges.
EBIT
Reported EBIT increased to SEK 0.6 (0.3) b. with an EBIT margin of 12.0% (6.4%). The increase was driven by increased gross margin.
Q1 2021 was negatively impacted by costs related to an exit from a non-core field services business in Italy.
Reported EBIT increased to SEK 0.6 b. from SEK 0.4 b. QoQ mainly due to higher gross margin.
Net sales rolling four quarters were SEK 20.5 b. and reported EBIT margin rolling four quarters was 8.5%.
Segment Emerging Business and Other
| SEK b. — Net sales | 2.2 | 1.7 | 26 % | 2.1 |
|---|---|---|---|---|
| Sales growth adj. for comparable units and FX | | | 15 % | |
| Gross income | 0.8 | 0.6 | 31 % | 0.7 |
| Gross margin | 38.1 % | 36.6 % | | 34.9 % |
| EBIT (loss) | -1.2 | -0.8 | | -0.6 |
| EBIT margin | -53.8 % | -44.4 % | | -25.8 % |
| Restructuring charges | 0.0 | 0.0 | | 0.0 |
| Measures excl. restructuring charges | ||||
| Gross margin excl. restructuring charges | 38.1 % | 36.8 % | | 35.2 % |
| EBIT (loss) excl. restructuring charges | -1.2 | -0.8 | | -0.5 |
| EBIT margin excl. restructuring charges | -53.5 % | -43.7 % | | -24.5 % |
Continued growth in sales and gross margin, driven mainly by Cradlepoint.
Negative EBIT impact of SEK -0.3 b. related to revaluation of Ericsson Ventures investments.
Net sales
Sales adjusted for comparable units and currency increased by 15% YoY. Reported sales increased by 26% YoY, driven mainly by Cradlepoint.
Gross margin
Reported gross margin increased to 38.1% (36.6%). The increase was driven primarily by Cradlepoint.
Reported gross margin increased to 38.1% from 34.9% QoQ, as a result of broad-based improvements across most units.
EBIT (loss)
Reported EBIT (loss) was SEK -1.2 (-0.8) b.
Reported EBIT was negatively impacted by SEK -0.3 b. from revaluation of Ericsson Ventures investments.
Reported EBIT (loss) decreased to SEK -1.2 b. from SEK -0.6 b. QoQ.
In Q4 2021, reported EBIT was positively impacted by SEK 0.4 b. related to a gain from divestment of a data center in the Netherlands and revaluation of Ericsson Ventures investments.
Net sales rolling four quarters were SEK 8.4 b. and reported EBIT margin rolling four quarters was -44.7%.
7 Ericsson | First quarter report 2022 Segment results
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Cash flow and financial position
| Free cash flow bridge, SEK b. — EBIT excl. restructuring charges | 4.8 | 5.3 | 12.3 |
|---|---|---|---|
| Depreciation, amortization and impairment losses | 2.1 | 1.9 | 2.6 |
| Restructuring charges | 0.0 | -0.1 | -0.5 |
| Changes in working capital ¹ ) | -5.5 | -3.9 | 2.7 |
| Interest paid/received, taxes paid, and other | -1.4 | -0.1 | -1.9 |
| Cash flow from operating activities | 0.0 | 3.2 | 15.2 |
| Capex net and other investing activities | -1.1 | -1.1 | -1.1 |
| Repayment of lease liabilities | -0.6 | -0.5 | -0.6 |
| Free cash flow before M&A | -1.7 | 1.6 | 13.5 |
| M&A | 0.0 | 0.0 | 0.2 |
| Free cash flow after M&A | -1.6 | 1.6 | 13.7 |
| Cash flow from operating activities | 0.0 | 3.2 | 15.2 |
| Cash flow from investing activities | 14.4 | -0.9 | -2.7 |
| Cash flow from financing activities | 7.8 | -6.2 | -4.9 |
| SEK b. — Gross cash | 104.2 | 68.6 | 97.6 |
|---|---|---|---|
| -Borrowings, current | 10.4 | 2.4 | 9.6 |
| -Borrowings, non-current | 28.6 | 23.3 | 22.2 |
| Net cash | 65.2 | 43.0 | 65.8 |
| Equity | 109.9 | 88.1 | 107.1 |
| Total assets | 323.9 | 270.3 | 305.6 |
| Capital turnover (times) | 1.2 | 1.3 | 1.3 |
| Return on capital employed (% ) | 10.2 % | 13.3 % | 18.4 % |
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 -1.7 (1.6) b. affected by investments in supply chain resilience.
Net cash position increased to SEK 65.2 (43.0) b.
The average maturity of long-term borrowings was 3.6 years.
Cash flow from operating activities
Reported cash flow from operating activities was SEK 0.0 (3.2) b. The strategy to improve supply chain resilience, and secure the ability to capture market demand, affected cash flow negatively. The decrease in cash flow was partly offset by continued high cash collection. Operating net assets increased in the quarter with a negative impact on cash flow of SEK -5.5 b. Key movements include a negative impact of SEK -5.3 b. related to an increase in inventory, to support the supply chain resilience within Networks. Cash flow was also negatively impacted by SEK -6.8 b. from a change in other operating assets and liabilities, net, which includes pay-outs of accrued employee-related expenses. These negative impacts were partly offset by a positive impact of SEK 6.3 b. as a result of an increase in contract liabilities related to customer contracts and IPR payments. Taxes paid were SEK -1.3 b.
Free cash flow
Free cash flow before M&A was SEK -1.7 (1.6) b. in the quarter. The decrease in the quarter was mainly driven by lower cash flow from operating activities, with build-up of operating net assets. Capex net and other investing activities were SEK -1.1 (-1.1) b. and include investments in 5G production capacity. Repayment of lease liabilities in the quarter was stable at SEK -0.6 b. and was mainly related to property leases.
Free cash flow before M&A rolling four quarters was SEK 28.8 b., or 12.1% in relation to sales.
There were limited M&A activities in the quarter and free cash flow after M&A was SEK -1.6 (1.6) b.
Cash flow from investing and financing activities
Reported cash flow from investing activities was SEK 14.4 (-0.9) b. due to disposal of non-current interest-bearing securities to cash and cash equivalents. Reported cash flow from financing activities including repayment of lease liabilities was SEK 7.8 (-6.2) b., mainly as a result of issuance of a EUR 750 m. (SEK 7.8 b.) bond. In Q1 2021, Ericsson repaid a EUR -500 m. (SEK -5.1 b.) bond.
Financial position
Gross cash increased by SEK 6.6 b. QoQ to SEK 104.2 b. as a result of the issuance of a EUR 750 m. (SEK 7.8 b.) bond. Net cash was stable at SEK 65.2 b. with a slight decrease of SEK -0.6 b. QoQ.
The funding strategy relies on diverse funding sources with bilateral loans and bonds. In the quarter, Ericsson issued a EUR 750 m. (SEK 7.8 b.) bond maturing in February 2027. The bond has a coupon of 1.125% and proceeds will be used for general corporate purposes. The average maturity of long-term borrowings was 3.6 years as of March 31, 2022, an increase from 3.0 years 12 months earlier.
Liabilities for post-employment benefits decreased to SEK 30.6 b. from SEK 36.1 b. in the quarter, due to higher discount rates partly offset by higher inflation rates. The Swedish defined benefit obligation (DBO) was calculated using a discount rate based on the yields of Swedish government bonds. If the discount rate had been based on Swedish covered mortgage bonds, the liability for post-employment benefits would have been approximately SEK 15.3 b. (SEK 15.3 b. lower than current DBO).
Return on capital employed (ROCE) was 10.2% (13.3%).
8 Ericsson | First quarter report 2022 Cash flow and financial position
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Key data points
Market related
The global RAN equipment market is estimated to grow by 5% (3%) in 2022. North America is expected to grow by 8% (3%), Europe by 5% (4%) and Mainland China by 4% (0%).
Source: DellOro Mobile RAN outlook report February 2022. Numbers in brackets from the DellOro Mobile RAN outlook report January 2022.
Ericsson related
Group long-term financial targets
EBITA margin, excluding restructuring: 1518%.
Free Cash flow (before M&A): 912% of sales.
Net sales
Reported average seasonality last 3 years (2019-2021), %
| Ericsson Group | -26 % | +11 % | +3 % | +21 % |
|---|---|---|---|---|
| Networks | -22 % | +12 % | +3 % | +19 % |
| Digital Services | -43 % | +15 % | +7 % | +42 % |
Net sales may show large variations between quarters.
Sales to Russia amounted to SEK 4.1 b. in 2021.
Operating expenses excluding restructuring
Reported average seasonality last 3 years (2019-2021), SEK b.
| Ericsson Group | +3.2 | -1.4 | +1.3 | -3.1 |
|---|---|---|---|---|
Operating expenses may show large variations between quarters.
M&A
Work continues towards closing the Vonage acquisition during H1 2022.
Currency exposure
Rule of thumb: A change by 10% of SEK to USD would have an impact of approximately +/-5% on net sales and approximately +/-1 percentage point on EBIT margin.
9 Ericsson | First quarter report 2022 Key data points
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Parent Company
Income after financial items JanuaryMarch 2022 was SEK 0.1 (0.8) b.
At the end of the quarter, gross cash (cash, cash equivalents, short-term investments and interest-bearing securities, non-current) amounted to SEK 89.0 (53.1) b.
There was a decrease in intercompany lending of SEK 1.6 b. and in intercompany borrowing of SEK 0.7 b. in the quarter.
In the quarter, a dividend of SEK 8.3 b. was recognized, after decision by the Annual General Meeting on March 29. The first of two equal dividend payouts was made in the first week of April. The second payout will be in October.
The holding of treasury stock on March 31, 2022, was 4,009,306 Class B shares.
10 Ericsson | First quarter report 2022 Parent Company
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Other information
Legal proceedings
On October 4, 2021, Ericsson asked the U.S. District Court for the Eastern District of Texas for a declaration that Ericsson has, in its negotiations with Apple, complied with its FRAND commitment and all other applicable laws and policies that would affect the terms of Ericssons and Apples prospective license. On December 17, 2021, Apple filed a responsive case against Ericsson in the U.S. District Court for the Eastern District of Texas alleging, among other things, that Ericsson breached obligations associated with the licensing of its standard essential patents under FRAND terms. Ericsson and Apple were not able to renew the now expired patent license agreement between the parties in a timely manner. On January 18, 2022, Ericsson filed three complaints with the U.S. International Trade Commission (ITC) alleging infringement of 12 patents by certain Apple products. In addition, Ericsson filed companion lawsuits in the Western District of Texas alleging infringement of the same 12 patents. Also, in January 2022 Ericsson filed complaints in several jurisdictions in Europe (Germany, Netherlands, Belgium) and South America (Brazil, Colombia) alleging that certain Apple products infringe Ericsson patents. On January 19, 2022, Apple filed a complaint against Ericsson in the ITC alleging infringement of three Apple patents by certain Ericsson products. Apple also filed a complaint in Germany at the District Court of Düsseldorf alleging infringement of a German utility model and another complaint at the District court of Mannheim alleging infringement of an Apple patent by certain Ericsson products. In addition, Apple filed complaints in China at the Beijing Patent Court alleging infringement by Ericsson of one patent and one utility model.
On March 3, 2022, Ericsson learned that Telefonaktiebolaget LM Ericsson and certain officers of Ericsson were named as defendants in a putative class action filed in the United States District Court for the Eastern District of New York. The complaint alleges violations of United States securities laws, in connection with allegedly false and misleading statements principally concerning the Companys adherence with its compliance and disclosure policies and obligations and the conduct of its business in Iraq.
PRESS RELEASES
March 02, 2022 | Update on Deferred Prosecution Agreement
On December 6, 2019, Ericsson entered into a Deferred Prosecution Agreement (DPA) with the United States Department of Justice (DOJ). On March 1, 2022, the DOJ informed Ericsson that the disclosure made by the company prior to the DPA about its internal investigation into conduct in Iraq in the period 2011 until 2019 was insufficient. Furthermore, it determined that the company breached the DPA by failing to make subsequent disclosure related to the investigation post-DPA. The company is in communication with the DOJ regarding the facts and circumstances of the breach determination and is committed to co-operating with the DOJ to resolve the matter.
At this stage it is premature to predict the outcome of this matter.
Comments about the Iraq investigation Based on our current review, we believe the situation described in the media reports on the conduct of Ericsson employees, vendors and suppliers in Iraq, going back to 2011 is covered by Ericssons 2019 internal investigation.
As previously disclosed in our press release on February 15, 2022, Ericsson invested significant time and resources to understand these matters. The investments we have made in our Ethics & Compliance program enabled us to identify and investigate the misconduct in Iraq. The 2019 investigation, which was supported by external legal
counsel, conducted over the course of a year, and involved the collection and review of a large amount of information, found serious breaches of compliance rules and the Code of Business Ethics.
The investigation could not identify that any Ericsson employee was directly involved in financing terrorist organizations. Based on our current assessment of the media reports, we do not believe they change this conclusion. We reiterate our commitment to investigate and take action to address any new information, including further investigation as appropriate.
