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Ericsson — Interim / Quarterly Report 2020
Oct 21, 2020
2911_10-q_2020-10-21_27d82fa8-2456-4143-be00-f4a08502b515.pdf
Interim / Quarterly Report
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ERICSSON
Third quarter report 2020
Stockholm, Oct 21, 2020
Third quarter highlights
- Sales adjusted for comparable units and currency increased by 7% YoY mainly driven by 5G sales in Mainland China. Reported sales were SEK 57.5 (57.1) b.
- Gross margin excluding restructuring charges improved to 43.2% (37.8%) with margin improvement in all segments. Reported gross margin improved to 43.1% (37.7%).
- Operating income excluding restructuring charges and items affecting comparability in Q3 2019, improved to SEK 9.0 b. (15.6% operating margin) from SEK 6.5¹ b. (11.4% operating margin) driven by Networks. Reported operating income SEK 8.6 (-4.2) b.
- Networks reported sales increased by 6% YoY, with an increase of 13% adjusted for comparable units and currency. Operating margin excluding restructuring charges was 22.7% (18.4%).
- Net income was SEK 5.6 (-6.9¹) b.
- Free cash flow before M&A was SEK 3.9 (4.5) b., including a capital injection into the Swedish Pension Trust of SEK -2 b. in the quarter. Net cash Sep 30, 2020, was SEK 41.5 (37.4) b.
¹ Q3 2019 was impacted by cost provisions of SEK -11.5 b. related to the investigation by the United States Securities and Exchange Commission (SEC) and the United States Department of Justice (DOJ) as well as a refund of social security costs of SEK 0.9 b.
Planning assumptions highlights (please see page 5 for complete planning assumptions)
- The YTD results strengthen the Company's confidence in delivering the Group targets for 2020. The financial targets for 2022 remain.
| SEK b. | Q3 2020 | Q3 2019 | YoY change | Q2 2020 | QoQ change | Jan-Sep 2020 | Jan-Sep 2019 |
|---|---|---|---|---|---|---|---|
| Net sales | 57.5 | 57.1 | 1% | 55.6 | 3% | 162.8 | 160.8 |
| Sales growth adj. for comparable units and currency | - | - | 7% | - | - | - | - |
| Gross margin | 43.1% | 37.7% | - | 37.6% | - | 40.2% | 37.5% |
| Operating income (loss) | 8.6 | -4.2 | - | 3.9 | 124% | 16.8 | 4.4 |
| Operating margin | 15.0% | -7.3% | - | 6.9% | - | 10.3% | 2.8% |
| Net income (loss) | 5.6 | -6.9 | - | 2.6 | 115% | 10.4 | -2.6 |
| EPS diluted, SEK | 1.61 | -1.89 | - | 0.74 | 118% | 3.00 | -0.67 |
Measures excl. restructuring charges and other items affecting comparability¹
| Gross margin excluding restructuring charges | 43.2% | 37.8% | - | 38.2% | - | 40.7% | 37.6% |
|---|---|---|---|---|---|---|---|
| Operating income excl. restr. charges & items affecting comparability in 2019² | 9.0 | 6.5 | 38% | 4.5 | 98% | 18.1 | 13.9 |
| Operating margin excl. restr. charges & items affecting comparability in 2019² | 15.6% | 11.4% | - | 8.2% | - | 11.1% | 8.6% |
| Free cash flow before M&A | 3.9 | 4.5 | -12% | 3.2 | 22% | 9.5 | 9.5 |
| Net cash, end of period | 41.5 | 37.4 | 11% | 37.5 | 11% | 41.5 | 37.4 |
¹ Non-SFRS financial measures are reconciled at the end of this report to the most directly reconcilable line items in the financial statements.
² Excludes restructuring charges in all periods. No other adjustments made in 2020. Q1 2019 excludes a capital gain related to the divestment of 51% of MediaKind (SEK 0.7 b.), divestment of certain assets in Red Bee Media (SEK 0.1 b.) and a reversal of an earlier provision for impairment of trade receivables following customer payment (SEK 0.7 b.). Q3 2019 excludes cost provisions (SEK -11.5 b.) related to the investigation by the United States Securities and Exchange Commission and the United States Department of Justice and a refund of social security costs (SEK 0.9 b.).
Ericsson | Third quarter report 2020
CEO comments
Amid the continuing global Covid-19 pandemic and with more than 80% of our people working from home, we keep on executing on our focused strategy. We continue to win footprint in several markets leveraging our competitive 5G portfolio. The gross margin¹ improved in all segments in the third quarter and reached 43.2% (37.8%), the highest since 2006. With the acquisition of Cradlepoint, expected to close in Q4, we are making further progress in our strategy to build an enterprise business. Covid-19 has so far had limited impact on our business, but we are closely monitoring any signs of a change in the situation. The year to date results strengthen our confidence in delivering on the 2020 Group target.
Networks grew organically² by 13% and reported a gross margin¹ of 46.7% (41.6%). This reflects high activity levels in North East Asia and North America. Underlying business fundamentals remain strong in North America driven by consolidation in the US operator market, pending spectrum auctions, and increased demand for 5G. The 5G contracts in Mainland China have developed according to plan, contributing positively to profits in Q3 and are expected to improve further. Our business in Europe grew based on several footprint gains. While the pandemic has hurt revenues for several of our customers, and in some cases this has led to a reduction of capex, we have not seen any negative impact on our business, largely due to footprint gains. However, the pandemic negatively impacted our sales in Latin America and Africa.
Digital Services continued to make good progress on the execution of the turnaround plan, transforming the business and increasing software sales. The gross margin¹ improved to 43.5% (38.3%), supported by increased software sales and improvements in the underlying business. Our cloud-native 5G core portfolio shows very positive momentum with a high win-ratio and a significant number of new customer contracts. We are selectively increasing R&D investments to accelerate our growth portfolio to capture market opportunities. However, sales in our legacy portfolio is declining faster than earlier predicted. In the short term, this shortfall will not be compensated by the growth in new offerings and therefore our sales volume is lower than expected. With weaker sales in combination with higher R&D investments, there is a risk of further delay in reaching the 2020 operating margin target for Digital Services.
Managed Services delivered a gross margin¹ of 20.1% (17.9%). The 4Q rolling operating margin¹ is 7.4%. Sales declined mainly due to the US operator consolidation. We expect our investments in automation and AI to create future business opportunities, which are anticipated to gradually improve the margin profile as this new portfolio grows.
Emerging Business and Other reported a gross margin¹ of 30.5% (20.5%). Our IoT platform sales grew by more than 40% despite an impact on demand from Covid-19. In the quarter we announced our plans to acquire Cradlepoint, which will strengthen our ability to grow in the 5G enterprise market alongside our existing dedicated networks and IoT portfolio. Cradlepoint will drive revenues for our customers as wireless WAN gains further penetration. Cradlepoint will operate as a standalone subsidiary within Ericsson, and we look forward to welcoming the team at Cradlepoint to Ericsson.
Patent licensing continues to perform well based on our strong IPR portfolio, even though revenues decreased in the third quarter as one of our licensees experienced lower sales volumes. We are approaching several important contract renewals. We are confident in the value of our broad patent portfolio, including a strong position in 5G and will seek to maximize the net present value of our patent estate that has been built over time through our large R&D investments. Depending on timing of the agreement renewals, we may see gaps in IPR revenues in 2021 and 2022.
Free cash flow before M&A amounted to SEK 3.9 (4.5) b. in the third quarter, a year-on-year improvement of SEK 1.9 b., if adjusted for a capital injection into the Swedish Pension Trust and last year's positive effect from a social security refund. On a 4Q rolling basis we have generated SEK 17.7 b. of free cash flow before M&A³ if excluding the payments to SEC and DOJ.
We are committed to continue improving our Ethics and Compliance program. Through driving stronger management ownership and accountability for compliance, we are also reinforcing our commitment to responsible business practices and a stronger corporate culture. Our people should always be able to speak up and we expect Ericsson leaders to operate with integrity at all times.
Open RAN is a hot topic in our industry today and Ericsson is a strong supporter of openness and actively engages in alliances, such as 3GPP, ONAP and the O-RAN alliance. In the years to come, networks will gradually evolve, as will the current open standards. At the same time 5G is ready and happening now so focus must be on providing early access to 5G networks to enable the broader ecosystem to innovate at scale.
We remain positive on the longer-term outlook for the industry and Ericsson. The year to date results strengthen our confidence in delivering on the 2020 Group target.
Stay healthy and well.
Börje Ekholm
President and CEO
Ericsson | Third quarter report 2020
CEO comments
Financial highlights
Net sales development
| SEK b. | Q3 2020 | Q3 2019 | YoY change | YoY adj.1 | Q2 2020 | Jan-Sep 2020 | Jan-Sep 2019 | YoY change | YoY adj.1 |
|---|---|---|---|---|---|---|---|---|---|
| Net sales | 57.5 | 57.1 | 1% | 7% | 55.6 | 162.8 | 160.8 | 1% | 2% |
| of which Networks | 41.7 | 39.3 | 6% | 13% | 39.8 | 116.6 | 110.6 | 5% | 6% |
| of which Digital Services | 8.7 | 9.9 | -12% | -5% | 8.6 | 24.7 | 26.7 | -8% | -6% |
| of which Managed Services | 5.5 | 6.4 | -14% | -9% | 5.6 | 16.8 | 18.5 | -9% | -9% |
| of which Emerging Business and Other | 1.6 | 1.6 | -3% | 2% | 1.6 | 4.8 | 5.1 | -6% | -4% |
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 increased by 1% YoY. Sales growth adjusted for comparable units and currency was 7%, primarily driven by 5G deployments in North East Asia and North America. Sales in Latin America and Africa declined, primarily due to Covid-19 and macroeconomic instability.
IPR licensing revenues decreased to SEK 2.2 (2.4) b. YoY, mainly due to lower volumes with one licensee.
Networks sales adjusted for comparable units and currency increased by 13% YoY with growth in North East Asia, North America and Europe while sales declined in Latin America and Africa.
Digital Services sales adjusted for comparable units and currency decreased by -5% YoY with reduced sales in the legacy portfolio. Uncertainty related to Covid-19 and its potential economic effects impacted the segment. Sales declined in all market areas except South East Asia, Oceania and India.
Managed Services sales adjusted for comparable units and currency decreased by -9% YoY, mainly due to lower variable sales in a managed services contract in North America post the merger between two large operators, and transfer of a managed services contract to an associated company.
Emerging Business and Other sales adjusted for comparable units and currency increased by 2% YoY, partly driven by Emerging Business.
Sequentially, Group reported sales increased by 3% supported by sales growth in market areas North East Asia and in South East Asia, Oceania and India.
Income and margin development
| SEK b. | Q3 2020 | Q3 2019 | YoY change | Q2 2020 | QoQ change | Jan-Sep 2020 | Jan-Sep 2019 |
|---|---|---|---|---|---|---|---|
| Net sales | 57.5 | 57.1 | 1% | 55.6 | 3% | 162.8 | 160.8 |
| Gross income | 24.8 | 21.5 | 15% | 20.9 | 18% | 65.5 | 60.4 |
| Gross margin | 43.1% | 37.7% | - | 37.6% | - | 40.2% | 37.5% |
| Research and development (R&D) expenses | -10.1 | -9.5 | - | -10.0 | - | -29.3 | -28.2 |
| Selling and administrative expenses | -6.0 | -4.9 | - | -7.1 | - | -19.3 | -17.9 |
| Impairment losses on trade receivables | 0.0 | 0.2 | -100% | 0.0 | - | -0.1 | 0.9 |
| Other operating income and expenses | 0.1 | -11.3 | - | 0.1 | -53% | 0.3 | -10.5 |
| Operating income | 8.6 | -4.2 | - | 3.9 | 124% | 16.8 | 4.4 |
| of which Networks | 9.2 | 7.2 | 27% | 5.3 | 74% | 20.2 | 18.4 |
| of which Digital Services | -0.6 | -0.7 | - | -0.7 | - | -2.7 | -3.9 |
| of which Managed Services | 0.5 | 0.6 | -13% | 0.3 | 87% | 1.2 | 2.0 |
| of which Emerging Business & Other | -0.4 | -11.3 | - | -1.0 | - | -1.9 | -12.1 |
| Operating margin | 15.0% | -7.3% | - | 6.9% | - | 10.3% | 2.8% |
| Financial income and expenses, net | 0.1 | -0.7 | - | 0.3 | -63% | -0.5 | -1.7 |
| Taxes | -3.2 | -2.0 | - | -1.6 | - | -5.9 | -5.4 |
| Net income | 5.6 | -6.9 | - | 2.6 | 115% | 10.4 | -2.6 |
| Restructuring charges | -0.3 | -0.1 | - | -0.7 | - | -1.3 | -0.5 |
Measures excl. restructuring charges and other items affecting comparability 1
| Gross margin excluding restructuring charges | 43.2% | 37.8% | - | 38.2% | - | 40.7% | 37.6% |
|---|---|---|---|---|---|---|---|
| Operating income excl. restr. charges & items affecting comparability in 2019 2 | 9.0 | 6.5 | 38% | 4.5 | 98% | 18.1 | 13.9 |
| Operating margin excl. restr. charges & items affecting comparability in 2019 2 | 15.6% | 11.4% | - | 8.2% | - | 11.1% | 8.6% |
| Operating margin excluding restructuring charges | 15.6% | -7.1% | - | 8.2% | - | 11.1% | 3.1% |
1 Non-IFRS financial measures are reconciled at the end of this report to the most directly reconcilable line items in the financial statements.
2 Excludes restructuring charges in all periods. No other adjustments made in 2020. Q1 2019 excludes a capital gain related to the divestment of 51% of MediaKind (SEK 0.7 b.), divestment of certain assets in Red Bee Media (SEK 0.1 b.) and a reversal of an earlier provision for impairment of trade receivables following customer payment (SEK 0.7 b.). Q3 2019 excludes cost provisions (SEK -11.5 b.) related to the investigation by the United States Securities and Exchange Commission and the United States Department of Justice and a refund of social security costs (SEK 0.9 b.).
Gross margin
Reported gross margin was 43.1% (37.7%). Gross margin excluding restructuring charges improved to 43.2% (37.8%) YoY driven by strong margin improvements in all segments. Increased software sales contributed to the higher margin in Networks and Digital Services. Managed Services gross margin improved mainly as an effect of efficiency gains.
Ericsson | Third quarter report 2020
Financial highlights
Sequentially, reported gross margin increased to 43.1% from 37.6%. Gross margin excluding restructuring charges increased to 43.2% from 38.2%. The improvement was primarily driven by the increased gross margin in Networks as a result of the business mix and higher software sales. Managed Services gross margin improved due to efficiency gains. Digital Services gross margin remained stable over the quarters. The share of IPR licensing revenues declined QoQ.
Restructuring charges
Restructuring charges increased to SEK -0.3 (-0.1) b. YoY. The ongoing restructuring of the acquired antenna and filter business in segment Networks as well as organizational changes as a consequence of the operator merger in North America impacted restructuring charges in the quarter.
Research and development (R&D) expenses
R&D expenses increased to SEK -10.1 (-9.5) b. R&D expenses excluding restructuring charges were SEK -9.9 (-9.4) b. R&D expenses increased in segment Networks according to plan.
Selling and administrative (SG&A) expenses
SG&A expenses were SEK -6.0 (-4.9) b. The social security refund of SEK 0.9 b. in Q3 2019 impacts comparison YoY. Revaluation of customer financing was SEK 0.0 (-0.1) b.
Impairment losses on trade receivables
Impairment losses on trade receivables were SEK 0.0 (0.2) b.
Other operating income and expenses
Other operating income and expenses was SEK 0.1 (-11.3) b. Q3 2019 was impacted by a provision of SEK -11.5 b. to cover the settlement with the United States Securities and Exchange Commission (SEC) and the United States Department of Justice (DOJ). Share in earnings of JVs and associated companies was SEK -0.1 (-0.2) b.
Operating income and margin
Reported operating income improved to SEK 8.6 (-4.2) b. YoY. Operating income excluding restructuring charges and items affecting comparability in Q3 2019 improved to SEK 9.0 (6.5) b. corresponding to an operating margin of 15.6% (11.4%). The improvement was driven by segment Networks.
Sequentially, reported operating income increased to SEK 8.6 b. from SEK 3.9 b. Operating income excluding restructuring charges increased to SEK 9.0 b. from SEK 4.5 b. Operating income improved in all segments QoQ, with segment Networks as the main contributor.
Financial net
Reported financial net improved to SEK 0.1 (-0.7) b. YoY, mainly driven by a positive currency hedge effect following the strengthened SEK to USD. The currency hedge effect was SEK 0.3 b. in the quarter compared with SEK -0.3 b. in Q3 2019. Sequentially the financial net declined to SEK 0.1 b. from SEK 0.3 b. with the currency hedge effect down from SEK 0.6 b. in the second quarter. The SEK strengthened against the USD between June 30, 2020 (SEK/USD rate 9.37) and September 30, 2020 (SEK/USD rate 9.00).
Taxes
Taxes were SEK -3.2 (-2.0) b. The tax rate in Q3 was 36% compared with 38% in Q2 2020. The tax rate is impacted by non-deductible costs in the quarter.
