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Ericsson — Interim / Quarterly Report 2021
Oct 19, 2021
2911_ffr_2021-10-19_d75d98b4-a980-486d-b82c-349b3f3a04a3.zip
Interim / Quarterly Report
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Table of Contents
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
October 19, 2021
Commission File Number 000-12033
LM ERICSSON TELEPHONE COMPANY
(Translation of registrants name into English)
Torshamnsgatan 21, Kista
SE-164 83, Stockholm, Sweden
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. Form 20-F ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
Announcement of LM Ericsson Telephone Company, October 19, 2021 regarding Third quarter report 2021.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| TELEFONAKTIEBOLAGET LM ERICSSON (publ) | |
|---|---|
| By: | /s/ XAVIER DEDULLEN |
| Xavier Dedullen | |
| Senior Vice President, Chief Legal Officer | |
| By: | /s/ CARL MELLANDER |
| Carl Mellander | |
| Senior Vice President, Chief Financial Officer |
Date: October 19, 2021
Table of Contents
Third quarter report 2021
Stockholm, October 19, 2021
Third quarter highlights
Group organic sales declined by -1% YoY. Sales in Mainland China in Networks and Digital Services declined by SEK -3.6 b. impacting the growth rate by -6%. Some impact was seen from disturbances in the supply chain. Reported sales were SEK 56.3 (57.5) b.
Gross margin excl. restructuring charges improved to 44.0% (43.2%) mainly driven by increased and partly retroactive IPR revenues and the acquired Cradlepoint business. Operational leverage continued to be strong in Networks. Reported gross margin was 44.0% (43.1%).
EBIT margin excl. restructuring charges increased slightly to 15.7% (15.6%). Reported EBIT increased to SEK 8.8 b. (15.7%) from SEK 8.6 b. (15.0%). EBIT was supported by a market revaluation of investments and an impairment write-off, amounting to SEK 0.4 b.
Organic sales development in Networks was stable YoY. The quarter was impacted by market share loss in Mainland China. Reported EBIT margin was 23.7% (22.0%).
Reported net income was SEK 5.8 (5.6) b.
Free cash flow before M&A was SEK 13.0 (3.9) b. driven primarily by strong cash collection. Net cash per September 30, 2021 was SEK 55.7 b. compared with SEK 41.5 b. per September 30, 2020.
Investor Update (Nov. 9) will be postponed into next year with the intent to host a full-day, in-person CMD with the entire executive management present.
| SEK b. — Net sales | 56.3 | 57.5 | -2 % | 54.9 | 2 % | 161.0 | 162.8 | -1 % |
|---|---|---|---|---|---|---|---|---|
| Sales growth adj. for comparable units and currency ¹ | | | -1 % | | | | | 6 % |
| Gross margin ¹ | 44.0 % | 43.1 % | | 43.4 % | | 43.4 % | 40.2 % | |
| EBIT | 8.8 | 8.6 | 2 % | 5.8 | 52 % | 19.9 | 16.8 | 19 % |
| EBIT margin ¹ | 15.7 % | 15.0 % | | 10.6 % | | 12.4 % | 10.3 % | |
| Net income | 5.8 | 5.6 | 4 % | 3.9 | 48 % | 12.8 | 10.4 | 23 % |
| EPS diluted, SEK | 1.73 | 1.61 | 7 % | 1.10 | 57 % | 3.79 | 3.00 | 26 % |
| Measures excl. restructuring charges ¹ | ||||||||
| Gross margin excluding restructuring charges | 44.0 % | 43.2 % | | 43.4 % | | 43.5 % | 40.7 % | |
| EBIT excluding restructuring charges | 8.8 | 9.0 | -1 % | 5.8 | 52 % | 20.0 | 18.1 | 10 % |
| EBIT margin excluding restructuring charges | 15.7 % | 15.6 % | | 10.6 % | | 12.4 % | 11.1 % | |
| Free cash flow before M&A | 13.0 | 3.9 | 229 % | 4.1 | 218 % | 18.6 | 9.5 | 96 % |
| Net cash, end of period | 55.7 | 41.5 | 34 % | 43.7 | 27 % | 55.7 | 41.5 | 34 % |
1 Non-IFRS financial measures are reconciled at the end of this report to the most directly reconcilable line items in the financial statements.
1 Ericsson | Third quarter report 2021
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CEO comments
We continue to win footprint across our business by leveraging our competitive 5G portfolio. The 5G contracts now awarded by all three tier-1 US carriers are the largest in Ericssons history. Gross margin 2 was further strengthened, both sequentially and year over year and reached 44.0% (43.2%). EBIT margin 2 reached 15.7%, and free cash flow before M&A was SEK 13.0 b. Through continuous measures for global supply chain resilience, we avoided customer impact during the first half of the year. However, late in Q3 we saw some impact on sales from disturbances in the supply chain, and such issues will continue to pose a risk. While we continued to gain share in a growing market, the expected sales reduction in Mainland China, lower variable sales in Managed Services and some supply chain disturbances, led to a negative organic sales 1 development of -1%.
Networks sales 1 were stable YoY, despite considerably lower volumes from Mainland China, reflecting market share gains in other markets. Excluding sales in Mainland China, Networks sales 1 increased by 8% in the third quarter compared to the same period last year. However, late in Q3 we experienced some impact on sales from disturbances in the supply chain, and such issues will continue to pose a risk. Gross margin 2 improved to 47.8% (46.7%), driven by operational leverage and higher IPR revenues.
Digital Services sales 1 grew by 1% despite a stark sales reduction in Mainland China. Excluding sales in Mainland China, Digital Services sales 1 increased by 6% in the third quarter compared to the same period last year. We are starting to see initial revenues from 5G contracts, driving growth in our Core business. Gross margin 2 was 42.3% (43.5%), impacted mainly by initial deployment costs in cloud native 5G Core projects. We continue to increase our R&D investments in the 5G portfolio, including Core and orchestration, further strengthening our competitive position. With increasing sales in combination with a higher share of software sales, we expect profitability to gradually improve and over time exceed our original target of EBIT margin 2 of 10%-12%.
As a consequence of the reduced market share in Mainland China we are planning to resize our sales and delivery organization in the country, starting in Q4, adding to our restructuring charges.
We increased IPR revenues to SEK 2.6 (2.2) b. driven by new agreements, with retroactive impact, confirming our IPR position. With the significant value of our broad patent portfolio and strong position in 5G, reaffirmed by the recent agreement with Samsung, we believe we are well positioned to conclude pending and future patent license renewals. As communicated in the past, the timing of agreement renewals may cause temporary gaps in IPR revenues.
We continue to improve our Ethics and Compliance program in accordance with our strategy and activities based on input from our independent compliance monitor. Such initiatives and activities have enabled the strengthening of an integrity-based culture, compliance governance and anti-corruption internal controls. We are firmly committed to continuously develop and improve in the years to come to ensure a sustainable compliance program.
We continue to strengthen our sustainability work. Supporting our customers by improving energy efficiency in our products as well as reducing our own carbon emissions has been crucial for our success in recent years. In the quarter, we signed a USD 2 b. sustainability-linked revolving credit facility, further integrating our sustainability ambitions by linking our climate action targets to our financial activities.
We continue to see results of our strategy to improve flexibility, reduce sensitivity to business mix and lower the working capital. Free cash flow before M&A amounted to SEK 13.0 (3.9) b. in the third quarter, supported by strong cash collection including some customer pre-payments.
5G for Enterprise provides an exciting opportunity for Ericsson. The acquired Cradlepoint business is developing favorably, contributing to gross margin improvement for the Group in the quarter. Building on the strong foundations of our core business we will continue to invest in the Enterprise business, aiming at Enterprise becoming a sizeable part of Ericssons business in a few years.
Stay healthy and well.
Börje Ekholm
President and CEO
1 Sales adjusted for comparable units and currency
2 Excluding restructuring charges
2 Ericsson | Third quarter report 2021 CEO comments
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Financial highlights
Net sales development
| SEK b. — Networks | 40.6 | 41.7 | -3 % | 0 % | 39.9 | 116.7 | 116.6 | 0 % | 8 % |
|---|---|---|---|---|---|---|---|---|---|
| Digital Services | 8.6 | 8.7 | -1 % | 1 % | 7.9 | 23.4 | 24.7 | -5 % | 1 % |
| Managed Services | 5.0 | 5.5 | -8 % | -7 % | 5.1 | 15.0 | 16.8 | -10 % | -5 % |
| Emerging Business and Other | 2.0 | 1.6 | 26 % | 4 % | 2.1 | 5.8 | 4.8 | 22 % | 9 % |
| Total | 56.3 | 57.5 | -2 % | -1 % | 54.9 | 161.0 | 162.8 | -1 % | 6 % |
1 Sales growth adjusted for comparable units and currency. Non-IFRS financial measures are reconciled at the end of this report to the most directly reconcilable line items in the financial statements.
Group reported sales were SEK 56.3 (57.5) b. Sales adjusted for comparable units and currency declined by -1% YoY, with growth in two of the five market areas. Sales in Mainland China in Networks and Digital Services declined by SEK -3.6 b. impacting the growth rate adjusted for comparable units and currency by -6%.
IPR licensing revenues increased to SEK 2.6 (2.2) b., driven by patent agreements signed early in the quarter. The agreements include retroactive revenues for unlicensed periods prior to signing.
Networks sales adjusted for comparable units and currency were stable YoY. Sales increased in North America as well as in Europe and Latin America. Sales in Mainland China were SEK -3.2 b. lower YoY, impacting the growth rate adjusted for comparable units and currency by -8%. Networks accounted for 72% (72%) of total sales.
Digital Services sales adjusted for comparable units and currency grew by 1% YoY, with growth in two market areas. Sales in Mainland China were SEK -0.4 b. lower YoY, impacting the growth rate adjusted for comparable units and currency by -5%. Digital Services share of total sales was 15% (15%).
Managed Services sales adjusted for comparable units and currency decreased by -7% YoY, mainly due to reduced variable sales and contract exits mainly in Europe. Managed Services share of total sales was 9% (10%).
Emerging Business and Other sales adjusted for comparable units and currency increased by 4%, primarily in iconectiv. Emerging Business and Other share of total sales was 4% (3%).
Income and margin development
| SEK b. — Net sales | 56.3 | 57.5 | -2 % | 54.9 | 2 % | 161.0 | 162.8 | -1 % |
|---|---|---|---|---|---|---|---|---|
| Gross income | 24.8 | 24.8 | 0 % | 23.9 | 4 % | 69.9 | 65.5 | 7 % |
| Gross margin | 44.0 % | 43.1 % | | 43.4 % | | 43.4 % | 40.2 % | |
| Research and development (R&D) expenses | -10.2 | -10.1 | | -10.5 | | -30.2 | -29.3 | |
| Selling and administrative expenses | -6.2 | -6.0 | | -7.0 | | -19.3 | -19.3 | |
| Impairment losses on trade receivables | 0.0 | 0.0 | | 0.1 | | -0.1 | -0.1 | |
| Other operating income and expenses | 0.5 | 0.1 | | -0.6 | | -0.1 | 0.3 | |
| Share in earnings of JV and associated companies | -0.1 | -0.1 | | -0.1 | | -0.3 | -0.2 | |
| EBIT | 8.8 | 8.6 | 2 % | 5.8 | 52 % | 19.9 | 16.8 | 19 % |
| of which Networks | 9.6 | 9.2 | 5 % | 8.6 | 11 % | 25.5 | 20.2 | 26 % |
| of which Digital Services | -0.8 | -0.6 | | -1.6 | | -3.9 | -2.7 | |
| of which Managed Services | 0.4 | 0.5 | -21 % | 0.4 | -7 % | 1.1 | 1.2 | -4 % |
| of which Emerging Business & Other | -0.4 | -0.4 | | -1.7 | | -2.8 | -1.9 | |
| EBIT margin | 15.7 % | 15.0 % | | 10.6 % | | 12.4 % | 10.3 % | |
| Financial income and expenses, net | -0.6 | 0.1 | | -0.5 | | -1.6 | -0.5 | |
| Income tax | -2.5 | -3.2 | | -1.5 | | -5.5 | -5.9 | |
| Net income | 5.8 | 5.6 | 4 % | 3.9 | 48 % | 12.8 | 10.4 | 23 % |
| Restructuring charges | 0.0 | -0.3 | | 0.0 | | -0.1 | -1.3 | |
| Measures excl. restructuring charges and other items affecting comparability ¹ | ||||||||
| Gross margin excluding restructuring charges | 44.0 % | 43.2 % | | 43.4 % | | 43.5 % | 40.7 % | |
| EBIT margin excluding restructuring charges | 15.7 % | 15.6 % | | 10.6 % | | 12.4 % | 11.1 % | |
| EBITA excluding restructuring charges | 9.3 | 9.3 | 0 % | 6.1 | 51 % | 21.0 | 19.1 | 10 % |
| EBITA margin excluding restructuring charges | 16.5 % | 16.2 % | | 11.1 % | | 13.1 % | 11.7 % | |
1 Non-IFRS financial measures are reconciled at the end of this report to the most directly reconcilable line items in the financial statements.
3 Ericsson | Third quarter report 2021 Financial highlights
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Gross margin
Reported gross margin was 44.0% (43.1%). Gross margin excluding restructuring charges increased to 44.0% (43.2%) driven mainly by increased IPR revenues and the acquired Cradlepoint business. Networks gross margin in the quarter was supported by continued strong operational leverage. Gross margin declined in Digital Services YoY due to higher initial deployment costs for the cloud native 5G Core portfolio and in Managed Services due to reduced variable sales.
Sequentially, reported gross margin increased to 44.0% from 43.4%, driven mainly by improved margin in Digital Services due to a higher share of software sales, while Q2 was negatively impacted by a write-down for pre-commercial product investments for the Chinese market. Gross margin was positively impacted by IPR licensing revenues related to patent agreements signed in the quarter.
Research and development (R&D) expenses
R&D expenses amounted to SEK -10.2 (-10.1) b. R&D expenses increased in Digital Services due to increased investments in the cloud native 5G Core portfolio and in Emerging Business and Other as a result of the acquired Cradlepoint business. The increase was partly offset by lower discretionary spending.
Selling and administrative (SG&A) expenses
SG&A expenses were SEK -6.2 (-6.0) b. The increase is mainly due to the acquired Cradlepoint business.
Revaluation of customer financing was SEK 0.1 (0.0) b.
Impairment losses on trade receivables
Impairment losses on trade receivables were SEK 0.0 (0.0) b.
Other operating income and expenses
Other operating income and expenses was SEK 0.5 (0.1) b. The quarter was positively impacted by SEK 0.4 b. through a net of positive fair market revaluation of Ericsson Ventures investments and an impairment write-off.
Share in earnings of JVs and associated companies was SEK -0.1 (-0.1) b.
Restructuring charges
Restructuring charges amounted to SEK 0.0 (-0.3) b.
EBIT
Reported EBIT improved to SEK 8.8 (8.6) b. EBIT excluding restructuring charges was SEK 8.8 (9.0) b. corresponding to an EBIT margin excluding restructuring charges of 15.7% (15.6%). The increase was driven mainly by Networks.
Sequentially, reported EBIT increased to SEK 8.8 b. from SEK 5.8 b., driven by retroactive IPR revenues as well as improved EBIT in Networks, Digital Services and in Emerging Business and Other from increased sales and lower operating expenses.
EBITA
EBITA improved to SEK 9.3 (9.0) b. YoY. EBITA excluding restructuring charges was stable at SEK 9.3 (9.3) b. corresponding to an EBITA margin excluding restructuring charges of 16.5% (16.2%).
4 Ericsson | Third quarter report 2021 Financial highlights
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Financial income and expenses, net
Reported financial net was SEK -0.6 (0.1) b. The strengthened USD to SEK resulted in a negative currency hedge effect of SEK -0.3 (0.3) b.
Sequentially, financial net decreased by SEK -0.1 b. to SEK -0.6 b. The currency hedge effect was SEK -0.3 b. in the quarter, versus SEK 0.1 b. in the second quarter. The USD strengthened against the SEK between June 30, 2021 (SEK/USD rate 8.51) and September 30, 2021 (SEK/USD rate 8.80).
Taxes
Taxes were SEK -2.5 (-3.2) b. The effective tax rate in Q3 was 30% compared with 27% in Q2 2021, mainly due to the market mix in the quarter.
Net income
Net income improved to SEK 5.8 (5.6) b. and EPS diluted improved to SEK 1.73 (1.61) YoY, driven by improved EBIT.
Employees
The number of employees on September 30, 2021, was 102,203 compared with 101,624 on June 30, 2021. The increase relates mainly to research and development.