As a result of the investigation, several employees were exited from the company and multiple other disciplinary and other remedial actions were taken. This included closing gaps in our internal processes in the region and incorporating lessons from the investigation into our ethics and compliance program. Furthermore, Ericsson terminated a number of third-party relationships and prioritized the Iraq country business for enhanced training and awareness activities, policies and procedures, and third-party management processes.
The Company has previously acknowledged publicly that it had failed to implement sufficient internal controls, including internal controls designed to deter and detect corruption. Over the last years, Ericsson has made significant investments in compliance which has enabled the company to uncover and address past misconduct. Since the beginning of 2017 when we started the turnaround of our company, we have invested extensively in enhanced compliance systems and processes. We work hard to build a better Ericsson focused on safeguarding a strong ethical and compliant culture throughout the entire company. We continue to invest significant resources to improve our ethics and compliance program and our speak-up culture to help prevent future misconduct.
Ericsson is under a compliance monitorship and the deferred prosecution agreement with the US Department of Justice remains in effect.
https://www.ericsson.com/en/press-releases/2022/3/update-on-
deferred-prosecution-agreement
March 16, 2022 | Ericsson appoints Scott Dresser as Chief Legal Officer
Ericsson (NASDAQ: ERIC) today announced the appointment of Scott Dresser to the companys Executive Team as Senior Vice President, Chief Legal Officer and Head of Group Function Legal Affairs & Compliance. Scott will join Ericsson on 21 March 2022 and be based in the US. Scott replaces Xavier Dedullen.
Ericsson President and CEO, Börje Ekholm said: I warmly welcome Scott to Ericsson. He brings a wealth of global experience spanning our sector and beyond. Scott joins us at a critical time and will play a key role working with me, our Board and the rest of our team as we continue to grow and strengthen the company. We demand that our business be conducted responsibly and with integrity across its value chain. Scotts experience driving positive change will be invaluable as Ericsson expands its business and continues its cultural transformation, enhancing its governance, compliance, and controls.
Commenting on his appointment, Scott Dresser said: Ericsson is a global leader that plays an essential role in advancing the future of communications. I am excited to be joining and look forward to working with Börje and the entire organization to execute the strategy
11 Ericsson | First quarter report 2022 Other information
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while focusing on operating with the highest standards of corporate governance and compliance.
With a legal career spanning more than three decades, Dresser joins Ericsson from Veon, where he has served for eight years as the companys General Counsel. Prior to Veon, Scott held senior leadership positions with Virgin Media, White Mountains Capital and Conservation International. He began his career in New York in private practice with law firms Lord Day & Lord and Morgan Lewis where he specialized in corporate law, governance, and mergers and acquisitions. Scott is a US citizen.
Appointed Chief Legal Officer and Secretary to the Board of Directors in April 2018, Xavier Dedullen has played an important role during the turn-around of the companys business and helped to establish firmer foundations for the legal, compliance, and corporate investigation functions. He will leave the role effective 20 March, 2022 but remain with Ericsson for a transition period.
Börje Ekholm continued: I want to thank Xavier sincerely for his commitment and support over the past four years. During his tenure, we have taken important strides in several strategic areas including our compliance program. Xavier leaves with our gratitude and I wish him well in all future endeavors.
https://www.ericsson.com/en/press-releases/2022/3/ericsson-
appoints-scott-dresser-as-chief-legal-officer
March 29, 2022 | Ericssons Annual General Meeting 2022
Telefonaktiebolaget LM Ericssons (NASDAQ:ERIC) Annual General Meeting (AGM) was held on March 29, 2022. Due to COVID-19, the AGM 2022 was conducted without the physical presence of shareholders, representatives and third parties and the meeting was conducted as a digital meeting with online participation. Shareholders were also able to exercise their voting rights by post before the meeting.
Adoption of the Profit and Loss Statements and the Balance Sheets The AGM resolved to adopt the Profit and Loss Statement and the Balance Sheet for the Parent Company as well as the Consolidated Profit and Loss Statement and the Consolidated Balance Sheet for the Group for 2021.
Dividend
The proposed dividend of SEK 2.50 per share was approved by the AGM. The dividend will be paid in two equal installments; SEK 1.25 per share with the record date Thursday, March 31, 2022, and SEK 1.25 per share with the record date Friday, September 30, 2022. Euroclear Sweden AB is expected to disburse SEK 1.25 per share on Tuesday, April 5, 2022, and SEK 1.25 per share on Wednesday, October 5, 2022.
Remuneration report
The AGM resolved to adopt the Board of Directors remuneration report for 2021.
Discharge from liability
It was recorded that shareholders representing at least one tenth of all of the shares in the Company voted against discharge from liability of the Board of Directors and the President for the financial year 2021.
Board of Directors
The AGM elected Board members in accordance with the proposal of the Nomination Committee. Ronnie Leten was re-elected as Chair of the Board and Jon Fredrik Baksaas, Jan Carlson, Nora Denzel, Börje Ekholm, Eric A. Elzvik, Kurt Jofs, Ronnie Leten, Kristin S. Rinne, Helena Stjernholm and Jacob Wallenberg were re-elected as Board members. Carolina Dybeck Happe was elected new Board member. It was also noted that the unions have appointed Torbjörn Nyman, Anders Ripa
and Kjell-Åke Soting employee representatives in the Board with Ulf Rosberg, Loredana Roslund and Annika Salomonsson as deputies.
Board of Directors Fees
The AGM resolved on fees to the Board of Directors, in accordance with the Nomination Committees proposal. Yearly fee to the Chair of the Board of SEK 4,375,000, and fees to other non-employee members of the Board, elected by the AGM, of SEK 1,100,000 each. Fees for Committee work to non-employee members of the Committees, elected by the AGM, were approved as follows: SEK 475,000 to the Chair of the Audit and Compliance Committee and SEK 275,000 to each of the other members of the Audit and Compliance Committee, SEK 205,000 to each of the Chairs of the Finance Committee, the Remuneration Committee and the Technology and Science Committee, and SEK 180,000 to each of the other members of the Finance Committee, the Remuneration Committee and the Technology and Science Committee.
The AGM approved the Nomination Committees proposal to enable payment of part of the fees to the members of the Board for the Board assignment, in the form of synthetic shares.
Auditor
The AGM elected Deloitte AB as auditor for the period up until the end of the AGM 2023.
Long-Term Variable Compensation Program (LTV)
Long-Term Variable compensation program 2022 (LTV 2022)
In accordance with the Board of Directors proposals, the AGM resolved on implementation of LTV 2022 for the members of the Executive Team (currently 15 individuals), comprising a maximum of 2 million B-shares in Ericsson. Performance Share Awards will be granted free of charge entitling the participant to receive a number of shares, free of charge, following the expiration of a three-year vesting period, provided that certain performance conditions are met and that the participant retains his or her employment. The performance conditions are based on TSR (total shareholder return) development during a three-year period (absolute TSR-development and relative TSR-development), fulfilment of a Group Environmental Social and Governance (ESG) performance criterion comprised of two equally weighted subcomponents covering environmental and social aspects of ESG measured during a three-year period and the 2022 Group EBIT (operating income) performance criterion. All targets have a three-year vesting period. The Company has approximately 3.3 billion shares in issue. The 2 million B-shares covered by LTV 2022 correspond to approximately 0.06 percent of the total number of outstanding shares.
Furthermore, the AGM resolved to approve the Board of Directors proposal to hedge the companys undertakings under LTV 2022 through an equity swap agreement with a third party.
The Board of Directors proposals on transfer of treasury stock, directed share issue and acquisition offer under agenda item 16.2 and item 17 were withdrawn.
Transfer of treasury stock for previously resolved LTV programs
The AGM resolved to approve the Board of Directors proposal on transfer of not more than 1.4 million B-shares on Nasdaq Stockholm prior to the AGM 2023 to cover certain expenses, mainly social security charges, which may occur in relation to previously resolved and ongoing LTV programs; LTV 2019 and LTV 2020.
The AGM further resolved that the Company shall have the right to, in conjunction with the delivery of vested shares under LTV 2019 and LTV 2020, prior to the AGM in 2023, retain and sell no more than 60% of the vested B-shares on Nasdaq Stockholm in order to cover for the costs for withholding and paying tax and social security liabilities on
12 Ericsson | First quarter report 2022 Other information
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behalf of the participants in relation to the Performance Share Awards. Transfer of these shares shall be made at a price within the, at each time, prevailing price interval for the share.
Shares and votes
There are in total 3,334,151,735 shares in the Company; 261,755,983 shares of series A and 3,072,395,752 shares of series B, corresponding to in total 568,995,558.2 votes. The Companys holding of treasury stock as of March 29, 2022, amounts to 4,009,306 shares of series B, corresponding to 400,930.6 votes.
https://www.ericsson.com/en/press-releases/2022/3/ericssons-
annual-general-meeting-2022
POST-CLOSING EVENTS
April 07, 2022 | Ericsson announces change to the Executive Team
Ericsson (NASDAQ: ERIC) today announces that Peter Laurin has decided to leave Ericsson to pursue opportunities outside the company. Peter Laurin has been with the company since 2001 and will leave his position as Senior Vice President and Head of Business Area Managed Services on August 15, 2022. He has served on Ericssons Executive Team since 2017.
Börje Ekholm, President and CEO, says: Peter has been instrumental in turning around and transforming our Managed Services business and successfully led Ericssons digitalization and IT journey. He is a valued member of the Ericsson leadership team and I wish Peter all the very best in this new role as CEO of Piab.
Peters successor as Head of Business Area Managed Services will be announced later.
Piab (www.piab.com) is a leading company in automation of production processes around the globe.
https://www.ericsson.com/en/press-releases/2022/4/ericsson-
announces-change-to-the-executive-team
April 11, 2022 | Ericsson suspends business in Russia indefinitely and records provision in Q1 2022
In late February, Ericsson (NASDAQ: ERIC) suspended all deliveries to customers in Russia. In the light of recent events and of European Union sanctions, the company will now suspend its affected business with customers in Russia indefinitely. Ericsson is engaging with customers and partners regarding the indefinite suspension of the affected business. The priority is to focus on the safety and well-being of Ericsson employees in Russia and they will be placed on paid leave.
As a consequence, Ericsson records a SEK 0.9 b. provision in first quarter 2022 for impairment of assets and other exceptional costs. No staff redundancy cost is included. The provision will be recorded in Other Operating Expenses in Segment Networks. Around one third of this amount will impact cashflow.
https://www.ericsson.com/en/press-releases/2022/4/ericsson-
suspends-business-in-russia-indefinitely-and-records-provision-in-q1-2022
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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 2021 and in the Annual Report on Form 20-F 2021 (in the following the Annual Report 2021). 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 risks described below:
Deferred Prosecution Agreement with the United States Department of Justice
On December 6, 2019, Ericsson entered into a Deferred Prosecution Agreement (DPA) with the United States Department of Justice (DOJ). In October 2021, Ericsson received correspondence from the DOJ stating its determination that the Company had breached its obligations under its DPA by failing to provide certain documents and factual information. On March 1, 2022, the DOJ informed Ericsson that the disclosure made by the Company prior to the DPA about its internal investigation into conduct in Iraq in the period 2011 until 2019 was insufficient. Furthermore, it determined that the Company breached the DPA by failing to make subsequent disclosure related to the investigation post-DPA. As mentioned in the Annual Report 2021, the Company is in communication with the DOJ regarding the facts and circumstances of the breach determinations and is committed to co-operating with the DOJ to resolve the matters. While the length of the process cannot be determined, the resolution of these matters could result in a range of actions by DOJ, and may likely include additional monetary payments, the magnitude of which cannot at this time be reliably estimated. Accordingly, no provisions have been recorded for such potential exposure.
Business in Russia
As mentioned in the Annual Report 2021, including in the risk factor 1.1 and 3.2, conducting business throughout the world makes Ericsson subject to the effects of general global economic conditions as well as conditions unique to specific countries or regions. In addition to the risk factors described in the Annual Report 2021 and the provision recorded by the Company in Q1 2022, the large uncertainties relating to the Russian market, including the applicable and changed sanctions landscape, lead to large uncertainties relating to other potential costs and consequences that may follow. All of the above could have a material adverse effect on the Company, including its reputation, business, financial condition, results of operations (EBIT), cash flows, or prospects.
Stockholm, April 14, 2022
Telefonaktiebolaget LM Ericsson
Börje Ekholm, President and CEO
Org. No. 556016-0680
This report has not been reviewed by Telefonaktiebolaget LM Ericsson auditors
Date for next report: July 14, 2022
14 Ericsson | First quarter report 2022 Risk factors
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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 April 14, 2022.
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 | First quarter report 2022 Editors note
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Forward-looking statements
This 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 2021.