Net income
Net income improved to SEK 5.6 (-6.9) b. and EPS diluted improved to SEK 1.61 (-1.89) YoY driven by the stronger operating income and the improved financial net. Q3 2019 was impacted by the provision of SEK -11.5 b. for the settlement with SEC and DOJ as well as the social security refund of SEK 0.9 b.
Employees
The number of employees on September 30, 2020, was 99,826, compared with 99,800 at the end of the previous quarter.
Financial highlights, year to date (Jan-Sep)
Reported sales increased by 1%. Sales adjusted for comparable units and currency increased by 2%. Reported sales in segment Networks increased by 5% while sales adjusted for comparable units and currency increased by 6%. Sales growth in Networks was driven by North East Asia and North America. Reported sales declined by -8% in Digital Services, whereas sales for comparable units and currency declined by -6%, due to declining sales in the legacy portfolio in combination with continued uncertainty due to Covid-19. Reported sales and sales adjusted for comparable units and currency in Managed Services declined by -9%, mainly due to reduced variable sales in North America. In the market area dimension, sales growth in North East Asia and North America has offset a decline in the other three market areas.
Reported gross margin increased to 40.2% (37.5%) driven by improvements primarily in Networks and Digital Services, mainly due to business mix and a higher share of software sales.
Reported operating income increased YoY to SEK 16.8 (4.4) b. The operating income was impacted by increased restructuring charges of SEK -1.3 (-0.5) b. Q3 2019 was negatively impacted by a provision of SEK -11.5 b. for the settlement with SEC and DOJ and positively by a refund of social security costs of SEK 0.9 b. In addition, operating income Q1 2019 was positively impacted by capital gains (SEK 0.8 b.) related to the media businesses, and a reversal of a provision for impairment of trade receivables (SEK 0.7 b.) following customer payment.
Net income year to date improved to SEK 10.4 (-2.6) b.
Ericsson | Third quarter report 2020
Financial highlights
Planning assumptions
Market related
- The global RAN equipment market is estimated to grow by 8% (previously: 4% growth) for full-year 2020. China is expected to grow by 33% and the global RAN market without China is expected to be flat in 2020. The global RAN equipment market is estimated to be flat at 0% CAGR for 2019-2024 (Source: Dell'Oro).
- The momentum in North America remains strong and the market is estimated to grow by 4% in 2020 (Source: Dell'Oro).
Ericsson related
Financial targets
- The YTD results strengthen the Company's confidence in delivering on the Group targets for 2020. The financial targets for 2022 remain.
- With the weaker sales in Digital Services, in combination with higher R&D investments, the Company foresees a risk of further delay in reaching the 2020 operating margin target in this segment. The 2022 operating margin target for Digital Services of 10-12% remains.
Net sales
- Three-year average reported sales seasonality between Q3 and Q4 is +17%.
- The revenues from current IPR licensing contracts are expected to reach approximately SEK 10 b. for 2020. During 2021 and 2022 the Company may see temporarily lower IPR licensing revenues as important agreements are up for renewal.
Gross margin
- The software share of sales in segment Networks is expected to be lower in Q4 2020 after a favorable Q3 2020. Historically the share of services sales typically increases in Q4 compared with Q3.
- The improvements in Digital Services continue, but earnings will vary between quarters depending on business mix, sales seasonality and impact of the remainder of the 45 critical contracts.
- In Managed Services there will be quarterly variations depending on timing of add-on sales and costs, but underlying margins have been established at a higher level.
R&D and SG&A expenses
- Operating expenses typically increase between Q3 and Q4 due to seasonality. The average increase for the last three years was SEK 3 b., with large variations.
Restructuring charges
- Restructuring charges are estimated to approximately 1% of sales, as a yearly average.
Currency exposure
- Rule of thumb: A change by 10% of USD to SEK would have an impact of approximately +/-5% on net sales and approximately +/-1 percentage point on operating margin.
Cradlepoint
- Transaction is expected to close in the coming weeks.
- Upon closing, a consideration of around USD 1 b., subject to customary adjustments for working capital and net debt, will be paid using cash-at-hand.
- Cradlepoint will be fully consolidated into the Ericsson group in segment Emerging Business & Other.
- Cradlepoint's sales for 2019 were SEK 1.2 b. with a gross margin of 61%.
- Ericsson's operating margin is expected to be negatively impacted by approximately -1% as of closing in Q4 2020 up until 2022. Half of this impact is related to amortization of intangible assets.
- Cradlepoint is expected to contribute with positive operating cash flow starting in 2022
Ericsson | Third quarter report 2020
Planning assumptions
Market area sales
| SEK b. | Q3 2020 | Q3 2019 | YoY change | Q2 2020 | QoQ change | Jan-Sep 2020 | YoY change |
|---|---|---|---|---|---|---|---|
| South East Asia, Oceania and India | 7.8 | 7.4 | 5% | 6.6 | 19% | 20.3 | -1% |
| North East Asia | 8.8 | 6.4 | 39% | 7.8 | 13% | 20.5 | 23% |
| North America | 18.4 | 19.0 | -3% | 18.4 | 0% | 54.7 | 3% |
| Europe and Latin America | 13.3 | 14.3 | -7% | 13.1 | 2% | 38.6 | -7% |
| Middle East and Africa | 5.5 | 6.0 | -9% | 5.4 | 2% | 16.8 | -2% |
| Other 1 | 3.7 | 4.0 | -8% | 4.3 | -15% | 11.9 | -2% |
| Total | 57.5 | 57.1 | 1% | 55.6 | 3% | 162.8 | 1% |
1 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.
- Ericsson 5G status on October 21: 65 live networks and 112 commercial agreements with unique operators
- Strong growth in North East Asia and continued business momentum in North America
- Networks sales continued to grow in Europe driven by market share gains
South East Asia, Oceania and India
Sales remained flat in Networks, while sales increased YoY in Digital Services due to timing of project milestones. Managed Services sales increased YoY, mainly as a result of a new contract win in 2020.
North East Asia
Sales increased YoY. Networks sales grew, primarily driven by continued 5G deployment in Mainland China. Digital Services sales declined due to timing and project milestones.
North America
Sales increased YoY adjusted for currencies. Networks sales grew driven by continued 5G momentum. Digital Services sales decreased due to lower legacy hardware volumes. Managed Services sales decreased post the merger between two large operators.
Europe and Latin America
Sales decreased YoY due to earlier decisions on Managed Services contract exits and reduced sales in Latin America due to macroeconomic uncertainty following Covid-19. Networks sales increased in Europe as a result of market share gains, partly offsetting the sales decline in Latin America.
Middle East and Africa
Sales decreased YoY primarily in Africa due to macroeconomic uncertainty related to Covid-19 and delayed investments in Networks and Digital Services. Continued 5G deployments in the Middle East contributed positively. Managed Services sales were stable.
Other
IPR licensing revenues decreased to SEK 2.2 (2.4) b. YoY, mainly due to lower volumes with one licensee.
Ericsson | Third quarter report 2020
Market area sales
Segment results
Segment Networks
| SEK b. | Q3 2020 | Q3 2019 | YoY change | Q2 2020 |
|---|---|---|---|---|
| Net sales | 41.7 | 39.3 | 6% | 39.8 |
| Sales growth adj. for comparable units and FX | - | - | 13% | - |
| Gross income | 19.4 | 16.3 | 19% | 16.0 |
| Gross margin | 46.5% | 41.6% | - | 40.2% |
| Operating income | 9.2 | 7.2 | 27% | 5.3 |
| Operating margin | 22.0% | 18.4% | - | 13.2% |
| Restructuring charges | -0.3 | 0.0 | - | -0.4 |
| Measures excl. restructuring charges | ||||
| Gross margin excl. restructuring charges | 46.7% | 41.6% | - | 40.5% |
| Operating income excl. restructuring charges | 9.4 | 7.2 | 31% | 5.6 |
| Operating margin excl. restructuring charges | 22.7% | 18.4% | - | 14.1% |
Breakdown of sales into products, services and IPR licensing is available in the back-end tables.
- Sales adjusted for comparable units and currency up 13%
- Operating margin excluding restructuring charges 22.7%
- A large share of software sales contributed to the higher margins in Networks
Net sales
Reported sales increased by 6% YoY. Sales adjusted for comparable units and currency increased by 13%. Sales growth was driven by North East Asia, North America and Europe. Sales declined YoY in Latin America and Africa, where the pandemic negatively impacted capex levels for some customers.
Gross margin
Reported gross margin increased to 46.5% (41.6%) YoY. Gross margin excluding restructuring charges increased to 46.7% (41.6%), as a result of a large share of software sales and operational leverage.
Reported gross margin increased QoQ to 46.5% from 40.2%. The increase is mainly driven by the business mix including a larger share of software sales.
Operating income and margin
Reported operating income increased to SEK 9.2 (7.2) b. YoY, with an increase in operating margin to 22.0% (18.4%). Operating margin excluding restructuring charges increased to 22.7% (18.4%). Operating expenses increased by SEK -1.1 b. to SEK -10.3 b. due to increased restructuring charges, accelerated R&D investments in 5G and in a broader portfolio of antenna and site solutions as well as an increase in SG&A expenses driven by the increased Group investments in digitalization and compliance.
Reported operating income increased by SEK 3.9 b. QoQ while operating income excluding restructuring charges increased by SEK 3.8 b. supported by seasonally higher sales, improved gross margin and seasonally lower operating expenses.
Net sales rolling four quarters were SEK 161.1 b. and operating margin excluding restructuring charges was 17.0%.
Segment Digital Services
| SEK b. | Q3 2020 | Q3 2019 | YoY change | Q2 2020 |
|---|---|---|---|---|
| Net sales | 8.7 | 9.9 | -12% | 8.6 |
| Sales growth adj. for comparable units and FX | - | - | -5% | - |
| Gross income | 3.8 | 3.7 | 1% | 3.7 |
| Gross margin | 43.4% | 37.9% | - | 43.6% |
| Operating income (loss) | -0.6 | -0.7 | - | -0.7 |
| Operating margin | -6.8% | -6.7% | - | -8.1% |
| Restructuring charges | -0.1 | -0.1 | - | 0.0 |
| Measures excl. restructuring charges | ||||
| Gross margin excl. restructuring charges | 43.5% | 38.3% | - | 43.6% |
| Operating income (loss) excl. restructuring charges | -0.5 | -0.5 | - | -0.7 |
| Operating margin excl. restructuring charges | -5.8% | -5.4% | - | -8.5% |
Breakdown of sales into products, services and IPR licensing is available in the back-end tables.
- Sales declined due to lower sales of the legacy portfolio
- Reported gross margin improved to 43.4% (37.9%) supported by a higher share of software, in line with the strategy
- The growth portfolio sales grew by 5% in the quarter supported by cloud infrastructure products
Net sales
Reported sales decreased by -12% YoY. Sales adjusted for comparable units and currency decreased by -5% YoY, mainly impacted by a sales decline in the legacy portfolio, primarily in hardware, as well as continued uncertainty related to Covid-19 and its potential economic effects. Sales grew YoY in South East Asia, Oceania and India while sales in all other market areas declined. Q3 2019 was supported by higher than normal legacy sales in North America and Europe.
Reported sales grew by 2% QoQ, with good business momentum in the growth portfolio, which grew by 5% both sequentially and for rolling 12 months. Sales of cloud infrastructure products strengthened in the quarter. Important 5G Core contracts have been signed with several tier-1 operators in 2020 and are expected to generate revenues in 2021 and beyond.
Gross margin
Reported gross margin increased to 43.4% (37.9%) supported by a favorable business mix with higher share of software sales. Q3 2019 was negatively impacted by critical contracts, while such impact in Q3 2020 was limited.
Gross margin excluding restructuring charges decreased to 43.5% from 43.6% QoQ. The impact of critical contracts was limited in both quarters.
Operating income (loss)
Reported operating income (loss) was SEK -0.6 (-0.7) b. Operating income (loss) excluding restructuring charges was SEK -0.5 (-0.5) b. Operating expenses excluding restructuring charges remained flat YoY. While rationalization of the legacy portfolio continues, R&D investments are made in the growth portfolio of 5G and cloud-native products.
Reported operating income as well as operating income excluding restructuring charges improved QoQ, supported by seasonally higher sales and lower operating expenses.
Net sales rolling four quarters were SEK 37.8 b. and operating margin excluding restructuring charges was -7.0%.
7
Ericsson | Third quarter report 2020
Segment results
Segment Managed Services
| SEK b. | Q3 2020 | Q3 2019 | YoY change | Q2 2020 |
|---|---|---|---|---|
| Net sales | 5.5 | 6.4 | -14% | 5.6 |
| Sales growth adj. for comparable units and FX | - | - | -4% | - |
| Gross income | 1.1 | 1.1 | -4% | 1.0 |
| Gross margin | 19.9% | 17.9% | - | 17.1% |
| Operating income | 0.5 | 0.6 | -13% | 0.3 |
| Operating margin | 8.9% | 8.8% | - | 4.7% |
| Restructuring charges | 0.0 | 0.0 | - | 0.0 |
| Measures excl. restructuring charges | ||||
| Gross margin excl. restructuring charges | 20.1% | 17.9% | - | 17.2% |
| Operating income excl. restructuring charges | 0.5 | 0.6 | -11% | 0.3 |
| Operating margin excl. restructuring charges | 9.1% | 8.9% | - | 4.8% |
- Sales declined YoY mainly due to reduced variable sales in North America
- Operating margin excluding restructuring charges increased YoY despite lower sales
- Further investments in automation, analytics and AI-driven offerings – supporting 5G and efficiency in service delivery
Net sales
Reported sales declined by -14% YoY. Sales adjusted for comparable units and currency decreased by -9% YoY, mainly due to reduced variable sales in a large contract in North America, post the merger between two large operators, and transfer of a contract from Ericsson to an associated company. Sales in Managed Services IT showed growth mainly in market areas North America and in South East Asia, Oceania and India.
Gross margin
Reported gross margin increased to 19.9% (17.9%). Gross margin excluding restructuring charges increased to 20.1% (17.9%) YoY, mainly as a result of efficiency gains.
Reported gross margin increased to 19.9% from 17.1% QoQ. Gross margin excluding restructuring charges increased to 20.1% from 17.2% QoQ, mainly due to higher variable sales, efficiency gains and timing of costs.
Operating income and margin
Reported operating income was SEK 0.5 (0.6) b. Operating income excluding restructuring charges was SEK 0.5 (0.6) b. The decline was mainly due to lower sales.
Reported operating income increased to SEK 0.5 b. from SEK 0.3 b. QoQ driven by higher gross margin.
Net sales rolling four quarters were SEK 23.8 b. Operating margin excluding restructuring charges rolling four quarters was 7.4%.
Segment Emerging Business and Other
| SEK b. | Q3 2020 | Q3 2019 | YoY change | Q2 2020 |
|---|---|---|---|---|
| Net sales | 1.6 | 1.6 | -3% | 1.6 |
| Of which Emerging Business and iconectiv | 1.0 | 1.1 | -1% | 1.1 |
| Of which Red Bee Media | 0.5 | 0.6 | -15% | 0.5 |
| Of which Media Solutions | 0.0 | 0.0 | - | 0.0 |
| Sales growth adj. for comparable units and FX | - | - | 2% | - |
| Gross income | 0.5 | 0.3 | 55% | 0.2 |
| Gross margin | 32.0% | 20.2% | - | 12.6% |
| Operating income (loss) | -0.4 | -11.3 | - | -1.0 |
| Of which Ein. Business, iconectiv & common costs | -0.3 | -0.5 | - | -0.8 |
| Of which Red Bee Media | 0.0 | 0.0 | - | 0.0 |
| Of which Media Solutions | -0.2 | -0.3 | - | -0.1 |
| Of which adjustments in Q3 2019 1 | - | -10.5 | - | - |
| Operating margin | -26.7% | -695.8% | - | -60.5% |
| Restructuring charges | 0.0 | 0.0 | - | -0.3 |
| Measures excl. restructuring charges | ||||
| Gross margin excl. restructuring charges | 30.5% | 20.5% | - | 25.3% |
| Operating income (loss) excl. restructuring charges | -0.5 | -11.3 | - | -0.6 |
| Operating margin excl. restructuring charges | -29.2% | -695.1% | - | -39.6% |
| Op. income excl. restr. charges & items affecting comp. 1 | -0.5 | -0.8 | - | -0.6 |
| Op. margin excl. restr. charges & items affecting comp. 1 | -29.2% | -46.6% | - | -39.6% |
1 Cost provisions related to a resolution of the SEC and DOJ investigations of SEK -11.5 b. and refund of social security costs of SEK 0.9 b. in Q3 2019.
- Continued sales and gross margin growth in Emerging Business
- iconectiv delivered stable sales and solid profitability
- Agreement to acquire Cradlepoint announced September 18
Net sales
Reported sales decreased by -3% YoY. Sales adjusted for comparable units and currency increased by 2%, partly driven by Emerging Business.
Gross margin
Reported gross margin increased to 32.0% (20.2%) YoY. Gross margin excluding restructuring charges increased to 30.5% (20.5%). The increase was driven by Emerging Business.
Reported gross margin increased to 32.0% from 12.6% QoQ. Gross margin excluding restructuring charges increased to 30.5% from 25.3% QoQ. The improvement was driven by Emerging Business.
Operating income (loss)
Reported operating income (loss) was SEK -0.4 (-11.3) b. Operating income (loss) excluding restructuring charges and items affecting comparability was SEK -0.5 (-0.8) b.