Financial highlights, year to date (Jan-Sep) development
Reported sales decreased by -1%. Sales adjusted for comparable units and currency increased by 6% driven primarily by sales in market area North America and in Europe and Latin America. Networks sales adjusted for comparable units and currency increased by 8%, and Digital Services increased by 1%. Sales in Mainland China in Networks and Digital Services declined by SEK -5.8 b., impacting the Group growth rate adjusted for comparable units and currency by -4%, with the same impact in Networks and Digital Services. Sales adjusted for comparable units and currency increased by 9% in Emerging Business and Other, while Managed Services declined by -5%.
Reported gross margin increased to 43.4% (40.2%), driven primarily by strengthened operational leverage in Networks.
Reported EBIT increased to SEK 19.9 (16.8) b. as a result of improved gross income.
Reported EBITA increased to SEK 21.0 (17.7) b. EBITA excluding restructuring charges was SEK 21.0 (19.1) b. corresponding to an EBITA margin excluding restructuring charges of 13.1% (11.7%).
Net income year to date improved to SEK 12.8 (10.4) b. with the improved gross income partly offset by the financial net.
5 Ericsson | Third quarter report 2021 Financial highlights
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Planning assumptions
Market related
The global RAN market is estimated to grow by 13% (10%) in 2021, with Mainland China expected to grow by 13% (11%), North America by 15% (12%) and Europe by 10% (9%). Source: DellOro Mobile RAN report, August 2021. (Previous forecast within brackets).
The global RAN market is estimated to grow by 2% in 2022, and by 3% excluding Mainland China.
Source: DellOro Mobile RAN 5-Year Forecast, July 2021.
Ericsson related
Net sales
Networks and Digital Services:
In Q3 2021, sales in Mainland China were SEK 1.3 (5.0) b.
In Q4 2020, sales in Mainland China were SEK 4.6 b.
The disturbance in the global supply chain, including shortage of individual components, will continue to pose a risk for impact on sales in Networks.
The annualized revenues from the current portfolio of IPR contracts are approximately SEK 7 b. As key contracts are approaching expiry, IPR revenues may be impacted until contracts are renewed.
Gross margin
Gross margin will vary by quarter depending on business mix and seasonality; thus, a rolling four quarter gross margin gives a more relevant view of the margin development.
R&D and SG&A expenses
Operating expenses typically increase between Q3 and Q4 due to seasonality, however, with large variations.
EBIT
Digital Services: break-even is expected in Q4 2021 isolated.
Restructuring charges
Restructuring charges are estimated to be approximately 1% of sales per year on average.
Currency exposure
Rule of thumb: A change by 10% of USD to SEK would have an impact of approximately +/-5% on net sales and approximately +/-1 percentage point on EBIT margin.
Cradlepoint
Group EBIT margin is expected to be negatively impacted by approximately -1 percentage point until the end of 2022.
6 Ericsson | Third quarter report 2021 Planning assumptions
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Market area sales
| SEK b. — South East Asia, Oceania and India | 6.5 | 7.8 | -17 % | -16 % | 7.1 | -9 % | 20.2 | 0 % |
|---|---|---|---|---|---|---|---|---|
| North East Asia | 5.7 | 8.8 | -35 % | -33 % | 7.1 | -20 % | 19.3 | -6 % |
| North America | 20.2 | 18.4 | 10 % | 13 % | 18.0 | 12 % | 55.2 | 1 % |
| Europe and Latin America | 14.4 | 13.3 | 8 % | 9 % | 14.0 | 3 % | 41.0 | 6 % |
| Middle East and Africa | 5.0 | 5.5 | -10 % | -8 % | 4.5 | 12 % | 13.8 | -18 % |
| Other² | 4.6 | 3.7 | 26 % | | 4.3 | 7 % | 11.4 | -4 % |
| Total | 56.3 | 57.5 | -2 % | -1 % | 54.9 | 2 % | 161.0 | -1 % |
1 Sales growth adjusted for comparable units and currency.
2 Market area Other includes primarily IPR licensing revenues and the major part of segment Emerging Business and Other.
Sales breakdown by market area by segment is available at the end of this report.
Continued strong growth in North America and in Europe and Latin America.
Organic growth in Latin America and Africa after a period of decline.
Growth in IPR revenues.
South East Asia, Oceania and India
Currency adjusted sales decreased by -16% YoY. Networks sales declined YoY due to accelerated rollouts in the second half of 2020, and timing of orders in 2021. Sales declined YoY in Digital Services due to timing of orders and project milestones. Managed Services declined YoY, mainly due to contract renegotiations and timing of variable sales. Reported sales decreased by -17%.
North East Asia
Currency adjusted sales declined by -33% YoY. Sales declined YoY in Networks and Digital Services due to loss of market share in Mainland China. Sales in other parts of the market area increased due to timing of orders and project milestones. Reported sales declined by -35%.
North America
Currency adjusted sales increased by 13% YoY. Sales growth was driven by strong demand for 5G Networks solutions. Reported sales increased by 10%.
Europe and Latin America
Currency adjusted growth was 9% YoY with 5% growth in Europe and 29% in Latin America. Sales in both Networks and Digital Services continued to grow as a result of market share gains, while sales decreased in Managed Services YoY due to earlier decisions on contract exits and rescoping of contracts. Reported sales increased by 8%.
Middle East and Africa
Currency adjusted sales declined by -8% YoY. Sales declined YoY in Networks primarily due to timing of 5G investments in the Middle East. Sales in Africa returned to growth during the quarter. Digital Services sales grew YoY due to strong software upgrades in the African market. Managed Services sales declined YoY due to renegotiations of scope and delays in contract signing. Reported sales decreased by -10%.
Other
IPR licensing revenues increased to SEK 2.6 (2.2) b., driven by patent agreements signed early in the quarter. The agreements include retroactive revenues for unlicensed periods prior to signing.
Sequentially, IPR licensing revenues increased to SEK 2.6 b. from SEK 2.3 b.
7 Ericsson | Third quarter report 2021 Market area sales
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Segment results
Segment Networks
| SEK b. — Net sales | 40.6 | 41.7 | -3 % | 39.9 |
|---|---|---|---|---|
| Of which IPR licensing revenues | 2.1 | 1.8 | 21 % | 1.9 |
| Sales growth adj. for comparable units and FX | | | 0 % | |
| Gross income | 19.4 | 19.4 | 0 % | 19.1 |
| Gross margin | 47.8 % | 46.5 % | | 47.9 % |
| EBIT | 9.6 | 9.2 | 5 % | 8.6 |
| EBIT margin | 23.7 % | 22.0 % | | 21.7 % |
| Restructuring charges | 0.0 | -0.3 | | 0.0 |
| Measures excl. restructuring charges | ||||
| Gross margin excl. restructuring charges | 47.8 % | 46.7 % | | 47.9 % |
| EBIT excl. restructuring charges | 9.6 | 9.4 | 2 % | 8.7 |
| EBIT margin excl. restructuring charges | 23.7 % | 22.7 % | | 21.7 % |
Breakdown of sales into products, services and IPR licensing is available in note 3.
Stable sales adjusted for comparable units and currency.
Double-digit growth in North America and in Europe and Latin America.
EBIT margin at 23.7% driven by operational leverage.
Net sales
Sales adjusted for comparable units and currency were stable, with double-digit growth in North America and in Europe and Latin America, and a sales decline in the other market areas mainly due to timing of orders and project milestones. Sales in North East Asia were impacted by a decline of SEK -3.2 b. YoY in Mainland China, impacting the growth rate adjusted for comparable units and currency by -8%. Growth was mainly driven by product sales. Reported sales declined by -3% YoY.
Sequentially, reported sales increased by 2%, driven by growth in North America, Europe and Latin America and in Middle East and Africa, partly offset by decline in South East Asia, Oceania and India and in North East Asia due to timing of orders and project milestones on the back of a seasonally strong second quarter.
Gross margin
Reported gross margin increased to 47.8% (46.5%), supported by operational leverage and higher IPR revenues.
Reported gross margin was stable QoQ with continued operational leverage and a positive impact from IPR revenues.
EBIT
Reported EBIT increased to SEK 9.6 (9.2) b. increasing the EBIT margin to 23.7% (22.0%). The increase was primarily due to higher IPR revenues and seasonally lower operating expenses. Moreover, Q3 2020 was impacted by restructuring charges. EBIT margin excluding restructuring charges increased to 23.7% (22.7%).
Sequentially, reported EBIT increased to SEK 9.6 b. from SEK 8.6 b. EBIT margin increased to 23.7% from 21.7%, due to seasonally higher sales, improved gross income and lower operating expenses.
Net sales rolling four quarters were SEK 166.1 b. and EBIT margin rolling four quarters excluding restructuring charges was 21.7%.
8 Ericsson | Third quarter report 2021 Segment results
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Segment Digital Services
| SEK b. — Net sales | 8.6 | 8.7 | -1 % | 7.9 |
|---|---|---|---|---|
| Of which IPR licensing revenues | 0.5 | 0.4 | 21 % | 0.4 |
| Sales growth adj. for comparable units and FX | | | 1 % | |
| Gross income | 3.6 | 3.8 | -4 % | 3.0 |
| Gross margin | 42.2 % | 43.4 % | | 37.9 % |
| EBIT (loss) | -0.8 | -0.6 | | -1.6 |
| EBIT margin | -9.5 % | -6.8 % | | -19.9 % |
| Restructuring charges | 0.0 | -0.1 | | 0.0 |
| Measures excl. restructuring charges | ||||
| Gross margin excl. restructuring charges | 42.3 % | 43.5 % | | 37.9 % |
| EBIT (loss) excl. restructuring charges | -0.8 | -0.5 | | -1.6 |
| EBIT margin excl. restructuring charges | -9.5 % | -5.8 % | | -19.8 % |
Breakdown of sales into products, services and IPR licensing is available in note 3.
Sales adjusted for comparable units and currency grew by 1% YoY.
Strong business momentum in the cloud native 5G Core portfolio with initial revenues in the quarter.
Gross margin impacted by initial deployment costs for the cloud native 5G Core portfolio.
Net sales
Sales adjusted for comparable units and currency increased by 1% YoY, with growth in North America and in Europe and Latin America. Sales declined in South East Asia, Oceania and India due to timing of orders and project milestones. Sales in Mainland China decreased by SEK -0.4 b. YoY, impacting the growth rate adjusted for comparable units and currency by -5%. Reported sales decreased by -1% YoY.
Sequentially, reported sales increased by 9%, driven by sales increase in Middle East and Africa, North America as well as in South East Asia, Oceania and India. Sales declined QoQ in Europe and Latin America due to timing of orders and project milestones. Sales in North East Asia were stable.
Gross margin
Reported gross margin decreased to 42.2% (43.4%) primarily due to initial deployment costs for the cloud native 5G Core portfolio.
Reported gross margin increased to 42.2% from 37.9% QoQ. Gross margin was positively impacted by a higher share of software sales and a positive impact from IPR revenues. In Q2 2021 gross margin was negatively impacted by -3.6 percentage points, due to a write-down for pre-commercial products related to the Chinese market.
EBIT (loss)
Reported EBIT (loss) was SEK -0.8 (-0.6) b. with an EBIT margin of -9.5% (-6.8%). Operating expenses increased, mainly due to acceleration of R&D investments in the cloud native 5G portfolio.
Sequentially, reported EBIT improved by SEK 0.7 b. to SEK -0.8 b. due to seasonally higher sales and improved gross margin.
Net sales rolling four quarters were SEK 36.1 b. and EBIT margin rolling four quarters excluding restructuring charges was -9.4%.
9 Ericsson | Third quarter report 2021 Segment results
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Segment Managed Services
| SEK b. — Net sales | 5.0 | 5.5 | -8 % | 5.1 |
|---|---|---|---|---|
| Sales growth adj. for comparable units and FX | | | -7 % | |
| Gross income | 0.9 | 1.1 | -14 % | 1.0 |
| Gross margin | 18.7 % | 19.9 % | | 19.0 % |
| EBIT | 0.4 | 0.5 | -21 % | 0.4 |
| EBIT margin | 7.7 % | 8.9 % | | 8.1 % |
| Restructuring charges | 0.0 | 0.0 | | 0.0 |
| Measures excl. restructuring charges | ||||
| Gross margin excl. restructuring charges | 18.7 % | 20.1 % | | 19.0 % |
| EBIT excl. restructuring charges | 0.4 | 0.5 | -23 % | 0.4 |
| EBIT margin excl. restructuring charges | 7.7 % | 9.1 % | | 8.1 % |
Sales declined YoY mainly due to reduced variable sales.
Continued investments in automation, analytics and AI offerings supporting 5G and efficiency in service delivery.
EBIT margin rolling 4Q excl. restructuring at 7.7%.
Net sales
Sales adjusted for comparable units and currency decreased by -7% YoY, due to reduced variable sales and planned contract exits mainly in Europe. Sales in Network Optimization showed growth mainly in Europe. Reported sales declined by -8% YoY.
Gross margin
Reported gross margin decreased to 18.7% (19.9%) mainly due to reduced variable sales.
Reported gross margin decreased slightly to 18.7% from 19.0% QoQ.
EBIT
Reported EBIT decreased to SEK 0.4 (0.5) b. with an EBIT margin of 7.7% (8.9%). The decrease was due to reduced sales and lower gross margin.
EBIT excluding restructuring charges was stable at SEK 0.4 b. QoQ.
Net sales rolling four quarters were SEK 20.8 b. and EBIT margin rolling four quarters excluding restructuring charges was 7.7%.
Segment Emerging Business and Other
Continued growth in sales and gross margin, driven mainly by Cradle point.
Positive EBIT impact of SEK 0.4 b. through the net of Ericsson Ventures investment revaluation and impairment write-off.
| SEK b. — Net sales | 2.0 | 1.6 | 26 % | 2.1 |
|---|---|---|---|---|
| Sales growth adj. for comparable units and FX | | | 4 % | |
| Gross income | 0.8 | 0.5 | 55 % | 0.8 |
| Gross margin | 39.4 % | 32.0 % | | 37.9 % |
| EBIT (loss) | -0.4 | -0.4 | | -1.7 |
| EBIT margin | -17.7 % | -26.7 % | | -81.1 % |
| Restructuring charges | 0.0 | 0.0 | | 0.0 |
| Measures excl. restructuring charges | ||||
| Gross margin excl. restructuring charges | 39.4 % | 30.5 % | | 38.1 % |
| EBIT (loss) excl. restructuring charges | -0.4 | -0.5 | | -1.7 |
| EBIT margin excl. restructuring charges | -17.6 % | -29.2 % | | -81.5 % |
Net sales
Sales adjusted for comparable units and currency increased by 4%. Reported sales increased by 26% YoY, driven mainly by the acquired Cradlepoint business.
Gross margin
Reported gross margin increased to 39.4% (32.0%). The increase was driven mainly by Cradlepoint.
Reported gross margin increased to 39.4% from 37.9% QoQ. The improvement was driven by iconectiv.
EBIT (loss)
Reported EBIT (loss) was SEK -0.4 (-0.4) b.
EBIT was positively impacted by SEK 0.4 b. in the quarter, through a net of positive fair market revaluation of Ericsson Ventures investments and an impairment write-off.
Net sales rolling four quarters were SEK 7.5 b. and EBIT margin rolling four quarters excluding restructuring charges was -43.8%.
10 Ericsson | Third quarter report 2021 Segment results
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Cash flow and financial position
| Free cash flow bridge, SEK b. — EBIT excl. restructuring charges | 8.8 | 9.0 | 5.8 | 20.0 | 18.1 |
|---|---|---|---|---|---|
| Depreciation, amortization and impairment losses | 2.4 | 2.1 | 2.1 | 6.4 | 6.4 |
| Restructuring charges | 0.0 | -0.3 | 0.0 | -0.1 | -1.3 |
| Changes in working capital¹ ) | 4.9 | -4.5 | 0.2 | 1.3 | -5.0 |
| Interest paid/received, taxes paid, and other | -1.4 | -0.9 | -2.2 | -3.7 | -3.2 |
| Cash flow from operating activities | 14.7 | 5.3 | 5.9 | 23.9 | 15.0 |
| Capex net and other investing activities | -1.2 | -0.8 | -1.3 | -3.6 | -3.8 |
| Repayment of lease liabilities | -0.6 | -0.6 | -0.6 | -1.7 | -1.8 |
| Free cash flow before M&A | 13.0 | 3.9 | 4.1 | 18.6 | 9.5 |
| M&A | -0.1 | -0.1 | -0.1 | -0.1 | -0.3 |
| Free cash flow after M&A | 12.9 | 3.8 | 4.0 | 18.5 | 9.1 |
| Cash flow from operating activities | 14.7 | 5.3 | 5.9 | 23.9 | 15.0 |
| Cash flow from investing activities | -9.1 | -1.1 | -7.1 | -17.2 | -6.6 |
| Cash flow from financing activities | -2.5 | -0.9 | 4.3 | -4.4 | -4.0 |
| SEK b. — Gross cash | 88.2 | 78.2 | 77.1 |
|---|---|---|---|
| -Borrowings, current | 10.2 | 14.6 | 11.7 |
| -Borrowings, non-current | 22.3 | 22.1 | 21.7 |
| Net cash | 55.7 | 41.5 | 43.7 |
| Equity | 95.6 | 82.5 | 91.7 |
| Total assets | 290.5 | 277.2 | 281.0 |
| Capital turn over (times) | 1.3 | 1.3 | 1.3 |
| Return on capital employed (%) | 15.9 % | 13.5 % | 13.5 % |
Non-IFRS financial measures are reconciled at the end of this report to the most directly reconcilable line items in the financial statements.