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 | First quarter report 2022 Forward-looking statements
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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 |
| 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 | First quarter report 2022 Financial statements and other information
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Financial statements (unaudited)
| Condensed consolidated income statement | ||||
|---|---|---|---|---|
| Q1 | ||||
| SEK million | Note | 2022 | 2021 | Change |
| Net sales | 3 | 55,061 | 49,778 | 11 % |
| Cost of sales | -31,772 | -28,483 | 12 % | |
| Gross income | 3 | 23,289 | 21,295 | 9 % |
| Research and development expenses | -10,705 | -9,576 | 12 % | |
| Selling and administrative expenses | -6,588 | -6,188 | 6 % | |
| Impairment losses on trade receivables | -180 | -212 | -15 % | |
| Operating expenses | -17,473 | -15,976 | 9 % | |
| Other operating income and | ||||
| expenses¹ ) | -1,065 | 13 | | |
| Share in earnings of JV and associated companies | -7 | -71 | -90 % | |
| Earnings before financial item sand income tax (EBIT) | 3 | 4,744 | 5,261 | -10 % |
| Financial income and expenses, net | -643 | -533 | 21 % | |
| Income after financial items | 4,101 | 4,728 | -13 % | |
| Income tax | -1,189 | -1,560 | -24 % | |
| Net income | 2,912 | 3,168 | -8 % | |
| Net income (loss) attributable to: | ||||
| Owners of the Parent Company | 2,940 | 3,187 | ||
| Non-controlling interests | -28 | -19 | ||
| Other information | ||||
| Average number of shares, basic (million) | 8 | 3,330 | 3,328 | |
| Earnings per share, basic (SEK) | ||||
| ² ) | 0.88 | 0.96 | ||
| Earnings per share, diluted (SEK) | ||||
| ³ ) | 0.88 | 0.96 |
1) Q1 2022 includes a provision of SEK -0.9 b. for impairment of assets and other extraordinary costs due to the suspension of affected business in Russia, and revaluation of Ericsson Venture investments of SEK -0.3 billion.
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 improve earnings per share.
Condensed statement of comprehensive income (loss)
| SEK million | Q1 — 2022 | 2021 |
|---|---|---|
| Net income | 2,912 | 3,168 |
| Other comprehensive income | ||
| Items that will not be reclassified to profit or loss | ||
| Re measurements of defined benefits pension plans in class etceiling | 6,926 | 6,046 |
| Revaluation of borrowings due to change in credit risk | 916 | -55 |
| Cash flow hedge reserve - gains/losses arising during the year | 458 | |
| Tax on items that will not be reclassified to profit or loss | -1,761 | -1,233 |
| Items that have been or may be reclassified to profit or loss | ||
| Cash flow hedge reserve | ||
| Gains/ losses arising during the period | 121 | -31 |
| Reclassification adjustments on gains/ losses included in profit or loss | 42 | -24 |
| Translation reserves | ||
| Changes in translation reserves | 1,585 | 1,721 |
| Reclassification to profit and loss | -8 | |
| Share of other comprehensive income (loss) of JV and associated companies | -1 | 35 |
| Tax on items that have been or may be reclassified to profit or loss | -34 | 11 |
| Total other com prehensive income, net of tax | 8,244 | 6,470 |
| Total comprehensive income | 11,156 | 9,638 |
| Total comprehensive income attributable to: | ||
| Owners of the Parent Company | 11,237 | 9,755 |
| Non-controlling interests | -81 | -117 |
18 Ericsson | First quarter report 2022 Financial statements
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Condensed consolidated balance sheet
| SEK million | Note | Mar 31 — 2022 | Dec 31 — 2021 |
|---|---|---|---|
| Assets | |||
| Non-current assets | |||
| Intangible assets | |||
| Capitalized development expenses | 3,428 | 3,528 | |
| Goodwill | 39,162 | 38,204 | |
| Intellectual property rights, brands and other intangible assets | 3,729 | 3,830 | |
| Property, plant and equipment | 13,603 | 13,580 | |
| Right-of-use assets | 7,937 | 7,948 | |
| Financial assets | |||
| Equity in JV and associated companies | 906 | 941 | |
| Other investments in shares and participations | 5 | 1,939 | 2,258 |
| Customer finance, non-current | 5 | 628 | 568 |
| Interest-bearing securities, non-current | 5 | 15,022 | 30,626 |
| Other financial assets, non-current | 5 | 6,810 | 6,217 |
| Deferred tax assets | 23,641 | 23,109 | |
| 116,805 | 130,809 | ||
| Current assets | |||
| Inventories | 41,279 | 35,164 | |
| Contract assets | 9,937 | 10,506 | |
| Trade receivables | 5 | 46,845 | 45,399 |
| Customer finance, current | 5 | 2,857 | 2,719 |
| Current tax assets | 7,673 | 6,379 | |
| Other current receivables | 9,391 | 7,656 | |
| Interest-bearing securities, current | 5 | 12,292 | 12,932 |
| Cash and cash equivalents | 5 | 76,856 | 54,050 |
| 207,130 | 174,805 | ||
| Total assets | 323,935 | 305,614 | |
| Equity and liabilities | |||
| Equity | |||
| Stockholders equity | 111,701 | 108,775 | |
| Non-controlling interest in equity of | |||
| subsidiaries | -1,822 | -1,676 | |
| 109,879 | 107,099 | ||
| Non-current liabilities | |||
| Post-employment benefits | 30,643 | 36,050 | |
| Provisions, non-current | 4 | 4,498 | 3,722 |
| Deferred tax liabilities | 1,012 | 884 | |
| Borrowings, non-current | 5 | 28,599 | 22,241 |
| Lease liabilities, non-current | 7,037 | 7,079 | |
| Other non-current liabilities | 1,070 | 1,587 | |
| 72,859 | 71,563 | ||
| Current liabilities | |||
| Provisions, current | 4 | 5,699 | 5,782 |
| Borrowings, current | 5 | 10,403 | 9,590 |
| Lease liabilities, current | 2,284 | 2,224 | |
| Contract liabilities | 39,875 | 32,834 | |
| Trade payables | 5 | 35,316 | 35,684 |
| Current tax liabilities | 5,701 | 2,917 | |
| Other current liabilities | 41,919 | 37,921 | |
| 141,197 | 126,952 | ||
| Total equity and liabilities | 323,935 | 305,614 |
19 Ericsson | First quarter report 2022 Financial statements
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Condensed consolidated statement of cash flows
| SEK million | Note | Q1 — 2022 | 2021 | Jan-Dec — 2021 |
|---|---|---|---|---|
| Operating activities | ||||
| Net income | 2,912 | 3,168 | 22,980 | |
| Adjustments for | ||||
| Taxes | 1,021 | 1,584 | 6,576 | |
| Earnings/dividends in JV and associated companies | 8 | 76 | 360 | |
| Depreciation, amortization and impairment losses | 6 | 2,146 | 1,935 | 8,969 |
| Other | 899 | 185 | 1,238 | |
| 6,986 | 6,948 | 40,123 | ||
| Changes in operating net assets | ||||
| Inventories | -5,346 | -1,235 | -5,565 | |
| Customer finance, current and non-current | -123 | 219 | 34 | |
| Trade receivables and contract assets | 901 | 1,979 | 1,551 | |
| Trade payables | -1,371 | -4,112 | 1,385 | |
| Provisions and post-employment benefits | 969 | 523 | -118 | |
| Contract liabilities | 6,260 | 4,454 | 4,014 | |
| Other operating assets and liabilities, net | -6,767 | -5,681 | 2,701 | |
| -5,477 | -3,853 | 4,002 | ||
| Interest received | 78 | 68 | 8 | |
| Interest paid | -211 | -160 | -974 | |
| Taxes paid | -1,346 | 202 | -4,094 | |
| Cash flow from operating activities | 30 | 3,205 | 39,065 | |
| Investing activities | ||||
| Investments in property, plant and equipment | 6 | -818 | -915 | -3,663 |
| Sales of property, plant and equipment | 38 | 24 | 115 | |
| Acquisitions/divestments of subsidiaries and other operations, net | 46 | 5 | 59 | |
| Product development | 6 | -288 | -204 | -962 |
| Purchase of interest-bearing securities | | -3,680 | -35,415 | |
| Sale of interest-bearing securities | 16,027 | 3,841 | 20,114 | |
| Other investing activities | -579 | -5 | -131 | |
| Cash flow from investing activities | 14,426 | -934 | -19,883 | |
| Financing activities | ||||
| Proceeds from issuance of long-term debt | 7,788 | 77 | 7,882 | |
| Repayment of long-term debt | | -5,242 | -5,791 | |
| Dividends paid | | -5 | -6,889 | |
| Repayment of lease liabilities | -593 | -548 | -2,368 | |
| Other financing activities | 569 | -449 | -2,141 | |
| Cash flow from financing activities | 7,764 | -6,167 | -9,307 | |
| Effect of exchange rate changes on cash | 586 | 827 | 563 | |
| Net change in cash and cash equivalents | 22,806 | -3,069 | 10,438 | |
| Cash and cash equivalents, beginning of period | 54,050 | 43,612 | 43,612 | |
| Cash and cash equivalents, end of period | 76,856 | 40,543 | 54,050 |
20 Ericsson | First quarter report 2022 Financial statements
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Condensed consolidated statement of changes in equity
| SEK million | Jan-Mar — 2022 | 2021 | Jan-Dec — 2021 |
|---|---|---|---|
| Opening balance | 107,099 | 85,177 | 85,177 |
| Total comprehensive income | 11,156 | 9,638 | 28,770 |
| Sale/repurchase of own shares | | | 42 |
| Long-term variable compensation plans | 24 | 21 | 93 |
| Dividends to shareholders 1) | -8,400 | -6,712 | -6,889 |
| Transactions with non-controlling interests | | | -94 |
| Closing balance | 109,879 | 88,124 | 107,099 |
1) Includes accrual of SEK 8,335 (6,668) million in Jan-Mar for the dividend approved by the Annual General Meeting on March 29, 2022 (March 30, 2021).