Media Solutions reported operating income was SEK -0.2 (-0.3) b. including Ericsson's 49% share in earnings of the MediaKind business.
Red Bee Media's operating income improved and reached break even and iconectiv delivered solid profitability.
Net sales rolling four quarters were SEK 6.5 b.
Acquisition of Cradlepoint
Acquisition of Cradlepoint, the market leader in Wireless Edge WAN solutions, was announced in Q3 for a price amounting to approximately USD 1.1 b. It complements Ericsson's enterprise offerings and creates valuable new revenue streams for customers. The transaction is expected to close within some weeks, subject to merger clearance and other closing conditions.
Ericsson | Third quarter report 2020
Segment results
Cash flow and financial position
| SEK b. | Q3 2020 | Q3 2019 | Q2 2020 | Jan-Sep 2020 | Jan-Sep 2019 |
|---|---|---|---|---|---|
| Net income adjusted for non-cash items | 9.7 | -4.3 | 5.6 | 20.0 | 6.1 |
| Working capital changes (net operating assets and liabilities) | -4.4 | 11.3 | -0.1 | -5.0 | 10.3 |
| Cash flow from operating activities | 5.3 | 7.0 | 5.4 | 15.0 | 16.4 |
| Capex (net) including product development | -1.1 | -1.4 | -1.5 | -3.9 | -4.3 |
| Other investing activities and lease liabilities | -0.3 | -1.1 | -0.7 | -1.6 | -2.5 |
| Free cash flow before M&A | 3.9 | 4.5 | 3.2 | 9.5 | 9.5 |
| Acquisitions/divestments, net | -0.1 | -0.5 | 0.0 | -0.3 | -0.2 |
| Free cash flow | 3.8 | 4.0 | 3.2 | 9.1 | 9.4 |
| Cash flow from investing activities | -1.1 | -3.1 | -0.5 | -6.6 | 1.2 |
| Cash flow from financing activities | -0.9 | 0.2 | -4.6 | -4.0 | -7.0 |
| Net change in cash and cash equivalents | 3.1 | 5.7 | -2.7 | 3.7 | 12.8 |
| SEK b. | Sep 30 2020 | Sep 30 2019 | Jun 30 2020 | ||
| --- | --- | --- | --- | ||
| Gross cash | 78.2 | 76.2 | 75.4 | ||
| - Borrowings, current | 14.6 | 1.6 | 15.3 | ||
| - Borrowings, non-current | 22.1 | 37.2 | 22.6 | ||
| Net cash | 41.5 | 37.4 | 37.5 | ||
| Equity | 82.5 | 77.5 | 78.5 | ||
| Total assets | 277.2 | 288.5 | 276.8 | ||
| Capital turnover (times) | 1.3 | 1.4 | 1.3 | ||
| Return on capital employed (%) | 13.5% | 3.8% | 9.9% |
Non-IFRS financial measures are reconciled at the end of this report to the most directly reconcilable line items in the financial statements.
- Free cash flow before M&A was SEK 3.9 (4.5) b. including a capital injection into the Swedish Pension Trust of SEK -2.0 b.
- Solid net cash position at SEK 41.5 (37.4) b.
Cash flow from operating activities
Reported cash flow from operating activities was SEK 5.3 (7.0) b. Change in net operating assets was SEK -4.4 b., driven by higher inventories and lower trade payables. A capital injection of SEK -2.0 b. was made into the Ericsson Swedish Pension Trust as previously reported, affecting cash flow negatively, as described under "Financial position" below. Out of the SEK 0.9 b. refund of social security costs in Q3 2019, SEK 0.4 b. had a positive impact on cash flow. Provisions of SEK 0.5 b. were utilized of which SEK 0.2 b. related to restructuring.
Free cash flow
Free cash flow before M&A was SEK 3.9 (4.5) b. Investments in property, plant and equipment were SEK -1.0 (-1.2) b. and capitalized development expenses were SEK -0.2 (-0.3) b. Free cash flow was SEK 3.8 (4.0) b.
Cash flow from investing and financing activities
Reported cash flow from investing activities was SEK -1.1 (-3.1) b. mainly due to less purchases of interest-bearing securities.
Reported cash flow from financing activities was SEK -0.9 (0.2) b.
Cash flow, year to date (Jan-Sep) development
Free cash flow before M&A year to date was SEK 9.5 (9.5) b. despite total payments made into the Swedish Pension Trust of SEK -3.0 b.
Reported cash flow from investing activities was SEK -6.6 (1.2) b. mainly due to purchase of interest-bearing securities while investments in property, plant and equipment remained stable YoY.
Reported cash flow from financing activities was SEK -4.0 (-7.0) b. of which payment of dividends was SEK -2.5 (-4.4) b. The second installment of the 2019 dividend payment was made on October 7.
Financial position
Gross cash was SEK 78.2 (76.2) b. Gross cash increased by SEK 2.8 b. QoQ as a result of the positive free cash flow. Net cash was SEK 41.5 (37.4) b., an increase of SEK 4.0 b. QoQ.
Liabilities for post-employment benefits decreased in the quarter, to SEK 36.5 b. from SEK 38.6 b., mainly as a result of a capital injection of SEK -2.0 b. into the Swedish Pension Trust. 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 9.8 b. lower (-SEK 26.7 b.).
As previously reported in the Q1 and Q2 2020 earnings reports there was a funding need for the Swedish pension plan in 2020. The total need was approximately SEK 4 b. of which SEK 3 b. was to be covered by payments into the Swedish Pension Trust and SEK 1 b. by providing a pledged business mortgage to PRI Pensionsgaranti. In Q2 2020, SEK -1 b. was paid and in Q3 2020 the remaining SEK -2 b. was paid into the Swedish Pension Trust. Depending on future market conditions, further cash injections to Pension Trusts amounting to approximately SEK 1 b. per year can be expected. Details regarding Ericsson's pension plans can be found in note G1 "Post-employment benefits" of the Annual Report.
The average maturity of long-term borrowings as of September 30, 2020, was 1.9 years, a decrease from 2.8 years 12 months earlier.
Ericsson | Third quarter report 2020
Cash flow
Parent Company
Income after financial items Jan-Sep 2020, was SEK 3.7 (-9.4) b.
At the end of the quarter, gross cash (cash, cash equivalents, short-term investments and interest-bearing securities, non-current) amounted to SEK 66.3 (59.4) b.
There was an increase in intercompany lending of SEK 1.0 b. and in intercompany borrowing of SEK 0.1 b. in the third quarter.
In accordance with the conditions of the long-term variable compensation program (LTV) for Ericsson employees, 4,489,317 shares from treasury stock were distributed or sold to employees during the third quarter. The holding of treasury stock on September 30, 2020 was 6,043,585 Class B shares.
Ericsson | Third quarter report 2020
Parent Company
Other information
Ericsson accelerates 5G for Enterprise with acquisition of Cradlepoint
On September 18, 2020, Ericsson announced that the Company has agreed to acquire Cradlepoint, a US-based vendor in Wireless Edge WAN 4G and 5G Enterprise solutions. The investment is key to Ericsson's ongoing strategy of capturing market share in the rapidly expanding 5G Enterprise space. Cradlepoint complements Ericsson's existing 5G Enterprise portfolio which includes Dedicated Networks and a global IoT platform.
The combined offering will create valuable new revenue streams for customers by supporting full 5G-enabled services for enterprise, and boost returns on investments in the network.
Cradlepoint will become a fully owned subsidiary of Ericsson while continuing to operate as a standalone company within segment Emerging Business and Other.
The acquisition price amounts to approximately USD 1.1 b. with the transaction expected to close during Q4 2020, subject to closing conditions.
Cradlepoint's sales for 2019 were SEK 1.2 b. with a gross margin of 61%. Ericsson's operating margin is expected to be negatively impacted by approximately -1% in 2021 and 2022 - where half is related to amortization of intangible assets which arise from the acquisition.
Cradlepoint is expected to contribute to operating cash flow starting in 2022.
Investigation into Ericsson's licensing practice in China
In April 2019, Ericsson was informed by China's State Administration for Market Regulation (SAMR) Anti-monopoly bureau that SAMR has initiated an investigation into Ericsson's patent licensing practices in China. Ericsson is cooperating with the investigation, which is still in a fact-finding phase. The next steps include continued fact-finding and meetings with SAMR in order to facilitate the authority's assessments and conclusions.
Covid-19 update
Ericsson continues to closely monitor the Covid-19 situation and the Global Crisis Management Council and task forces in each Market Area have been activated since January. The health and safety of employees, customers, partners and other stakeholders is Ericsson's top priority. In June, travel and event restrictions were prolonged until the end of the year and employees are still asked to work from home. A mandatory use of face masks in all offices and locations was introduced in September. An office furniture program was also introduced, allowing employees to buy furniture for their home office environment.
The proactive approach to Business Continuity Management (BCM) in full alignment with customers at the beginning of the year has paid off so far with continued quality in Ericsson's operations and customers' networks while maintaining highest priority for the wellbeing of Ericsson employees. The Company continues this approach across all facets of the managed service business including through thorough risk assessment and management. For the supply chain, the dual mode production strategy and regionalized supply chains are successful, making it possible to keep the supply chain operational.
11 Ericsson | Third quarter report 2020
Other information
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.
Ericsson's 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 2019. Updates to these risk factors and uncertainties observed by Ericsson that are deemed of short-term relevance include, but are not limited to, the following:
Pandemics, such as for example the one caused by the novel Coronavirus, Covid-19, could severely impact our local and global operations
Pandemics, such as for example the one caused by the novel Coronavirus, could severely impact our local and global operations related to e.g. Service Delivery, Research & Development, Sales and Supply, as well as our customers and suppliers, with significant financial and other consequences. As an example, the Coronavirus pandemic has caused challenges and risks relating to travel and lockdowns limiting access to sites, transportation and logistics and impacting the flow of goods. Although we further strengthen business continuity measures to be able to continue to support our customers' needs and mitigate any impact on our business, disruptions to the global economy and to the operations and business of our customers, suppliers, and partners could cause disturbances in our operations and may have a material adverse effects on our business and financial position.
Our ability to benefit from intellectual property rights (IPR), may be limited by the loss of patent licenses to or from third parties
Patent licensing agreements are generally multi-year and term based and the process for renewal of these licenses normally requires negotiations, particularly in conjunction with technology shifts and the introduction of new standards, such as 5G. Such renewals and negotiations may take time to resolve, sometimes involve litigation and may have material adverse impact on our business and financial position, including on the timing for and level of revenues from the IPR licensing contract portfolio.
Stockholm, October 21, 2020
Telefonaktiebolaget LM Ericsson
Börje Ekholm, President and CEO
Org. no. 556016-0680
Date for next report: January 26, 2021
12 Ericsson | Third quarter report 2020
Risk factors
Editor's note
Press briefing and live webcast
Ericsson invites media, investors and analysts to a conference call on October 21, 2020 starting at 9:00 am CET.
Live audio webcast of the conference call as well as supporting slides will be available at:
www.ericsson.com/investors and
www.ericsson.com/press
Replay of the conference call will be available approximately one hour after the call has ended and will remain available for seven days.
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
Peter Olofsson, Head of Corporate Communication
Phone: +46 70 267 34 45
E-mail: [email protected]
Corporate Communications
Phone: +46 10 719 69 92
E-mail: [email protected]
Ericsson | Third quarter report 2020
Editor's note
Forward-looking statements
This report includes forward-looking statements, including statements reflecting management's 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 2019.
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
14 Ericsson | Third quarter report 2020
Forward-looking statements
Auditors' Review Report
Introduction
We have reviewed the condensed interim financial information (interim report) of Telefonaktiebolaget LM Ericsson (publ.) as of September 30, 2020, and the nine months period then ended. The board of directors and the CEO are responsible for the preparation and presentation of the interim report in accordance with IAS 34 and the Swedish Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.
Scope of review
We conducted our review in accordance with the International Standard on Review Engagements ISRE 2410, Review of Interim Report Performed by the Independent Auditor of the Entity.
A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing, ISA, and other generally accepted auditing standards in Sweden. The procedures performed in a review do not enable us to obtain assurance that would make us aware of all significant matters that might be identified in an audit. Therefore, the conclusion expressed based on a review does not give the same level of assurance as a conclusion expressed based on an audit.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the interim report is not prepared, in all material respects, in accordance with IAS 34 and the Swedish Annual Accounts Act, regarding the Group, and with the Swedish Annual Accounts Act, regarding the Parent Company.
Stockholm, October 21, 2020
Deloitte AB
Thomas Strömberg
Authorized Public Accountant
15 Ericsson | Third quarter report 2020
Auditors' Review Report
Financial statements and other information
Contents
Financial statements...17
Condensed consolidated income statement...17
Condensed statement of comprehensive income (loss)...17
Condensed consolidated balance sheet...18
Condensed consolidated statement of cash flows...19
Condensed consolidated statement of changes in equity...20
Condensed consolidated income statement — isolated quarters...20
Condensed consolidated statement of cash flows — isolated quarters...21
Condensed Parent Company income statement...22
Condensed Parent Company statement of comprehensive income (loss)...22
Condensed Parent Company balance sheet...23
Accounting policies and Explanatory notes...24
Accounting policies...24
Explanatory notes...24
Net sales by segment by quarter...25
Gross income by segment by quarter...26
Operating income (loss) by segment by quarter...26
Net sales by market area by quarter...27
Net sales by market area by segment...28
Top 5 countries in sales...28
IPR licensing revenues by segment by quarter...29
Provisions...29
Financial instruments...30
Information on investments...30
Other information...31
Number of employees...31
Alternative performance measures...32
Sales growth adjusted for comparable units and currency...32
Items excluding restructuring charges...33
EBITA and EBITA margin...34
Rolling four quarters of net sales and operating margin excluding restructuring charges (%)...34
Gross cash and net cash, end of period...35
Capital employed...35
Capital turnover...35
Return on capital employed...36
Equity ratio...36
Return on equity...36
Adjusted earnings (loss) per share (non-IFRS)...37
Free cash flow and free cash flow before M&A...37
Sales growth by segment adjusted for comparable units and currency...38
Gross margin by segment by quarter...38
Operating margin by segment by quarter...38
Restructuring charges by function...39
Restructuring charges by segment...39
Gross income and gross margin excluding restructuring charges by segment...40
Operating income (loss) and operating margin excluding restructuring charges by segment...41
EBITA and EBITA margin by segment by quarter...42
Other ratios...42
16 Ericsson | Third quarter report 2020
Financial statements and other information
Financial statements
Condensed consolidated income statement
| SEK million | Q3 | Jan-Sep | ||||
|---|---|---|---|---|---|---|
| 2020 | 2019 | Change | 2020 | 2019 | Change | |
| Net sales | 57,472 | 57,127 | 1% | 162,800 | 160,843 | 1% |
| Cost of sales | -32,710 | -35,587 | -8% | -97,333 | -100,453 | -3% |
| Gross income | 24,762 | 21,540 | 15% | 65,467 | 60,390 | 8% |
| Research and development expenses | -10,101 | -9,497 | 6% | -29,281 | -28,182 | 4% |
| Selling and administrative expenses | -5,992 | -4,920 | 22% | -19,282 | -17,915 | 8% |
| Impairment losses on trade receivables | -28 | 200 | -114% | -146 | 910 | -116% |
| Operating expenses | -16,121 | -14,217 | 13% | -48,709 | -45,187 | 8% |
| Other operating income and expenses | 61 | -11,305 | -101% | 281 | -10,466 | -103% |
| Share in earnings of JV and associated companies | -59 | -214 | -72% | -239 | -298 | -20% |
| Operating income (loss) | 8,643 | -4,196 | -306% | 16,800 | 4,439 | 278% |
| Financial income and expenses, net | 109 | -685 | -116% | -501 | -1,731 | -71% |
| Income after financial items | 8,752 | -4,881 | -279% | 16,299 | 2,708 | 502% |
| Income tax | -3,186 | -2,013 | 58% | -5,868 | -5,352 | 10% |
| Net income (loss) | 5,566 | -6,894 | -181% | 10,431 | -2,644 | -495% |
| Net income (loss) attributable to: | ||||||
| Owners of the Parent Company | 5,353 | -6,229 | 9,961 | -2,207 | ||
| Non-controlling interests | 213 | -665 | 470 | -437 | ||
| Other information | ||||||
| Average number of shares, basic (million) | 3,326 | 3,308 | 3,322 | 3,304 | ||
| Earnings (loss) per share, basic (SEK) 1) | 1.61 | -1.89 | 3.00 | -0.67 | ||
| Earnings (loss) per share, diluted (SEK) 2) | 1.61 | -1.89 | 3.00 | -0.67 |
1) Based on net income (loss) attributable to owners of the Parent Company.
2) Potential ordinary shares are not considered when their conversion to ordinary shares would increase earnings per share.