1 Defined as Changes in operating net assets
Free cash flow before M&A was SEK 13.0 (3.9) b. supported by strong cash collection.
Net cash position increased to SEK 55.7 (41.5) b.
A sustainability-linked revolving credit facility of USD 2.0 b. was signed in the quarter.
Cash flow from operating activities
Reported cash flow from operating activities was SEK 14.7 (5.3) b. on the back of continued earnings momentum and decrease in operating net assets. Cash flow from operating activities in Q3 2020 was impacted by a payment of SEK -2.0 b. into the Swedish Pension Trust. Operating net assets decreased in the quarter with a positive impact on cash flow of SEK 4.9 b. Key movements include a positive impact of SEK 5.4 b., related to a decrease in trade receivables and contract assets, partly offset by a decrease in contract liabilities, and was a result of solid cash collection in several market areas including some pre-payments from customers. The positive impact was, however, partly offset by a negative impact of SEK -2.1 b. related to the net of inventory and trade payables, due to the strategic build-up of components for resilience in the supply chain within Networks. Taxes paid were SEK -1.3 b.
Free cash flow
Free cash flow before M&A was SEK 13.0 (3.9) b. and, on a rolling 12-month basis, SEK 31.3 b. or 13.6% in relation to sales. Capex net and other investing activities was SEK -1.2 (-0.8) b., related to capitalization of development expenses and investments in test equipment for 5G within Networks and Digital Services. Repayment of lease liabilities in the quarter was stable at SEK -0.6 b., mainly related to property leases. Free cash flow after M&A was SEK 12.9 (3.8) b.
Cash flow from investing and financing activities
Reported cash flow from investing activities was SEK -9.1 (-1.1) b. as a result of purchases of interest-bearing securities. Reported cash flow from financing activities was SEK -2.5 (-0.9) b. including repayment of lease liabilities and mainly attributed to repayment of current borrowings in subsidiaries.
Financial position
Gross cash was SEK 88.2 (78.2) b. and net cash was SEK 55.7 (41.5) b. They increased QoQ by SEK 11.0 b. and SEK 12.0 b. respectively, as a result of the positive free cash flow.
The funding strategy relies on diverse funding sources with bonds as well as bilateral loans. In the quarter, Ericsson renewed its existing USD 2.0 b. revolving credit facility, linked to two of Ericssons long-term sustainability
11 Ericsson | Third quarter report 2021 Cash flow and financial position
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goals. The facility has a five-year tenure with two one-year extension options and is undrawn. The average maturity of long-term borrowings was 3.8 years as of September 30, 2021, an increase from 1.9 years 12 months earlier.
Liabilities for post-employment benefits increased in the quarter, to SEK 34.7 b. from SEK 31.4 b. due to lower interest rates and higher inflation rate in Sweden. The Swedish defined benefit obligation (DBO) was calculated using a discount rate based on the Swedish government bond yield-curve. If the discount rate had been based on Swedish covered mortgage bonds, the liability for post-employment benefits would have been approximately SEK 19.7 b. (SEK 15 b. lower than current DBO).
Return on capital employed (ROCE) was 15.9% (13.5%).
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Parent Company
Income after financial items Jan-Sep 2021 was SEK 7.3 (3.7) b.
At the end of the quarter, gross cash (cash, cash equivalents, short-term investments and interest-bearing securities, non-current) amounted to SEK 74.8 (66.3) b.
There was an increase in intercompany lending of SEK 3.5 b. and in intercompany borrowing of SEK 0.6 b. in the third quarter.
In accordance with the conditions of the long-term variable compensation program (LTV) for Ericsson employees, 404,760 shares from treasury stock were distributed or sold to employees during the third quarter. The holding of treasury stock on September 30, 2021 was 4,009,306 Class B shares.
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Other information
Ericsson awarded reduced market share by China Mobile
On July 19, 2021, Ericsson announced that the Company had been awarded a 2% market share of Chinas 5G network development for 700MHz radio.
In line with earlier market guidance to investors, this is materially lower than the market share previously awarded to the Company for 2.6GHz radio (11%).
China Mobile is the first operator to award under the latest round of central procurement for 5G radio. Given the context and based on the bidding rules, should Ericsson be awarded business in China Unicom and China Telecom Ericsson believes it would be in a similar range as with the China Mobile award.
As previously disclosed by Ericsson, most recently in its Q2 2021 financial report and in its 2020 annual report, the risk of lower market share award follows the decision by the Post and Telecommunication Authority (PTS) to exclude Chinese vendors products from the 5G auction in Sweden.
Legal proceedings update
On October 4, 2021, Ericsson asked the United States District Court for the Eastern District of Texas, Marshall Division, for a declaration that Ericsson has, in its negotiations with Apple, complied with its FRAND commitment and all other applicable laws and policies that would affect the terms of Ericssons and Apples prospective license.
COVID-19 update
Mass vaccination against the COVID-19 virus during 2021 has enabled the gradual return to normal working arrangements in some geographies.
Ericsson retains cautious optimism that conditions continue to improve but recognize that improvements may be non-linear as the northern hemisphere approaches the winter months. The Company continues to advocate working from home for the majority of employees, travel restrictions for non-essential international travel, and mandatory wearing of face masks in public spaces in work locations, until the end of 2021.
Results continue to reflect the positive response of Ericsson employees to the challenges of the global pandemic. The Company is working to deliver a phased return to work under the Workplace of the Future program which promotes flexibility as well as the promotion of positive health and well-being.
POST-CLOSING EVENTS
AT&T selected Ericsson for expansion of 5G Network and C-band spectrum build
On October 11, 2021, building on more than 20 years of collaboration, Ericsson and AT&T announced a five-year agreement to accelerate the expansion of AT&T 5G. This deal helps support deployment of the service providers recently acquired C-band spectrum and the launch of 5G Standalone (SA). AT&T is tapping into Ericssons leading network expertise as the company works toward its 5G network goals.
Ericsson will help AT&T to bring its 5G network to more consumers, businesses and first responders across key industries including 5G use cases in sports and venues, entertainment, travel and transportation, business transformation and public safety.
AT&Ts network evolution is made possible in part by the Ericsson Radio System portfolio, which includes the Advanced Antenna System, Advanced RAN Coordination and Carrier Aggregation technologies.
These deployments will support future network enhancements like Cloud RAN, which offers communications services providers increased flexibility, faster delivery of services and greater scalability in networks.
The solution supports a centralized RAN architecture enabled by Ericsson Fronthaul Gateway, a new technology that will enable a more efficient transport of the fronthaul interface by converting it to packet (eCPRI).
Ericsson Cloud RAN is a cloud-native software solution handling compute functionality in the Radio Access Network (RAN). It complements the existing technologies in the RAN domain and allows for the adoption of leading practices to become a foundation for openness, enabling innovation in 5G.
Ericsson Cloud RAN will enable communications service providers to seamlessly evolve towards cloud-native technologies and open network architectures to meet the demand for more deployment flexibility.
Investor Update 2021 postponed
Investor Update, planned for November 9, will be postponed and expanded into a Capital Markets Day in 2022. 2021 is a year with focus on continued R&D investments and market share expansion preparing for 2022 and long-term growth and value creation. The aim with the Capital Market Day in 2022 is to host a full-day, in-person event with the entire executive management present, specifying the building blocks towards the long-term targets and elaborating on Enterprise driven growth.
14 Ericsson | Third quarter report 2021 Other information
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Risk factors
Ericsson is exposed to a number of risks in its activities. To stimulate identification and support cross-functional treatment within the Ericsson Group, risks are grouped in a number of categories, including for example risks relating to technology, IPR, compliance, project execution, operations, products and services, treasury and accounting, the geopolitical environment, M&A, cyber security and occupational health and safety.
Ericssons risk management is embedded into strategy development and operational processes and is a part of the Ericsson Group Management System to ensure accountability, effectiveness, efficiency, business continuity and compliance. Risks are defined in both a short-term and long-term perspective and are related to long-term objectives as per the strategic direction as well as to short-term objectives.
Risk factors and uncertainties of relevance to Ericsson are described in the Annual Report 2020. Updates to these risk factors and uncertainties observed by Ericsson that are deemed of short-term relevance include, but are not limited to, the following:
Pandemics, such as for example the one caused by the novel Coronavirus, COVID-19, could severely impact our local and global operations
The COVID-19 pandemic has caused challenges and risks relating to travel and lockdowns limiting access to sites, transportation and logistics and impacting the flow of goods, as well as having major parts of the workforce working remotely. With an increasing infection rate in some of Ericssons markets, there is an increased risk for negative impact and disturbances in the Companys operations, including in network deployments in those markets, impacting corresponding revenues. As previously mentioned, disturbances from the pandemic may have material adverse effects on our business and financial position.
Ericsson relies on a limited number of suppliers of components, production capacity and R&D and IT services, which exposes the Company to supply disruptions and cost increases.
As stated in the Risk Factors in the 2020 Annual Report, section 1.13, Ericsson relies on a limited number of suppliers of components, which exposes the Company to supply disruptions and cost increases. The combination of this with the effects from the COVID-19 pandemic on the component industry, especially on semi-conductors, is causing challenges to the capabilities to fully deliver according to customer demands, which may cause delays in deliveries and reduced sales. Such disruptions and cost increases may negatively affect the Ericsson business, operating results and financial condition.
Stockholm, October 19, 2021
Telefonaktiebolaget LM Ericsson
Börje Ekholm, President and CEO
Org. No. 556016-0680
Date for next report: January 25, 2022
15 Ericsson | Third quarter report 2021 Risk factors
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Editors note
Media and analyst briefing
Ericsson invites media, investors and analysts to a conference call and live video webcast at 9:00 AM CEST on October 19, 2021.
Link to the webcast, dial-in to audio conference, supporting material and replay will be available at:
www.ericsson.com/investors and
www.ericsson.com/newsroom
For further information, please contact:
Carl Mellander, Senior Vice President, Chief Financial Officer
Phone: +46 72 583 88 70
E-mail: [email protected] or
Stella Medlicott, Senior Vice President, Chief Marketing and Communications Officer
Phone: +46 73 095 65 39
E-mail: [email protected] or
Telefonaktiebolaget LM Ericsson
Org. number: 556016-0680
Torshamnsgatan 21
SE-164 83 Stockholm
Phone: +46 10 719 00 00
www.ericsson.com
Investors
Peter Nyquist, Vice President,
Head of Investor Relations
Phone: +46 70 575 29 06
E-mail: [email protected]
Lena Häggblom, Director,
Investor Relations
Phone: +46 72 593 27 78
E-mail: [email protected]
Stefan Jelvin, Director,
Investor Relations
Phone: +46 70 986 02 27
E-mail: [email protected]
Media
Kristoffer Edshage, Director of Corporate Media
Phone: +46 72 220 44 46
E-mail: [email protected]
Corporate Communications
Phone: +46 10 719 69 92
E-mail: [email protected]
16 Ericsson | Third quarter report 2021 Editors note
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Forward-looking statements
This This report includes forward-looking statements, including statements reflecting managements current views relating to the growth of the market, future market conditions, future events, financial condition, and expected operational and financial performance, including, the following:
Our goals, targets, strategies, planning assumptions and operational or financial performance expectations, such as the investor day key messages and our targets and strategies as described in the introductory bullets, the CEO comments, the Segment descriptions and in Other information
Industry trends, future characteristics and development of the markets in which we operate
Our future liquidity, capital resources, capital expenditures, cost savings and profitability
The expected demand for our existing and new products and services as well as plans to launch new products and services including research and development expenditures
The ability to deliver on future plans and to realize potential for future growth
The expected operational or financial performance of strategic cooperation activities and joint ventures
The time until acquired entities and businesses will be integrated and accretive to income
Technology and industry trends including the regulatory and standardization environment in which we operate, competition and our customer structure.
The words believe, expect, foresee, anticipate, assume, intend, likely, projects, may, could, plan, estimate, forecast, will, should, would, predict, aim, ambition, seek, potential, target, might, continue, or, in each case, their negative or variations, and similar words or expressions are used to identify forward-looking statements. Any statement that refers to expectations, projections or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements.
We caution investors that these statements are subject to risks and uncertainties many of which are difficult to predict and generally beyond our control that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements.
Important factors that could affect whether and to what extent any of our forward-looking statements materialize include, but are not limited to, the factors described in the section Risk Factors, and in Risk Factors in the Annual Report 2020.
These forward-looking statements also represent our estimates and assumptions only as of the date that they were made. We expressly disclaim a duty to provide updates to these forward-looking statements, and the estimates and assumptions associated with them, after the date of this report, to reflect events or changes in circumstances or changes in expectations or the occurrence of anticipated events, whether as a result of new information, future events or otherwise, except as required by applicable law or stock exchange regulation.
17 Ericsson | Third quarter report 2021 Forward-looking statements
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Auditors Review Report
Introduction
We have reviewed the condensed interim financial information (interim report) of Telefonaktiebolaget LM Ericsson (publ.) as of September 30, 2021, 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 19, 2021
Deloitte AB
Thomas Strömberg Authorized Public Accountant
18 Ericsson | Third quarter report 2021 Auditors Review Report
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Financial statements and other information
Contents
| Financial statements (unaudited) | 20 |
|---|---|
| Condensed consolidated income statement | 20 |
| Condensed statement of comprehensive income (loss) | 20 |
| Condensed consolidated balance sheet | 21 |
| Condensed consolidated statement of cash flows | 22 |
| Condensed consolidated statement of changes in equity | 23 |
| Condensed consolidated income statement isolated | |
| quarters | 23 |
| Condensed consolidated statement of cash flows isolated | |
| quarters | 24 |
| Condensed Parent Company income statement | 25 |
| Condensed Parent Company statement of comprehensive income | |
| (loss) | 25 |
| Condensed Parent Company balance sheet | 26 |
| Accounting policies and Explanatory notes (unaudited) | 27 |
| Note 1 Accounting policies | 27 |
| Note 2 Critical accounting estimates and judgements | 27 |
| Note 3 Segment information | 28 |
| Note 4 Provisions | 32 |
| Note 5 Financial risk management | 33 |
| Note 6 Cash flow | 34 |
| Note 7 Contingent liabilities and Assets pledged as | |
| collateral | 34 |
| Note 8 Share information | 35 |
| Note 9 Employee information | 35 |
| Note 10 Business combinations | 35 |
| Alternative performance measures (unaudited) | 36 |
| Sales growth adjusted for comparable units and currency | 36 |
| Items excluding restructuring charges | 37 |
| EBITA and EBITA margin / EBITA and EBITA margin excluding restructuring charges | 38 |
| Rolling four quarters of net sales and EBIT margin excluding restructuring charges | |
| (%) | 38 |
| Gross cash and net cash, end of period | 39 |
| Capital employed | 39 |
| Capital turnover | 39 |
| Return on capital employed | 40 |
| Equity ratio | 40 |
| Return on equity | 40 |
| Adjusted earnings per share | 41 |
| Free cash flow before M&A / Free cash flow after M&A | 41 |
| Sales growth by segment adjusted for comparable units and | |
| currency | 42 |
| Sales growth by market area adjusted for comparable units and | |
| currency | 42 |
| Gross margin by segment by quarter | 43 |
| EBIT margin by segment by quarter | 43 |
| Restructuring charges by function | 44 |
| Restructuring charges by segment | 44 |
| Gross income and gross margin excluding restructuring charges by | |
| segment | 45 |
| EBIT and EBIT margin excluding restructuring charges by | |
| segment | 46 |
| Rolling four quarters of net sales by segment | 46 |
| Rolling four quarters of EBIT margin excluding restructuring charges by segment | |
| (%) | 46 |
| EBITA and EBITA margin by segment by quarter | 47 |
| Other ratios | 47 |
19 Ericsson | Third quarter report 2021 Financial statements and other information
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Financial statements (unaudited)
Condensed consolidated income statement
| SEK million | Note | Q3 — 2021 | 2020 | Change | Jan-Sep — 2021 | 2020 |
|---|---|---|---|---|---|---|
| Net sales | 3 | 56,263 | 57,472 | -2 % | 160,982 | 162,800 |
| Cost of sales | -31,487 | -32,710 | -4 % | -91,054 | -97,333 | |
| Gross income | 3 | 24,776 | 24,762 | 0 % | 69,928 | 65,467 |
| Research and development expenses | -10,155 | -10,101 | 1 % | -30,211 | -29,281 | |
| Selling and administrative expenses | -6,177 | -5,992 | 3 % | -19,337 | -19,282 | |
| Impairment losses on trade receivables | -27 | -28 | -4 % | -139 | -146 | |
| Operating expenses | -16,359 | -16,121 | 1 % | -49,687 | -48,709 | |
| Other operating income and | ||||||
| expenses¹ ) | 500 | 61 | 720 % | -66 | 281 | |
| Share in earnings of JV and associated companies | -82 | -59 | 39 % | -256 | -239 | |
| Earnings before financial items and income tax (EBIT) | 3 | 8,835 | 8,643 | 2 % | 19,919 | 16,800 |
| Financial income and expenses, net | -598 | 109 | -649 % | -1,585 | -501 | |
| Income after financial items | 8,237 | 8,752 | -6 % | 18,334 | 16,299 | |
| Income tax | -2,471 | -3,186 | -22 % | -5,500 | -5,868 | |
| Net income | 5,766 | 5,566 | 4 % | 12,834 | 10,431 | |
| Net income (loss) attributable to: | ||||||
| Owners of the Parent Company | 5,752 | 5,353 | 12,618 | 9,961 | ||
| Non-controlling interests | 14 | 213 | 216 | 470 | ||
| Other information | ||||||
| Average number of shares, basic (million) | 8 | 3,330 | 3,326 | 3,329 | 3,322 | |
| Earnings per share, basic (SEK) ² | 1.73 | 1.61 | 3.79 | 3.00 | ||
| Earnings per share, diluted (SEK) ³ | 1.73 | 1.61 | 3.79 | 3.00 |
1) Q3 2021 includes Ericsson Ventures investment revaluation of SEK 0.5 b. Jan-Sep 2021 includes cost of SEK -0.8 b. as a result of the Nokia settlement in Q2 2021 related to the 2019 resolutions with SEC and DOJ.