Condensed consolidated income statement isolated quarters
| Isolated quarters, SEK million | 2022 — Q1 | 2021 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|
| Net sales | 55,061 | 71,332 | 56,263 | 54,941 | 49,778 |
| Cost of sales | -31,772 | -40,511 | -31,487 | -31,084 | -28,483 |
| Gross income | 23,289 | 30,821 | 24,776 | 23,857 | 21,295 |
| Research and development expenses | -10,705 | -11,863 | -10,155 | -10,480 | -9,576 |
| Selling and administrative expenses | -6,588 | -7,620 | -6,177 | -6,972 | -6,188 |
| Impairment losses on trade receivables | -180 | 99 | -27 | 100 | -212 |
| Operating expenses | -17,473 | -19,384 | -16,359 | -17,352 | -15,976 |
| Other operating income and expenses 1) | -1,065 | 428 | 500 | -579 | 13 |
| Share in earnings of JV and associated companies | -7 | -4 | -82 | -103 | -71 |
| Earnings before financial items and income tax (EBIT) | 4,744 | 11,861 | 8,835 | 5,823 | 5,261 |
| Financial income and expenses, net | -643 | -945 | -598 | -454 | -533 |
| Income after financial items | 4,101 | 10,916 | 8,237 | 5,369 | 4,728 |
| Income tax | -1,189 | -770 | -2,471 | -1,469 | -1,560 |
| Net income | 2,912 | 10,146 | 5,766 | 3,900 | 3,168 |
| Net income (loss) attributable to: | |||||
| Owners of the Parent Company | 2,940 | 10,076 | 5,752 | 3,679 | 3,187 |
| Non-controlling interests | -28 | 70 | 14 | 221 | -19 |
| Other information | |||||
| Average number of shares, basic (million) | 3,330 | 3,330 | 3,330 | 3,329 | 3,328 |
| Earnings per share, basic (SEK) 2) | 0.88 | 3.03 | 1.73 | 1.10 | 0.96 |
| Earnings per share, diluted (SEK) 3) | 0.88 | 3.02 | 1.73 | 1.10 | 0.96 |
1) Q1 2022 includes a provision of SEK -0.9 b. for impairment of assets and other extraordinary costs due to the suspension of affected business in Russia, and revaluation of Ericsson Venture investments of SEK -0.3 billion. Q4 2021 includes a gain from divestment of a data center and revaluation of Ericsson Ventures investments of SEK 0.4 billion. Q3 2021 includes an Ericsson Ventures investment revaluation of SEK 0.5 billion. Q2 2021 includes cost of SEK -0.8 billion 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 | First quarter report 2022 Financial statements
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Condensed consolidated statement of cash flows isolated quarters
| Isolated quarters, SEK million | 2022 — Q1 | 2021 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|
| Operating activities | |||||
| Net income | 2,912 | 10,146 | 5,766 | 3,900 | 3,168 |
| Adjustments for | |||||
| Taxes | 1,021 | 938 | 2,824 | 1,230 | 1,584 |
| Earnings/dividends in JV and associated companies | 8 | 13 | 159 | 112 | 76 |
| Depreciation, amortization and impairment losses | 2,146 | 2,552 | 2,385 | 2,097 | 1,935 |
| Other | 899 | 398 | 24 | 631 | 185 |
| 6,986 | 14,047 | 11,158 | 7,970 | 6,948 | |
| Changes in operating net assets | |||||
| Inventories | -5,346 | 248 | -3,877 | -701 | -1,235 |
| Customer finance, current and non-current | -123 | 780 | -1,419 | 454 | 219 |
| Trade receivables and contract assets | 901 | -5,227 | 8,833 | -4,034 | 1,979 |
| Trade payables | -1,371 | 3,020 | 1,733 | 744 | -4,112 |
| Provisions and post-employment benefits | 969 | 950 | -130 | -1,461 | 523 |
| Contract liabilities | 6,260 | -1,655 | -3,388 | 4,603 | 4,454 |
| Other operating assets and liabilities, net | -6,767 | 4,606 | 3,168 | 608 | -5,681 |
| -5,477 | 2,722 | 4,920 | 213 | -3,853 | |
| Interest received | 78 | -104 | 42 | 2 | 68 |
| Interest paid | -211 | -310 | -120 | -384 | -160 |
| Taxes paid/received | -1,346 | -1,159 | -1,276 | -1,861 | 202 |
| Cash flow from operating activities | 30 | 15,196 | 14,724 | 5,940 | 3,205 |
| Investing activities | |||||
| Investments in property, plant and equipment | -818 | -701 | -1,040 | -1,007 | -915 |
| Sales of property, plant and equipment | 38 | 34 | 40 | 17 | 24 |
| Acquisitions/divestments of subs, and other operations, net | 46 | 178 | -55 | -69 | 5 |
| Product development | -288 | -302 | -190 | -266 | -204 |
| Purchase of interest-bearing securities | | -8,858 | -9,670 | -13,207 | -3,680 |
| Sale of interest-bearing securities | 16,027 | 7,064 | 1,801 | 7,408 | 3,841 |
| Other investing activities | -579 | -122 | -4 | | -5 |
| Cash flow from investing activities | 14,426 | -2,707 | -9,118 | -7,124 | -934 |
| Financing activities | |||||
| Proceeds from issuance of long-term debt | 7,788 | 1 | | 7,804 | 77 |
| Repayment of long-term debt | | -39 | | -510 | -5,242 |
| Dividends paid | | -3,395 | -161 | -3,328 | -5 |
| Repayment of lease liabilities | -593 | -623 | -580 | -617 | -548 |
| Other financing activities | 569 | -825 | -1,807 | 940 | -449 |
| Cash flow from financing activities | 7,764 | -4,881 | -2,548 | 4,289 | -6,167 |
| Effect of exchange rate changes on cash | 586 | -34 | 145 | -375 | 827 |
| Net change in cash and cash equivalents | 22,806 | 7,574 | 3,203 | 2,730 | -3,069 |
| Cash and cash equivalents, beginning of period | 54,050 | 46,476 | 43,273 | 40,543 | 43,612 |
| Cash and cash equivalents, end of period | 76,856 | 54,050 | 46,476 | 43,273 | 40,543 |
22 Ericsson | First quarter report 2022 Financial statements
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Condensed Parent Company income statement
| SEK million | Q1 — 2022 | 2021 | Jan-Dec — 2021 |
|---|---|---|---|
| Net sales | | | |
| Cost of sales | | | |
| Gross income | | | |
| Operating expenses | -355 | -173 | -820 |
| Other operating income and expenses | 609 | 614 | 1,770 |
| EBIT | 254 | 441 | 950 |
| Financial net | -169 | 352 | 8,368 |
| Income after financial items | 85 | 793 | 9,318 |
| Transfers to (-) / from untaxed reserves | | | -1,526 |
| Income tax | -87 | -126 | -161 |
| Net income | -2 | 667 | 7,631 |
Condensed Parent Company statement of comprehensive income (loss)
| SEK million | Q1 — 2022 | 2021 | Jan-Dec — 2021 |
|---|---|---|---|
| Net income | -2 | 667 | 7,631 |
| Revaluation of borrowings due to change in credit risk | 916 | -55 | 31 |
| Cash flow hedge reserve - gains/losses arising during the period | 458 | | -26 |
| Tax on items that will not be reclassified to profit or loss | -278 | 11 | -6 |
| Other comprehensive income, net of tax | 1,096 | -44 | -1 |
| Total comprehensive income | 1,094 | 623 | 7,630 |
23 Ericsson | First quarter report 2022 Financial statements
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Condensed Parent Company balance sheet
| SEK million | ||
|---|---|---|
| Assets | ||
| Fixed assets | ||
| Intangible assets | 7 | 8 |
| Tangible assets | 403 | 413 |
| Financial assets¹ ) | 105,602 | 120,605 |
| 106,012 | 121,026 | |
| Current assets | ||
| Receivables | 27,533 | 27,364 |
| Short-term investments | 11,955 | 12,722 |
| Cash and cash equivalents | 62,001 | 37,128 |
| 101,489 | 77,214 | |
| Total assets | 207,501 | 198,240 |
| Stockholders equity, provisions and liabilities | ||
| Equity | ||
| Restricted equity | 48,164 | 48,164 |
| Non-restricted equity | 27,762 | 34,984 |
| 75,926 | 83,148 | |
| Provisions | 261 | 293 |
| Non-current liabilities | 28,774 | 22,406 |
| Current liabilities | 102,540 | 92,393 |
| Total stockholders equity, provisions and liabilities | 207,501 | 198,240 |
| 1) Of which interest-bearing | ||
| securities, non-current | 14,994 | 30,615 |
24 Ericsson | First quarter report 2022 Financial statements
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Accounting policies and Explanatory notes (unaudited)
Note 1 Accounting policies
The group
This condensed consolidated interim financial report for the quarterly reporting period ended March 31, 2022, 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, 2021 and should be read in conjunction with that annual report. There are no amendments of IFRS during 2022 that are estimated to have a material impact on the result and financial position of the Company.
Note 2 Critical accounting estimates and judgements
Russia
In late February, Ericsson suspended all deliveries to customers in Russia. In the light of recent events and of European Union sanctions, the company will now suspend its affected business with customers in Russia indefinitely. Ericsson is engaging with customers and partners regarding the indefinite suspension of the affected business. The priority is to focus on the safety and well-being of Ericsson employees in Russia and they will be placed on paid leave.
As a consequence, Ericsson records a SEK 0.9 b. provision in the first quarter 2022 for impairment of assets and other exceptional costs. No staff redundancy cost is included. The provision will be recorded in Other operating expenses in Segment Networks. Around one third of this amount will impact cash flow.
25 Ericsson | First quarter report 2022 Accounting policies and Explanatory notes
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Note 3 Segment information
Net sales by segment by quarter
| Isolated quarters, SEK million | 2022 — Q1 | 2021 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|
| Networks | 40,712 | 51,097 | 40,592 | 39,875 | 36,274 |
| Of which Products | 31,131 | 39,963 | 31,079 | 30,414 | 27,495 |
| Of which Services | 9,581 | 11,134 | 9,513 | 9,461 | 8,779 |
| Digital Services | 7,214 | 12,736 | 8,630 | 7,887 | 6,898 |
| Of which Products | 3,634 | 7,157 | 4,601 | 3,989 | 3,581 |
| Of which Services | 3,580 | 5,579 | 4,029 | 3,898 | 3,317 |
| Managed Services | 4,946 | 5,354 | 5,041 | 5,119 | 4,865 |
| Emerging Business and Other | 2,189 | 2,145 | 2,000 | 2,060 | 1,741 |
| Total | 55,061 | 71,332 | 56,263 | 54,941 | 49,778 |
| 2022 | 2021 | ||||
| Sequential change, percent | Q1 | Q4 | Q3 | Q2 | Q1 |
| Networks | -20 % | 26 % | 2 % | 10 % | -27 % |
| Of which Products | -22 % | 29 % | 2 % | 11 % | -27 % |
| Of which Services | -14 % | 17 % | 1 % | 8 % | -26 % |
| Digital Services | -43 % | 48 % | 9 % | 14 % | -46 % |
| Of which Products | -49 % | 56 % | 15 % | 11 % | -52 % |
| Of which Services | -36 % | 38 % | 3 % | 18 % | -37 % |
| Managed Services | -8 % | 6 % | -2 % | 5 % | -16 % |
| Emerging Business and Other | 2 % | 7 % | -3 % | 18 % | 0 % |
| Total | -23 % | 27 % | 2 % | 10 % | -28 % |
| 2022 | 2021 | ||||
| Year over year change, percent | Q1 | Q4 | Q3 | Q2 | Q1 |
| Networks | 12 % | 4 % | -3 % | 0 % | 3 % |
| Of which Products | 13 % | 7 % | 0 % | 5 % | 11 % |
| Of which Services | 9 % | -6 % | -11 % | -13 % | -15 % |
| Digital Services | 5 % | 1 % | -1 % | -8 % | -6 % |
| Of which Products | 1 % | -4 % | 0 % | -13 % | -6 % |
| Of which Services | 8 % | 6 % | -2 % | -2 % | -6 % |
| Managed Services | 2 % | -8 % | -8 % | -8 % | -15 % |
| Emerging Business and Other | 26 % | 23 % | 26 % | 29 % | 11 % |
| Total | 11 % | 3 % | -2 % | -1 % | 0 % |
| 2022 | 2021 | ||||
| Year to date, SEK million | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Networks | 40,712 | 167,838 | 116,741 | 76,149 | 36,274 |
| Of which Products | 31,131 | 128,951 | 88,988 | 57,909 | 27,495 |
| Of which Services | 9,581 | 38,887 | 27,753 | 18,240 | 8,779 |
| Digital Services | 7,214 | 36,151 | 23,415 | 14,785 | 6,898 |
| Of which Products | 3,634 | 19,328 | 12,171 | 7,570 | 3,581 |
| Of which Services | 3,580 | 16,823 | 11,244 | 7,215 | 3,317 |
| Managed Services | 4,946 | 20,379 | 15,025 | 9,984 | 4,865 |
| Emerging Business and Other | 2,189 | 7,946 | 5,801 | 3,801 | 1,741 |
| Total | 55,061 | 232,314 | 160,982 | 104,719 | 49,778 |
| 2022 | 2021 | ||||
| Year over year change, percent | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Networks | 12 % | 1 % | 0 % | 2 % | 3 % |
| Of which Products | 13 % | 5 % | 5 % | 8 % | 11 % |
| Of which Services | 9 % | -11 % | -13 % | -14 % | -15 % |