Condensed statement of comprehensive income (loss)
| SEK million | Q3 | Jan-Sep | ||
|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |
| Net income (loss) | 5,566 | -6,894 | 10,431 | -2,644 |
| Other comprehensive income (loss) | ||||
| Items that will not be reclassified to profit or loss | ||||
| Remeasurements of defined benefits pension plans incl. asset ceiling | -701 | -2,716 | -3,902 | -8,166 |
| Revaluation of borrowings due to change in credit risk | -269 | 81 | 424 | -454 |
| Tax on items that will not be reclassified to profit or loss | 148 | 629 | 707 | 1,886 |
| Items that have been or may be reclassified to profit or loss | ||||
| Cash flow hedge reserve | ||||
| Gains/losses arising during the period | 71 | -374 | -24 | -580 |
| Reclassification adjustments on gains/losses included in profit or loss | 70 | - | 211 | - |
| Changes in cumulative translation adjustments | -887 | 2,092 | -2,366 | 3,687 |
| Share of other comprehensive income (loss) on JV and associated companies | -24 | 68 | -26 | 114 |
| Tax on items that have been or may be reclassified to profit or loss | -30 | 77 | -39 | 119 |
| Total other comprehensive income (loss), net of tax | -1,622 | -143 | -5,015 | -3,394 |
| Total comprehensive income (loss) | 3,944 | -7,037 | 5,416 | -6,038 |
| Total comprehensive income (loss) attributable to: | ||||
| Owners of the Parent Company | 3,717 | -6,409 | 4,963 | -5,656 |
| Non-controlling interests | 227 | -628 | 453 | -382 |
17 Ericsson | Third quarter report 2020
Financial statements
Condensed consolidated balance sheet
| SEK million | Sep 30 2020 | Jun 30 2020 | Dec 31 2019 |
|---|---|---|---|
| Assets | |||
| Non-current assets | |||
| Intangible assets | |||
| Capitalized development expenses | 3,978 | 4,078 | 4,040 |
| Goodwill | 30,314 | 31,130 | 31,200 |
| Intellectual property rights, brands and other intangible assets | 2,091 | 2,189 | 2,491 |
| Property, plant and equipment | 13,882 | 13,996 | 13,850 |
| Right-of-use assets | 8,243 | 8,251 | 8,487 |
| Financial assets | |||
| Equity in JV and associated companies | 1,317 | 1,415 | 1,565 |
| Other investments in shares and participations | 1,420 | 1,472 | 1,432 |
| Customer finance, non-current | 1,269 | 1,553 | 2,262 |
| Interest-bearing securities, non-current | 23,898 | 24,025 | 20,354 |
| Other financial assets, non-current | 5,312 | 5,944 | 5,614 |
| Deferred tax assets | 29,726 | 31,082 | 31,174 |
| 121,450 | 125,135 | 122,469 | |
| Current assets | |||
| Inventories | 32,804 | 31,917 | 30,863 |
| Contract assets | 11,468 | 10,971 | 12,171 |
| Trade receivables | 38,180 | 38,325 | 43,069 |
| Customer finance, current | 1,878 | 1,001 | 1,494 |
| Other current receivables | 17,081 | 18,035 | 14,479 |
| Interest-bearing securities, current | 5,552 | 5,739 | 6,759 |
| Cash and cash equivalents | 48,774 | 45,655 | 45,079 |
| 155,737 | 151,643 | 153,914 | |
| Total assets | 277,187 | 276,778 | 276,383 |
| Equity and liabilities | |||
| Equity | |||
| Stockholders' equity | 82,830 | 79,005 | 82,559 |
| Non-controlling interest in equity of subsidiaries | -345 | -533 | -681 |
| 82,485 | 78,472 | 81,878 | |
| Non-current liabilities | |||
| Post-employment benefits | 36,515 | 38,605 | 35,817 |
| Provisions, non-current | 2,378 | 2,240 | 2,679 |
| Deferred tax liabilities | 1,102 | 1,164 | 1,224 |
| Borrowings, non-current | 22,132 | 22,582 | 28,257 |
| Lease liabilities, non-current | 7,426 | 7,400 | 7,595 |
| Other non-current liabilities | 1,759 | 1,812 | 2,114 |
| 71,312 | 73,803 | 77,686 | |
| Current liabilities | |||
| Provisions, current | 8,544 | 8,363 | 8,244 |
| Borrowings, current | 14,587 | 15,290 | 9,439 |
| Lease liabilities, current | 2,257 | 2,302 | 2,287 |
| Contract liabilities | 29,393 | 31,532 | 29,041 |
| Trade payables | 30,704 | 32,182 | 30,403 |
| Other current liabilities | 37,905 | 34,834 | 37,405 |
| 123,390 | 124,503 | 116,819 | |
| Total equity and liabilities | 277,187 | 276,778 | 276,383 |
18 Ericsson | Third quarter report 2020
Financial statements
Condensed consolidated statement of cash flows
| SEK million | Q3 | Jan-Sep | Jan-Dec | ||
|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | 2019 | |
| Operating activities | |||||
| Net income | 5,566 | -6,894 | 10,431 | -2,644 | 1,840 |
| Adjustments for | |||||
| Taxes | 2,465 | -411 | 3,177 | 703 | 1,652 |
| Earnings/dividends in JV and associated companies | 74 | 278 | 259 | 373 | 406 |
| Depreciation, amortization and impairment losses | 2,105 | 2,199 | 6,381 | 6,799 | 9,089 |
| Other | -541 | 508 | -247 | 882 | 1,079 |
| 9,669 | -4,320 | 20,001 | 6,113 | 14,066 | |
| Changes in operating net assets | |||||
| Inventories | -1,578 | 1,077 | -3,369 | -4,939 | 261 |
| Customer finance, current and non-current | -635 | -265 | 489 | -792 | -858 |
| Trade receivables and contract assets | -1,513 | 6,528 | 4,046 | 14,211 | 10,995 |
| Trade payables | -624 | -2,913 | 1,304 | -1,060 | -372 |
| Provisions and post-employment benefits | -1,897 | 10,719 | -2,868 | 6,780 | -3,729 |
| Contract liabilities | -1,501 | -3,988 | 1,486 | 2,834 | -1,579 |
| Other operating assets and liabilities, net | 3,358 | 151 | -6,059 | -6,770 | -1,911 |
| -4,390 | 11,309 | -4,971 | 10,264 | 2,807 | |
| Cash flow from operating activities | 5,279 | 6,989 | 15,030 | 16,377 | 16,873 |
| Investing activities | |||||
| Investments in property, plant and equipment | -963 | -1,231 | -3,403 | -3,643 | -5,118 |
| Sales of property, plant and equipment | 55 | 122 | 150 | 538 | 744 |
| Acquisitions/divestments of subsidiaries and other operations, net | -89 | -466 | -342 | -164 | -1,505 |
| Product development | -167 | -313 | -640 | -1,216 | -1,545 |
| Other investing activities | 301 | -56 | 133 | -257 | -331 |
| Interest-bearing securities | -246 | -1,114 | -2,537 | 5,973 | 4,214 |
| Cash flow from investing activities | -1,109 | -3,058 | -6,639 | 1,231 | -3,541 |
| Financing activities | |||||
| Dividends paid | -42 | -141 | -2,540 | -4,435 | -4,450 |
| Repayment of lease liabilities | -567 | -1,052 | -1,781 | -2,279 | -2,990 |
| Other financing activities | -277 | 1,396 | 308 | -294 | 540 |
| Cash flow from financing activities | -886 | 203 | -4,013 | -7,008 | -6,900 |
| Effect of exchange rate changes on cash | -165 | 1,550 | -683 | 2,194 | 258 |
| Net change in cash and cash equivalents | 3,119 | 5,684 | 3,695 | 12,794 | 6,690 |
| Cash and cash equivalents, beginning of period | 45,655 | 45,499 | 45,079 | 38,389 | 38,389 |
| Cash and cash equivalents, end of period | 48,774 | 51,183 | 48,774 | 51,183 | 45,079 |
19 Ericsson | Third quarter report 2020
Financial statements
Condensed consolidated statement of changes in equity
| SEK million | Jan-Sep | Jan-Dec | |
|---|---|---|---|
| 2020 | 2019 | 2019 | |
| Opening balance | 81,878 | 87,770 | 87,770 |
| Adjustment due to new accounting standards 1) | - | -249 | -249 |
| Adjusted opening balance | 81,878 | 87,521 | 87,521 |
| Total comprehensive income (loss) | 5,416 | -6,038 | -1,750 |
| Sale/repurchase of own shares | 163 | 125 | 197 |
| Long-term variable compensation plans | 123 | 303 | 377 |
| Dividends to shareholders 2) | -5,095 | -4,435 | -4,450 |
| Transactions with non-controlling interests | - | -1 | -17 |
| Closing balance | 82,485 | 77,475 | 81,878 |
1) Opening balance adjustment in 2019 due to IFRS 16.
2) SEK 0.75 per share of the dividend decided by the AGM in April will be paid out in Q4 2020.
Condensed consolidated income statement – isolated quarters
| 2020 | 2019 | |||||
|---|---|---|---|---|---|---|
| Isolated quarters, SEK million | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 |
| Net sales | 57,472 | 55,578 | 49,750 | 66,373 | 57,127 | 54,810 |
| Cost of sales | -32,710 | -34,661 | -29,962 | -41,939 | -35,587 | -34,739 |
| Gross income | 24,762 | 20,917 | 19,788 | 24,434 | 21,540 | 20,071 |
| Research and development expenses | -10,101 | -10,035 | -9,145 | -10,633 | -9,497 | -9,518 |
| Selling and administrative expenses | -5,992 | -7,052 | -6,238 | -8,222 | -4,920 | -6,964 |
| Impairment losses on trade receivables | -28 | 42 | -160 | -173 | 200 | 151 |
| Operating expenses | -16,121 | -17,045 | -15,543 | -19,028 | -14,217 | -16,331 |
| Other operating income and expenses 1) | 61 | 131 | 89 | 756 | -11,305 | 66 |
| Share in earnings of JV and associated companies | -59 | -152 | -28 | -37 | -214 | -67 |
| Operating income (loss) | 8,643 | 3,851 | 4,306 | 6,125 | -4,196 | 3,739 |
| Financial income and expenses, net | 109 | 292 | -902 | -71 | -685 | -441 |
| Income after financial items | 8,752 | 4,143 | 3,404 | 6,054 | -4,881 | 3,298 |
| Taxes | -3,186 | -1,558 | -1,124 | -1,570 | -2,013 | -1,451 |
| Net income (loss) | 5,566 | 2,585 | 2,280 | 4,484 | -6,894 | 1,847 |
| Net income (loss) attributable to: | ||||||
| Owners of the Parent Company | 5,353 | 2,452 | 2,156 | 4,430 | -6,229 | 1,705 |
| Non-controlling interests | 213 | 133 | 124 | 54 | -665 | 142 |
| Other information | ||||||
| Average number of shares, basic (million) | 3,326 | 3,322 | 3,317 | 3,313 | 3,308 | 3,304 |
| Earnings (loss) per share, basic (SEK) 2) | 1.61 | 0.74 | 0.65 | 1.34 | -1.89 | 0.52 |
| Earnings (loss) per share, diluted (SEK) 3) | 1.61 | 0.74 | 0.65 | 1.33 | -1.89 | 0.51 |
1) Includes cost provisions related to the resolution of the SEC and DOJ investigations of SEK -11.5 b. in Q3 2019 and a partial release of the same provision of SEK 0.7 b. in Q4 2019.
2) Based on net income (loss) 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.
20 Ericsson | Third quarter report 2020
Financial statements
Condensed consolidated statement of cash flows — isolated quarters
| Isolated quarters, SEK million | 2020 | 2019 | |||||
|---|---|---|---|---|---|---|---|
| Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |
| Operating activities | |||||||
| Net income (loss) | 5,566 | 2,585 | 2,280 | 4,484 | -6,894 | 1,847 | 2,403 |
| Adjustments for | |||||||
| Taxes | 2,465 | 1,132 | -420 | 949 | -411 | 310 | 804 |
| Earnings/dividends in JV and associated companies | 74 | 155 | 30 | 33 | 278 | 71 | 24 |
| Depreciation, amortization and impairment losses | 2,105 | 2,156 | 2,120 | 2,290 | 2,199 | 2,274 | 2,326 |
| Other | -541 | -440 | 734 | 197 | 508 | 450 | -76 |
| 9,669 | 5,588 | 4,744 | 7,953 | -4,320 | 4,952 | 5,481 | |
| Changes in operating net assets | |||||||
| Inventories | -1,578 | -1,253 | -538 | 5,200 | 1,077 | -3,065 | -2,951 |
| Customer finance, current and non-current | -635 | 307 | 817 | -66 | -265 | 384 | -911 |
| Trade receivables and contract assets | -1,513 | 0 | 5,559 | -3,216 | 6,528 | 3,338 | 4,345 |
| Trade payables | -624 | 4,104 | -2,176 | 688 | -2,913 | 1,833 | 20 |
| Provisions and post-employment benefits | -1,897 | -1,189 | 218 | -10,509 | 10,719 | -480 | -3,459 |
| Contract liabilities | -1,501 | -1,000 | 3,987 | -4,413 | -3,988 | -1,641 | 8,463 |
| Other operating assets and liabilities, net | 3,358 | -1,108 | -8,309 | 4,859 | 151 | -1,698 | -5,223 |
| -4,390 | -139 | -442 | -7,457 | 11,309 | -1,329 | 284 | |
| Cash flow from operating activities | 5,279 | 5,449 | 4,302 | 496 | 6,989 | 3,623 | 5,765 |
| Investing activities | |||||||
| Investments in property, plant and equipment | -963 | -1,327 | -1,113 | -1,475 | -1,231 | -1,098 | -1,314 |
| Sales of property, plant and equipment | 55 | 69 | 26 | 206 | 122 | 184 | 232 |
| Acquisitions/divestments of subsidiaries and other operations, net | -89 | -45 | -208 | -1,341 | -466 | 3 | 299 |
| Product development | -167 | -211 | -262 | -329 | -313 | -446 | -457 |
| Other investing activities | 301 | -126 | -42 | -74 | -56 | -36 | -165 |
| Interest-bearing securities | -246 | 1,141 | -3,432 | -1,759 | -1,114 | 2,414 | 4,673 |
| Cash flow from investing activities | -1,109 | -499 | -5,031 | -4,772 | -3,058 | 1,021 | 3,268 |
| Financing activities | |||||||
| Dividends paid | -42 | -2,489 | -9 | -15 | -141 | -3,308 | -986 |
| Repayment of lease liabilities | -567 | -618 | -596 | -711 | -1,052 | -623 | -604 |
| Other financing activities | -277 | -1,451 | 2,036 | 834 | 1,396 | -680 | -1,010 |
| Cash flow from financing activities | -886 | -4,558 | 1,431 | 108 | 203 | -4,611 | -2,600 |
| Effect of exchange rate changes on cash | -165 | -3,084 | 2,566 | -1,936 | 1,550 | 13 | 631 |
| Net change in cash and cash equivalents | 3,119 | -2,692 | 3,268 | -6,104 | 5,684 | 46 | 7,064 |
| Cash and cash equivalents, beginning of period | 45,655 | 48,347 | 45,079 | 51,183 | 45,499 | 45,453 | 38,389 |
| Cash and cash equivalents, end of period | 48,774 | 45,655 | 48,347 | 45,079 | 51,183 | 45,499 | 45,453 |
21 Ericsson | Third quarter report 2020
Financial statements
Condensed Parent Company income statement
| Q3 | Jan-Sep | Jan-Dec | |||
|---|---|---|---|---|---|
| SEK million | 2020 | 2019 | 2020 | 2019 | 2019 |
| Net sales | - | - | - | - | - |
| Cost of sales | - | - | - | - | - |
| Gross income | - | - | - | - | - |
| Operating expenses | -503 | -275 | -995 | -1,032 | -1,531 |
| Other operating income and expenses 1) | 633 | -10,925 | 1,828 | -9,957 | -8,148 |
| Operating income | 130 | -11,200 | 833 | -10,989 | -9,679 |
| Financial net | 1,327 | 1,030 | 2,899 | 1,626 | 6,610 |
| Income after financial items | 1,457 | -10,170 | 3,732 | -9,363 | -3,069 |
| Transfers to (-) / from untaxed reserves | - | - | - | - | -1,961 |
| Taxes | -193 | -189 | -511 | -264 | 87 |
| Net income (loss) | 1,264 | -10,359 | 3,221 | -9,627 | -4,943 |
1) Includes costs of SEK -10.7 billion in 2019 related to the resolution of the SEC and DOJ investigations.
Condensed Parent Company statement of comprehensive income (loss)
| Q3 | Jan-Sep | Jan-Dec | |||
|---|---|---|---|---|---|
| SEK million | 2020 | 2019 | 2020 | 2019 | 2019 |
| Net income (loss) | 1,264 | -10,359 | 3,221 | -9,627 | -4,943 |
| Revaluation of borrowings due to change in credit risk | -269 | 81 | 424 | -454 | -651 |
| Tax on items that will not be reclassified to profit or loss | 56 | -17 | -87 | 93 | 134 |
| Total other comprehensive income, net of tax | -213 | 64 | 337 | -361 | -517 |
| Total comprehensive income (loss) | 1,051 | -10,295 | 3,558 | -9,988 | -5,460 |
22 Ericsson | Third quarter report 2020
Financial statements
Condensed Parent Company balance sheet
| SEK million | Sep 30 2020 | Dec 31 2019 |
|---|---|---|
| Assets | ||
| Fixed assets | ||
| Intangible assets | 34 | 58 |
| Tangible assets | 388 | 303 |
| Financial assets 1) | 110,477 | 106,156 |
| 110,899 | 106,517 | |
| Current assets | ||
| Receivables | 26,753 | 23,166 |
| Short-term investments | 5,274 | 6,328 |
| Cash and cash equivalents | 37,095 | 29,800 |
| 69,122 | 59,294 | |
| Total assets | 180,021 | 165,811 |
| Stockholders' equity, provisions and liabilities | ||
| Equity | ||
| Restricted equity | 48,164 | 48,164 |
| Non-restricted equity | 31,005 | 32,222 |
| 79,169 | 80,386 | |
| Provisions | 627 | 668 |
| Non-current liabilities | 22,354 | 28,341 |
| Current liabilities | 77,871 | 56,416 |
| Total stockholders' equity, provisions and liabilities | 180,021 | 165,811 |
| 1) Of which interest-bearing securities, non-current | 23,898 | 20,354 |
Ericsson | Third quarter report 2020
Financial statements
Accounting policies and Explanatory notes
Accounting policies
The group
This condensed consolidated interim financial report for the quarterly reporting period ended September 30, 2020, has been prepared in accordance with 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 IASB's 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, 2019 and should be read in conjunction with that annual report. There are no amendments of IFRS during 2020 that are estimated to have a material impact on the result and financial position of the Company.