2) Based on net income attributable to owners of the Parent Company.
3) Potential ordinary shares are not considered when their conversion to ordinary shares would increase earnings per share.
Condensed statement of comprehensive income (loss)
| SEK million | Q3 — 2021 | 2020 | Jan-Sep — 2021 | 2020 |
|---|---|---|---|---|
| Net income | 5,766 | 5,566 | 12,834 | 10,431 |
| Other comprehensive income (loss) | ||||
| Items that will not be reclassified to profit or loss | ||||
| Remeasurements of defined benefits pension plans incl. asset ceiling | -3,025 | -701 | 3,616 | -3,902 |
| Revaluation of borrowings due to change in credit risk | -158 | -269 | -174 | 424 |
| Tax on items that will not be reclassified to profit or loss | 582 | 148 | -744 | 707 |
| Items that have been or may be reclassified to profit or loss | ||||
| Cash flow hedge reserve | ||||
| Gains/losses arising during the period | -200 | 71 | -354 | -24 |
| Reclassification adjustments on gains/losses included in profit or loss | -24 | 70 | -72 | 211 |
| Translation reserves | ||||
| Changes in translation reserves | 856 | -887 | 2,101 | -2,267 |
| Reclassification to profit and loss | 14 | | 5 | -99 |
| Share of other comprehensive income (loss) of JV and associated companies | 3 | -24 | 34 | -26 |
| Tax on items that have been or may be reclassified to profit or loss | 46 | -30 | 88 | -39 |
| Total other comprehensive income, net of tax | -1,906 | -1,622 | 4,500 | -5,015 |
| Total comprehensive income | 3,860 | 3,944 | 17,334 | 5,416 |
| Total comprehensive income attributable to: | ||||
| Owners of the Parent Company | 3,919 | 3,717 | 17,271 | 4,963 |
| Non-controlling interests | -59 | 227 | 63 | 453 |
20 Ericsson | Third quarter report 2021 Financial statements
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Condensed consolidated balance sheet
| SEK million | Note | Sep 30 — 2021 | Dec 31 — 2020 |
|---|---|---|---|
| Assets | |||
| Non-current assets | |||
| Intangible assets | |||
| Capitalized development expenses | 3,610 | 3,857 | |
| Goodwill | 10 | 37,164 | 34,945 |
| Intellectual property rights, brands and other intangible assets | 4,036 | 4,805 | |
| Property, plant and equipment | 13,903 | 13,383 | |
| Right-of-use assets | 7,878 | 7,980 | |
| Financial assets | |||
| Equity in JV and associated companies | 959 | 1,274 | |
| Other investments in shares and participations | 5 | 2,120 | 1,519 |
| Customer finance, non-current | 5 | 657 | 1,221 |
| Interest-bearing securities, non-current | 5 | 26,668 | 21,613 |
| Other financial assets, non-current | 5 | 5,382 | 4,842 |
| Deferred tax assets | 25,047 | 26,296 | |
| 127,424 | 121,735 | ||
| Current assets | |||
| Inventories | 34,823 | 28,097 | |
| Contract assets | 10,211 | 11,273 | |
| Trade receivables | 5 | 39,084 | 42,063 |
| Customer finance, current | 5 | 3,356 | 1,916 |
| Other current receivables | 14,137 | 16,014 | |
| Interest-bearing securities, current | 5 | 15,016 | 6,820 |
| Cash and cash equivalents | 5 | 46,476 | 43,612 |
| 163,103 | 149,795 | ||
| Total assets | 290,527 | 271,530 | |
| Equity and liabilities | |||
| Equity | |||
| Stockholders equity | 97,323 | 86,674 | |
| Non-controlling interest in equity of | |||
| subsidiaries | -1,695 | -1,497 | |
| 95,628 | 85,177 | ||
| Non-current liabilities | |||
| Post-employment benefits | 34,734 | 37,353 | |
| Provisions, non-current | 4 | 2,471 | 2,886 |
| Deferred tax liabilities | 909 | 1,089 | |
| Borrowings, non-current | 5 | 22,282 | 22,218 |
| Lease liabilities, non-current | 7,043 | 7,104 | |
| Other non-current liabilities | 1,605 | 1,383 | |
| 69,044 | 72,033 | ||
| Current liabilities | |||
| Provisions, current | 4 | 6,342 | 7,580 |
| Borrowings, current | 5 | 10,155 | 7,942 |
| Lease liabilities, current | 2,178 | 2,196 | |
| Contract liabilities | 33,869 | 26,440 | |
| Trade payables | 5 | 31,877 | 31,988 |
| Other current liabilities | 41,434 | 38,174 | |
| 125,855 | 114,320 | ||
| Total equity and liabilities | 290,527 | 271,530 |
21 Ericsson | Third quarter report 2021 Financial statements
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Condensed consolidated statement of cash flows
| SEK million | Note | Q3 — 2021 | 2020 | Jan-Sep — 2021 | 2020 |
|---|---|---|---|---|---|
| Operating activities | |||||
| Net income | 5,766 | 5,566 | 12,834 | 10,431 | |
| Adjustments for | |||||
| Taxes | 2,824 | 3,482 | 5,638 | 6,590 | |
| Earnings/dividends in JV and associated companies | 159 | 74 | 347 | 259 | |
| Depreciation, amortization and impairment losses | 6 | 2,385 | 2,105 | 6,417 | 6,381 |
| Other | 24 | -320 | 840 | 257 | |
| 11,158 | 10,907 | 26,076 | 23,918 | ||
| Changes in operating net assets | |||||
| Inventories | -3,877 | -1,578 | -5,813 | -3,369 | |
| Customer finance, current and non-current | -1,419 | -635 | -746 | 489 | |
| Trade receivables and contract assets | 8,833 | -1,513 | 6,778 | 4,046 | |
| Trade payables | 1,733 | -624 | -1,635 | 1,304 | |
| Provisions and post-employment benefits | -130 | -1,897 | -1,068 | -2,868 | |
| Contract liabilities | -3,388 | -1,501 | 5,669 | 1,486 | |
| Other operating assets and liabilities, net | 3,168 | 3,228 | -1,905 | -6,048 | |
| 4,920 | -4,520 | 1,280 | -4,960 | ||
| Interest received | 42 | 96 | 112 | 575 | |
| Interest paid | -120 | -187 | -664 | -1,090 | |
| Taxes paid/received | -1,276 | -1,017 | -2,935 | -3,413 | |
| Cash flow from operating activities | 14,724 | 5,279 | 23,869 | 15,030 | |
| Investing activities | |||||
| Investments in property, plant and equipment | 6 | -1,040 | -963 | -2,962 | -3,403 |
| Sales of property, plant and equipment | 40 | 55 | 81 | 150 | |
| Acquisitions/divestments of subsidiaries and other operations, net | -55 | -89 | -119 | -342 | |
| Product development | 6 | -190 | -167 | -660 | -640 |
| Other investing activities | -4 | 301 | -9 | 133 | |
| Interest-bearing securities | -7,869 | -246 | -13,507 | -2,537 | |
| Cash flow from investing activities | -9,118 | -1,109 | -17,176 | -6,639 | |
| Financing activities | |||||
| Proceeds from issuance of long-term debt | | 83 | 7,881 | 1,006 | |
| Repayment of long-term debt | | -160 | -5,752 | -995 | |
| Dividends paid | -161 | -42 | -3,494 | -2,540 | |
| Repayment of lease liabilities | -580 | -567 | -1,745 | -1,781 | |
| Other financing activities | -1,807 | -200 | -1,316 | 297 | |
| Cash flow from financing activities | -2,548 | -886 | -4,426 | -4,013 | |
| Effect of exchange rate changes on cash | 145 | -165 | 597 | -683 | |
| Net change in cash and cash equivalents | 3,203 | 3,119 | 2,864 | 3,695 | |
| Cash and cash equivalents, beginning of period | 43,273 | 45,655 | 43,612 | 45,079 | |
| Cash and cash equivalents, end of period | 46,476 | 48,774 | 46,476 | 48,774 |
22 Ericsson | Third quarter report 2021 Financial statements
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Condensed consolidated statement of changes in equity
| SEK million | Jan-Sep — 2021 | 2020 |
|---|---|---|
| Opening balance | 85,177 | 81,878 |
| Total comprehensive income | 17,334 | 5,416 |
| Sale/repurchase of own shares | 42 | 163 |
| Long-term variable compensation plans | 64 | 123 |
| Dividends to shareholders ¹ ) | -6,863 | -5,095 |
| Transactions with non-controlling interests | -126 | |
| Closing balance | 95,628 | 82,485 |
1) SEK 1.00 per share of the total SEK 2.00 per share of the dividend approved by the AGM in March 2021 will be paid out in Q4 2021.
Condensed consolidated income statement isolated quarters
| Isolated quarters, SEK million | 2021 — Q3 | Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|---|
| Net sales | 56,263 | 54,941 | 49,778 | 69,590 | 57,472 | 55,578 | 49,750 |
| Cost of sales | -31,487 | -31,084 | -28,483 | -41,333 | -32,710 | -34,661 | -29,962 |
| Gross income | 24,776 | 23,857 | 21,295 | 28,257 | 24,762 | 20,917 | 19,788 |
| Research and development expenses | -10,155 | -10,480 | -9,576 | -10,433 | -10,101 | -10,035 | -9,145 |
| Selling and administrative expenses | -6,177 | -6,972 | -6,188 | -7,402 | -5,992 | -7,052 | -6,238 |
| Impairment losses on trade receivables | -27 | 100 | -212 | 264 | -28 | 42 | -160 |
| Operating expenses | -16,359 | -17,352 | -15,976 | -17,571 | -16,121 | -17,045 | -15,543 |
| Other operating income and expenses | |||||||
| ¹ ) | 500 | -579 | 13 | 381 | 61 | 131 | 89 |
| Share in earnings of JV and associated companies | -82 | -103 | -71 | -59 | -59 | -152 | -28 |
| Earnings before financial items and income tax (EBIT) | 8,835 | 5,823 | 5,261 | 11,008 | 8,643 | 3,851 | 4,306 |
| Financial income and expenses, net | -598 | -454 | -533 | -95 | 109 | 292 | -902 |
| Income after financial items | 8,237 | 5,369 | 4,728 | 10,913 | 8,752 | 4,143 | 3,404 |
| Income tax | -2,471 | -1,469 | -1,560 | -3,721 | -3,186 | -1,558 | -1,124 |
| Net income | 5,766 | 3,900 | 3,168 | 7,192 | 5,566 | 2,585 | 2,280 |
| Net income (loss) attributable to: | |||||||
| Owners of the Parent Company | 5,752 | 3,679 | 3,187 | 7,522 | 5,353 | 2,452 | 2,156 |
| Non-controlling interests | 14 | 221 | -19 | -330 | 213 | 133 | 124 |
| Other information | |||||||
| Average number of shares, basic (million) | 3,330 | 3,329 | 3,328 | 3,328 | 3,326 | 3,322 | 3,317 |
| Earnings per share, basic (SEK) | |||||||
| ² ) | 1.73 | 1.10 | 0.96 | 2.26 | 1.61 | 0.74 | 0.65 |
| Earnings per share, diluted (SEK) | |||||||
| ³ ) | 1.73 | 1.10 | 0.96 | 2.26 | 1.61 | 0.74 | 0.65 |
1) Q3 2021 includes Ericsson Ventures investment revaluation of SEK 0.5 b. Q2 2021 includes cost of SEK -0.8 b. as a result of the Nokia settlement related to the 2019 resolutions with SEC and DOJ.
2) Based on net income attributable to owners of the Parent Company.
3) Potential ordinary shares are not considered when their conversion to ordinary shares would increase earnings per share.
23 Ericsson | Third quarter report 2021 Financial statements
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Condensed consolidated statement of cash flows isolated quarters
| Isolated quarters, SEK million | 2021 — Q3 | Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|---|
| Operating activities | |||||||
| Net income | 5,766 | 3,900 | 3,168 | 7,192 | 5,566 | 2,585 | 2,280 |
| Adjustments for | |||||||
| Taxes | 2,824 | 1,230 | 1,584 | 3,846 | 3,482 | 1,871 | 1,237 |
| Earnings/dividends in JV and associated companies | 159 | 112 | 76 | 115 | 74 | 155 | 30 |
| Depreciation, amortization and impairment losses | 2,385 | 2,097 | 1,935 | 2,293 | 2,105 | 2,156 | 2,120 |
| Other ¹ ) | 24 | 631 | 185 | 190 | -320 | -215 | 792 |
| 11,158 | 7,970 | 6,948 | 13,636 | 10,907 | 6,552 | 6,459 | |
| Changes in operating net assets | |||||||
| Inventories | -3,877 | -701 | -1,235 | 3,753 | -1,578 | -1,253 | -538 |
| Customer finance, current and non-current | -1,419 | 454 | 219 | -119 | -635 | 307 | 817 |
| Trade receivables and contract assets | 8,833 | -4,034 | 1,979 | -7,231 | -1,513 | 0 | 5,559 |
| Trade payables | 1,733 | 744 | -4,112 | 2,999 | -624 | 4,104 | -2,176 |
| Provisions and post-employment benefits | -130 | -1,461 | 523 | 199 | -1,897 | -1,189 | 218 |
| Contract liabilities | -3,388 | 4,603 | 4,454 | -2,046 | -1,501 | -1,000 | 3,987 |
| Other operating assets and liabilities, net | 3,168 | 608 | -5,681 | 3,768 | 3,228 | -1,167 | -8,109 |
| 4,920 | 213 | -3,853 | 1,323 | -4,520 | -198 | -242 | |
| Interest received ¹ ) | 42 | 2 | 68 | 188 | 96 | 347 | 132 |
| Interest paid¹ ) | -120 | -384 | -160 | -344 | -187 | -513 | -390 |
| Taxes paid/received | -1,276 | -1,861 | 202 | -900 | -1,017 | -739 | -1,657 |
| Cash flow from operating activities | 14,724 | 5,940 | 3,205 | 13,903 | 5,279 | 5,449 | 4,302 |
| Investing activities | |||||||
| Investments in property, plant and equipment | -1,040 | -1,007 | -915 | -1,090 | -963 | -1,327 | -1,113 |
| Sales of property, plant and equipment | 40 | 17 | 24 | 104 | 55 | 69 | 26 |
| Acquisitions/divestments of subsidiaries and other operations, net ² ) | -55 | -69 | 5 | -9,256 | -89 | -45 | -208 |
| Product development | -190 | -266 | -204 | -177 | -167 | -211 | -262 |
| Other investing activities | -4 | | -5 | 668 | 301 | -126 | -42 |
| Interest-bearing securities | -7,869 | -5,799 | 161 | 1,189 | -246 | 1,141 | -3,432 |
| Cash flow from investing activities | -9,118 | -7,124 | -934 | -8,562 | -1,109 | -499 | -5,031 |
| Financing activities | |||||||
| Proceeds from issuance of long-term debt | | 7,804 | 77 | 2,213 | 83 | 579 | 344 |
| Repayment of long-term debt | | -510 | -5,242 | -8,036 | -160 | -544 | -291 |
| Dividends paid | -161 | -3,328 | -5 | -3,456 | -42 | -2,489 | -9 |
| Repayment of lease liabilities | -580 | -617 | -548 | -636 | -567 | -618 | -596 |
| Other financing activities | -1,807 | 940 | -449 | 1,436 | -200 | -1,486 | 1,983 |
| Cash flow from financing activities | -2,548 | 4,289 | -6,167 | -8,479 | -886 | -4,558 | 1,431 |
| Effect of exchange rate changes on cash | 145 | -375 | 827 | -2,024 | -165 | -3,084 | 2,566 |
| Net change in cash and cash equivalents | 3,203 | 2,730 | -3,069 | -5,162 | 3,119 | -2,692 | 3,268 |
| Cash and cash equivalents, beginning of period | 43,273 | 40,543 | 43,612 | 48,774 | 45,655 | 48,347 | 45,079 |
| Cash and cash equivalents, end of period | 46,476 | 43,273 | 40,543 | 43,612 | 48,774 | 45,655 | 48,347 |
1) Interest received and paid have been adjusted with a corresponding effect on Other in Q1 and Q2 2021.