| Digital Services | 5 % | -3 % | -5 % | -7 % | -6 % |
| Of which Products | 1 % | -5 % | -6 % | -10 % | -6 % |
| Of which Services | 8 % | 0 % | -3 % | -4 % | -6 % |
| Managed Services | 2 % | -10 % | -10 % | -12 % | -15 % |
| Emerging Business and Other | 26 % | 22 % | 22 % | 20 % | 11 % |
| Total | 11 % | 0 % | -1 % | -1 % | 0 % |
26 Ericsson | First quarter report 2022 Accounting policies and Explanatory notes
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Gross income by segment by quarter
| Isolated quarters, SEK million | 2022 — Q1 | 2021 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|
| Networks | 18,211 | 23,643 | 19,401 | 19,111 | 16,714 |
| Digital Services | 3,097 | 5,456 | 3,644 | 2,990 | 3,002 |
| Managed Services | 1,148 | 974 | 944 | 975 | 942 |
| Emerging Business and Other | 833 | 748 | 787 | 781 | 637 |
| Total | 23,289 | 30,821 | 24,776 | 23,857 | 21,295 |
| 2022 | 2021 | ||||
| Year to date, SEK million | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Networks | 18,211 | 78,869 | 55,226 | 35,825 | 16,714 |
| Digital Services | 3,097 | 15,092 | 9,636 | 5,992 | 3,002 |
| Managed Services | 1,148 | 3,835 | 2,861 | 1,917 | 942 |
| Emerging Business and Other | 833 | 2,953 | 2,205 | 1,418 | 637 |
| Total | 23,289 | 100,749 | 69,928 | 45,152 | 21,295 |
EBIT (loss) by segment by quarter
| Isolated quarters, SEK million | 2022 — Q1 | 2021 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|
| Networks | 6,747 | 11,757 | 9,624 | 8,645 | 7,240 |
| Digital Services | -1,418 | 304 | -822 | -1,567 | -1,519 |
| Managed Services | 592 | 353 | 386 | 416 | 313 |
| Emerging Business and Other | -1,177 | -553 | -353 | -1,671 | -773 |
| Total | 4,744 | 11,861 | 8,835 | 5,823 | 5,261 |
| 2022 | 2021 | ||||
| Year to date, SEK million | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Networks | 6,747 | 37,266 | 25,509 | 15,885 | 7,240 |
| Digital Services | -1,418 | -3,604 | -3,908 | -3,086 | -1,519 |
| Managed Services | 592 | 1,468 | 1,115 | 729 | 313 |
| Emerging Business and Other | -1,177 | -3,350 | -2,797 | -2,444 | -773 |
| Total | 4,744 | 31,780 | 19,919 | 11,084 | 5,261 |
27 Ericsson | First quarter report 2022 Accounting policies and Explanatory notes
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Net sales by market area by quarter
| Isolated quarters, SEK million | 2022 — Q1 | 2021 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|
| South East Asia, Oceania and India | 5,836 | 8,604 | 6,450 | 7,099 | 6,676 |
| North East Asia | 5,421 | 9,816 | 5,691 | 7,123 | 6,491 |
| North America | 20,727 | 22,264 | 20,161 | 17,950 | 17,081 |
| Europe and Latin America 1) 2) | 15,290 | 19,236 | 14,378 | 14,011 | 12,647 |
| Middle East and Africa | 4,301 | 6,948 | 4,985 | 4,459 | 4,393 |
| Other 1) 2) | 3,486 | 4,464 | 4,598 | 4,299 | 2,490 |
| Total | 55,061 | 71,332 | 56,263 | 54,941 | 49,778 |
| 1) Of which in Sweden | 678 | 1,078 | 478 | 404 | 389 |
| 2) Of which in EU | 8,611 | 10,181 | 7,069 | 7,256 | 6,801 |
| 2022 | 2021 | ||||
| Sequential change, percent | Q1 | Q4 | Q3 | Q2 | Q1 |
| South East Asia, Oceania and India | -32 % | 33 % | -9 % | 6 % | -32 % |
| North East Asia | -45 % | 72 % | -20 % | 10 % | -49 % |
| North America | -7 % | 10 % | 12 % | 5 % | -11 % |
| Europe and Latin America 1) 2) | -21 % | 34 % | 3 % | 11 % | -26 % |
| Middle East and Africa | -38 % | 39 % | 12 % | 2 % | -33 % |
| Other 1) 2) | -22 % | -3 % | 7 % | 73 % | -42 % |
| Total | -23 % | 27 % | 2 % | 10 % | -28 % |
| 1) Of which in Sweden | -37 % | 126 % | 18 % | 4 % | 7 % |
| 2) Of which in EU | -15 % | 44 % | -3 % | 7 % | -23 % |
| 2022 | 2021 | ||||
| Year over year change, percent | Q1 | Q4 | Q3 | Q2 | Q1 |
| South East Asia, Oceania and India | -13 % | -12 % | -17 % | 8 % | 13 % |
| North East Asia | -16 % | -23 % | -35 % | -9 % | 66 % |
| North America | 21 % | 17 % | 10 % | -2 % | -5 % |
| Europe and Latin America 1) 2) | 21 % | 12 % | 8 % | 7 % | 3 % |
| Middle East and Africa | -2 % | 7 % | -10 % | -18 % | -25 % |
| Other 1) 2) | 40 % | 4 % | 26 % | 0 % | -37 % |
| Total | 11 % | 3 % | -2 % | -1 % | 0 % |
| 1) Of which in Sweden | 74 % | 197 % | 92 % | 42 % | 71 % |
| 2) Of which in EU | 27 % | 15 % | 0 % | 0 % | 9 % |
| 2022 | 2021 | ||||
| Year to date, SEK million | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| South East Asia, Oceania and India | 5,836 | 28,829 | 20,225 | 13,775 | 6,676 |
| North East Asia | 5,421 | 29,121 | 19,305 | 13,614 | 6,491 |
| North America | 20,727 | 77,456 | 55,192 | 35,031 | 17,081 |
| Europe and Latin America 1) 2) | 15,290 | 60,272 | 41,036 | 26,658 | 12,647 |
| Middle East and Africa | 4,301 | 20,785 | 13,837 | 8,852 | 4,393 |
| Other 1) 2) | 3,486 | 15,851 | 11,387 | 6,789 | 2,490 |
| Total | 55,061 | 232,314 | 160,982 | 104,719 | 49,778 |
| 1) Of which in Sweden | 678 | 2,349 | 1,271 | 793 | 389 |
| 2) Of which in EU | 8,611 | 31,307 | 21,126 | 14,057 | 6,801 |
| 2022 | 2021 | ||||
| Year to date, year over year change, percent | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| South East Asia, Oceania and India | -13 % | -4 % | 0 % | 10 % | 13 % |
| North East Asia | -16 % | -13 % | -6 % | 16 % | 66 % |
| North America | 21 % | 5 % | 1 % | -4 % | -5 % |
| Europe and Latin America 1) 2) | 21 % | 8 % | 6 % | 5 % | 3 % |
| Middle East and Africa | -2 % | -11 % | -18 % | -21 % | -25 % |
| Other 1) 2) | 40 % | -2 % | -4 % | -18 % | -37 % |
| Total | 11 % | 0 % | -1 % | -1 % | 0 % |
| 1) Of which in Sweden | 74 % | 109 % | 67 % | 55 % | 71 % |
| 2) Of which in EU | 27 % | 6 % | 2 % | 4 % | 9 % |
28 Ericsson | First quarter report 2022 Accounting policies and Explanatory notes
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Net sales by market area by segment
| SEK million | Q1 2022 — Networks | Digital Services | Managed Services | Emerging Business and Other | Total |
|---|---|---|---|---|---|
| South East Asia, Oceania and India | 3,910 | 796 | 1,124 | 6 | 5,836 |
| North East Asia | 4,541 | 682 | 142 | 56 | 5,421 |
| North America | 18,209 | 1,689 | 806 | 23 | 20,727 |
| Europe and Latin America | 10,625 | 2,562 | 1,996 | 107 | 15,290 |
| Middle East and Africa | 2,186 | 1,233 | 878 | 4 | 4,301 |
| Other ¹ ) | 1,241 | 252 | 0 | 1,993 | 3,486 |
| Total | 40,712 | 7,214 | 4,946 | 2,189 | 55,061 |
| Share of total | 74 % | 13 % | 9 % | 4 % | 100 % |
1) Includes IPR licensing revenues.
| Sequential change, percent | Q1 2022 — Networks | Digital Services | Managed Services | Emerging Business and Other | Total |
|---|---|---|---|---|---|
| South East Asia, Oceania and India | -34 % | -50 % | 4 % | -40 % | -32 % |
| North East Asia | -44 % | -50 % | -48 % | -31 % | -45 % |
| North America | -3 % | -36 % | -2 % | 28 % | -7 % |
| Europe and Latin America | -16 % | -40 % | -11 % | -9 % | -21 % |
| Middle East and Africa | -38 % | -50 % | -5 % | -20 % | -38 % |
| Other | -42 % | -41 % | | 4 % | -22 % |
| Total | -20 % | -43 % | -8 % | 2 % | -23 % |
| Q1 2022 | |||||
| Year over year change, percent | Networks | Digital Services | Managed Services | Emerging Business and Other | Total |
| South East Asia, Oceania and India | -19 % | 4 % | 6 % | -14 % | -13 % |
| North East Asia | -16 % | -21 % | -16 % | -21 % | -16 % |
| North America | 22 % | 14 % | 27 % | 77 % | 21 % |
| Europe and Latin America | 34 % | 3 % | -5 % | 9 % | 21 % |
| Middle East and Africa | -7 % | 7 % | -1 % | 0 % | -2 % |
| Other | 59 % | 57 % | | 29 % | 40 % |
| Total | 12 % | 5 % | 2 % | 26 % | 11 % |
29 Ericsson | First quarter report 2022 Accounting policies and Explanatory notes
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Top 5 countries in sales
| Country, percentage of net sales 1) | Q1 — 2022 | 2021 | Jan-Dec — 2021 |
|---|---|---|---|
| United States | 39 % | 36 % | 34 % |
| China | 4 % | 3 % | 4 % |
| United Kingdom | 4 % | 3 % | 3 % |
| Japan | 3 % | 8 % | 6 % |
| France | 3 % | 3 % | 2 % |
1) Based on Jan-Mar 2022. Includes IPR licensing revenues.
IPR licensing revenues by segment by quarter
| Isolated quarters, SEK million | 2022 — Q1 | 2021 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|
| Networks | 1,142 | 1,949 | 2,146 | 1,904 | 671 |
| Digital Services | 250 | 428 | 471 | 418 | 147 |
| Total | 1,392 | 2,377 | 2,617 | 2,322 | 818 |
| 2022 | 2021 | ||||
| Year to date, SEK million | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Networks | 1,142 | 6,670 | 4,721 | 2,575 | 671 |
| Digital Services | 250 | 1,464 | 1,036 | 565 | 147 |
| Total | 1,392 | 8,134 | 5,757 | 3,140 | 818 |
Note 4 Provisions
Provisions
| Isolated quarters, SEK million | 2022 — Q1 | 2021 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|
| Opening balance | 9,504 | 8,813 | 9,232 | 11,045 | 10,466 |
| Additions | 1,583 | 1,738 | 316 | 616 | 1,753 |
| Utilization | -1,173 | -643 | -408 | -2,179 | -979 |
| Of which restructuring | -67 | -193 | -95 | -161 | -336 |
| Reversal of excess amounts | -452 | -603 | -66 | -170 | -339 |
| Reclassification, translation difference and other | 735 | 199 | -261 | -80 | 144 |
| Closing balance | 10,197 | 9,504 | 8,813 | 9,232 | 11,045 |
| Of which restructuring | 604 | 637 | 732 | 807 | 950 |
| 2022 | 2021 | ||||
| Year to date, SEK million | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Opening balance | 9,504 | 10,466 | 10,466 | 10,466 | 10,466 |
| Additions | 1,583 | 4,423 | 2,685 | 2,369 | 1,753 |
| Utilization/Cash out | -1,173 | -4,209 | -3,566 | -3,158 | -979 |
| Of which restructuring | -67 | -785 | -592 | -497 | -336 |
| Reversal of excess amounts | -452 | -1,178 | -575 | -509 | -339 |
| Reclassification, translation difference and other | 735 | 2 | -197 | 64 | 144 |
| Closing balance | 10,197 | 9,504 | 8,813 | 9,232 | 11,045 |
| Of which restructuring | 604 | 637 | 732 | 807 | 950 |
30 Ericsson | First quarter report 2022 Accounting policies and Explanatory notes
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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 | Mar 31 2022 | Dec 31 2021 | ||||||
|---|---|---|---|---|---|---|---|---|
| Fair value hierarchy level | Fair value hierarchy level | |||||||
| Assets at fair value through profit or loss | Carrying value | Level 1 | Level 2 | Level 3 | Carrying value | Level 1 | Level 2 | Level 3 |
| Customer finance ¹ ) | 3.5 | | | 3.5 | 3.3 | | | 3.3 |
| Interest-bearing securities | 26.8 | 26.8 | | | 43.3 | 43.3 | | |
| Cash equivalents² ) | 51.5 | | 51.5 | | 26.0 | | 26.0 | |
| Other financial assets | 1.9 | 0.2 | | 1.7 | 2.3 | 0.6 | | 1.7 |
| Other current assets | 1.1 | | 1.1 | | 0.3 | | 0.3 | |
| Assets at fair value through OCI | ||||||||
| Trade receivables | 46.8 | | | 46.8 | 45.4 | | | 45.4 |
| Assets at amortized costs | ||||||||
| Interest-bearing securities | 0.5 | | | | 0.3 | | | |
| Cash equivalents² ) | 3.2 | | | | 4.0 | | | |
| Other financial assets | 0.6 | | | | 0.5 | | | |
| Total financial assets | 135.9 | 125.4 | ||||||
| Financial liabilities at designated FVTPL | ||||||||
| Parent company borrowings | -38.0 | -26.1 | -11.9 | | -31.4 | -19.5 | -11.9 | |
| Financial liabilities at FVTPL | ||||||||
| Other current liabilities | -1.4 | | -1.4 | | -0.8 | | -0.8 | |
| Liabilities at amortized cost | ||||||||
| Trade payables | -35.3 | | | | -35.7 | | | |
| Borrowings | -1.0 | | | | -0.4 | | | |
| Total financial liabilities | -75.7 | -68.3 |
1) Year to date movements of customer finance receivables are as follows: additions of SEK 5.2 billion, disposals and repayments of SEK 5.2 billion and revaluation gain of SEK 0.1 billion.
2) Total Cash and cash equivalent is SEK 76.9 (54.1) billion, of which SEK 54.7 (30.0) billion relating to Cash equivalents are presented in the table above.