Explanatory notes
Covid-19 impacts on the Financial statements
As noted in the previous interim reports, the Covid-19 pandemic has impacted certain lines within our financial statements. Fiscal stimulus provided by governments worldwide has reduced government bond yields and resulted in the significant movement in the capital and equity markets in Q1. These trends have largely reversed as the economic conditions improved in subsequent quarters. This meant that movements in certain line items reported in Q1 have largely been offset or reversed in subsequent quarters to Q3. Figures below are year to date.
In Sweden, government bond yields decreased significantly in Q1, resulting in a significant increase in the net pensions liability. The market conditions have since stabilized, although government bond yields are still lower than that at the end of 2019. The higher pensions liability was offset by cash contributions into the pension trust of SEK 3.0 b and improved trust asset performance in subsequent quarters, resulting in a net increase in pension liability of SEK 0.5 b at Q3.
Borrowings issued by the Parent Company are held at fair value with changes in value due to changes in credit risk recognized in Other comprehensive income (OCI). The widening of credit spreads for corporate bonds in Q1 resulted in a positive impact in equity. Credit spreads on corporate bonds have decreased substantially in subsequent quarters, resulting in a positive impact of SEK 0.4 b. recognized in the OCI at Q3.
Foreign exchanges rates continued to fluctuate significantly during the period. Since the peak in Q1, USD has weakened against SEK in subsequent quarters. This resulted in a net gain on the hedge loan balances used to manage FX execution risk of SEK 0.4 b. recognized within Financial income and expenses in the Consolidated income statement at Q3.
A stronger SEK in Q2 and Q3 also resulted in a negative currency translation adjustment of SEK -2.4 b. on consolidation, recognized in the OCI at Q3.
The Company currently expect no material changes to expected future cash flows which could impact recoverability of assets such as deferred tax assets and intangible assets. Risk assessment on the business plans is carried out on a regular basis and an impairment review will be performed if conditions suggest that such assets may be impaired.
The Company also assessed the wider economic impact in the foreseeable future on the expected credit losses model for trade receivables. The Company concluded that the impact is not material but will continue to perform such analysis on a regular basis.
24 Ericsson | Third quarter report 2020
Accounting policies and Explanatory notes
Net sales by segment by quarter
| 2020 | 2019 | |||||
|---|---|---|---|---|---|---|
| Isolated quarters, SEK million | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 |
| Networks | 41,659 | 39,827 | 35,126 | 44,448 | 39,261 | 37,819 |
| Of which Products | 30,992 | 28,966 | 24,748 | 31,159 | 27,500 | 26,698 |
| Of which Services | 10,667 | 10,861 | 10,378 | 13,289 | 11,761 | 11,121 |
| Digital Services | 8,733 | 8,575 | 7,345 | 13,168 | 9,881 | 8,991 |
| Of which Products | 4,621 | 4,598 | 3,798 | 7,338 | 5,594 | 4,611 |
| Of which Services | 4,112 | 3,977 | 3,547 | 5,830 | 4,287 | 4,380 |
| Managed Services | 5,498 | 5,573 | 5,714 | 7,027 | 6,359 | 6,323 |
| Emerging Business and Other | 1,582 | 1,603 | 1,565 | 1,730 | 1,626 | 1,677 |
| Total | 57,472 | 55,578 | 49,750 | 66,373 | 57,127 | 54,810 |
| 2020 | 2019 | |||||
| Sequential change, percent | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 |
| Networks | 5% | 13% | -21% | 13% | 4% | 13% |
| Of which Products | 7% | 17% | -21% | 13% | 3% | 12% |
| Of which Services | -2% | 5% | -22% | 13% | 6% | 14% |
| Digital Services | 2% | 17% | -44% | 33% | 10% | 15% |
| Of which Products | 1% | 21% | -48% | 31% | 21% | 17% |
| Of which Services | 3% | 12% | -39% | 36% | -2% | 13% |
| Managed Services | -1% | -2% | -19% | 11% | 1% | 8% |
| Emerging Business and Other | -1% | 2% | -10% | 6% | -3% | -4% |
| Total | 3% | 12% | -25% | 16% | 4% | 12% |
| 2020 | 2019 | |||||
| Year over year change, percent | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 |
| Networks | 6% | 5% | 5% | 7% | 9% | 17% |
| Of which Products | 13% | 8% | 4% | 5% | 9% | 20% |
| Of which Services | -9% | -2% | 7% | 12% | 11% | 10% |
| Digital Services | -12% | -5% | -6% | 1% | 10% | 2% |
| Of which Products | -17% | 0% | -4% | -2% | 22% | 3% |
| Of which Services | -4% | -9% | -9% | 5% | -3% | 0% |
| Managed Services | -14% | -12% | -2% | 2% | -2% | -3% |
| Emerging Business and Other | -3% | -4% | -11% | -24% | -33% | -18% |
| Total | 1% | 1% | 2% | 4% | 6% | 10% |
| 2020 | 2019 | |||||
| Year to date, SEK million | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun |
| Networks | 116,612 | 74,953 | 35,126 | 155,009 | 110,561 | 71,300 |
| Of which Products | 84,706 | 53,714 | 24,748 | 109,122 | 77,963 | 50,463 |
| Of which Services | 31,906 | 21,239 | 10,378 | 45,887 | 32,598 | 20,837 |
| Digital Services | 24,653 | 15,920 | 7,345 | 39,857 | 26,689 | 16,808 |
| Of which Products | 13,017 | 8,396 | 3,798 | 21,480 | 14,142 | 8,548 |
| Of which Services | 11,636 | 7,524 | 3,547 | 18,377 | 12,547 | 8,260 |
| Managed Services | 16,785 | 11,287 | 5,714 | 25,565 | 18,538 | 12,179 |
| Emerging Business and Other | 4,750 | 3,168 | 1,565 | 6,785 | 5,055 | 3,429 |
| Total | 162,800 | 105,328 | 49,750 | 227,216 | 160,843 | 103,716 |
| 2020 | 2019 | |||||
| Year over year change, percent | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun |
| Networks | 5% | 5% | 5% | 12% | 14% | 17% |
| Of which Products | 9% | 6% | 4% | 13% | 16% | 21% |
| Of which Services | -2% | 2% | 7% | 10% | 9% | 9% |
| Digital Services | -8% | -5% | -6% | 5% | 6% | 4% |
| Of which Products | -8% | -2% | -4% | 5% | 9% | 2% |
| Of which Services | -7% | -9% | -9% | 4% | 4% | 8% |
| Managed Services | -9% | -7% | -2% | -1% | -2% | -2% |
| Emerging Business and Other | -6% | -8% | -11% | -19% | -18% | -7% |
| Total | 1% | 2% | 2% | 8% | 9% | 11% |
Ericsson | Third quarter report 2020
Accounting policies and Explanatory notes
Gross income by segment by quarter
| 2020 | 2019 | |||||
|---|---|---|---|---|---|---|
| Isolated quarters, SEK million | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 |
| Networks | 19,375 | 16,022 | 15,586 | 18,265 | 16,327 | 15,670 |
| Digital Services | 3,787 | 3,738 | 2,929 | 4,898 | 3,749 | 3,311 |
| Managed Services | 1,093 | 955 | 933 | 1,039 | 1,136 | 779 |
| Emerging Business and Other | 507 | 202 | 340 | 232 | 328 | 311 |
| Total | 24,762 | 20,917 | 19,788 | 24,434 | 21,540 | 20,071 |
| 2020 | 2019 | |||||
| Year to date, SEK million | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun |
| Networks | 50,983 | 31,608 | 15,586 | 64,717 | 46,452 | 30,125 |
| Digital Services | 10,454 | 6,667 | 2,929 | 14,836 | 9,938 | 6,189 |
| Managed Services | 2,981 | 1,888 | 933 | 3,990 | 2,951 | 1,815 |
| Emerging Business and Other | 1,049 | 542 | 340 | 1,281 | 1,049 | 721 |
| Total | 65,467 | 40,705 | 19,788 | 84,824 | 60,390 | 38,850 |
Operating income (loss) by segment by quarter
| 2020 | 2019 | |||||
|---|---|---|---|---|---|---|
| Isolated quarters, SEK million | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 |
| Networks | 9,165 | 5,255 | 5,827 | 6,399 | 7,216 | 5,680 |
| Digital Services | -591 | -697 | -1,417 | -164 | -660 | -1,405 |
| Managed Services | 491 | 263 | 408 | 292 | 562 | 203 |
| Emerging Business and Other | -422 | -970 | -512 | -402 | -11,314 | -739 |
| Total | 8,643 | 3,851 | 4,306 | 6,125 | -4,196 | 3,739 |
| 2020 | 2019 | |||||
| Year to date, SEK million | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun |
| Networks | 20,247 | 11,082 | 5,827 | 24,767 | 18,368 | 11,152 |
| Digital Services | -2,705 | -2,114 | -1,417 | -4,027 | -3,863 | -3,203 |
| Managed Services | 1,162 | 671 | 408 | 2,309 | 2,017 | 1,455 |
| Emerging Business and Other | -1,904 | -1,482 | -512 | -12,485 | -12,083 | -769 |
| Total | 16,800 | 8,157 | 4,306 | 10,564 | 4,439 | 8,635 |
26 Ericsson | Third quarter report 2020
Accounting policies and Explanatory notes
Net sales by market area by quarter
| 2020 | 2019 | |||||
|---|---|---|---|---|---|---|
| Isolated quarters, SEK million | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 |
| South East Asia, Oceania and India | 7,801 | 6,582 | 5,917 | 9,231 | 7,432 | 6,965 |
| North East Asia | 8,814 | 7,790 | 3,907 | 9,704 | 6,356 | 6,516 |
| North America | 18,356 | 18,407 | 17,911 | 17,368 | 18,985 | 17,699 |
| Europe and Latin America 1) 2) | 13,318 | 13,061 | 12,241 | 17,489 | 14,308 | 14,085 |
| Middle East and Africa | 5,520 | 5,431 | 5,829 | 8,426 | 6,046 | 5,641 |
| Other 1) 2) | 3,663 | 4,307 | 3,945 | 4,155 | 4,000 | 3,904 |
| Total | 57,472 | 55,578 | 49,750 | 66,373 | 57,127 | 54,810 |
| 1) Of which in Sweden | 249 | 284 | 227 | 235 | 13 | 149 |
| 2) Of which in EU* | 7,090 | 7,278 | 6,259 | 10,572 | 8,815 | 8,385 |
| 2020 | 2019 | |||||
| Sequential change, percent | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 |
| South East Asia, Oceania and India | 19% | 11% | -36% | 24% | 7% | 13% |
| North East Asia | 13% | 99% | -60% | 53% | -2% | 70% |
| North America | 0% | 3% | 3% | -9% | 7% | 9% |
| Europe and Latin America 1) 2) | 2% | 7% | -30% | 22% | 2% | 7% |
| Middle East and Africa | 2% | -7% | -31% | 39% | 7% | 4% |
| Other 1) 2) | -15% | 9% | -5% | 4% | 2% | -8% |
| Total | 3% | 12% | -25% | 16% | 4% | 12% |
| 1) Of which in Sweden | -12% | 25% | -3% | 1708% | -91% | -22% |
| 2) Of which in EU* | -3% | 16% | -29% | 20% | 5% | 5% |
| 2020 | 2019 | |||||
| Year over year change, percent | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 |
| South East Asia, Oceania and India | 5% | -5% | -4% | 12% | -7% | 0% |
| North East Asia | 39% | 20% | 2% | 16% | 10% | 37% |
| North America | -3% | 4% | 11% | -4% | 27% | 23% |
| Europe and Latin America 1) 2) | -7% | -7% | -7% | -2% | -3% | 1% |
| Middle East and Africa | -9% | -4% | 8% | 23% | 4% | -3% |
| Other 1) 2) | -8% | 10% | -7% | -6% | -13% | -1% |
| Total | 1% | 1% | 2% | 4% | 6% | 10% |
| 1) Of which in Sweden | 1815% | 91% | 18% | -37% | -97% | -75% |
| 2) Of which in EU* | -4% | 5% | -4% | 2% | 4% | -3% |
| 2020 | 2019 | |||||
| Year to date, SEK million | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun |
| South East Asia, Oceania and India | 20,300 | 12,499 | 5,917 | 29,776 | 20,545 | 13,113 |
| North East Asia | 20,511 | 11,697 | 3,907 | 26,400 | 16,696 | 10,340 |
| North America | 54,674 | 36,318 | 17,911 | 70,223 | 52,855 | 33,870 |
| Europe and Latin America 1) 2) | 38,620 | 25,302 | 12,241 | 59,006 | 41,517 | 27,209 |
| Middle East and Africa | 16,780 | 11,260 | 5,829 | 25,525 | 17,099 | 11,053 |
| Other 1) 2) | 11,915 | 8,252 | 3,945 | 16,286 | 12,131 | 8,131 |
| Total | 162,800 | 105,328 | 49,750 | 227,216 | 160,843 | 103,716 |
| 1) Of which in Sweden | 760 | 511 | 227 | 589 | 354 | 341 |
| 2) Of which in EU* | 20,627 | 13,537 | 6,259 | 35,729 | 25,157 | 16,342 |
| 2020 | 2019 | |||||
| Year to date, year over year change, percent | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun |
| South East Asia, Oceania and India | -1% | -5% | -4% | 1% | -4% | -2% |
| North East Asia | 23% | 13% | 2% | 18% | 20% | 27% |
| North America | 3% | 7% | 11% | 20% | 30% | 32% |
| Europe and Latin America 1) 2) | -7% | -7% | -7% | -1% | 0% | 1% |
| Middle East and Africa | -2% | 2% | 8% | 5% | -2% | -5% |
| Other 1) 2) | -2% | 1% | -7% | -1% | 1% | 9% |
| Total | 1% | 2% | 2% | 8% | 9% | 11% |
| 1) Of which in Sweden | 115% | 50% | 18% | -75% | -82% | -77% |
| 2) Of which in EU* | -1% | 1% | -4% | -1% | -2% | -5% |
*) No sales to UK are included as from 2020.