2) Includes acquisition of Cradlepoint of SEK -9.5 b. in Q4 2020
24 Ericsson | Third quarter report 2021 Financial statements
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Condensed Parent Company income statement
| SEK million | Q3 — 2021 | 2020 | Jan-Sep — 2021 | 2020 |
|---|---|---|---|---|
| Net sales | | | | |
| Cost of sales | | | | |
| Gross income | | | | |
| Operating expenses | -158 | -503 | -503 | -995 |
| Other operating income and expenses | 670 | 633 | 1,106 | 1,828 |
| EBIT | 512 | 130 | 603 | 833 |
| Financial net | 1,131 | 1,327 | 6,724 | 2,899 |
| Income after financial items | 1,643 | 1,457 | 7,327 | 3,732 |
| Transfers to (-) / from untaxed reserves | | | | |
| Income tax | -163 | -193 | -426 | -511 |
| Net income | 1,480 | 1,264 | 6,901 | 3,221 |
Condensed Parent Company statement of comprehensive income (loss)
| SEK million | Q3 — 2021 | 2020 | Jan-Sep — 2021 | 2020 |
|---|---|---|---|---|
| Net income | 1,480 | 1,264 | 6,901 | 3,221 |
| Revaluation of borrowings due to change in credit risk | -158 | -269 | -174 | 424 |
| Tax on items that will not be reclassified to profit or loss | 33 | 56 | 36 | -87 |
| Other comprehensive income, net of tax | -125 | -213 | -138 | 337 |
| Total comprehensive income | 1,355 | 1,051 | 6,763 | 3,558 |
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Condensed Parent Company balance sheet
| Sep 30 | Dec 31 | |
|---|---|---|
| SEK million | 2021 | 2020 |
| Assets | ||
| Fixed assets | ||
| Intangible assets | 10 | 26 |
| Tangible assets | 429 | 460 |
| Financial assets ¹ ) | 114,744 | 104,989 |
| 115,183 | 105,475 | |
| Current assets | ||
| Receivables | 30,469 | 30,230 |
| Short-term investments | 14,813 | 6,621 |
| Cash and cash equivalents | 33,377 | 28,775 |
| 78,659 | 65,626 | |
| Total assets | 193,842 | 171,101 |
| Stockholders equity, provisions and liabilities | ||
| Equity | ||
| Restricted equity | 48,164 | 48,164 |
| Non-restricted equity | 34,105 | 33,915 |
| 82,269 | 82,079 | |
| Provisions | 260 | 343 |
| Non-current liabilities | 22,388 | 22,111 |
| Current liabilities | 88,925 | 66,568 |
| Total stockholders equity, provisions and liabilities | 193,842 | 171,101 |
| ¹ ) Of which interest-bearing | ||
| securities, non-current | 26,645 | 21,597 |
26 Ericsson | Third quarter report 2021 Financial statements
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Accounting policies and Explanatory notes (unaudited)
Note 1 Accounting policies
The group
This condensed consolidated interim financial report for the quarterly reporting period ended September 30, 2021, has been prepared in accordance with International Accounting Standard, IAS 34 Interim Financial Reporting. The term IFRS used in this document refers to the application of IAS and IFRS as well as interpretations of these standards as issued by IASBs Standards Interpretation Committee (SIC) and IFRS Interpretations Committee (IFRIC). The accounting policies adopted are consistent with those of the annual report for the year ended December 31, 2020 and should be read in conjunction with that annual report. There are no amendments of IFRS during 2021 that are estimated to have a material impact on the result and financial position of the Company.
Changes applied as from Q1 2021
- Change in name from Operating income to EBIT
Operating income has been renamed as EBIT (Earnings before financial items and income tax) and Operating margin as EBIT margin. The definitions of EBIT and EBIT margin remains unchanged.
- Changes in presentation of cash flow statement
From Q1 2021, interests and tax cash flows are presented as a separate section within the Cash flow from operating activities. Previously, interests and tax cash flows were subsumed within various lines in the sections Adjustments to reconcile net income to cash and Changes in operating net assets, and only disclosed in note H3 Statement of cash flow of the Annual Report. All prior quarters in 2020 have been restated with this new section and other sections adjusted accordingly. There is no impact on Cash flows from operating activities for all periods in 2020.
From Q1 2021, the condensed consolidated statement of cash flow in the interim report is expanded to show Proceeds from issuance of borrowings and Repayment of borrowings separately. The Company also decided to present the net movements in collaterals received from CSA agreements and bank borrowings less than 3 months (used for short term liquidity purposes) as Other financing activities as these balances fluctuate over a short duration.
The prior quarters in 2020 have been restated accordingly. This resulted in a reclassification between the lines Proceeds from issuance of borrowings, Repayment of borrowings and Other financing activities compared to the full year cash flow statement
in the 2020 Annual Report. The Cash flow from financing activities remained unchanged for all periods in 2020.
Note 2 Critical accounting estimates and judgements
COVID-19 impacts on the Financial statements
The COVID-19 pandemic has impacted certain lines within our financial statements, especially market assumptions used in the valuation of pension liabilities in 2020. Government bond yields and corporate bond yields have largely returned to levels observed before the pandemic. The increase in government bond yields in Sweden, and corporate bond yields in US and UK resulted in a significant decrease in the net pensions liability compared to year end. This is, however, partially offset by an increase in inflation rate observed in Sweden and the UK, although the Company believes it is difficult to attribute all movement in general price levels to the COVID-19 effect alone.
The Company continually assesses the business performance and profitability for changes in expected future cash flows which could impact recoverability of assets such as deferred tax assets and intangible assets. Risk assessment on the business plans is carried out on a regular basis and an impairment review will be performed if conditions suggest that such assets may be impaired. The Company also monitors customer collections trends for changes in current and future conditions that may impact the expected credit losses model for trade receivables. At the end of September 2021, the Company concluded there is no evidence of material changes to recoverability risk of business assets, including deferred tax assets and trade receivables.
27 Ericsson | Third quarter report 2021 Accounting policies and Explanatory notes
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Note 3 Segment information
Net sales by segment by quarter
| Isolated quarters, SEK million | 2021 — Q3 | Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|---|
| Networks | 40,592 | 39,875 | 36,274 | 49,366 | 41,659 | 39,827 | 35,126 |
| Of which Products | 31,079 | 30,414 | 27,495 | 37,523 | 30,992 | 28,966 | 24,748 |
| Of which Services | 9,513 | 9,461 | 8,779 | 11,843 | 10,667 | 10,861 | 10,378 |
| Digital Services | 8,630 | 7,887 | 6,898 | 12,671 | 8,733 | 8,575 | 7,345 |
| Of which Products | 4,601 | 3,989 | 3,581 | 7,430 | 4,621 | 4,598 | 3,798 |
| Of which Services | 4,029 | 3,898 | 3,317 | 5,241 | 4,112 | 3,977 | 3,547 |
| Managed Services | 5,041 | 5,119 | 4,865 | 5,815 | 5,498 | 5,573 | 5,714 |
| Emerging Business and Other | 2,000 | 2,060 | 1,741 | 1,738 | 1,582 | 1,603 | 1,565 |
| Total | 56,263 | 54,941 | 49,778 | 69,590 | 57,472 | 55,578 | 49,750 |
| 2021 | 2020 | ||||||
| Sequential change, percent | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 |
| Networks | 2 % | 10 % | -27 % | 19 % | 5 % | 13 % | -21 % |
| Of which Products | 2 % | 11 % | -27 % | 21 % | 7 % | 17 % | -21 % |
| Of which Services | 1 % | 8 % | -26 % | 11 % | -2 % | 5 % | -22 % |
| Digital Services | 9 % | 14 % | -46 % | 45 % | 2 % | 17 % | -44 % |
| Of which Products | 15 % | 11 % | -52 % | 61 % | 1 % | 21 % | -48 % |
| Of which Services | 3 % | 18 % | -37 % | 27 % | 3 % | 12 % | -39 % |
| Managed Services | -2 % | 5 % | -16 % | 6 % | -1 % | -2 % | -19 % |
| Emerging Business and Other | -3 % | 18 % | 0 % | 10 % | -1 % | 2 % | -10 % |
| Total | 2 % | 10 % | -28 % | 21 % | 3 % | 12 % | -25 % |
| 2021 | 2020 | ||||||
| Year over year change, percent | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 |
| Networks | -3 % | 0 % | 3 % | 11 % | 6 % | 5 % | 5 % |
| Of which Products | 0 % | 5 % | 11 % | 20 % | 13 % | 8 % | 4 % |
| Of which Services | -11 % | -13 % | -15 % | -11 % | -9 % | -2 % | 7 % |
| Digital Services | -1 % | -8 % | -6 % | -4 % | -12 % | -5 % | -6 % |
| Of which Products | 0 % | -13 % | -6 % | 1 % | -17 % | 0 % | -4 % |
| Of which Services | -2 % | -2 % | -6 % | -10 % | -4 % | -9 % | -9 % |
| Managed Services | -8 % | -8 % | -15 % | -17 % | -14 % | -12 % | -2 % |
| Emerging Business and Other | 26 % | 29 % | 11 % | 0 % | -3 % | -4 % | -11 % |
| Total | -2 % | -1 % | 0 % | 5 % | 1 % | 1 % | 2 % |
| 2021 | 2020 | ||||||
| Year to date, SEK million | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Networks | 116,741 | 76,149 | 36,274 | 165,978 | 116,612 | 74,953 | 35,126 |
| Of which Products | 88,988 | 57,909 | 27,495 | 122,229 | 84,706 | 53,714 | 24,748 |
| Of which Services | 27,753 | 18,240 | 8,779 | 43,749 | 31,906 | 21,239 | 10,378 |
| Digital Services | 23,415 | 14,785 | 6,898 | 37,324 | 24,653 | 15,920 | 7,345 |
| Of which Products | 12,171 | 7,570 | 3,581 | 20,447 | 13,017 | 8,396 | 3,798 |
| Of which Services | 11,244 | 7,215 | 3,317 | 16,877 | 11,636 | 7,524 | 3,547 |
| Managed Services | 15,025 | 9,984 | 4,865 | 22,600 | 16,785 | 11,287 | 5,714 |
| Emerging Business and Other | 5,801 | 3,801 | 1,741 | 6,488 | 4,750 | 3,168 | 1,565 |
| Total | 160,982 | 104,719 | 49,778 | 232,390 | 162,800 | 105,328 | 49,750 |
| 2021 | 2020 | ||||||
| Year over year change, percent | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Networks | 0 % | 2 % | 3 % | 7 % | 5 % | 5 % | 5 % |
| Of which Products | 5 % | 8 % | 11 % | 12 % | 9 % | 6 % | 4 % |
| Of which Services | -13 % | -14 % | -15 % | -5 % | -2 % | 2 % | 7 % |
| Digital Services | -5 % | -7 % | -6 % | -6 % | -8 % | -5 % | -6 % |
| Of which Products | -6 % | -10 % | -6 % | -5 % | -8 % | -2 % | -4 % |
| Of which Services | -3 % | -4 % | -6 % | -8 % | -7 % | -9 % | -9 % |
| Managed Services | -10 % | -12 % | -15 % | -12 % | -9 % | -7 % | -2 % |
| Emerging Business and Other | 22 % | 20 % | 11 % | -4 % | -6 % | -8 % | -11 % |
| Total | -1 % | -1 % | 0 % | 2 % | 1 % | 2 % | 2 % |
28 Ericsson | Third quarter report 2021 Accounting policies and Explanatory notes
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Gross income by segment by quarter
| Isolated quarters, SEK million | 2021 — Q3 | Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|---|
| Networks | 19,401 | 19,111 | 16,714 | 21,430 | 19,375 | 16,022 | 15,586 |
| Digital Services | 3,644 | 2,990 | 3,002 | 5,183 | 3,787 | 3,738 | 2,929 |
| Managed Services | 944 | 975 | 942 | 1,031 | 1,093 | 955 | 933 |
| Emerging Business and Other | 787 | 781 | 637 | 613 | 507 | 202 | 340 |
| Total | 24,776 | 23,857 | 21,295 | 28,257 | 24,762 | 20,917 | 19,788 |
| 2021 | 2020 | ||||||
| Year to date, SEK million | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Networks | 55,226 | 35,825 | 16,714 | 72,413 | 50,983 | 31,608 | 15,586 |
| Digital Services | 9,636 | 5,992 | 3,002 | 15,637 | 10,454 | 6,667 | 2,929 |
| Managed Services | 2,861 | 1,917 | 942 | 4,012 | 2,981 | 1,888 | 933 |
| Emerging Business and Other | 2,205 | 1,418 | 637 | 1,662 | 1,049 | 542 | 340 |
| Total | 69,928 | 45,152 | 21,295 | 93,724 | 65,467 | 40,705 | 19,788 |
EBIT (loss) by segment by quarter
| Isolated quarters, SEK million | 2021 — Q3 | Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|---|
| Networks | 9,624 | 8,645 | 7,240 | 10,604 | 9,165 | 5,255 | 5,827 |
| Digital Services | -822 | -1,567 | -1,519 | 499 | -591 | -697 | -1,417 |
| Managed Services | 386 | 416 | 313 | 401 | 491 | 263 | 408 |
| Emerging Business and Other | -353 | -1,671 | -773 | -496 | -422 | -970 | -512 |
| Total | 8,835 | 5,823 | 5,261 | 11,008 | 8,643 | 3,851 | 4,306 |
| 2021 | 2020 | ||||||