Exchange rates used in the consolidation
| 2022 | 2021 | 2021 | |
|---|---|---|---|
| SEK/EUR -closing rate | 10.34 | 10.22 | 10.24 |
| SEK/USD -closing rate | 9.32 | 8.71 | 9.05 |
31 Ericsson | First quarter report 2022 Accounting policies and Explanatory notes
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Note 6 Cash flow
Information on investments
Investments in assets subject to depreciation, amortization, impairment and write-downs
| Isolated quarters, SEK million | 2022 — Q1 | 2021 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|
| Additions | |||||
| Property, plant and equipment | 818 | 701 | 1,040 | 1,007 | 915 |
| Capitalized development expenses | 288 | 302 | 190 | 266 | 204 |
| IPR, brands and other intangible assets | 2 | 123 | 3 | 1 | 4 |
| Total | 1,108 | 1,126 | 1,233 | 1,274 | 1,123 |
| Depreciation, amortization and impairment losses | |||||
| Property, plant and equipment | 964 | 1,134 | 954 | 910 | 874 |
| Capitalized development expenses | 401 | 396 | 394 | 329 | 224 |
| Goodwill, IPR, brands and other intangible assets | 198 | 435 | 464 | 294 | 283 |
| Right-of-use assets | 583 | 587 | 572 | 564 | 554 |
| Total | 2,146 | 2,552 | 2,384 | 2,097 | 1,935 |
| 2022 | 2021 | ||||
| Year to date, SEK million | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Additions | |||||
| Property, plant and equipment | 818 | 3,663 | 2,962 | 1,922 | 915 |
| Capitalized development expenses | 288 | 962 | 660 | 470 | 204 |
| IPR, brands and other intangible assets | 2 | 131 | 8 | 5 | 4 |
| Total | 1,108 | 4,756 | 3,630 | 2,397 | 1,123 |
| Depreciation, amortization and impairment losses | |||||
| Property, plant and equipment | 964 | 3,872 | 2,738 | 1,784 | 874 |
| Capitalized development expenses | 401 | 1,343 | 947 | 553 | 224 |
| Goodwill, IPR, brands and other intangible assets | 198 | 1,477 | 1,041 | 577 | 283 |
| Right-of-use assets | 583 | 2,277 | 1,690 | 1,118 | 554 |
| Total | 2,146 | 8,969 | 6,416 | 4,032 | 1,935 |
Note 7 Contingent liabilities and Assets pledged as collateral
Contingent liabilities and Assets pledged as collateral
| SEK million — Contingent liabilities | 1,805 | 1,614 |
|---|---|---|
| Assets pledged as collateral | 7,080 | 6,873 |
On December 6, 2019, Ericsson entered into a Deferred Prosecution Agreement (DPA) with the United States Department of Justice (DOJ). In October 2021, Ericsson received correspondence from the DOJ stating its determination that the Company had breached its obligations under its DPA by failing to provide certain documents and factual information. On March 1, 2022, the DOJ informed Ericsson that the disclosure made by the Company prior to the DPA about its internal investigation into conduct in Iraq in the period 2011 until 2019 was insufficient. Furthermore, it determined that the Company breached the DPA by failing to make subsequent disclosure related to the investigation post-DPA. As mentioned in the Annual Report 2021, the Company is in communication with the DOJ regarding the facts and circumstances of the breach determinations and is committed to co-operating with the DOJ to resolve the matters. While the length of the process cannot be determined, the resolution of these matters could result in a range of actions by DOJ, and may likely include additional monetary payments, the magnitude of which cannot at this time be reliably estimated. Accordingly, no provisions have been recorded for such potential exposure.
On March 3, 2022, Ericsson learned that Telefonaktiebolaget LM Ericsson and certain officers of Ericsson were named as defendants in a putative class action filed in the United States District Court for the Eastern District of New York. The complaint alleges violations of United States securities laws, in connection with allegedly false and misleading statements principally concerning the Companys adherence with its compliance and disclosure policies and obligations and the conduct of its business in Iraq. At this stage it is premature to predict the outcome of this matter. Hence it is not possible to reliably estimate potential future cash outflows in resolving the matter.
32 Ericsson | First quarter report 2022 Accounting policies and Explanatory notes
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Note 8 Share information
Number of shares and earnings per share
| 2022 | 2021 | 2021 | |
|---|---|---|---|
| Number of shares issued, end of period (million) | 3,334 | 3,334 | 3,334 |
| Of which class A-shares (million) | 262 | 262 | 262 |
| Of which class B-shares (million) | 3,072 | 3,072 | 3,072 |
| Number of treasury shares, end of period (million) | 4 | 6 | 4 |
| Number of shares outstanding, basic, end of period (million) | 3,330 | 3,328 | 3,330 |
| Numbers of shares outstanding, diluted, end of period (million) | 3,333 | 3,328 | 3,333 |
| Average number of treasury shares (million) | 4 | 6 | 5 |
| Average number of shares outstanding, basic (million) | 3,330 | 3,328 | 3,329 |
| Average number of shares outstanding, diluted (million) 1) | 3,333 | 3,328 | 3,332 |
| Earnings per share, basic (SEK) 2) | 0.88 | 0.96 | 6.82 |
| Earnings per share, diluted (SEK) 1) | 0.88 | 0.96 | 6.81 |
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.
The proposed dividend of SEK 2.50 per share was approved by the AGM. The dividend will be paid in two equal installments; SEK 1.25 per share with the record date Thursday, March 31, 2022, and SEK 1.25 per share with the record date Friday, September 30, 2022.
Note 9 Employee information
Number of employees
| End of period | 2022 — Mar 31 | 2021 — Dec 31 | Sep 30 | Jun 30 | Mar 31 |
|---|---|---|---|---|---|
| South East Asia, Oceania and India | 26,255 | 26,369 | 26,363 | 26,325 | 26,123 |
| North East Asia | 12,999 | 13,091 | 14,111 | 14,043 | 14,033 |
| North America | 10,327 | 10,344 | 10,371 | 10,256 | 10,161 |
| Europe and Latin America 1) | 46,994 | 47,064 | 46,903 | 46,616 | 46,482 |
| Middle East and Africa | 4,492 | 4,454 | 4,455 | 4,384 | 4,314 |
| Total | 101,067 | 101,322 | 102,203 | 101,624 | 101,113 |
| 1) Of which in | |||||
| Sweden | 14,195 | 14,183 | 13,908 | 13,626 | 13,379 |
33 Ericsson | First quarter report 2022 Accounting policies and Explanatory notes
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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.
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 2021.
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 sales.
| Isolated quarters, year over year change | 2022 — Q1 | 2021 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|
| Reported net sales | 55,061 | 71,332 | 56,263 | 54,941 | 49,778 |
| Acquired business | | -124 | -402 | -450 | -225 |
| Net FX impact | -4,008 | -385 | 1,196 | 5,455 | 5,341 |
| Comparable net sales, excluding FX impact | 51,053 | 70,823 | 57,057 | 59,946 | 54,894 |
| Comparable quarter net sales adj. for acq/div business | 49,778 | 69,590 | 57,472 | 55,578 | 49,750 |
| Sales growth adjusted for comparable units and currency (%) | 3 % | 2 % | -1 % | 8 % | 10 % |
| 2022 | 2021 | ||||
| Year to date, year over year change | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Reported net sales | 55,061 | 232,314 | 160,982 | 104,719 | 49,778 |
| Acquired business | | -1,201 | -1,077 | -675 | -225 |
| Net FX impact | -4,008 | 11,607 | 11,992 | 10,796 | 5,341 |
| Comparable net sales, excluding FX impact | 51,053 | 242,720 | 171,897 | 114,840 | 54,894 |
| Comparable quarter net sales adj. for acq/div business | 49,778 | 232,390 | 162,800 | 105,328 | 49,750 |
| Sales growth adjusted for comparable units and currency (%) | 3 % | 4 % | 6 % | 9 % | 10 % |
34 Ericsson | First quarter report 2022 Alternative performance measures
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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.
| Isolated quarters, SEK million | 2022 — Q1 | 2021 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|
| Gross income | 23,289 | 30,821 | 24,776 | 23,857 | 21,295 |
| Net sales | 55,061 | 71,332 | 56,263 | 54,941 | 49,778 |
| Gross margin (% ) | 42.3 % | 43.2 % | 44.0 % | 43.4 % | 42.8 % |
| Gross income | 23,289 | 30,821 | 24,776 | 23,857 | 21,295 |
| Restructuring charges included in cost of sales | 2 | 199 | 6 | 6 | 62 |
| Gross income excluding restructuring charges | 23,291 | 31,020 | 24,782 | 23,863 | 21,357 |
| Net sales | 55,061 | 71,332 | 56,263 | 54,941 | 49,778 |
| Gross margin excluding restructuring charges (% ) | 42.3 % | 43.5 % | 44.0 % | 43.4 % | 42.9 % |
| Operating expenses | -17,473 | -19,384 | -16,359 | -17,352 | -15,976 |
| Restructuring charges included in R&D expenses | 33 | 140 | -2 | -1 | |
| Restructuring charges included in selling and administrative expenses | 6 | 124 | 1 | -1 | 15 |
| Operating expenses excluding restructuring charges | -17,434 | -19,120 | -16,360 | -17,354 | -15,961 |
| EBIT | 4,744 | 11,861 | 8,835 | 5,823 | 5,261 |
| Net sales | 55,061 | 71,332 | 56,263 | 54,941 | 49,778 |
| EBIT margin (% ) | 8.6 % | 16.6 % | 15.7 % | 10.6 % | 10.6 % |
| EBIT | 4,744 | 11,861 | 8,835 | 5,823 | 5,261 |
| Total restructuring charges | 41 | 463 | 5 | 4 | 77 |
| EBIT excluding restructuring charges | 4,785 | 12,324 | 8,840 | 5,827 | 5,338 |
| Net sales | 55,061 | 71,332 | 56,263 | 54,941 | 49,778 |
| EBIT margin excluding restructuring charges (% ) | 8.7 % | 17.3 % | 15.7 % | 10.6 % | 10.7 % |
| 2022 | 2021 | ||||
| Year to date, SEK million | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Gross income | 23,289 | 100,749 | 69,928 | 45,152 | 21,295 |
| Net sales | 55,061 | 232,314 | 160,982 | 104,719 | 49,778 |
| Gross margin (% ) | 42.3 % | 43.4 % | 43.4 % | 43.1 % | 42.8 % |
| Gross income | 23,289 | 100,749 | 69,928 | 45,152 | 21,295 |
| Restructuring charges included in cost of sales | 2 | 273 | 74 | 68 | 62 |
| Gross income excluding restructuring charges | 23,291 | 101,022 | 70,002 | 45,220 | 21,357 |
| Net sales | 55,061 | 232,314 | 160,982 | 104,719 | 49,778 |
| Gross margin excluding restructuring charges (% ) | 42.3 % | 43.5 % | 43.5 % | 43.2 % | 42.9 % |
| Operating expenses | -17,473 | -69,071 | -49,687 | -33,328 | -15,976 |
| Restructuring charges included in R&D expenses | 33 | 137 | -3 | -1 | |
| Restructuring charges included in selling and administrative expenses | 6 | 139 | 15 | 14 | 15 |
| Operating expenses excluding restructuring charges | -17,434 | -68,795 | -49,675 | -33,315 | -15,961 |
| EBIT | 4,744 | 31,780 | 19,919 | 11,084 | 5,261 |
| Net sales | 55,061 | 232,314 | 160,982 | 104,719 | 49,778 |
| EBIT margin (% ) | 8.6 % | 13.7 % | 12.4 % | 10.6 % | 10.6 % |
| EBIT | 4,744 | 31,780 | 19,919 | 11,084 | 5,261 |
| Total restructuring charges | 41 | 549 | 86 | 81 | 77 |
| EBIT excluding restructuring charges | 4,785 | 32,329 | 20,005 | 11,165 | 5,338 |
| Net sales | 55,061 | 232,314 | 160,982 | 104,719 | 49,778 |
| EBIT margin excluding restructuring charges (% ) | 8.7 % | 13.9 % | 12.4 % | 10.7 % | 10.7 % |
35 Ericsson | First quarter report 2022 Alternative performance measures
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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.
| Isolated quarters, SEK million | 2022 — Q1 | 2021 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|
| Net income | 2,912 | 10,146 | 5,766 | 3,900 | 3,168 |
| Income tax | 1,189 | 770 | 2,471 | 1,469 | 1,560 |
| Financial income and expenses, net | 643 | 945 | 598 | 454 | 533 |
| Amortizations and write-downs of acquired intangibles | 199 | 436 | 464 | 294 | 283 |
| EBITA | 4,943 | 12,297 | 9,299 | 6,117 | 5,544 |
| Net sales | 55,061 | 71,332 | 56,263 | 54,941 | 49,778 |
| EBITA margin (% ) | 9.0 % | 17.2 % | 16.5 % | 11.1 % | 11.1 % |
| Restructuring charges | 41 | 463 | 5 | 4 | 77 |
| EBITA excluding restructuring charges | 4,984 | 12,760 | 9,304 | 6,121 | 5,621 |
| EBITA margin excluding restructuring charges (%) | 9.1 % | 17.9 % | 16.5 % | 11.1 % | 11.3 % |
| 2022 | 2021 | ||||
| Year to date, SEK million | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Net income | 2,912 | 22,980 | 12,834 | 7,068 | 3,168 |
| Income tax | 1,189 | 6,270 | 5,500 | 3,029 | 1,560 |
| Financial income and expenses, net | 643 | 2,530 | 1,585 | 987 | 533 |
| Amortizations and write-downs of acquired intangibles | 199 | 1,477 | 1,041 | 577 | 283 |
| EBITA | 4,943 | 33,257 | 20,960 | 11,661 | 5,544 |
| Net sales | 55,061 | 232,314 | 160,982 | 104,719 | 49,778 |
| EBITA margin (% ) | 9.0 % | 14.3 % | 13.0 % | 11.1 % | 11.1 % |
| Restructuring charges | 41 | 549 | 86 | 81 | 77 |
| EBITA excluding restructuring charges | 4,984 | 33,806 | 21,046 | 11,742 | 5,621 |
| EBITA margin excluding restructuring charges (%) | 9.1 % | 14.6 % | 13.1 % | 11.2 % | 11.3 % |
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 four quarters, SEK million | 2022 — Q1 | 2021 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|
| Net sales | 237,597 | 232,314 | 230,572 | 231,781 | 232,418 |
| EBIT | 31,263 | 31,780 | 30,927 | 30,735 | 28,763 |
| Restructuring charges | 513 | 549 | 78 | 403 | 1,082 |
| EBIT excl. restr. charges | 31,776 | 32,329 | 31,005 | 31,138 | 29,845 |
| EBIT margin excl. restr. charges (%) | 13.4 % | 13.9 % | 13.4 % | 13.4 % | 12.8 % |
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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 | 2022 — Q1 | 2021 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|
| Cash and cash equivalents | 76,856 | 54,050 | 46,476 | 43,273 | 40,543 |
| + Interest-bearing securities, current | 12,292 | 12,932 | 15,016 | 12,855 | 4,599 |
| + Interest-bearing securities, non-current | 15,022 | 30,626 | 26,668 | 20,998 | 23,477 |
| Gross cash, end of period | 104,170 | 97,608 | 88,160 | 77,126 | 68,619 |
| -Borrowings, current | 10,403 | 9,590 | 10,155 | 11,737 | 2,353 |
| -Borrowings, non-current | 28,599 | 22,241 | 22,282 | 21,673 | 23,299 |
| Net cash, end of period | 65,168 | 65,777 | 55,723 | 43,716 | 42,967 |
Capital employed
Total assets less non-interest-bearing provisions and liabilities.