Ericsson | Third quarter report 2020
Accounting policies and Explanatory notes
Net sales by market area by segment
| SEK million | Q3 2020 | Jan-Sep 2020 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Networks | Digital Services | Managed Services | Emerging Business and Other | Total | Networks | Digital Services | Managed Services | Emerging Business and Other | Total | |
| South East Asia, Oceania and India | 5,560 | 1,085 | 1,153 | 3 | 7,801 | 14,237 | 2,935 | 3,100 | 28 | 20,300 |
| North East Asia | 7,432 | 1,130 | 164 | 88 | 8,814 | 16,594 | 3,167 | 539 | 211 | 20,511 |
| North America | 15,616 | 1,984 | 745 | 11 | 18,356 | 46,618 | 5,264 | 2,746 | 46 | 54,674 |
| Europe and Latin America | 8,056 | 2,728 | 2,443 | 91 | 13,318 | 23,074 | 7,745 | 7,535 | 266 | 38,620 |
| Middle East and Africa | 3,108 | 1,416 | 993 | 3 | 5,520 | 9,693 | 4,209 | 2,865 | 13 | 16,780 |
| Other | 1,887 | 390 | 0 | 1,386 | 3,663 | 6,396 | 1,333 | 0 | 4,186 | 11,915 |
| Total | 41,659 | 8,733 | 5,498 | 1,582 | 57,472 | 116,612 | 24,653 | 16,785 | 4,750 | 162,800 |
| Share of total | 72% | 15% | 10% | 3% | 100% | 72% | 15% | 10% | 3% | 100% |
| Sequential change, percent | Q3 2020 | |||||||||
| --- | --- | --- | --- | --- | --- | |||||
| Networks | Digital Services | Managed Services | Emerging Business and Other | Total | ||||||
| South East Asia, Oceania and India | 24% | 1% | 12% | -63% | 19% | |||||
| North East Asia | 16% | -4% | -5% | 54% | 13% | |||||
| North America | -1% | 14% | -15% | -52% | 0% | |||||
| Europe and Latin America | 3% | 4% | -3% | 2% | 2% | |||||
| Middle East and Africa | 3% | -2% | 2% | - | 2% | |||||
| Other | -21% | -22% | -100% | -3% | -15% | |||||
| Total | 5% | 2% | -1% | -1% | 3% | |||||
| Year over year change, percent | Q3 2020 | Jan-Sep 2020 | ||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Networks | Digital Services | Managed Services | Emerging Business and Other | Total | Networks | Digital Services | Managed Services | Emerging Business and Other | Total | |
| South East Asia, Oceania and India | 1% | 17% | 18% | -77% | 5% | -5% | 10% | 11% | -30% | -1% |
| North East Asia | 54% | -13% | -26% | 319% | 39% | 28% | 9% | -22% | 132% | 23% |
| North America | 4% | -26% | -39% | -58% | -3% | 9% | -21% | -21% | -43% | 3% |
| Europe and Latin America | -2% | -8% | -19% | -17% | -7% | -4% | -9% | -14% | -9% | -7% |
| Middle East and Africa | -11% | -11% | 5% | -67% | -9% | 0% | -9% | 4% | 8% | -2% |
| Other | -11% | -10% | -100% | -4% | -8% | 2% | 3% | - | -8% | -2% |
| Total | 6% | -12% | -14% | -3% | 1% | 5% | -8% | -9% | -6% | 1% |
Top 5 countries in sales
| Country, percentage of net sales | Q3 | Jan-Sep | ||
|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |
| United States | 34% | 35% | 35% | 34% |
| China | 10% | 7% | 8% | 6% |
| Australia | 4% | 3% | 4% | 3% |
| Japan | 4% | 4% | 4% | 3% |
| Saudi Arabia | 4% | 3% | 4% | 3% |
Ericsson | Third quarter report 2020
Accounting policies and Explanatory notes
IPR licensing revenues by segment by quarter
| 2020 | 2019 | |||||
|---|---|---|---|---|---|---|
| Isolated quarters, SEK million | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 |
| Networks | 1,773 | 2,282 | 2,019 | 2,014 | 1,972 | 1,845 |
| Digital Services | 389 | 501 | 443 | 443 | 433 | 404 |
| Total | 2,162 | 2,783 | 2,462 | 2,457 | 2,405 | 2,249 |
| 2020 | 2019 | |||||
| Year to date, SEK million | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun |
| Networks | 6,074 | 4,301 | 2,019 | 7,897 | 5,883 | 3,911 |
| Digital Services | 1,333 | 944 | 443 | 1,734 | 1,291 | 858 |
| Total | 7,407 | 5,245 | 2,462 | 9,631 | 7,174 | 4,769 |
Provisions
| 2020 | 2019 | |||||
|---|---|---|---|---|---|---|
| Isolated quarters, SEK million | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 |
| Opening balance | 10,603 | 11,060 | 10,923 | 22,007 | 11,358 | 12,033 |
| Additions 1) | 1,093 | 2,116 | 793 | 2,438 | 12,774 | 1,423 |
| Utilization/Cash out 1) | -475 | -2,066 | -673 | -12,529 | -2,151 | -2,084 |
| Of which restructuring | -160 | -137 | -186 | -143 | -711 | -378 |
| Reversal of excess amounts | -172 | -192 | -124 | -842 | -128 | -88 |
| Reclassification, translation difference and other | -127 | -315 | 141 | -151 | 154 | 74 |
| Closing balance | 10,922 | 10,603 | 11,060 | 10,923 | 22,007 | 11,358 |
| Of which restructuring | 1,659 | 1,594 | 1,202 | 1,095 | 1,099 | 1,743 |
| 2020 | 2019 | |||||
| Year to date, SEK million | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun |
| Opening balance | 10,923 | 10,923 | 10,923 | 16,008 | 16,008 | 16,008 |
| Additions | 4,002 | 2,909 | 793 | 7,172 | 15,598 | 2,824 |
| Utilization/Cash out | -3,214 | -2,739 | -673 | -7,576 | -5,911 | -3,760 |
| Of which restructuring | -483 | -323 | -186 | -1,789 | -1,646 | -935 |
| Reversal of excess amounts | -488 | -316 | -124 | -1,183 | -341 | -213 |
| Reclassification, translation difference and other | -301 | -174 | 141 | -3,498 | -3,347 | -3,501 |
| Closing balance | 10,922 | 10,603 | 11,060 | 10,923 | 22,007 | 11,358 |
| Of which restructuring | 1,659 | 1,594 | 1,202 | 1,095 | 1,099 | 1,743 |
1) Includes additions of cost provisions related to the resolution of the SEC and DOJ investigations of SEK -11.5 b. in Q3 2019. Includes payment of SEK 10.1 b. to SEC and DOJ in Q4 2019.
29 Ericsson | Third quarter report 2020
Accounting policies and Explanatory notes
Financial instruments
There have been no changes to the classification of financial instruments or fair value hierarchy categorization from that presented in the latest 2019 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:
| SEK million | Sep 30 2020 | Jun 30 2020 | Dec 31 2019 |
|---|---|---|---|
| Financial assets at fair value through profit or loss | 64,402 | 61,384 | 57,040 |
| Financial assets at fair value through OCI | 38,180 | 38,325 | 43,069 |
| Financial assets at amortized costs | 4,361 | 3,384 | 4,519 |
| Total financial assets | 106,943 | 103,093 | 104,628 |
| Financial liabilities at fair value through profit or loss | 35,645 | 36,780 | 36,895 |
| Financial liabilities at amortized costs | 32,397 | 34,133 | 32,199 |
| Total financial liabilities | 68,042 | 70,913 | 69,094 |
Financial assets at fair value through profit or loss (FVTPL) are mainly interest bearing securities and cash equivalents, measured at quoted market prices (Level 1) (SEK 58,210 million at Sep 2020, SEK 55,760 million at Jun 2020 and SEK 50,543 million at Dec 2019). Other FVTPL assets measured under Level 3 hierarchy are customer finance receivables (SEK 3,147 million at Sep 2020, SEK 2,554 million at June 2020, SEK 3,756 million at Dec 2019) and other financial investments (SEK 2,557 million at Sep 2020, SEK 2,621 million at June 2020 and SEK 2,600 million at Dec 2019). Movements of customer finance receivables are as follows: additions of SEK 20,895 million, disposals and repayments of SEK 21,378 million and revaluation loss of SEK 126 million.
Financial assets at fair value through OCI consist of trade receivables, measured at gross values less impairment allowance for expected credit losses which is deemed to be equal to their fair values.
Financial liabilities at FVTPL are mainly parent company borrowings (SEK 35,024 million at Sep 2020, SEK 35,920 million at Jun 2020 and SEK 35,899 million at Dec 2019). Some borrowings are valued at quoted market prices (Level 1), whereas others not traded on the credit market (Level 2) are valued based on the latest average pricing updates from Ericsson core banks.
Financial assets and liabilities at amortized costs comprise of some cash equivalents, borrowings and trade payables that are deemed to be equal to fair values.
Information on investments
Investments in assets subject to depreciation, amortization, impairment and write-downs
| 2020 | 2019 | ||||||
|---|---|---|---|---|---|---|---|
| Isolated quarters, SEK million | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 |
| Additions | |||||||
| Property, plant and equipment | 963 | 1,327 | 1,113 | 1,475 | 1,231 | 1,098 | 1,314 |
| Capitalized development expenses | 167 | 211 | 262 | 329 | 313 | 446 | 457 |
| IPR, brands and other intangible assets | - | 97 | 1 | 1 | 2 | - | 1 |
| Total | 1,130 | 1,635 | 1,376 | 1,805 | 1,546 | 1,544 | 1,772 |
| Depreciation, amortization and impairment losses | |||||||
| Property, plant and equipment | 916 | 1,003 | 1,009 | 1,100 | 1,048 | 919 | 880 |
| Capitalized development expenses | 230 | 272 | 174 | 256 | 330 | 449 | 520 |
| Goodwill, IPR, brands and other intangible assets | 365 | 258 | 321 | 269 | 229 | 226 | 314 |
| Total | 1,511 | 1,533 | 1,504 | 1,625 | 1,607 | 1,594 | 1,714 |
| 2020 | 2019 | ||||||
| Year to date, SEK million | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Additions | |||||||
| Property, plant and equipment | 3,403 | 2,440 | 1,113 | 5,118 | 3,643 | 2,412 | 1,314 |
| Capitalized development expenses | 640 | 473 | 262 | 1,545 | 1,216 | 903 | 457 |
| IPR, brands and other intangible assets | 98 | 98 | 1 | 4 | 3 | 1 | 1 |
| Total | 4,141 | 3,011 | 1,376 | 6,667 | 4,862 | 3,316 | 1,772 |
| Depreciation, amortization and impairment losses | |||||||
| Property, plant and equipment | 2,928 | 2,012 | 1,009 | 3,947 | 2,847 | 1,799 | 880 |
| Capitalized development expenses | 676 | 446 | 174 | 1,555 | 1,299 | 969 | 520 |
| Goodwill, IPR, brands and other intangible assets | 944 | 579 | 321 | 1,038 | 769 | 540 | 314 |
| Total | 4,548 | 3,037 | 1,504 | 6,540 | 4,915 | 3,308 | 1,714 |
Ericsson | Third quarter report 2020
Accounting policies and Explanatory notes
Other information
| SEK million | Q3 | Jan-Sep | ||
|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |
| Number of shares and earnings per share | ||||
| Number of shares, end of period (million) | 3,334 | 3,334 | 3,334 | 3,334 |
| Of which class A-shares (million) | 262 | 262 | 262 | 262 |
| Of which class B-shares (million) | 3,072 | 3,072 | 3,072 | 3,072 |
| Number of treasury shares, end of period (million) | 6 | 25 | 6 | 25 |
| Number of shares outstanding, basic, end of period (million) | 3,328 | 3,309 | 3,328 | 3,309 |
| Numbers of shares outstanding, diluted, end of period (million) | 3,331 | 3,327 | 3,331 | 3,327 |
| Average number of treasury shares (million) | 8 | 26 | 12 | 30 |
| Average number of shares outstanding, basic (million) | 3,326 | 3,308 | 3,322 | 3,304 |
| Average number of shares outstanding, diluted (million) 1) | 3,329 | 3,326 | 3,325 | 3,322 |
| Earnings (loss) per share, basic (SEK) 2) | 1.61 | -1.89 | 3.00 | -0.67 |
| Earnings (loss) per share, diluted (SEK) 1) | 1.61 | -1.89 | 3.00 | -0.67 |
| Exchange rates used in the consolidation | ||||
| SEK/EUR - closing rate | - | - | 10.55 | 10.71 |
| SEK/USD - closing rate | - | - | 9.00 | 9.81 |
| Other | ||||
| Assets pledged as collateral | - | - | 6,743 | 6,049 |
| Contingent liabilities | - | - | 1,113 | 1,640 |
1) Potential ordinary shares are not considered when their conversion to ordinary shares would increase earnings per share.
2) Based on net income (loss) attributable to owners of the Parent Company.
Number of employees
| End of period | 2020 | 2019 | |||||
|---|---|---|---|---|---|---|---|
| Sep 30 | Jun 30 | Mar 31 | Dec 31 | Sep 30 | Jun 30 | Mar 31 | |
| South East Asia, Oceania and India | 25,633 | 25,265 | 24,942 | 24,559 | 24,322 | 23,942 | 24,051 |
| North East Asia | 13,955 | 13,965 | 13,786 | 13,783 | 13,608 | 13,334 | 13,169 |
| North America | 9,537 | 9,785 | 9,718 | 9,643 | 9,487 | 9,342 | 9,246 |
| Europe and Latin America 1) | 46,495 | 46,521 | 46,402 | 47,135 | 44,150 | 43,846 | 43,833 |
| Middle East and Africa | 4,206 | 4,264 | 4,247 | 4,297 | 4,320 | 4,292 | 4,281 |
| Total | 99,826 | 99,800 | 99,095 | 99,417 | 95,887 | 94,756 | 94,580 |
| 1) Of which Sweden | 13,046 | 12,884 | 12,746 | 12,730 | 12,679 | 12,549 | 12,455 |
31 Ericsson | Third quarter report 2020
Accounting policies and Explanatory notes
Alternative performance measures
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 investor's 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. APM's should not be viewed as substitutes for income statement or cash flow items computed in accordance with IFRS.
As from 2020 net sales and operating margin excluding restructuring charges rolling four quarters (%) are introduced. The Company is of the view that the new APM is a good way to explain and measure the performance of the company. The contracts are delivered over several quarters and thus an individual quarter does not always fully reflect the performance.
The Company has decided to remove Cash conversion as an APM since it is no longer used by the Company. The Company is instead using Free cash flow before M&A to reflect the cash flows generated by the Company.
This section also includes a reconciliation of the APM's to the most directly reconcilable line items in the financial statements. For more information about non-IFRS key operating measures, see Ericsson Annual Report 2019.
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.
| 2020 | 2019 | ||||||
|---|---|---|---|---|---|---|---|
| Isolated quarters, year over year change | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 |
| Reported net sales | 57,472 | 55,578 | 49,750 | 66,373 | 57,127 | 54,810 | 48,906 |
| Acquired business | -415 | -422 | -319 | -96 | - | - | - |
| Net FX impact | 4,304 | -326 | -1,654 | -2,748 | -2,457 | -2,538 | -2,932 |
| Comparable net sales, excluding FX impact | 61,361 | 54,830 | 47,777 | 63,529 | 54,670 | 52,272 | 45,974 |
| Comparable quarter net sales adj. for acq/div business 1) | 57,150 | 54,810 | 48,798 | 63,037 | 53,077 | 49,055 | 42,961 |
| Sales growth adjusted for comparable units and currency (%) | 7% | 0% | -2% | 1% | 3% | 7% | 7% |
| 2020 | 2019 | ||||||
| Year to date, year over year change | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Reported net sales | 162,800 | 105,328 | 49,750 | 227,216 | 160,843 | 103,716 | 48,906 |
| Acquired business | -1,156 | -741 | -319 | -96 | - | - | - |
| Net FX impact | 2,324 | -1,980 | -1,654 | -10,675 | -7,927 | -5,470 | -2,932 |
| Comparable net sales, excluding FX impact | 163,968 | 102,607 | 47,777 | 216,445 | 152,916 | 98,246 | 45,974 |
| Comparable quarter net sales adj. for acq/div business 1) | 160,758 | 103,608 | 48,798 | 208,130 | 145,093 | 92,016 | 42,961 |
| Sales growth adjusted for comparable units and currency (%) | 2% | -1% | -2% | 4% | 5% | 7% | 7% |
1) Adjusted for divestment of MediaKind in February 2019 and acquisition of Kathrein in October 2019.
32 Ericsson | Third quarter report 2020
Alternative performance measures
Items excluding restructuring charges
Gross income, operating expenses, and operating income (loss) are presented excluding restructuring charges and, for certain measures, as a percentage of net sales.