| Year to date, SEK million | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Networks | 25,509 | 15,885 | 7,240 | 30,851 | 20,247 | 11,082 | 5,827 |
| Digital Services | -3,908 | -3,086 | -1,519 | -2,206 | -2,705 | -2,114 | -1,417 |
| Managed Services | 1,115 | 729 | 313 | 1,563 | 1,162 | 671 | 408 |
| Emerging Business and Other | -2,797 | -2,444 | -773 | -2,400 | -1,904 | -1,482 | -512 |
| Total | 19,919 | 11,084 | 5,261 | 27,808 | 16,800 | 8,157 | 4,306 |
29 Ericsson | Third quarter report 2021 Accounting policies and Explanatory notes
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Net sales by market area by quarter
| Isolated quarters, SEK million | 2021 — Q3 | Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|---|
| South East Asia, Oceania and India | 6,450 | 7,099 | 6,676 | 9,748 | 7,801 | 6,582 | 5,917 |
| North East Asia | 5,691 | 7,123 | 6,491 | 12,823 | 8,814 | 7,790 | 3,907 |
| North America | 20,161 | 17,950 | 17,081 | 19,101 | 18,356 | 18,407 | 17,911 |
| Europe and Latin America 1) 2) | 14,378 | 14,011 | 12,647 | 17,125 | 13,318 | 13,061 | 12,241 |
| Middle East and Africa | 4,985 | 4,459 | 4,393 | 6,518 | 5,520 | 5,431 | 5,829 |
| Other 1) 2) | 4,598 | 4,299 | 2,490 | 4,275 | 3,663 | 4,307 | 3,945 |
| Total | 56,263 | 54,941 | 49,778 | 69,590 | 57,472 | 55,578 | 49,750 |
| ¹) Of which in Sweden | 478 | 404 | 389 | 363 | 249 | 284 | 227 |
| ² ) Of which in EU | 7,069 | 7,256 | 6,801 | 8,874 | 7,090 | 7,278 | 6,259 |
| 2021 | 2020 | ||||||
| Sequential change, percent | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 |
| South East Asia, Oceania and India | -9 % | 6 % | -32 % | 25 % | 19 % | 11 % | -36 % |
| North East Asia | -20 % | 10 % | -49 % | 45 % | 13 % | 99 % | -60 % |
| North America | 12 % | 5 % | -11 % | 4 % | 0 % | 3 % | 3 % |
| Europe and Latin America 1) 2) | 3 % | 11 % | -26 % | 29 % | 2 % | 7 % | -30 % |
| Middle East and Africa | 12 % | 2 % | -33 % | 18 % | 2 % | -7 % | -31 % |
| Other 1) 2) | 7 % | 73 % | -42 % | 17 % | -15 % | 9 % | -5 % |
| Total | 2 % | 10 % | -28 % | 21 % | 3 % | 12 % | -25 % |
| ¹) Of which in Sweden | 18 % | 4 % | 7 % | 46 % | -12 % | 25 % | -3 % |
| ² ) Of which in EU | -3 % | 7 % | -23 % | 25 % | -3 % | 16 % | -29 % |
| 2021 | 2020 | ||||||
| Year over year change, percent | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 |
| South East Asia, Oceania and India | -17 % | 8 % | 13 % | 6 % | 5 % | -5 % | -4 % |
| North East Asia | -35 % | -9 % | 66 % | 32 % | 39 % | 20 % | 2 % |
| North America | 10 % | -2 % | -5 % | 10 % | -3 % | 4 % | 11 % |
| Europe and Latin America 1) 2) | 8 % | 7 % | 3 % | -2 % | -7 % | -7 % | -7 % |
| Middle East and Africa | -10 % | -18 % | -25 % | -23 % | -9 % | -4 % | 8 % |
| Other 1) 2) | 26 % | 0 % | -37 % | 3 % | -8 % | 10 % | -7 % |
| Total | -2 % | -1 % | 0 % | 5 % | 1 % | 1 % | 2 % |
| ¹ ) Of which in Sweden | 92 % | 42 % | 71 % | 54 % | 1815 % | 91 % | 18 % |
| ² ) Of which in EU | 0 % | 0 % | 9 % | 1 % | -4 % | 5 % | -4 % |
| 2021 | 2020 | ||||||
| Year to date, SEK million | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| South East Asia, Oceania and India | 20,225 | 13,775 | 6,676 | 30,048 | 20,300 | 12,499 | 5,917 |
| North East Asia | 19,305 | 13,614 | 6,491 | 33,334 | 20,511 | 11,697 | 3,907 |
| North America | 55,192 | 35,031 | 17,081 | 73,775 | 54,674 | 36,318 | 17,911 |
| Europe and Latin America 1) 2) | 41,036 | 26,658 | 12,647 | 55,745 | 38,620 | 25,302 | 12,241 |
| Middle East and Africa | 13,837 | 8,852 | 4,393 | 23,298 | 16,780 | 11,260 | 5,829 |
| Other 1) 2) | 11,387 | 6,789 | 2,490 | 16,190 | 11,915 | 8,252 | 3,945 |
| Total | 160,982 | 104,719 | 49,778 | 232,390 | 162,800 | 105,328 | 49,750 |
| ¹ ) Of which in Sweden | 1,271 | 793 | 389 | 1,123 | 760 | 511 | 227 |
| ² ) Of which in EU | 21,126 | 14,057 | 6,801 | 29,501 | 20,627 | 13,537 | 6,259 |
| 2021 | 2020 | ||||||
| Year to date, year over year change, percent | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| South East Asia, Oceania and India | 0 % | 10 % | 13 % | 1 % | -1 % | -5 % | -4 % |
| North East Asia | -6 % | 16 % | 66 % | 26 % | 23 % | 13 % | 2 % |
| North America | 1 % | -4 % | -5 % | 5 % | 3 % | 7 % | 11 % |
| Europe and Latin America 1) 2) | 6 % | 5 % | 3 % | -6 % | -7 % | -7 % | -7 % |
| Middle East and Africa | -18 % | -21 % | -25 % | -9 % | -2 % | 2 % | 8 % |
| Other 1) 2) | -4 % | -18 % | -37 % | -1 % | -2 % | 1 % | -7 % |
| Total | -1 % | -1 % | 0 % | 2 % | 1 % | 2 % | 2 % |
| ¹ ) Of which in Sweden | 67 % | 55 % | 71 % | 91 % | 115 % | 50 % | 18 % |
| ² ) Of which in EU | 2 % | 4 % | 9 % | 0 % | -1 % | 1 % | -4 % |
30 Ericsson | Third quarter report 2021 Accounting policies and Explanatory notes
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Net sales by market area by segment
| SEK million | Q3 2021 — Networks | Digital Services | Managed Services | Emerging Business and Other | Total | Jan-Sep 2021 — Networks | Digital Services | Managed Services | Emerging Business and Other | Total |
|---|---|---|---|---|---|---|---|---|---|---|
| South East Asia, Oceania and India | 4,375 | 1,007 | 1,062 | 6 | 6,450 | 14,378 | 2,638 | 3,182 | 27 | 20,225 |
| North East Asia | 4,752 | 695 | 196 | 48 | 5,691 | 16,358 | 2,251 | 525 | 171 | 19,305 |
| North America | 17,341 | 2,052 | 753 | 15 | 20,161 | 47,665 | 5,363 | 2,103 | 61 | 55,192 |
| Europe and Latin America | 9,379 | 2,748 | 2,156 | 95 | 14,378 | 26,074 | 8,113 | 6,550 | 299 | 41,036 |
| Middle East and Africa | 2,478 | 1,631 | 874 | 2 | 4,985 | 7,191 | 3,972 | 2,665 | 9 | 13,837 |
| Other ¹ ) | 2,267 | 497 | 0 | 1,834 | 4,598 | 5,075 | 1,078 | 0 | 5,234 | 11,387 |
| Total | 40,592 | 8,630 | 5,041 | 2,000 | 56,263 | 116,741 | 23,415 | 15,025 | 5,801 | 160,982 |
| Share of total | 72 % | 15 % | 9 % | 4 % | 100 % | 72 % | 15 % | 9 % | 4 % | 100 % |
1) Includes IPR licensing revenues.
| Sequential change, percent | Q3 2021 — Networks | Digital Services | Managed Services | Emerging Business and Other | Total |
|---|---|---|---|---|---|
| South East Asia, Oceania and India | -15 % | 16 % | 0 % | -57 % | -9 % |
| North East Asia | -24 % | 0 % | 23 % | -8 % | -20 % |
| North America | 13 % | 12 % | 5 % | -55 % | 12 % |
| Europe and Latin America | 7 % | -5 % | -6 % | -10 % | 3 % |
| Middle East and Africa | 5 % | 37 % | -3 % | -33 % | 12 % |
| Other | 12 % | 18 % | | -1 % | 7 % |
| Total | 2 % | 9 % | -2 % | -3 % | 2 % |
| Year over year change, percent | Q3 2021 — Networks | Digital Services | Managed Services | Emerging Business and Other | Total | Jan-Sep 2021 — Networks | Digital Services | Managed Services | Emerging Business and Other | Total |
|---|---|---|---|---|---|---|---|---|---|---|
| South East Asia, Oceania and India | -21 % | -7 % | -8 % | 100 % | -17 % | 1 % | -10 % | 3 % | -4 % | 0 % |
| North East Asia | -36 % | -38 % | 20 % | -45 % | -35 % | -1 % | -29 % | -3 % | -19 % | -6 % |
| North America | 11 % | 3 % | 1 % | 36 % | 10 % | 2 % | 2 % | -23 % | 33 % | 1 % |
| Europe and Latin America | 16 % | 1 % | -12 % | 4 % | 8 % | 13 % | 5 % | -13 % | 12 % | 6 % |
| Middle East and Africa | -20 % | 15 % | -12 % | -33 % | -10 % | -26 % | -6 % | -7 % | -31 % | -18 % |
| Other | 20 % | 27 % | | 32 % | 26 % | -21 % | -19 % | | 25 % | -4 % |
| Total | -3 % | -1 % | -8 % | 26 % | -2 % | 0 % | -5 % | -10 % | 22 % | -1 % |
31 Ericsson | Third quarter report 2021 Accounting policies and Explanatory notes
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Top 5 countries in sales
| Country, percentage of net sales 1) | Q3 — 2021 | 2020 | Jan-Sep — 2021 | 2020 |
|---|---|---|---|---|
| United States | 37 % | 34 % | 35 % | 35 % |
| Japan | 4 % | 4 % | 6 % | 4 % |
| China | 5 % | 10 % | 4 % | 8 % |
| India | 3 % | 3 % | 3 % | 3 % |
| United Kingdom | 4 % | 3 % | 3 % | 3 % |
1) Based on Jan-Sep 2021. Includes IPR licensing revenues.
IPR licensing revenues by segment by quarter
| Isolated quarters, SEK million | 2021 — Q3 | Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|---|
| Networks | 2,146 | 1,904 | 671 | 2,105 | 1,773 | 2,282 | 2,019 |
| Digital Services | 471 | 418 | 147 | 463 | 389 | 501 | 443 |
| Total | 2,617 | 2,322 | 818 | 2,568 | 2,162 | 2,783 | 2,462 |
| 2021 | 2020 | ||||||
| Year to date, SEK million | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Networks | 4,721 | 2,575 | 671 | 8,179 | 6,074 | 4,301 | 2,019 |
| Digital Services | 1,036 | 565 | 147 | 1,796 | 1,333 | 944 | 443 |
| Total | 5,757 | 3,140 | 818 | 9,975 | 7,407 | 5,245 | 2,462 |
Note 4 Provisions
Provisions
| Isolated quarters, SEK million | 2021 — Q3 | Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|---|
| Opening balance | 9,232 | 11,045 | 10,466 | 10,922 | 10,603 | 11,060 | 10,923 |
| Additions | 316 | 616 | 1,753 | 1,245 | 1,093 | 2,116 | 793 |
| Utilization/Cash out | -408 | -2,179 | -979 | -761 | -475 | -2,066 | -673 |
| Of which restructuring | -95 | -161 | -336 | -332 | -160 | -137 | -186 |
| Reversal of excess amounts | -66 | -170 | -339 | -673 | -172 | -192 | -124 |
| Reclassification, translation difference and other | -261 | -80 | 144 | -267 | -127 | -315 | 141 |
| Closing balance | 8,813 | 9,232 | 11,045 | 10,466 | 10,922 | 10,603 | 11,060 |
| Of which restructuring | 732 | 807 | 950 | 1,200 | 1,659 | 1,594 | 1,202 |
| 2021 | 2020 | ||||||
| Year to date, SEK million | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Opening balance | 10,466 | 10,466 | 10,466 | 10,923 | 10,923 | 10,923 | 10,923 |
| Additions | 2,685 | 2,369 | 1,753 | 5,247 | 4,002 | 2,909 | 793 |
| Utilization/Cash out | -3,566 | -3,158 | -979 | -3,975 | -3,214 | -2,739 | -673 |
| Of which restructuring | -592 | -497 | -336 | -815 | -483 | -323 | -186 |
| Reversal of excess amounts | -575 | -509 | -339 | -1,161 | -488 | -316 | -124 |
| Reclassification, translation difference and other | -197 | 64 | 144 | -568 | -301 | -174 | 141 |
| Closing balance | 8,813 | 9,232 | 11,045 | 10,466 | 10,922 | 10,603 | 11,060 |
| Of which restructuring | 732 | 807 | 950 | 1,200 | 1,659 | 1,594 | 1,202 |
32 Ericsson | Third quarter report 2021 Accounting policies and Explanatory notes
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Note 5 Financial risk management
There have been no changes to the classification of financial instruments or fair value hierarchy categorization from that presented in the latest Annual Report. Where Level 2 and Level 3 fair value hierarchies apply, the inputs and valuation methods used remained unchanged. The book values and fair values of financial instruments are as follows:
Financial instruments
| SEK billion | ||||||||
|---|---|---|---|---|---|---|---|---|
| Fair value hierarchy level | Fair value hierarchy level | |||||||
| Carrying value | Level 1 | Level 2 | Level 3 | Carrying value | Level l | Level 2 | Level 3 | |
| Assets at fair value through profit or loss | ||||||||
| Customer finance 1 ) | 4.0 | | | 4.0 | 3.1 | | | 3.1 |
| Interest-bearing securities | 41.4 | 41.4 | | | 28.1 | 28.1 | | |
| Cash equivalents² ) | 26.1 | | 26.1 | | 23.6 | | 23.6 | |
| Other financial assets | 2.1 | 0.5 | | 1.6 | 1.5 | | | 1.5 |
| Other current assets | 0.6 | | 0.6 | | 1.5 | | 1.5 | |
| Assets at fair value through OCI | ||||||||
| Trade receivables | 39.1 | | | 39.1 | 42.1 | | | 42.1 |
| Assets at amortized costs | ||||||||
| Interest-bearing securities | 0.3 | | | | 0.4 | | | |
| Cash equivalents ² ) | 2.6 | | | | 3.6 | | | |
| Other financial assets | 0.5 | | | | 0.5 | | | |
| Total financial assets | 116.7 | 104.4 | ||||||
| Financial liabilities at designated FVTPL | ||||||||
| Parent company borrowings | -31.1 | -14.3 | -16.8 | | -27.2 | -18.9 | -8.3 | |
| Financial liabilities at FVTPL | ||||||||
| Other current liabilities | -0.6 | | -0.6 | | -0.2 | | -0.2 | |
| Liabilities at amortized cost | ||||||||
| Trade payables | -31.9 | | | | -32.0 | | | |
| Borrowings | -1.3 | | | | -2.9 | | | |
| Total financial liabilities | -64.9 | -62.3 |
1) Year to date movements of customer finance receivables are as follows: additions of SEK 18.1 billion, disposals and repayments of SEK 17.7 billion and revaluation gain of SEK 0.5 billion.
2) Total Cash and cash equivalent is SEK 46.5 (43.6) billion, of which SEK 28.7 (27.2) billion relating to Cash equivalents are presented in the table above.