| SEK million | 2022 — Q1 | 2021 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|
| Total assets | 323,935 | 305,614 | 290,527 | 281,045 | 270,319 |
| Non-interest-bearing provisions and liabilities | |||||
| Provisions, non-current | 4,498 | 3,722 | 2,471 | 1,922 | 2,337 |
| Deferred tax liabilities | 1,012 | 884 | 909 | 975 | 1,049 |
| Other non-current liabilities | 1,070 | 1,587 | 1,605 | 1,596 | 1,326 |
| Provisions, current | 5,699 | 5,782 | 6,342 | 7,310 | 8,708 |
| Contract liabilities | 39,875 | 32,834 | 33,869 | 36,621 | 32,054 |
| Trade payables | 35,316 | 35,684 | 31,877 | 29,638 | 29,135 |
| Current tax liabilities | 5,701 | 2,917 | 5,409 | 4,676 | 4,761 |
| Other current liabilities | 41,919 | 37,921 | 36,025 | 32,477 | 35,761 |
| Capital employed | 188,845 | 184,283 | 172,020 | 165,830 | 155,188 |
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 | 2022 — Q1 | 2021 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|
| Net sales | 55,061 | 71,332 | 56,263 | 54,941 | 49,778 |
| Annualized net sales | 220,244 | 285,328 | 225,052 | 219,764 | 199,112 |
| Average capital employed | |||||
| Capital employed at beginning of period | 184,283 | 172,020 | 165,830 | 155,188 | 161,990 |
| Capital employed at end of period | 188,845 | 184,283 | 172,020 | 165,830 | 155,188 |
| Average capital employed | 186,564 | 178,152 | 168,925 | 160,509 | 158,589 |
| Capital turn over(times) | 1.2 | 1.6 | 1.3 | 1.4 | 1.3 |
| 2022 | 2021 | ||||
| Year to date, SEK million | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Net sales | 55,061 | 232,314 | 160,982 | 104,719 | 49,778 |
| Annualized net sales | 220,244 | 232,314 | 214,643 | 209,438 | 199,112 |
| Average capital employed | |||||
| Capital employed at beginning of period | 184,283 | 161,990 | 161,990 | 161,990 | 161,990 |
| Capital employed at end of period | 188,845 | 184,283 | 172,020 | 165,830 | 155,188 |
| Average capital employed | 186,564 | 173,137 | 167,005 | 163,910 | 158,589 |
| Capital turnover (times) | 1.2 | 1.3 | 1.3 | 1.3 | 1.3 |
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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 | 2022 — Q1 | 2021 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|
| EBIT | 4,744 | 11,861 | 8,835 | 5,823 | 5,261 |
| Annualized EBIT | 18,976 | 47,444 | 35,340 | 23,292 | 21,044 |
| Average capital employed | |||||
| Capital employed at beginning of period | 184,283 | 172,020 | 165,830 | 155,188 | 161,990 |
| Capital employed at end of period | 188,845 | 184,283 | 172,020 | 165,830 | 155,188 |
| Average capital employed | 186,564 | 178,152 | 168,925 | 160,509 | 158,589 |
| Return on capital employed (%) | 10.2 % | 26.6 % | 20.9 % | 14.5 % | 13.3 % |
| 2022 | 2021 | ||||
| Year to date, SEK million | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| EBIT | 4,744 | 31,780 | 19,919 | 11,084 | 5,261 |
| Annualized EBIT | 18,976 | 31,780 | 26,559 | 22,168 | 21,044 |
| Average capital employed | |||||
| Capital employed at beginning of period | 184,283 | 161,990 | 161,990 | 161,990 | 161,990 |
| Capital employed at end of period | 188,845 | 184,283 | 172,020 | 165,830 | 155,188 |
| Average capital employed | 186,564 | 173,137 | 167,005 | 163,910 | 158,589 |
| Return on capital employed (%) | 10.2 % | 18.4 % | 15.9 % | 13.5 % | 13.3 % |
Equity ratio
Equity expressed as a percentage of total assets.
| SEK million | 2022 — Q1 | 2021 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|
| Total equity | 109,879 | 107,099 | 95,628 | 91,695 | 88,124 |
| Total assets | 323,935 | 305,614 | 290,527 | 281,045 | 270,319 |
| Equity ratio (%) | 33.9 % | 35.0 % | 32.9 % | 32.6 % | 32.6 % |
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 | 2022 — Q1 | 2021 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|
| Net income attributable to owners of the Parent Company | 2,940 | 10,076 | 5,752 | 3,679 | 3,187 |
| Annualized | 11,760 | 40,304 | 23,008 | 14,716 | 12,748 |
| Average stockholders equity | |||||
| Stockholders equity, beginning of period | 108,775 | 97,323 | 93,331 | 89,782 | 86,674 |
| Stockholders equity, end of period | 111,701 | 108,775 | 97,323 | 93,331 | 89,782 |
| Average stockholders equity | 110,238 | 103,049 | 95,327 | 91,557 | 88,228 |
| Return on equity (%) | 10.7 % | 39.1 % | 24.1 % | 16.1 % | 14.4 % |
| 2022 | 2021 | ||||
| Year to date, SEK million | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Net income attributable to owners of the Parent Company | 2,940 | 22,694 | 12,618 | 6,866 | 3,187 |
| Annualized | 11,760 | 22,694 | 16,824 | 13,732 | 12,748 |
| Average stockholders equity | |||||
| Stockholders equity, beginning of period | 108,775 | 86,674 | 86,674 | 86,674 | 86,674 |
| Stockholders equity, end of period | 111,701 | 108,775 | 97,323 | 93,331 | 89,782 |
| Average stockholders equity | 110,238 | 97,725 | 91,999 | 90,003 | 88,228 |
| Return on equity (%) | 10.7 % | 23.2 % | 18.3 % | 15.3 % | 14.4 % |
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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 | 2022 — Q1 | 2021 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|
| Earnings per share, diluted | 0.88 | 3.02 | 1.73 | 1.10 | 0.96 |
| Restructuring charges | 0.01 | 0.11 | 0.00 | 0.00 | 0.02 |
| Amortizations and write-downs of acquired intangibles | 0.05 | 0.10 | 0.09 | 0.07 | 0.06 |
| Adjusted earnings per share | 0.94 | 3.23 | 1.82 | 1.17 | 1.04 |
| 2022 | 2021 | ||||
| Year to date, SEK | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Earnings per share, diluted | 0.88 | 6.81 | 3.79 | 2.06 | 0.96 |
| Restructuring charges | 0.01 | 0.13 | 0.02 | 0.02 | 0.02 |
| Amortizations and write-downs of acquired intangibles | 0.05 | 0.32 | 0.22 | 0.13 | 0.06 |
| Adjusted earnings per share | 0.94 | 7.26 | 4.03 | 2.21 | 1.04 |
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 | 2022 — Q1 | 2021 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|
| Cash flow from operating activities | 30 | 15,196 | 14,724 | 5,940 | 3,205 |
| Net capital expenditures and other investments (excl M&A) | |||||
| Investments in property, plant and equipment | -818 | -701 | -1,040 | -1,007 | -915 |
| Sales of property, plant and equipment | 38 | 34 | 40 | 17 | 24 |
| Product development | -288 | -302 | -190 | -266 | -204 |
| Other investments 1) | -27 | -122 | -4 | | -5 |
| Repayment of lease liabilities | -593 | -623 | -580 | -617 | -548 |
| Free cash flow before M&A | -1,658 | 13,482 | 12,950 | 4,067 | 1,557 |
| Acquisitions/ divestments of subs and other operations, net | 46 | 178 | -55 | -69 | 5 |
| Free cash flow after M&A | -1,612 | 13,660 | 12,895 | 3,998 | 1,562 |
| 2022 | 2021 | ||||
| Year to date, SEK million | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Cash flow from operating activities | 30 | 39,065 | 23,869 | 9,145 | 3,205 |
| Net capital expenditures and other investments (excl M&A) | |||||
| Investments in property, plant and equipment | -818 | -3,663 | -2,962 | -1,922 | -915 |
| Sales of property, plant and equipment | 38 | 115 | 81 | 41 | 24 |
| Product development | -288 | -962 | -660 | -470 | -204 |
| Other investments 1) | -27 | -131 | -9 | -5 | -5 |
| Repayment of lease liabilities | -593 | -2,368 | -1,745 | -1,165 | -548 |
| Free cash flow before M&A | -1,658 | 32,056 | 18,574 | 5,624 | 1,557 |
| Acquisitions/ divestments of subs and other operations, net | 46 | 59 | -119 | -64 | 5 |
| Free cash flow after M&A | -1,612 | 32,115 | 18,455 | 5,560 | 1,562 |
1) Other investments is part of the line item Other investing activities in the Consolidated cash flow statement. The difference is movement in other interest-bearing assets, which is not to be part of the definition of Free cash flow.