| Isolated quarters, SEK million | 2020 | 2019 | |||||
|---|---|---|---|---|---|---|---|
| Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |
| Gross income | 24,762 | 20,917 | 19,788 | 24,434 | 21,540 | 20,071 | 18,779 |
| Net sales | 57,472 | 55,578 | 49,750 | 66,373 | 57,127 | 54,810 | 48,906 |
| Gross margin (%) | 43.1% | 37.6% | 39.8% | 36.8% | 37.7% | 36.6% | 38.4% |
| Gross income | 24,762 | 20,917 | 19,788 | 24,434 | 21,540 | 20,071 | 18,779 |
| Restructuring charges included in cost of sales | 73 | 312 | 335 | 218 | 28 | 26 | 65 |
| Gross income excluding restructuring charges | 24,835 | 21,229 | 20,123 | 24,652 | 21,568 | 20,097 | 18,844 |
| Net sales | 57,472 | 55,578 | 49,750 | 66,373 | 57,127 | 54,810 | 48,906 |
| Gross margin excluding restructuring charges (%) | 43.2% | 38.2% | 40.4% | 37.1% | 37.8% | 36.7% | 38.5% |
| Operating expenses | -16,121 | -17,045 | -15,543 | -19,028 | -14,217 | -16,331 | -14,639 |
| Restructuring charges included in R&D expenses | 244 | 227 | -39 | 79 | 98 | 49 | 118 |
| Restructuring charges included in selling and administrative expenses | 13 | 144 | 5 | 30 | 21 | 43 | 23 |
| Operating expenses excluding restructuring charges | -15,864 | -16,674 | -15,577 | -18,919 | -14,098 | -16,239 | -14,498 |
| Operating income (loss) | 8,643 | 3,851 | 4,306 | 6,125 | -4,196 | 3,739 | 4,896 |
| Net sales | 57,472 | 55,578 | 49,750 | 66,373 | 57,127 | 54,810 | 48,906 |
| Operating margin (%) | 15.0% | 6.9% | 8.7% | 9.2% | -7.3% | 6.8% | 10.0% |
| Operating income (loss) | 8,643 | 3,851 | 4,306 | 6,125 | -4,196 | 3,739 | 4,896 |
| Total restructuring charges | 330 | 683 | 301 | 327 | 147 | 118 | 206 |
| Operating income (loss) excluding restructuring charges | 8,973 | 4,534 | 4,607 | 6,452 | -4,049 | 3,857 | 5,102 |
| Net sales | 57,472 | 55,578 | 49,750 | 66,373 | 57,127 | 54,810 | 48,906 |
| Operating margin excluding restructuring charges (%) | 15.6% | 8.2% | 9.3% | 9.7% | -7.1% | 7.0% | 10.4% |
| Year to date, SEK million | 2020 | 2019 | |||||
| --- | --- | --- | --- | --- | --- | --- | --- |
| Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |
| Gross income | 65,467 | 40,705 | 19,788 | 84,824 | 60,390 | 38,850 | 18,779 |
| Net sales | 162,800 | 105,328 | 49,750 | 227,216 | 160,843 | 103,716 | 48,906 |
| Gross margin (%) | 40.2% | 38.6% | 39.8% | 37.3% | 37.5% | 37.5% | 38.4% |
| Gross income | 65,467 | 40,705 | 19,788 | 84,824 | 60,390 | 38,850 | 18,779 |
| Restructuring charges included in cost of sales | 720 | 647 | 335 | 337 | 119 | 91 | 65 |
| Gross income excluding restructuring charges | 66,187 | 41,352 | 20,123 | 85,161 | 60,509 | 38,941 | 18,844 |
| Net sales | 162,800 | 105,328 | 49,750 | 227,216 | 160,843 | 103,716 | 48,906 |
| Gross margin excluding restructuring charges (%) | 40.7% | 39.3% | 40.4% | 37.5% | 37.6% | 37.5% | 38.5% |
| Operating expenses | -48,709 | -32,588 | -15,543 | -64,215 | -45,187 | -30,970 | -14,639 |
| Restructuring charges included in R&D expenses | 432 | 188 | -39 | 344 | 265 | 167 | 118 |
| Restructuring charges included in selling and administrative expenses | 162 | 149 | 5 | 117 | 87 | 66 | 23 |
| Operating expenses excluding restructuring charges | -48,115 | -32,251 | -15,577 | -63,754 | -44,835 | -30,737 | -14,498 |
| Operating income (loss) | 16,800 | 8,157 | 4,306 | 10,564 | 4,439 | 8,635 | 4,896 |
| Net sales | 162,800 | 105,328 | 49,750 | 227,216 | 160,843 | 103,716 | 48,906 |
| Operating margin (%) | 10.3% | 7.7% | 8.7% | 4.6% | 2.8% | 8.3% | 10.0% |
| Operating income (loss) | 16,800 | 8,157 | 4,306 | 10,564 | 4,439 | 8,635 | 4,896 |
| Total restructuring charges | 1,314 | 984 | 301 | 798 | 471 | 324 | 206 |
| Operating income (loss) excluding restructuring charges | 18,114 | 9,141 | 4,607 | 11,362 | 4,910 | 8,959 | 5,102 |
| Net sales | 162,800 | 105,328 | 49,750 | 227,216 | 160,843 | 103,716 | 48,906 |
| Operating margin excluding restructuring charges (%) | 11.1% | 8.7% | 9.3% | 5.0% | 3.1% | 8.6% | 10.4% |
33 Ericsson | Third quarter report 2020
Alternative performance measures
EBITA and EBITA margin
Earnings (loss) before interest, taxes, amortization and write-downs of acquired intangibles, also expressed as a percentage of net sales.
| 2020 | 2019 | ||||||
|---|---|---|---|---|---|---|---|
| Isolated quarters, SEK million | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 |
| Net income (loss) | 5,566 | 2,585 | 2,280 | 4,484 | -6,894 | 1,847 | 2,403 |
| Taxes | 3,186 | 1,558 | 1,124 | 1,570 | 2,013 | 1,451 | 1,888 |
| Financial income and expenses, net | -109 | -292 | 902 | 71 | 685 | 441 | 605 |
| Amortization and write-downs of acquired intangibles | 365 | 258 | 321 | 269 | 229 | 226 | 314 |
| EBITA | 9,008 | 4,109 | 4,627 | 6,394 | -3,967 | 3,965 | 5,210 |
| Net sales | 57,472 | 55,578 | 49,750 | 66,373 | 57,127 | 54,810 | 48,906 |
| EBITA margin (%) | 15.7% | 7.4% | 9.3% | 9.6% | -6.9% | 7.2% | 10.7% |
| 2020 | 2019 | ||||||
| --- | --- | --- | --- | --- | --- | --- | --- |
| Year to date, SEK million | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Net income (loss) | 10,431 | 4,865 | 2,280 | 1,840 | -2,644 | 4,250 | 2,403 |
| Taxes | 5,868 | 2,682 | 1,124 | 6,922 | 5,352 | 3,339 | 1,888 |
| Financial income and expenses, net | 501 | 610 | 902 | 1,802 | 1,731 | 1,046 | 605 |
| Amortization and write-downs of acquired intangibles | 944 | 579 | 321 | 1,038 | 769 | 540 | 314 |
| EBITA | 17,744 | 8,736 | 4,627 | 11,602 | 5,208 | 9,175 | 5,210 |
| Net sales | 162,800 | 105,328 | 49,750 | 227,216 | 160,843 | 103,716 | 48,906 |
| EBITA margin (%) | 10.9% | 8.3% | 9.3% | 5.1% | 3.2% | 8.8% | 10.7% |
Rolling four quarters of net sales and operating margin excluding restructuring charges (%)
Net sales, operating margin and restructuring charges as a sum of last four quarters.
| 2020 | 2019 | ||||||
|---|---|---|---|---|---|---|---|
| Rolling four quarters, SEK million | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 |
| Net sales | 229,173 | 228,828 | 228,060 | 227,216 | 224,652 | 221,335 | 216,333 |
| Operating income (loss) | 22,925 | 10,086 | 9,974 | 10,564 | 2,587 | 10,024 | 6,450 |
| Restructuring charges | 1,641 | 1,458 | 893 | 798 | 4,882 | 5,287 | 7,049 |
| Operating income (loss) excl. restr. charges | 24,566 | 11,544 | 10,867 | 11,362 | 7,469 | 15,311 | 13,499 |
| Operating margin excl. restr. charges (%) | 10.7% | 5.0% | 4.8% | 5.0% | 3.3% | 6.9% | 6.2% |
34 Ericsson | Third quarter report 2020
Alternative performance measures
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 | 2020 | 2019 | |||||
|---|---|---|---|---|---|---|---|
| Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |
| Cash and cash equivalents | 48,774 | 45,655 | 48,347 | 45,079 | 51,183 | 45,498 | 45,453 |
| + Interest-bearing securities, current | 5,552 | 5,739 | 7,834 | 6,759 | 5,866 | 6,367 | 3,183 |
| + Interest-bearing securities, non-current | 23,898 | 24,025 | 23,335 | 20,354 | 19,157 | 17,091 | 23,022 |
| Gross cash, end of period | 78,224 | 75,419 | 79,516 | 72,192 | 76,206 | 68,956 | 71,658 |
| - Borrowings, current | 14,587 | 15,290 | 17,759 | 9,439 | 1,622 | 2,160 | 3,015 |
| - Borrowings, non-current | 22,132 | 22,581 | 23,381 | 28,257 | 37,153 | 33,040 | 32,533 |
| Net cash, end of period | 41,505 | 37,548 | 38,376 | 34,496 | 37,431 | 33,756 | 36,110 |
Capital employed
Total assets less non-interest-bearing provisions and liabilities.
| SEK million | 2020 | 2019 | |||||
|---|---|---|---|---|---|---|---|
| Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |
| Total assets | 277,187 | 276,778 | 292,307 | 276,383 | 288,531 | 280,447 | 283,958 |
| Non-interest-bearing provisions and liabilities | |||||||
| Provisions, non-current | 2,378 | 2,240 | 2,703 | 2,679 | 2,308 | 2,646 | 2,670 |
| Deferred tax liabilities | 1,102 | 1,164 | 1,060 | 1,224 | 857 | 1,178 | 792 |
| Other non-current liabilities | 1,759 | 1,813 | 2,178 | 2,114 | 2,163 | 2,160 | 2,118 |
| Provisions, current | 8,544 | 8,363 | 8,357 | 8,244 | 19,699 | 8,712 | 9,363 |
| Contract liabilities | 29,393 | 31,532 | 34,265 | 29,041 | 34,499 | 37,264 | 38,605 |
| Trade payables | 30,704 | 32,182 | 29,840 | 30,403 | 30,672 | 31,388 | 30,842 |
| Other current liabilities | 37,905 | 34,834 | 40,521 | 37,405 | 34,624 | 33,351 | 38,528 |
| Capital employed | 165,402 | 164,650 | 173,383 | 165,273 | 163,709 | 163,748 | 161,040 |
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 | 2020 | 2019 | |||||
|---|---|---|---|---|---|---|---|
| Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |
| Net sales | 57,472 | 55,578 | 49,750 | 66,373 | 57,127 | 54,810 | 48,906 |
| Annualized net sales | 229,888 | 222,312 | 199,000 | 265,492 | 228,508 | 219,240 | 195,624 |
| Average capital employed | |||||||
| Capital employed at beginning of period | 164,650 | 173,383 | 165,273 | 163,709 | 163,748 | 161,040 | 149,615 |
| Capital employed at end of period | 165,402 | 164,650 | 173,383 | 165,273 | 163,709 | 163,748 | 161,040 |
| Average capital employed | 165,026 | 169,017 | 169,328 | 164,491 | 163,729 | 162,394 | 155,328 |
| Capital turnover (times) | 1.4 | 1.3 | 1.2 | 1.6 | 1.4 | 1.4 | 1.3 |
| Year to date, SEK million | 2020 | 2019 | |||||
| --- | --- | --- | --- | --- | --- | --- | --- |
| Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |
| Net sales | 162,800 | 105,328 | 49,750 | 227,216 | 160,843 | 103,716 | 48,906 |
| Annualized net sales | 217,067 | 210,656 | 199,000 | 227,216 | 214,457 | 207,432 | 195,624 |
| Average capital employed | |||||||
| Capital employed at beginning of period | 165,273 | 165,273 | 165,273 | 149,615 | 149,615 | 149,615 | 149,615 |
| Capital employed at end of period | 165,402 | 164,650 | 173,383 | 165,273 | 163,709 | 163,748 | 161,040 |
| Average capital employed | 165,338 | 164,962 | 169,328 | 157,444 | 156,662 | 156,682 | 155,328 |
| Capital turnover (times) | 1.3 | 1.3 | 1.2 | 1.4 | 1.4 | 1.3 | 1.3 |
Ericsson | Third quarter report 2020
Alternative performance measures
Return on capital employed
The annualized total of operating income (loss) 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.
| 2020 | 2019 | ||||||
|---|---|---|---|---|---|---|---|
| Isolated quarters, SEK million | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 |
| Operating income (loss) | 8,643 | 3,851 | 4,306 | 6,125 | -4,196 | 3,739 | 4,896 |
| Annualized operating income (loss) | 34,572 | 15,404 | 17,224 | 24,500 | -16,784 | 14,956 | 19,584 |
| Average capital employed | |||||||
| Capital employed at beginning of period | 164,650 | 173,383 | 165,273 | 163,709 | 163,748 | 161,040 | 149,615 |
| Capital employed at end of period | 165,402 | 164,650 | 173,383 | 165,273 | 163,709 | 163,748 | 161,040 |
| Average capital employed | 165,026 | 169,017 | 169,328 | 164,491 | 163,729 | 162,394 | 155,328 |
| Return on capital employed (%) | 20.9% | 9.1% | 10.2% | 14.9% | -10.3% | 9.2% | 12.6% |
| 2020 | 2019 | ||||||
| --- | --- | --- | --- | --- | --- | --- | --- |
| Year to date, SEK million | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Operating income (loss) | 16,800 | 8,157 | 4,306 | 10,564 | 4,439 | 8,635 | 4,896 |
| Annualized operating income (loss) | 22,400 | 16,314 | 17,224 | 10,564 | 5,919 | 17,270 | 19,584 |
| Average capital employed | |||||||
| Capital employed at beginning of period | 165,273 | 165,273 | 165,273 | 149,615 | 149,615 | 149,615 | 149,615 |
| Capital employed at end of period | 165,402 | 164,650 | 173,383 | 165,273 | 163,709 | 163,748 | 161,040 |
| Average capital employed | 165,338 | 164,962 | 169,328 | 157,444 | 156,662 | 156,682 | 155,328 |
| Return on capital employed (%) | 13.5% | 9.9% | 10.2% | 6.7% | 3.8% | 11.0% | 12.6% |
Equity ratio
Equity expressed as a percentage of total assets.
| 2020 | 2019 | ||||||
|---|---|---|---|---|---|---|---|
| SEK million | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 |
| Total equity | 82,485 | 78,472 | 79,113 | 81,878 | 77,475 | 84,533 | 84,532 |
| Total assets | 277,187 | 276,778 | 292,307 | 276,383 | 288,531 | 280,447 | 283,958 |
| Equity ratio (%) | 29.8% | 28.4% | 27.1% | 29.6% | 26.9% | 30.1% | 29.8% |
Return on equity
Annualized net income (loss) 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.
| 2020 | 2019 | ||||||
|---|---|---|---|---|---|---|---|
| Isolated quarters, SEK million | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 |
| Net income (loss) attributable to owners of the Parent Company | 5,353 | 2,452 | 2,156 | 4,430 | -6,229 | 1,705 | 2,317 |
| Annualized | 21,412 | 9,808 | 8,624 | 17,720 | -24,916 | 6,820 | 9,268 |
| Average stockholders' equity | |||||||
| Stockholders' equity, beginning of period | 79,005 | 79,841 | 82,559 | 78,200 | 84,488 | 84,619 | 86,978 |
| Stockholders' equity, end of period | 82,830 | 79,005 | 79,841 | 82,559 | 78,200 | 84,488 | 84,619 |
| Average stockholders' equity | 80,918 | 79,423 | 81,200 | 80,380 | 81,344 | 84,554 | 85,799 |
| Return on equity (%) | 26.5% | 12.3% | 10.6% | 22.0% | -30.6% | 8.1% | 10.8% |
| 2020 | 2019 | ||||||
| --- | --- | --- | --- | --- | --- | --- | --- |
| Year to date, SEK million | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Net income (loss) attributable to owners of the Parent Company | 9,961 | 4,608 | 2,156 | 2,223 | -2,207 | 4,022 | 2,317 |
| Annualized | 13,281 | 9,216 | 8,624 | 2,223 | -2,943 | 8,044 | 9,268 |
| Average stockholders' equity | |||||||
| Stockholders' equity, beginning of period | 82,559 | 82,559 | 82,559 | 86,978 | 86,978 | 86,978 | 86,978 |
| Stockholders' equity, end of period | 82,830 | 79,005 | 79,841 | 82,559 | 78,200 | 84,488 | 84,619 |
| Average stockholders' equity | 82,695 | 80,782 | 81,200 | 84,769 | 82,589 | 85,733 | 85,799 |
| Return on equity (%) | 16.1% | 11.4% | 10.6% | 2.6% | -3.6% | 9.4% | 10.8% |
36 Ericsson | Third quarter report 2020
Alternative performance measures
Adjusted earnings (loss) per share (non-IFRS)
Adjusted earnings (loss) per share, diluted, excluding amortizations and write-down of acquired intangible assets and excluding restructuring charges.
The APM has been renamed. It was earlier referred to as Earnings (loss) per share (non-IFRS).
| 2020 | 2019 | ||||||
|---|---|---|---|---|---|---|---|
| Isolated quarters, SEK | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 |
| Earnings (loss) per share, diluted | 1.61 | 0.74 | 0.65 | 1.33 | -1.89 | 0.51 | 0.70 |
| Restructuring charges | 0.08 | 0.14 | 0.07 | 0.07 | 0.04 | 0.02 | 0.05 |
| Amortization and write-downs of acquired intangibles | 0.08 | 0.06 | 0.07 | 0.06 | 0.05 | 0.06 | 0.05 |
| Adjusted earnings (loss) per share (non-IRFS) | 1.77 | 0.94 | 0.79 | 1.46 | -1.80 | 0.59 | 0.80 |
| 2020 | 2019 | ||||||
| Year to date, SEK | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Earnings (loss) per share, diluted | 3.00 | 1.39 | 0.65 | 0.67 | -0.67 | 1.21 | 0.70 |
| Restructuring charges | 0.29 | 0.21 | 0.07 | 0.18 | 0.11 | 0.07 | 0.05 |
| Amortization and write-downs of acquired intangibles | 0.21 | 0.13 | 0.07 | 0.22 | 0.16 | 0.11 | 0.05 |
| Adjusted earnings (loss) per share (non-IRFS) | 3.50 | 1.73 | 0.79 | 1.07 | -0.40 | 1.39 | 0.80 |
Free cash flow and free cash flow before M&A
Free cash flow: Cash flow from operating activities less net capital expenditures and other investments.