Exchange rates used in the consolidation
| 2021 | 2020 | 2020 | |
|---|---|---|---|
| SEK/EUR -closing rate | 10.18 | 10.55 | 10.06 |
| SEK/USD -closing rate | 8.80 | 9.00 | 8.19 |
33 Ericsson | Third quarter report 2021 Accounting policies and Explanatory notes
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Note 6 Cash flow
Information on investments
Investments in assets subject to depreciation, amortization, impairment and write-downs
| Isolated quarters, SEK million | 2021 — Q3 | Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|---|
| Additions | |||||||
| Property, plant and equipment | 1,040 | 1,007 | 915 | 1,090 | 963 | 1,327 | 1,113 |
| Capitalized development expenses | 190 | 266 | 204 | 177 | 167 | 211 | 262 |
| IPR, brands and other intangible assets | 3 | 1 | 4 | 124 | | 97 | 1 |
| Total | 1,233 | 1,274 | 1,123 | 1,391 | 1,130 | 1,635 | 1,376 |
| Depreciation, amortization and impairment losses | |||||||
| Property, plant and equipment | 954 | 910 | 874 | 1,186 | 916 | 1,003 | 1,009 |
| Capitalized development expenses | 394 | 329 | 224 | 230 | 230 | 272 | 174 |
| Goodwill, IPR, brands and other intangible assets | 464 | 294 | 283 | 276 | 365 | 258 | 321 |
| Right-of-use assets | 572 | 564 | 554 | 601 | 594 | 623 | 616 |
| Total | 2,384 | 2,097 | 1,935 | 2,293 | 2,105 | 2,156 | 2,120 |
| 2021 | 2020 | ||||||
| Year to date, SEK million | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Additions | |||||||
| Property, plant and equipment | 2,962 | 1,922 | 915 | 4,493 | 3,403 | 2,440 | 1,113 |
| Capitalized development expenses | 660 | 470 | 204 | 817 | 640 | 473 | 262 |
| IPR, brands and other intangible assets | 8 | 5 | 4 | 222 | 98 | 98 | 1 |
| Total | 3,630 | 2,397 | 1,123 | 5,532 | 4,141 | 3,011 | 1,376 |
| Depreciation, amortization and impairment losses | |||||||
| Property, plant and equipment | 2,738 | 1,784 | 874 | 4,114 | 2,928 | 2,012 | 1,009 |
| Capitalized development expenses | 947 | 553 | 224 | 906 | 676 | 446 | 174 |
| Goodwill, IPR, brands and other intangible assets | 1,041 | 577 | 283 | 1,220 | 944 | 579 | 321 |
| Right-of-use assets | 1,690 | 1,118 | 554 | 2,434 | 1,833 | 1,239 | 616 |
| Total | 6,416 | 4,032 | 1,935 | 8,674 | 6,381 | 4,276 | 2,120 |
Note 7 Contingent liabilities and Assets pledged as collateral
Contingent liabilities and Assets pledged as collateral
| SEK million — Contingent liabilities | 1,297 | 1,198 |
|---|---|---|
| Assets pledged as collateral | 6,893 | 6,808 |
34 Ericsson | Third quarter report 2021 Accounting policies and Explanatory notes
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Note 8 Share information
Number of shares and earnings per share
| 2021 | 2020 | 2021 | 2020 | |
|---|---|---|---|---|
| Number of shares, end of period (million) | 3,334 | 3,334 | 3,334 | 3,334 |
| Of which class A-shares (million) | 262 | 262 | 262 | 262 |
| Of which class B-shares (million) | 3,072 | 3,072 | 3,072 | 3,072 |
| Number of treasury shares, end of period (million) | 4 | 6 | 4 | 6 |
| Number of shares outstanding, basic, end of period (million) | 3,330 | 3,328 | 3,330 | 3,328 |
| Numbers of shares outstanding, diluted, end of period (million) | 3,333 | 3,331 | 3,333 | 3,331 |
| Average number of treasury shares (million) | 4 | 8 | 5 | 12 |
| Average number of shares outstanding, basic (million) | 3,330 | 3,326 | 3,329 | 3,322 |
| Average number of shares outstanding, diluted (million) ¹ ) | 3,333 | 3,329 | 3,332 | 3,325 |
| Earnings per share, basic (SEK) | ||||
| ² ) | 1.73 | 1.61 | 3.79 | 3.00 |
| Earnings per share, diluted (SEK) | ||||
| ¹ ) | 1.73 | 1.61 | 3.79 | 3.00 |
1) Potential ordinary shares are not considered when their conversion to ordinary shares would increase earnings per share.
2) Based on net income attributable to owners of the Parent Company.
Note 9 Employee information
Number of employees
| End of period | 2021 — Sep 30 | Jun 30 | Mar 31 | 2020 — Dec 31 | Sep 30 | Jun 30 | Mar 31 |
|---|---|---|---|---|---|---|---|
| South East Asia, Oceania and India | 26,363 | 26,325 | 26,123 | 25,869 | 25,633 | 25,265 | 24,942 |
| North East Asia | 14,111 | 14,043 | 14,033 | 13,944 | 13,955 | 13,965 | 13,786 |
| North America | 10,371 | 10,256 | 10,161 | 10,175 | 9,537 | 9,785 | 9,718 |
| Europe and Latin America ¹ ) | 46,903 | 46,616 | 46,482 | 46,580 | 46,495 | 46,521 | 46,402 |
| Middle East and Africa | 4,455 | 4,384 | 4,314 | 4,256 | 4,206 | 4,264 | 4,247 |
| Total | 102,203 | 101,624 | 101,113 | 100,824 | 99,826 | 99,800 | 99,095 |
| ¹ ) Of which in Sweden | 13,908 | 13,626 | 13,379 | 13,173 | 13,046 | 12,884 | 12,746 |
Note 10 Business combinations
Acquisition Cradle pointFinal PPA
| SEK billion | |
|---|---|
| Total consideration incl. cash | 9.5 |
| Net assets acquired | |
| Cash and cash equivalents | 0.3 |
| Inventory | 0.6 |
| Other assets | 1.0 |
| Intangible assets | 3.2 |
| Other liabilities ¹ ) | -3.1 |
| Total identifiable net assets | 2.0 |
| Goodwill | 7.5 |
| Total | 9.5 |
1) Includes deferred tax liabilities of SEK -1.0 billion.
On November 1, 2020, the Company acquired all of the shares in Cradlepoint Inc, a US-based market leader in Wireless Edge WAN 4G and 5G Enterprise solutions. The investment is key to Ericssons ongoing strategy of capturing market share in the rapidly expanding 5G Enterprise space. Cradlepoint complements Ericssons existing 5G Enterprise portfolio which includes Dedicated Networks and a global IoT platform. Goodwill in this transaction represents future customers, future technology and synergies to the sales channels and commercial model applied by Cradlepoint and is not expected to be deductible for tax purposes. In Q2 2021 the final fair values at the acquisition date of the assets acquired and liabilities assumed was finalized, see table above. The main change between the provisional and final fair values in the balance sheet is an increase in goodwill of SEK 0.5 billion with a corresponding increase of deferred revenues. This resulted in a positive impact in the income statement of SEK 0.1 billion in Q2 2021.
35 Ericsson | Third quarter report 2021 Accounting policies and Explanatory notes
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Alternative performance measures (unaudited)
In this section, the Company presents its Alternative Performance Measures (APMs), which are not recognized measures of financial performance under IFRS. The presentation of APMs has limitations as analytical tools and should not be considered in isolation or as a substitute for related financial measures prepared in accordance with IFRS.
APMs are presented to enhance an investors evaluation of ongoing operating results, to aid in forecasting future periods and to facilitate meaningful comparison of results between periods.
Management uses these APMs to, among other things, evaluate ongoing operations in relation to historical results, for internal planning and forecasting purposes and in the calculation of certain performance-based compensation. APMs should not be viewed as substitutes for income statement or cash flow items computed in accordance with IFRS.
As from 2021 Operating income has been renamed as EBIT and Operating margin as EBIT margin. The definitions of EBIT and EBIT margin remain unchanged. The APMs have been updated with the new names.
As from 2021 EBITA excluding restructuring charges has been added. The main reason for the update is that Ericssons long-term target is expressed as EBITA excluding restructuring charges as a percentage of net sales.
The APM Sales growth adjusted for comparable units and currency has been added with the split by market area. Previously the information was provided by segment, but as from 2021 the information is also provided by market area.
This section also includes a reconciliation of the APMs to the most directly reconcilable line items in the financial statements. For more information about non-IFRS key operating measures, see Ericsson Annual Report 2020.
Sales growth adjusted for comparable units and currency
Sales growth adjusted for the impact of acquisitions and divestments as well as the effects of foreign currency fluctuations. Also named organic growth.
| Isolated quarters, year over year change | 2021 — Q3 | Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|---|
| Reported net sales | 56,263 | 54,941 | 49,778 | 69,590 | 57,472 | 55,578 | 49,750 |
| Acquired business | -402 | -450 | -225 | -206 | -415 | -422 | -319 |
| Net FX impact | 1,196 | 5,455 | 5,341 | 5,472 | 4,304 | -326 | -1,654 |
| Comparable net sales, excluding FX impact | 57,057 | 59,946 | 54,894 | 74,856 | 61,361 | 54,830 | 47,777 |
| Comparable quarter net sales adj. for acq/div business¹ ) | 57,472 | 55,578 | 49,750 | 66,373 | 57,150 | 54,810 | 48,798 |
| Sales growth adjusted for comparable units and currency (%) | -1 % | 8 % | 10 % | 13 % | 7 % | 0 % | -2 % |
| 2021 | 2020 | ||||||
| Year to date, year over year change | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Reported net sales | 160,982 | 104,719 | 49,778 | 232,390 | 162,800 | 105,328 | 49,750 |
| Acquired business | -1,077 | -675 | -225 | -1,362 | -1,156 | -741 | -319 |
| Net FX impact | 11,992 | 10,796 | 5,341 | 7,796 | 2,324 | -1,980 | -1,654 |
| Comparable net sales, excluding FX impact | 171,897 | 114,840 | 54,894 | 238,824 | 163,968 | 102,607 | 47,777 |
| Comparable quarter net sales adj. for acq/div business¹ ) | 162,800 | 105,328 | 49,750 | 227,132 | 160,758 | 103,608 | 48,798 |
| Sales growth adjusted for comparable units and currency (% ) | 6 % | 9 % | 10 % | 5 % | 2 % | -1 % | -2 % |
1) Adjusted for acquisition of Cradlepoint in November 2020.
36 Ericsson | Third quarter report 2021 Alternative performance measures
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Items excluding restructuring charges
Gross income, operating expenses, and EBIT are presented excluding restructuring charges and, for certain measures, as a percentage of net sales. Operating income has been renamed to EBIT and Operating margin to EBIT margin. The definition on EBIT and EBIT margin remain unchanged.
| Isolated quarters, SEK million | 2021 — Q3 | Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|---|
| Gross income | 24,776 | 23,857 | 21,295 | 28,257 | 24,762 | 20,917 | 19,788 |
| Net sales | 56,263 | 54,941 | 49,778 | 69,590 | 57,472 | 55,578 | 49,750 |
| Gross margin (% ) | 44.0 % | 43.4 % | 42.8 % | 40.6 % | 43.1 % | 37.6 % | 39.8 % |
| Gross income | 24,776 | 23,857 | 21,295 | 28,257 | 24,762 | 20,917 | 19,788 |
| Restructuring charges included in cost of sales | 6 | 6 | 62 | 5 | 73 | 312 | 335 |
| Gross income excluding restructuring charges | 24,782 | 23,863 | 21,357 | 28,262 | 24,835 | 21,229 | 20,123 |
| Net sales | 56,263 | 54,941 | 49,778 | 69,590 | 57,472 | 55,578 | 49,750 |
| Gross margin excluding restructuring charges (% ) | 44.0 % | 43.4 % | 42.9 % | 40.6 % | 43.2 % | 38.2 % | 40.4 % |
| Operating expenses | -16,359 | -17,352 | -15,976 | -17,571 | -16,121 | -17,045 | -15,543 |
| Restructuring charges included in R&D expenses | -2 | -1 | | -21 | 244 | 227 | -39 |
| Restructuring charges included in selling and administrative expenses | 1 | -1 | 15 | 8 | 13 | 144 | 5 |
| Operating expenses excluding restructuring charges | -16,360 | -17,354 | -15,961 | -17,584 | -15,864 | -16,674 | -15,577 |
| EBIT | 8,835 | 5,823 | 5,261 | 11,008 | 8,643 | 3,851 | 4,306 |
| Net sales | 56,263 | 54,941 | 49,778 | 69,590 | 57,472 | 55,578 | 49,750 |
| EBIT margin (% ) | 15.7 % | 10.6 % | 10.6 % | 15.8 % | 15.0 % | 6.9 % | 8.7 % |
| EBIT | 8,835 | 5,823 | 5,261 | 11,008 | 8,643 | 3,851 | 4,306 |
| Total restructuring charges | 5 | 4 | 77 | -8 | 330 | 683 | 301 |
| EBIT excluding restructuring charges | 8,840 | 5,827 | 5,338 | 11,000 | 8,973 | 4,534 | 4,607 |
| Net sales | 56,263 | 54,941 | 49,778 | 69,590 | 57,472 | 55,578 | 49,750 |
| EBIT margin excluding restructuring charges (% ) | 15.7 % | 10.6 % | 10.7 % | 15.8 % | 15.6 % | 8.2 % | 9.3 % |
| Year to date, SEK million | 2021 — Jan-Sep | Jan-Jun | Jan-Mar | 2020 — Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
|---|---|---|---|---|---|---|---|
| Gross income | 69,928 | 45,152 | 21,295 | 93,724 | 65,467 | 40,705 | 19,788 |
| Net sales | 160,982 | 104,719 | 49,778 | 232,390 | 162,800 | 105,328 | 49,750 |
| Gross margin (% ) | 43.4 % | 43.1 % | 42.8 % | 40.3 % | 40.2 % | 38.6 % | 39.8 % |
| Gross income | 69,928 | 45,152 | 21,295 | 93,724 | 65,467 | 40,705 | 19,788 |
| Restructuring charges included in cost of sales | 74 | 68 | 62 | 725 | 720 | 647 | 335 |
| Gross income excluding restructuring charges | 70,002 | 45,220 | 21,357 | 94,449 | 66,187 | 41,352 | 20,123 |
| Net sales | 160,982 | 104,719 | 49,778 | 232,390 | 162,800 | 105,328 | 49,750 |
| Gross margin excluding restructuring charges (% ) | 43.5 % | 43.2 % | 42.9 % | 40.6 % | 40.7 % | 39.3 % | 40.4 % |
| Operating expenses | -49,687 | -33,328 | -15,976 | -66,280 | -48,709 | -32,588 | -15,543 |
| Restructuring charges included in R&D expenses | -3 | -1 | | 411 | 432 | 188 | -39 |
| Restructuring charges included in selling and administrative expenses | 15 | 14 | 15 | 170 | 162 | 149 | 5 |
| Operating expenses excluding restructuring charges | -49,675 | -33,315 | -15,961 | -65,699 | -48,115 | -32,251 | -15,577 |
| EBIT | 19,919 | 11,084 | 5,261 | 27,808 | 16,800 | 8,157 | 4,306 |
| Net sales | 160,982 | 104,719 | 49,778 | 232,390 | 162,800 | 105,328 | 49,750 |
| EBIT margin (% ) | 12.4 % | 10.6 % | 10.6 % | 12.0 % | 10.3 % | 7.7 % | 8.7 % |
| EBIT | 19,919 | 11,084 | 5,261 | 27,808 | 16,800 | 8,157 | 4,306 |
| Total restructuring charges | 86 | 81 | 77 | 1,306 | 1,314 | 984 | 301 |
| EBIT excluding restructuring charges | 20,005 | 11,165 | 5,338 | 29,114 | 18,114 | 9,141 | 4,607 |
| Net sales | 160,982 | 104,719 | 49,778 | 232,390 | 162,800 | 105,328 | 49,750 |
| EBIT margin excluding restructuring charges (% ) | 12.4 % | 10.7 % | 10.7 % | 12.5 % | 11.1 % | 8.7 % | 9.3 % |
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EBITA and EBITA margin / EBITA and EBITA margin excluding restructuring charges
Earnings before interest, taxes, amortizations, write-downs of acquired intangibles and excluding restructuring charges also expressed as a percentage of net sales.
EBITA and EBITA margin excluding restructuring charges has been added to the APM.
| Isolated quarters, SEK million | 2021 — Q3 | Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|---|
| Net income | 5,766 | 3,900 | 3,168 | 7,192 | 5,566 | 2,585 | 2,280 |
| Taxes | 2,471 | 1,469 | 1,560 | 3,721 | 3,186 | 1,558 | 1,124 |
| Financial income and expenses, net | 598 | 454 | 533 | 95 | -109 | -292 | 902 |
| Amortizations and write-downs of acquired | |||||||
| intangibles | 464 | 294 | 283 | 276 | 365 | 258 | 321 |
| EBITA | 9,299 | 6,117 | 5,544 | 11,284 | 9,008 | 4,109 | 4,627 |
| Net sales | 56,263 | 54,941 | 49,778 | 69,590 | 57,472 | 55,578 | 49,750 |
| EBITA margin (% ) | 16.5 % | 11.1 % | 11.1 % | 16.2 % | 15.7 % | 7.4 % | 9.3 % |
| Restructuring charges | 5 | 4 | 77 | -8 | 330 | 683 | 301 |
| EBITA excluding restructuring charges | 9,304 | 6,121 | 5,621 | 11,276 | 9,338 | 4,792 | 4,928 |
| EBITA margin excluding restructuring charges (% ) | 16.5 % | 11.1 % | 11.3 % | 16.2 % | 16.2 % | 8.6 % | 9.9 % |
| 2021 | 2020 | ||||||
| Year to date, SEK million | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Net income | 12,834 | 7,068 | 3,168 | 17,623 | 10,431 | 4,865 | 2,280 |
| Taxes | 5,500 | 3,029 | 1,560 | 9,589 | 5,868 | 2,682 | 1,124 |
| Financial income and expenses, net | 1,585 | 987 | 533 | 596 | 501 | 610 | 902 |
| Amortizations and write-downs of acquired | |||||||
| intangibles | 1,041 | 577 | 283 | 1,220 | 944 | 579 | 321 |
| EBITA | 20,960 | 11,661 | 5,544 | 29,028 | 17,744 | 8,736 | 4,627 |
| Net sales | 160,982 | 104,719 | 49,778 | 232,390 | 162,800 | 105,328 | 49,750 |
| EBITA margin (% ) | 13.0 % | 11.1 % | 11.1 % | 12.5 % | 10.9 % | 8.3 % | 9.3 % |
| Restructuring charges | 86 | 81 | 77 | 1,306 | 1,314 | 984 | 301 |
| EBITA excluding restructuring charges | 21,046 | 11,742 | 5,621 | 30,334 | 19,058 | 9,720 | 4,928 |
| EBITA margin excluding restructuring charges (% ) | 13.1 % | 11.2 % | 11.3 % | 13.1 % | 11.7 % | 9.2 % | 9.9 % |
Rolling four quarters of net sales and EBIT margin excluding restructuring charges (%)
Net sales, EBIT margin and restructuring charges as a sum of last four quarters.
| Rolling four quarters, SEK million | 2021 — Q3 | Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|---|
| Net sales | 230,572 | 231,781 | 232,418 | 232,390 | 229,173 | 228,828 | 228,060 |
| EBIT | 30,927 | 30,735 | 28,763 | 27,808 | 22,925 | 10,086 | 9,974 |
| Restructuring charges | 78 | 403 | 1,082 | 1,306 | 1,641 | 1,458 | 893 |
| EBIT excl. restr. charges | 31,005 | 31,138 | 29,845 | 29,114 | 24,566 | 11,544 | 10,867 |
| EBIT margin excl. restr. charges (% ) | 13.4 % | 13.4 % | 12.8 % | 12.5 % | 10.7 % | 5.0 % | 4.8 % |
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Gross cash and net cash, end of period
Gross cash: Cash and cash equivalents plus interest-bearing securities (current and non-current).