39 Ericsson | First quarter report 2022 Alternative performance measures
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Sales growth by segment adjusted for comparable units and currency
| Isolated quarter, year over year change, percent | 2022 — Q1 | 2021 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|
| Networks | 4 % | 3 % | 0 % | 11 % | 15 % |
| Digital Services | -2 % | 0 % | 1 % | 0 % | 3 % |
| Managed Services | -5 % | -8 % | -7 % | -2 % | -8 % |
| Emerging Business and Other | 15 % | 16 % | 4 % | 13 % | 9 % |
| Total | 3 % | 2 % | -1 % | 8 % | 10 % |
| 2022 | 2021 | ||||
| Year to date, year over year change, percent | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Networks | 4 % | 7 % | 8 % | 13 % | 15 % |
| Digital Services | -2 % | 1 % | 1 % | 1 % | 3 % |
| Managed Services | -5 % | -6 % | -5 % | -5 % | -8 % |
| Emerging Business and Other | 15 % | 11 % | 9 % | 11 % | 9 % |
| Total | 3 % | 4 % | 6 % | 9 % | 10 % |
Sales growth by market area adjusted for comparable units and currency
| Isolated quarter, year over year change, percent | 2022 — Q1 | 2021 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|
| South East Asia, Oceania and India | -17 % | -13 % | -16 % | 14 % | 21 % |
| North East Asia | -20 % | -22 % | -33 % | 1 % | 78 % |
| North America | 9 % | 15 % | 13 % | 11 % | 10 % |
| Europe and Latin America | 15 % | 12 % | 9 % | 14 % | 12 % |
| Middle East and Africa | -9 % | 5 % | -8 % | -10 % | -16 % |
| Total | 3 % | 2 % | -1 % | 8 % | 10 % |
| 2022 | 2021 | ||||
| Year to date, year over year change, percent | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| South East Asia, Oceania and India | -17 % | -1 % | 4 % | 17 % | 21 % |
| North East Asia | -20 % | -8 % | 1 % | 27 % | 78 % |
| North America | 9 % | 12 % | 11 % | 11 % | 10 % |
| Europe and Latin America | 15 % | 12 % | 12 % | 13 % | 12 % |
| Midle East and Africa | -9 % | -7 % | -12 % | -13 % | -16 % |
| Total | 3 % | 4 % | 6 % | 9 % | 10 % |
40 Ericsson | First quarter report 2022 Alternative performance measures
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Gross margin by segment by quarter
| Isolated quarters, as percentage of net sales | 2022 — Q1 | 2021 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|
| Networks | 44.7 % | 46.3 % | 47.8 % | 47.9 % | 46.1 % |
| Digital Services | 42.9 % | 42.8 % | 42.2 % | 37.9 % | 43.5 % |
| Managed Services | 23.2 % | 18.2 % | 18.7 % | 19.0 % | 19.4 % |
| Emerging Business and Other | 38.1 % | 34.9 % | 39.4 % | 37.9 % | 36.6 % |
| Total | 42.3 % | 43.2 % | 44.0 % | 43.4 % | 42.8 % |
| 2022 | 2021 | ||||
| Year to date, as percentage of net sales | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Networks | 44.7 % | 47.0 % | 47.3 % | 47.0 % | 46.1 % |
| Digital Services | 42.9 % | 41.7 % | 41.2 % | 40.5 % | 43.5 % |
| Managed Services | 23.2 % | 18.8 % | 19.0 % | 19.2 % | 19.4 % |
| Emerging Business and Other | 38.1 % | 37.2 % | 38.0 % | 37.3 % | 36.6 % |
| Total | 42.3 % | 43.4 % | 43.4 % | 43.1 % | 42.8 % |
EBIT margin by segment by quarter
| Isolated quarters, as percentage of net sales | 2022 — Q1 | 2021 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|
| Networks | 16.6 % | 23.0 % | 23.7 % | 21.7 % | 20.0 % |
| Digital Services | -19.7 % | 2.4 % | -9.5 % | -19.9 % | -22.0 % |
| Managed Services | 12.0 % | 6.6 % | 7.7 % | 8.1 % | 6.4 % |
| Emerging Business and Other | -53.8 % | -25.8 % | -17.7 % | -81.1 % | -44.4 % |
| Total | 8.6 % | 16.6 % | 15.7 % | 10.6 % | 10.6 % |
| 2022 | 2021 | ||||
| Year to date, as percentage of net sales | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Networks | 16.6 % | 22.2 % | 21.9 % | 20.9 % | 20.0 % |
| Digital Services | -19.7 % | -10.0 % | -16.7 % | -20.9 % | -22.0 % |
| Managed Services | 12.0 % | 7.2 % | 7.4 % | 7.3 % | 6.4 % |
| Emerging Business and Other | -53.8 % | -42.2 % | -48.2 % | -64.3 % | -44.4 % |
| Total | 8.6 % | 13.7 % | 12.4 % | 10.6 % | 10.6 % |
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Restructuring charges by function
| Isolated quarters, SEK million | 2022 — Q1 | 2021 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|
| Cost of sales | -2 | -199 | -6 | -6 | -62 |
| Research and development expenses | -33 | -140 | 2 | 1 | 0 |
| Selling and administrative expenses | -6 | -124 | -1 | 1 | -15 |
| Total | -41 | -463 | -5 | -4 | -77 |
| 2022 | 2021 | ||||
| Year to date, SEK million | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Cost of sales | -2 | -273 | -74 | -68 | -62 |
| Research and development expenses | -33 | -137 | 3 | 1 | 0 |
| Selling and administrative expenses | -6 | -139 | -15 | -14 | -15 |
| Total | -41 | -549 | -86 | -81 | -77 |
Restructuring charges by segment
| Isolated quarters, SEK million | 2022 — Q1 | 2021 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|
| Networks | -10 | -278 | 1 | -9 | 24 |
| of which cost of sales | -10 | -77 | 1 | -1 | 24 |
| of which operating expenses | 0 | -201 | 0 | -8 | 0 |
| Digital Services | -33 | -115 | -4 | -3 | -8 |
| of which cost of sales | 0 | -76 | -6 | -2 | -3 |
| of which operating expenses | -33 | -39 | 2 | -1 | -5 |
| Managed Services | 8 | -43 | -1 | -1 | -79 |
| of which cost of sales | 8 | -40 | -1 | 0 | -79 |
| of which operating expenses | 0 | -3 | 0 | -1 | 0 |
| Emerging Business and Other | -6 | -27 | -1 | 9 | -14 |
| of which cost of sales | 0 | -6 | 0 | -3 | -4 |
| of which operating expenses | -6 | -21 | -1 | 12 | -10 |
| Total | -41 | -463 | -5 | -4 | -77 |
| 2022 | 2021 | ||||
| Year to date, SEK million | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Networks | -10 | -262 | 16 | 15 | 24 |
| of which cost of sales | -10 | -53 | 24 | 23 | 24 |
| of which operating expenses | 0 | -209 | -8 | -8 | 0 |
| Digital Services | -33 | -130 | -15 | -11 | -8 |
| of which cost of sales | 0 | -87 | -11 | -5 | -3 |
| of which operating expenses | -33 | -43 | -4 | -6 | -5 |
| Managed Services | 8 | -124 | -81 | -80 | -79 |
| of which cost of sales | 8 | -120 | -80 | -79 | -79 |
| of which operating expenses | 0 | -4 | -1 | -1 | 0 |
| Emerging Business and Other | -6 | -33 | -6 | -5 | -14 |
| of which cost of sales | 0 | -13 | -7 | -7 | -4 |
| of which operating expenses | -6 | -20 | 1 | 2 | -10 |
| Total | -41 | -549 | -86 | -81 | -77 |
42 Ericsson | First quarter report 2022 Alternative performance measures
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Gross income and gross margin excluding restructuring charges by segment
| Isolated quarters, SEK million | 2022 — Q1 | 2021 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|
| Networks | 18,221 | 23,720 | 19,400 | 19,112 | 16,690 |
| Digital Services | 3,097 | 5,532 | 3,650 | 2,992 | 3,005 |
| Managed Services | 1,140 | 1,014 | 945 | 975 | 1,021 |
| Emerging Business and Other | 833 | 754 | 787 | 784 | 641 |
| Total | 23,291 | 31,020 | 24,782 | 23,863 | 21,357 |
| 2022 | 2021 | ||||
| Isolated quarters, as percentage of net sales | Q1 | Q4 | Q3 | Q2 | Q1 |
| Networks | 44.8 % | 46.4 % | 47.8 % | 47.9 % | 46.0 % |
| Digital Services | 42.9 % | 43.4 % | 42.3 % | 37.9 % | 43.6 % |
| Managed Services | 23.0 % | 18.9 % | 18.7 % | 19.0 % | 21.0 % |
| Emerging Business and Other | 38.1 % | 35.2 % | 39.4 % | 38.1 % | 36.8 % |
| Total | 42.3 % | 43.5 % | 44.0 % | 43.4 % | 42.9 % |
| 2022 | 2021 | ||||
| Year to date, SEK million | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Networks | 18,221 | 78,922 | 55,202 | 35,802 | 16,690 |
| Digital Services | 3,097 | 15,179 | 9,647 | 5,997 | 3,005 |
| Managed Services | 1,140 | 3,955 | 2,941 | 1,996 | 1,021 |
| Emerging Business and Other | 833 | 2,966 | 2,212 | 1,425 | 641 |
| Total | 23,291 | 101,022 | 70,002 | 45,220 | 21,357 |
| 2022 | 2021 | ||||
| Year to date, as percentage of net sales | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Networks | 44.8 % | 47.0 % | 47.3 % | 47.0 % | 46.0 % |
| Digital Services | 42.9 % | 42.0 % | 41.2 % | 40.6 % | 43.6 % |
| Managed Services | 23.0 % | 19.4 % | 19.6 % | 20.0 % | 21.0 % |
| Emerging Business and Other | 38.1 % | 37.3 % | 38.1 % | 37.5 % | 36.8 % |
| Total | 42.3 % | 43.5 % | 43.5 % | 43.2 % | 42.9 % |
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EBIT and EBIT margin excluding restructuring charges by segment
| Isolated quarters, SEK million | 2022 — Q1 | 2021 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|
| Networks | 6,757 | 12,035 | 9,623 | 8,653 | 7,217 |
| Digital Services | -1,385 | 419 | -818 | -1,565 | -1,510 |
| Managed Services | 584 | 396 | 387 | 417 | 392 |
| Emerging Business and Other | -1,171 | -526 | -352 | -1,678 | -761 |
| Total | 4,785 | 12,324 | 8,840 | 5,827 | 5,338 |
| 2022 | 2021 | ||||
| Isolated quarters, as percentage of net sales | Q1 | Q4 | Q3 | Q2 | Q1 |
| Networks | 16.6 % | 23.6 % | 23.7 % | 21.7 % | 19.9 % |
| Digital Services | -19.2 % | 3.3 % | -9.5 % | -19.8 % | -21.9 % |
| Managed Services | 11.8 % | 7.4 % | 7.7 % | 8.1 % | 8.1 % |
| Emerging Business and Other | -53.5 % | -24.5 % | -17.6 % | -81.5 % | -43.7 % |
| Total | 8.7 % | 17.3 % | 15.7 % | 10.6 % | 10.7 % |
| 2022 | 2021 | ||||
| Year to date, SEK million | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Networks | 6,757 | 37,528 | 25,493 | 15,870 | 7,217 |
| Digital Services | -1,385 | -3,474 | -3,893 | -3,075 | -1,510 |
| Managed Services | 584 | 1,592 | 1,196 | 809 | 392 |
| Emerging Business and Other | -1,171 | -3,317 | -2,791 | -2,439 | -761 |
| Total | 4,785 | 32,329 | 20,005 | 11,165 | 5,338 |
| 2022 | 2021 | ||||
| Year to date, as percentage of net sales | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Networks | 16.6 % | 22.4 % | 21.8 % | 20.8 % | 19.9 % |
| Digital Services | -19.2 % | -9.6 % | -16.6 % | -20.8 % | -21.9 % |
| Managed Services | 11.8 % | 7.8 % | 8.0 % | 8.1 % | 8.1 % |
| Emerging Business and Other | -53.5 % | -41.7 % | -48.1 % | -64.2 % | -43.7 % |
| Total | 8.7 % | 13.9 % | 12.4 % | 10.7 % | 10.7 % |
Rolling four quarters of net sales by segment
| Rolling four quarters, SEK million | 2022 — Q1 | 2021 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|
| Networks | 172,276 | 167,838 | 166,107 | 167,174 | 167,126 |
| Digital Services | 36,467 | 36,151 | 36,086 | 36,189 | 36,877 |
| Managed Services | 20,460 | 20,379 | 20,840 | 21,297 | 21,751 |
| Emerging Business and Other | 8,394 | 7,946 | 7,539 | 7,121 | 6,664 |
| Total | 237,597 | 232,314 | 230,572 | 231,781 | 232,418 |
Rolling four quarters of EBIT margin excluding restructuring charges by segment (%)
| Rolling four quarters, SEK million | 2022 — Q1 | 2021 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|
| Networks | 21.5 % | 22.4 % | 21.7 % | 21.5 % | 19.7 % |
| Digital Services | -9.2 % | -9.6 % | -9.4 % | -8.5 % | -6.1 % |
| Managed Services | 8.7 % | 7.8 % | 7.7 % | 8.0 % | 7.2 % |
| Emerging Business and Other | -44.4 % | -41.7 % | -43.8 % | -47.9 % | -35.5 % |
| Total | 13.4 % | 13.9 % | 13.4 % | 13.4 % | 12.8 % |
44 Ericsson | First quarter report 2022 Alternative performance measures
Table of Contents
EBITA and EBITA margin by segment by quarter
| Isolated quarters, SEK million | 2022 — Q1 | 2021 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|
| Networks | 6,775 | 11,787 | 9,643 | 8,679 | 7,274 |
| Digital Services | -1,369 | 569 | -701 | -1,445 | -1,400 |
| Managed Services | 597 | 359 | 396 | 417 | 314 |
| Emerging Business and Other | -1,060 | -418 | -39 | -1,534 | -644 |
| Total | 4,943 | 12,297 | 9,299 | 6,117 | 5,544 |
| 2022 | 2021 | ||||
| Isolated quarters, as percentage of net sales | Q1 | Q4 | Q3 | Q2 | Q1 |
| Networks | 16.6 % | 23.1 % | 23.8 % | 21.8 % | 20.1 % |
| Digital Services | -19.0 % | 4.5 % | -8.1 % | -18.3 % | -20.3 % |
| Managed Services | 12.1 % | 6.7 % | 7.9 % | 8.1 % | 6.5 % |
| Emerging Business and Other | -48.4 % | -19.5 % | -2.0 % | -74.5 % | -37.0 % |
| Total | 9.0 % | 17.2 % | 16.5 % | 11.1 % | 11.1 % |
| 2022 | 2021 | ||||
| Year to date, SEK million | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Networks | 6,775 | 37,383 | 25,596 | 15,953 | 7,274 |
| Digital Services | -1,369 | -2,977 | -3,546 | -2,845 | -1,400 |
| Managed Services | 597 | 1,486 | 1,127 | 731 | 314 |
| Emerging Business and Other | -1,060 | -2,635 | -2,217 | -2,178 | -644 |
| Total | 4,943 | 33,257 | 20,960 | 11,661 | 5,544 |
| 2022 | 2021 | ||||
| Year to date, as percentage of net sales | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Networks | 16.6 % | 22.3 % | 21.9 % | 20.9 % | 20.1 % |
| Digital Services | -19.0 % | -8.2 % | -15.1 % | -19.2 % | -20.3 % |
| Managed Services | 12.1 % | 7.3 % | 7.5 % | 7.3 % | 6.5 % |
| Emerging Business and Other | -48.4 % | -33.2 % | -38.2 % | -57.3 % | -37.0 % |
| Total | 9.0 % | 14.3 % | 13.0 % | 11.1 % | 11.1 % |
Other ratios
| 2022 | 2021 | 2021 | |
|---|---|---|---|
| Days sales outstanding | 92 | 95 | 71 |
| Inventory turnover days | 110 | 93 | 88 |
| Payable days | 102 | 98 | 94 |
45 Ericsson | First quarter report 2022 Alternative performance measures