Free cash flow before M&A: Cash flow from operating activities less net capital expenditures and other investments (excluding M&A).
| 2020 | 2019 | ||||||
|---|---|---|---|---|---|---|---|
| Isolated quarters, SEK million | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 |
| Cash flow from operating activities | 5,279 | 5,449 | 4,302 | 496 | 6,989 | 3,623 | 5,765 |
| Net capital expenditures and other investments (excluding M&A) | |||||||
| Investments in property, plant and equipment | -963 | -1,327 | -1,113 | -1,475 | -1,231 | -1,098 | -1,314 |
| Sales of property, plant and equipment | 55 | 69 | 26 | 206 | 122 | 184 | 232 |
| Product development | -167 | -211 | -262 | -329 | -313 | -446 | -457 |
| Other investing activities | 301 | -126 | -42 | -74 | -56 | -36 | -165 |
| Repayment of lease liabilities | -567 | -618 | -596 | -711 | -1,052 | -623 | -604 |
| Free cash flow before M&A | 3,938 | 3,236 | 2,315 | -1,887 | 4,459 | 1,604 | 3,457 |
| Acquisitions/divestments of subsidiaries and other operations, net | -89 | -45 | -208 | -1,341 | -466 | 3 | 299 |
| Free cash flow | 3,849 | 3,191 | 2,107 | -3,228 | 3,993 | 1,607 | 3,756 |
| Year to date, SEK million | 2020 | 2019 | |||||
| --- | --- | --- | --- | --- | --- | --- | --- |
| Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |
| Cash flow from operating activities | 15,030 | 9,751 | 4,302 | 16,873 | 16,377 | 9,388 | 5,765 |
| Net capital expenditures and other investments (excluding M&A) | |||||||
| Investments in property, plant and equipment | -3,403 | -2,440 | -1,113 | -5,118 | -3,643 | -2,412 | -1,314 |
| Sales of property, plant and equipment | 150 | 95 | 26 | 744 | 538 | 416 | 232 |
| Product development | -640 | -473 | -262 | -1,545 | -1,216 | -903 | -457 |
| Other investing activities | 133 | -168 | -42 | -331 | -257 | -201 | -165 |
| Repayment of lease liabilities | -1,781 | -1,214 | -596 | -2,990 | -2,279 | -1,227 | -604 |
| Free cash flow before M&A | 9,489 | 5,551 | 2,315 | 7,633 | 9,520 | 5,061 | 3,457 |
| Acquisitions/divestments of subsidiaries and other operations, net | -342 | -253 | -208 | -1,505 | -164 | 302 | 299 |
| Free cash flow | 9,147 | 5,298 | 2,107 | 6,128 | 9,356 | 5,363 | 3,756 |
37 Ericsson | Third quarter report 2020
Alternative performance measures
Sales growth by segment adjusted for comparable units and currency
| 2020 | 2019 | |||||
|---|---|---|---|---|---|---|
| Isolated quarter, year over year change, percent | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 |
| Networks 1) | 13% | 4% | 0% | 2% | 4% | 11% |
| Digital Services | -5% | -5% | -9% | -3% | 5% | -3% |
| Managed Services | -9% | -12% | -5% | -1% | -5% | -6% |
| Emerging Business and Other 2) | 2% | -6% | -8% | 9% | -7% | 24% |
| Total 1) 2) | 7% | 0% | -2% | 1% | 3% | 7% |
| 2020 | 2019 | |||||
| Year to date, year over year change, percent | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun |
| Networks | 6% | 2% | 0% | 6% | 8% | 11% |
| Digital Services | -6% | -7% | -9% | -1% | 1% | -2% |
| Managed Services | -9% | -9% | -5% | -4% | -5% | -6% |
| Emerging Business and Other 2) | -4% | -7% | -8% | 14% | 15% | 30% |
| Total 1) 2) | 2% | -1% | -2% | 4% | 5% | 7% |
1) Adjusted for Kathrein acquisition in October 2019.
2) Adjusted for MediaKind divestment in February 2019.
Gross margin by segment by quarter
| 2020 | 2019 | |||||
|---|---|---|---|---|---|---|
| Isolated quarters, as percentage of net sales | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 |
| Networks | 46.5% | 40.2% | 44.4% | 41.1% | 41.6% | 41.4% |
| Digital Services | 43.4% | 43.6% | 39.9% | 37.2% | 37.9% | 36.8% |
| Managed Services | 19.9% | 17.1% | 16.3% | 14.8% | 17.9% | 12.3% |
| Emerging Business and Other | 32.0% | 12.6% | 21.7% | 13.4% | 20.2% | 18.5% |
| Total | 43.1% | 37.6% | 39.8% | 36.8% | 37.7% | 36.6% |
| 2020 | 2019 | |||||
| Year to date, as percentage of net sales | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun |
| Networks | 43.7% | 42.2% | 44.4% | 41.8% | 42.0% | 42.3% |
| Digital Services | 42.4% | 41.9% | 39.9% | 37.2% | 37.2% | 36.8% |
| Managed Services | 17.8% | 16.7% | 16.3% | 15.6% | 15.9% | 14.9% |
| Emerging Business and Other | 22.1% | 17.1% | 21.7% | 18.9% | 20.8% | 21.0% |
| Total | 40.2% | 38.6% | 39.8% | 37.3% | 37.5% | 37.5% |
Operating margin by segment by quarter
| 2020 | 2019 | |||||
|---|---|---|---|---|---|---|
| Isolated quarters, as percentage of net sales | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 |
| Networks | 22.0% | 13.2% | 16.6% | 14.4% | 18.4% | 15.0% |
| Digital Services | -6.8% | -8.1% | -19.3% | -1.2% | -6.7% | -15.6% |
| Managed Services | 8.9% | 4.7% | 7.1% | 4.2% | 8.8% | 3.2% |
| Emerging Business and Other | -26.7% | -60.5% | -32.7% | -23.2% | -695.8% | -44.1% |
| Total | 15.0% | 6.9% | 8.7% | 9.2% | -7.3% | 6.8% |
| 2020 | 2019 | |||||
| Year to date, as percentage of net sales | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun |
| Networks | 17.4% | 14.8% | 16.6% | 16.0% | 16.6% | 15.6% |
| Digital Services | -11.0% | -13.3% | -19.3% | -10.1% | -14.5% | -19.1% |
| Managed Services | 6.9% | 5.9% | 7.1% | 9.0% | 10.9% | 11.9% |
| Emerging Business and Other | -40.1% | -46.8% | -32.7% | -184.0% | -239.0% | -22.4% |
| Total | 10.3% | 7.7% | 8.7% | 4.6% | 2.8% | 8.3% |
38 Ericsson | Third quarter report 2020
Alternative performance measures
Restructuring charges by function
| 2020 | 2019 | ||||||
|---|---|---|---|---|---|---|---|
| Isolated quarters, SEK million | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 |
| Cost of sales | -73 | -312 | -335 | -218 | -28 | -26 | -65 |
| Research and development expenses | -244 | -227 | 39 | -79 | -98 | -49 | -118 |
| Selling and administrative expenses | -13 | -144 | -5 | -30 | -21 | -43 | -23 |
| Total | -330 | -683 | -301 | -327 | -147 | -118 | -206 |
| 2020 | 2019 | ||||||
| Year to date, SEK million | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Cost of sales | -720 | -647 | -335 | -337 | -119 | -91 | -65 |
| Research and development expenses | -432 | -188 | 39 | -344 | -265 | -167 | -118 |
| Selling and administrative expenses | -162 | -149 | -5 | -117 | -87 | -66 | -23 |
| Total | -1,314 | -984 | -301 | -798 | -471 | -324 | -206 |
Restructuring charges by segment
| 2020 | 2019 | ||||||
|---|---|---|---|---|---|---|---|
| Isolated quarters, SEK million | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 |
| Networks | -272 | -380 | -75 | -48 | -5 | -5 | -10 |
| of which cost of sales | -79 | -110 | -72 | -24 | 12 | 9 | -3 |
| of which operating expenses | -193 | -270 | -3 | -24 | -17 | -14 | -7 |
| Digital Services | -87 | 34 | 20 | -206 | -128 | -93 | -187 |
| of which cost of sales | -8 | 3 | -16 | -125 | -32 | -27 | -60 |
| of which operating expenses | -79 | 31 | 36 | -81 | -96 | -66 | -127 |
| Managed Services | -11 | -2 | -245 | -42 | -2 | 1 | -2 |
| of which cost of sales | -11 | -2 | -245 | -40 | -2 | 3 | -1 |
| of which operating expenses | 0 | 0 | 0 | -2 | 0 | -2 | -1 |
| Emerging Business and Other | 40 | -335 | -1 | -31 | -12 | -21 | -7 |
| of which cost of sales | 25 | -203 | -2 | -29 | -6 | -11 | -1 |
| of which operating expenses | 15 | -132 | 1 | -2 | -6 | -10 | -6 |
| Total | -330 | -683 | -301 | -327 | -147 | -118 | -206 |
| Year to date, SEK million | 2020 | 2019 | |||||
| --- | --- | --- | --- | --- | --- | --- | --- |
| Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |
| Networks | -727 | -455 | -75 | -68 | -20 | -15 | -10 |
| of which cost of sales | -261 | -182 | -72 | -6 | 18 | 6 | -3 |
| of which operating expenses | -466 | -273 | -3 | -62 | -38 | -21 | -7 |
| Digital Services | -33 | 54 | 20 | -614 | -408 | -280 | -187 |
| of which cost of sales | -21 | -13 | -16 | -244 | -119 | -87 | -60 |
| of which operating expenses | -12 | 67 | 36 | -370 | -289 | -193 | -127 |
| Managed Services | -258 | -247 | -245 | -45 | -3 | -1 | -2 |
| of which cost of sales | -258 | -247 | -245 | -40 | 0 | 2 | -1 |
| of which operating expenses | 0 | 0 | 0 | -5 | -3 | -3 | -1 |
| Emerging Business and Other | -296 | -336 | -1 | -71 | -40 | -28 | -7 |
| of which cost of sales | -180 | -205 | -2 | -47 | -18 | -12 | -1 |
| of which operating expenses | -116 | -131 | 1 | -24 | -22 | -16 | -6 |
| Total | -1,314 | -984 | -301 | -798 | -471 | -324 | -206 |
39 Ericsson | Third quarter report 2020
Alternative performance measures
Gross income and gross margin excluding restructuring charges by segment
| 2020 | 2019 | |||||
|---|---|---|---|---|---|---|
| Isolated quarters, SEK million | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 |
| Networks | 19,454 | 16,132 | 15,658 | 18,289 | 16,315 | 15,661 |
| Digital Services | 3,795 | 3,735 | 2,945 | 5,023 | 3,781 | 3,338 |
| Managed Services | 1,104 | 957 | 1,178 | 1,079 | 1,138 | 776 |
| Emerging Business and Other | 482 | 405 | 342 | 261 | 334 | 322 |
| Total | 24,835 | 21,229 | 20,123 | 24,652 | 21,568 | 20,097 |
| 2020 | 2019 | |||||
| Isolated quarters, as percentage of net sales | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 |
| Networks | 46.7% | 40.5% | 44.6% | 41.1% | 41.6% | 41.4% |
| Digital Services | 43.5% | 43.6% | 40.1% | 38.1% | 38.3% | 37.1% |
| Managed Services | 20.1% | 17.2% | 20.6% | 15.4% | 17.9% | 12.3% |
| Emerging Business and Other | 30.5% | 25.3% | 21.9% | 15.1% | 20.5% | 19.2% |
| Total | 43.2% | 38.2% | 40.4% | 37.1% | 37.8% | 36.7% |
| 2020 | 2019 | |||||
| Year to date, SEK million | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun |
| Networks | 51,244 | 31,790 | 15,658 | 64,723 | 46,434 | 30,119 |
| Digital Services | 10,475 | 6,680 | 2,945 | 15,080 | 10,057 | 6,276 |
| Managed Services | 3,239 | 2,135 | 1,178 | 4,030 | 2,951 | 1,813 |
| Emerging Business and Other | 1,229 | 747 | 342 | 1,328 | 1,067 | 733 |
| Total | 66,187 | 41,352 | 20,123 | 85,161 | 60,509 | 38,941 |
| 2020 | 2019 | |||||
| Year to date, as percentage of net sales | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun |
| Networks | 43.9% | 42.4% | 44.6% | 41.8% | 42.0% | 42.2% |
| Digital Services | 42.5% | 42.0% | 40.1% | 37.8% | 37.7% | 37.3% |
| Managed Services | 19.3% | 18.9% | 20.6% | 15.8% | 15.9% | 14.9% |
| Emerging Business and Other | 25.9% | 23.6% | 21.9% | 19.6% | 21.1% | 21.4% |
| Total | 40.7% | 39.3% | 40.4% | 37.5% | 37.6% | 37.5% |
40 Ericsson | Third quarter report 2020
Alternative performance measures
Operating income (loss) and operating margin excluding restructuring charges by segment
| 2020 | 2019 | |||||
|---|---|---|---|---|---|---|
| Isolated quarters, SEK million | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 |
| Networks | 9,437 | 5,635 | 5,902 | 6,447 | 7,221 | 5,685 |
| Digital Services | -504 | -731 | -1,437 | 42 | -532 | -1,312 |
| Managed Services | 502 | 265 | 653 | 334 | 564 | 202 |
| Emerging Business and Other | -462 | -635 | -511 | -371 | -11,302 | -718 |
| Total | 8,973 | 4,534 | 4,607 | 6,452 | -4,049 | 3,857 |
| 2020 | 2019 | |||||
| Isolated quarters, as percentage of net sales | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 |
| Networks | 22.7% | 14.1% | 16.8% | 14.5% | 18.4% | 15.0% |
| Digital Services | -5.8% | -8.5% | -19.6% | 0.3% | -5.4% | -14.6% |
| Managed Services | 9.1% | 4.8% | 11.4% | 4.8% | 8.9% | 3.2% |
| Emerging Business and Other | -29.2% | -39.6% | -32.7% | -21.4% | -695.1% | -42.8% |
| Total | 15.6% | 8.2% | 9.3% | 9.7% | -7.1% | 7.0% |
| 2020 | 2019 | |||||
| Year to date, SEK million | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun |
| Networks | 20,974 | 11,537 | 5,902 | 24,835 | 18,388 | 11,167 |
| Digital Services | -2,672 | -2,168 | -1,437 | -3,413 | -3,455 | -2,923 |
| Managed Services | 1,420 | 918 | 653 | 2,354 | 2,020 | 1,456 |
| Emerging Business and Other | -1,608 | -1,146 | -511 | -12,414 | -12,043 | -741 |
| Total | 18,114 | 9,141 | 4,607 | 11,362 | 4,910 | 8,959 |
| 2020 | 2019 | |||||
| Year to date, as percentage of net sales | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun |
| Networks | 18.0% | 15.4% | 16.8% | 16.0% | 16.6% | 15.7% |
| Digital Services | -10.8% | -13.6% | -19.6% | -8.6% | -12.9% | -17.4% |
| Managed Services | 8.5% | 8.1% | 11.4% | 9.2% | 10.9% | 12.0% |
| Emerging Business and Other | -33.9% | -36.2% | -32.7% | -183.0% | -238.2% | -21.6% |
| Total | 11.1% | 8.7% | 9.3% | 5.0% | 3.1% | 8.6% |
41 Ericsson | Third quarter report 2020
Alternative performance measures
EBITA and EBITA margin by segment by quarter
| 2020 | 2019 | |||||
|---|---|---|---|---|---|---|
| Isolated quarters, SEK million | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 |
| Networks | 9,347 | 5,321 | 5,957 | 6,447 | 7,253 | 5,716 |
| Digital Services | -461 | -563 | -1,283 | -23 | -521 | -1,268 |
| Managed Services | 492 | 264 | 409 | 293 | 563 | 205 |
| Emerging Business and Other | -370 | -913 | -456 | -323 | -11,262 | -688 |
| Total | 9,008 | 4,109 | 4,627 | 6,394 | -3,967 | 3,965 |
| 2020 | 2019 | |||||
| Isolated quarters, as percentage of net sales | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 |
| Networks | 22.4% | 13.4% | 17.0% | 14.5% | 18.5% | 15.1% |
| Digital Services | -5.3% | -6.6% | -17.5% | -0.2% | -5.3% | -14.1% |
| Managed Services | 8.9% | 4.7% | 7.2% | 4.2% | 8.9% | 3.2% |
| Emerging Business and Other | -23.4% | -57.0% | -29.1% | -18.7% | -692.6% | -41.0% |
| Total | 15.7% | 7.4% | 9.3% | 9.6% | -6.9% | 7.2% |
| 2020 | 2019 | |||||
| Year to date, SEK million | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun |
| Networks | 20,625 | 11,278 | 5,957 | 24,968 | 18,521 | 11,268 |
| Digital Services | -2,307 | -1,846 | -1,283 | -3,450 | -3,427 | -2,906 |
| Managed Services | 1,165 | 673 | 409 | 2,314 | 2,021 | 1,458 |
| Emerging Business and Other | -1,739 | -1,369 | -456 | -12,230 | -11,907 | -645 |
| Total | 17,744 | 8,736 | 4,627 | 11,602 | 5,208 | 9,175 |
| 2020 | 2019 | |||||
| Year to date, as percentage of net sales | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun |
| Networks | 17.7% | 15.0% | 17.0% | 16.1% | 16.8% | 15.8% |
| Digital Services | -9.4% | -11.6% | -17.5% | -8.7% | -12.8% | -17.3% |
| Managed Services | 6.9% | 6.0% | 7.2% | 9.1% | 10.9% | 12.0% |
| Emerging Business and Other | -36.6% | -43.2% | -29.1% | -180.3% | -235.5% | -18.8% |
| Total | 10.9% | 8.3% | 9.3% | 5.1% | 3.2% | 8.8% |
Other ratios
| Q3 | Jan-Sep | |||
|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |
| Days sales outstanding | - | - | 78 | 85 |
| Inventory turnover days | 90 | 93 | 90 | 89 |
| Payable days | 88 | 80 | 86 | 83 |
42 Ericsson | Third quarter report 2020
Alternative performance measures