Net cash: Cash and cash equivalents plus interest-bearing securities (current and non-current) less borrowings (current and non-current).
| SEK million | 2021 — Q3 | Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|---|
| Cash and cash equivalents | 46,476 | 43,273 | 40,543 | 43,612 | 48,774 | 45,655 | 48,347 |
| + Interest-bearing securities, current | 15,016 | 12,855 | 4,599 | 6,820 | 5,552 | 5,739 | 7,834 |
| + Interest-bearing securities, non-current | 26,668 | 20,998 | 23,477 | 21,613 | 23,898 | 24,025 | 23,335 |
| Gross cash, end of period | 88,160 | 77,126 | 68,619 | 72,045 | 78,224 | 75,419 | 79,516 |
| -Borrowings, current | 10,155 | 11,737 | 2,353 | 7,942 | 14,587 | 15,290 | 17,759 |
| -Borrowings, non-current | 22,282 | 21,673 | 23,299 | 22,218 | 22,132 | 22,581 | 23,381 |
| Net cash, end of period | 55,723 | 43,716 | 42,967 | 41,885 | 41,505 | 37,548 | 38,376 |
Capital employed
Total assets less non-interest-bearing provisions and liabilities.
| SEK million | 2021 — Q3 | Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|---|
| Total assets | 290,527 | 281,045 | 270,319 | 271,530 | 277,187 | 276,778 | 292,307 |
| Non-interest-bearing provisions and liabilities | |||||||
| Provisions, non-current | 2,471 | 1,922 | 2,337 | 2,886 | 2,378 | 2,240 | 2,703 |
| Deferred tax liabilities | 909 | 975 | 1,049 | 1,089 | 1,102 | 1,164 | 1,060 |
| Other non-current liabilities | 1,605 | 1,596 | 1,326 | 1,383 | 1,759 | 1,813 | 2,178 |
| Provisions, current | 6,342 | 7,310 | 8,708 | 7,580 | 8,544 | 8,363 | 8,357 |
| Contract liabilities | 33,869 | 36,621 | 32,054 | 26,440 | 29,393 | 31,532 | 34,265 |
| Trade payables | 31,877 | 29,638 | 29,135 | 31,988 | 30,704 | 32,182 | 29,840 |
| Other current liabilities | 41,434 | 37,153 | 40,522 | 38,174 | 37,905 | 34,834 | 40,521 |
| Capital employed | 172,020 | 165,830 | 155,188 | 161,990 | 165,402 | 164,650 | 173,383 |
Capital turnover
Annualized net sales divided by average capital employed.
Annualization factor of four is used for isolated quarter.
Annualization factor of four is used for Jan-Mar, two is used for Jan-Jun, 4/3 is used for Jan-Sep and one is used for Jan-Dec.
| Isolated quarters, SEK million | 2021 — Q3 | Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|---|
| Net sales | 56,263 | 54,941 | 49,778 | 69,590 | 57,472 | 55,578 | 49,750 |
| Annualized net sales | 225,052 | 219,764 | 199,112 | 278,360 | 229,888 | 222,312 | 199,000 |
| Average capital employed | |||||||
| Capital employed at beginning of period | 165,830 | 155,188 | 161,990 | 165,402 | 164,650 | 173,383 | 165,273 |
| Capital employed at end of period | 172,020 | 165,830 | 155,188 | 161,990 | 165,402 | 164,650 | 173,383 |
| Average capital employed | 168,925 | 160,509 | 158,589 | 163,696 | 165,026 | 169,017 | 169,328 |
| Capital turn over (times) | 1.3 | 1.4 | 1.3 | 1.7 | 1.4 | 1.3 | 1.2 |
| Year to date, SEK million | 2021 — Jan-Sep | Jan-Jun | Jan-Mar | 2020 — Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
|---|---|---|---|---|---|---|---|
| Net sales | 160,982 | 104,719 | 49,778 | 232,390 | 162,800 | 105,328 | 49,750 |
| Annualized net sales | 214,643 | 209,438 | 199,112 | 232,390 | 217,067 | 210,656 | 199,000 |
| Average capital employed | |||||||
| Capital employed at beginning of period | 161,990 | 161,990 | 161,990 | 165,273 | 165,273 | 165,273 | 165,273 |
| Capital employed at end of period | 172,020 | 165,830 | 155,188 | 161,990 | 165,402 | 164,650 | 173,383 |
| Average capital employed | 167,005 | 163,910 | 158,589 | 163,632 | 165,338 | 164,962 | 169,328 |
| Capital turn over (times) | 1.3 | 1.3 | 1.3 | 1.4 | 1.3 | 1.3 | 1.2 |
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Return on capital employed
The annualized total of EBIT as a percentage of average capital employed.
Annualization factor of four is used for isolated quarter.
Annualization factor of four is used for Jan-Mar, two is used for Jan-Jun, 4/3 is used for Jan-Sep and one is used for Jan-Dec.
| Isolated quarters, SEK million | 2021 — Q3 | Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|---|
| EBIT | 8,835 | 5,823 | 5,261 | 11,008 | 8,643 | 3,851 | 4,306 |
| Annualized EBIT | 35,340 | 23,292 | 21,044 | 44,032 | 34,572 | 15,404 | 17,224 |
| Average capital employed | |||||||
| Capital employed at beginning of period | 165,830 | 155,188 | 161,990 | 165,402 | 164,650 | 173,383 | 165,273 |
| Capital employed at end of period | 172,020 | 165,830 | 155,188 | 161,990 | 165,402 | 164,650 | 173,383 |
| Average capital employed | 168,925 | 160,509 | 158,589 | 163,696 | 165,026 | 169,017 | 169,328 |
| Return on capital employed (%) | 20.9 % | 14.5 % | 13.3 % | 26.9 % | 20.9 % | 9.1 % | 10.2 % |
| Year to date, SEK million | 2021 — Jan-Sep | Jan-Jun | Jan-Mar | 2020 — Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
|---|---|---|---|---|---|---|---|
| EBIT | 19,919 | 11,084 | 5,261 | 27,808 | 16,800 | 8,157 | 4,306 |
| Annualized EBIT | 26,559 | 22,168 | 21,044 | 27,808 | 22,400 | 16,314 | 17,224 |
| Average capital employed | |||||||
| Capital employed at beginning of period | 161,990 | 161,990 | 161,990 | 165,273 | 165,273 | 165,273 | 165,273 |
| Capital employed at end of period | 172,020 | 165,830 | 155,188 | 161,990 | 165,402 | 164,650 | 173,383 |
| Average capital employed | 167,005 | 163,910 | 158,589 | 163,632 | 165,338 | 164,962 | 169,328 |
| Return on capital employed (%) | 15.9 % | 13.5 % | 13.3 % | 17.0 % | 13.5 % | 9.9 % | 10.2 % |
Equity ratio
Equity expressed as a percentage of total assets.
| SEK million | 2021 — Q3 | Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|---|
| Total equity | 95,628 | 91,695 | 88,124 | 85,177 | 82,485 | 78,472 | 79,113 |
| Total assets | 290,527 | 281,045 | 270,319 | 271,530 | 277,187 | 276,778 | 292,307 |
| Equity ratio (% ) | 32.9 % | 32.6 % | 32.6 % | 31.4 % | 29.8 % | 28.4 % | 27.1 % |
Return on equity
Annualized net income attributable to owners of the Parent Company as a percentage of average stockholders equity.
Annualization factor of four is used for isolated quarter.
Annualization factor of four is used for Jan-Mar, two is used for Jan-Jun, 4/3 is used for Jan-Sep and one is used for Jan-Dec.
| Isolated quarters, SEK million | 2021 — Q3 | Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|---|
| Net income attributable to owners of the Parent Company | 5,752 | 3,679 | 3,187 | 7,522 | 5,353 | 2,452 | 2,156 |
| Annualized | 23,008 | 14,716 | 12,748 | 30,088 | 21,412 | 9,808 | 8,624 |
| Average stockholders equity | |||||||
| Stockholders equity, beginning of period | 93,331 | 89,782 | 86,674 | 82,830 | 79,005 | 79,841 | 82,559 |
| Stockholders equity, end of period | 97,323 | 93,331 | 89,782 | 86,674 | 82,830 | 79,005 | 79,841 |
| Average stockholders equity | 95,327 | 91,557 | 88,228 | 84,752 | 80,918 | 79,423 | 81,200 |
| Return on equity (%) | 24.1 % | 16.1 % | 14.4 % | 35.5 % | 26.5 % | 12.3 % | 10.6 % |
| Year to date, SEK million | 2021 — Jan-Sep | Jan-Jun | Jan-Mar | 2020 — Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
|---|---|---|---|---|---|---|---|
| Net income attributable to owners of the Parent Company | 12,618 | 6,866 | 3,187 | 17,483 | 9,961 | 4,608 | 2,156 |
| Annualized | 16,824 | 13,732 | 12,748 | 17,483 | 13,281 | 9,216 | 8,624 |
| Average stockholders equity | |||||||
| Stockholders equity, beginning of period | 86,674 | 86,674 | 86,674 | 82,559 | 82,559 | 82,559 | 82,559 |
| Stockholders equity, end of period | 97,323 | 93,331 | 89,782 | 86,674 | 82,830 | 79,005 | 79,841 |
| Average stockholders equity | 91,999 | 90,003 | 88,228 | 84,617 | 82,695 | 80,782 | 81,200 |
| Return on equity (%) | 18.3 % | 15.3 % | 14.4 % | 20.7 % | 16.1 % | 11.4 % | 10.6 % |
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Adjusted earnings per share
Adjusted earnings per share, diluted, excluding amortizations and write-downs of acquired intangible assets and excluding restructuring charges.
| Isolated quarters, SEK | 2021 — Q3 | Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|---|
| Earnings per share, diluted | 1.73 | 1.10 | 0.96 | 2.26 | 1.61 | 0.74 | 0.65 |
| Restructuring charges | 0.00 | 0.00 | 0.02 | 0.01 | 0.08 | 0.14 | 0.07 |
| Amortizations and write-downs of acquired | |||||||
| intangibles | 0.09 | 0.07 | 0.06 | 0.06 | 0.08 | 0.06 | 0.07 |
| Adjusted earnings per share | 1.82 | 1.17 | 1.04 | 2.33 | 1.77 | 0.94 | 0.79 |
| Year to date, SEK | 2021 — Jan-Sep | Jan-Jun | Jan-Mar | 2020 — Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
|---|---|---|---|---|---|---|---|
| Earnings per share, diluted | 3.79 | 2.06 | 0.96 | 5.26 | 3.00 | 1.39 | 0.65 |
| Restructuring charges | 0.02 | 0.02 | 0.02 | 0.30 | 0.29 | 0.21 | 0.07 |
| Amortizations and write-downs of acquired | |||||||
| intangibles | 0.22 | 0.13 | 0.06 | 0.27 | 0.21 | 0.13 | 0.07 |
| Adjusted earnings per share | 4.03 | 2.21 | 1.04 | 5.83 | 3.50 | 1.73 | 0.79 |
Free cash flow before M&A / Free cash flow after M&A
Free cash flow before M&A: Cash flow from operating activities less net capital expenditures, other investments (excluding M&A) and repayment of lease liabilities.
Free cash flow after M&A: Cash flow from operating activities less net capital expenditures, other investments and repayment of lease liabilities.
| Isolated quarters, SEK million | 2021 — Q3 | Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|---|
| Cash flow from operating activities | 14,724 | 5,940 | 3,205 | 13,903 | 5,279 | 5,449 | 4,302 |
| Net capital expenditures and other investments (excl M&A) | |||||||
| Investments in property, plant and equipment | -1,040 | -1,007 | -915 | -1,090 | -963 | -1,327 | -1,113 |
| Sales of property, plant and equipment | 40 | 17 | 24 | 104 | 55 | 69 | 26 |
| Product development | -190 | -266 | -204 | -177 | -167 | -211 | -262 |
| Other investing activities | -4 | | -5 | 668 | 301 | -126 | -42 |
| Repayment of lease liabilities | -580 | -617 | -548 | -636 | -567 | -618 | -596 |
| Free cash flow before M&A | 12,950 | 4,067 | 1,557 | 12,772 | 3,938 | 3,236 | 2,315 |
| Acquisitions/divestments of subs and other operations, net | -55 | -69 | 5 | -9,256 | -89 | -45 | -208 |
| Free cash flow after M&A | 12,895 | 3,998 | 1,562 | 3,516 | 3,849 | 3,191 | 2,107 |
| Year to date, SEK million | 2021 — Jan-Sep | Jan-Jun | Jan-Mar | 2020 — Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
|---|---|---|---|---|---|---|---|
| Cash flow from operating activities | 23,869 | 9,145 | 3,205 | 28,933 | 15,030 | 9,751 | 4,302 |
| Net capital expenditures and other investments (excl M&A) | |||||||
| Investments in property, plant and equipment | -2,962 | -1,922 | -915 | -4,493 | -3,403 | -2,440 | -1,113 |
| Sales of property, plant and equipment | 81 | 41 | 24 | 254 | 150 | 95 | 26 |
| Product development | -660 | -470 | -204 | -817 | -640 | -473 | -262 |
| Other investing activities | -9 | -5 | -5 | 801 | 133 | -168 | -42 |
| Repayment of lease liabilities | -1,745 | -1,165 | -548 | -2,417 | -1,781 | -1,214 | -596 |
| Free cash flow before M&A | 18,574 | 5,624 | 1,557 | 22,261 | 9,489 | 5,551 | 2,315 |
| Acquisitions/divestments of subs and other operations, net | -119 | -64 | 5 | -9,598 | -342 | -253 | -208 |
| Free cash flow after M&A | 18,455 | 5,560 | 1,562 | 12,663 | 9,147 | 5,298 | 2,107 |
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Sales growth by segment adjusted for comparable units and currency
| Isolated quarter, year over year change, percent | 2021 — Q3 | Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|---|
| Networks | 0 % | 11 % | 15 % | 20 % | 13 % | 4 % | 0 % |
| Digital Services | 1 % | 0 % | 3 % | 3 % | -5 % | -5 % | -9 % |
| Managed Services | -7 % | -2 % | -8 % | -12 % | -9 % | -12 % | -5 % |
| Emerging Business and Other¹ | 4 % | 13 % | 9 % | -4 % | 2 % | -6 % | -8 % |
| Total¹ | -1 % | 8 % | 10 % | 13 % | 7 % | 0 % | -2 % |
| Year to date, year over year change, percent | 2021 — Jan-Sep | Jan-Jun | Jan-Mar | 2020 — Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
|---|---|---|---|---|---|---|---|
| Networks | 8 % | 13 % | 15 % | 10 % | 6 % | 2 % | 0 % |
| Digital Services | 1 % | 1 % | 3 % | -3 % | -6 % | -7 % | -9 % |
| Managed Services | -5 % | -5 % | -8 % | -10 % | -9 % | -9 % | -5 % |
| Emerging Business and Other¹ | 9 % | 11 % | 9 % | -4 % | -4 % | -7 % | -8 % |
| Total¹ | 6 % | 9 % | 10 % | 5 % | 2 % | -1 % | -2 % |
1) Adjusted for Cradlepoint acquisition in November 2020.
Sales growth by market area adjusted for comparable units and currency
| Isolated quarter, year over year change, percent | 2021 — Q3 | Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|---|
| South East Asia, Oceania and India | -16 % | 14 % | 21 % | 13 % | 11 % | -3 % | -6 % |
| North East Asia | -33 % | 1 % | 78 % | 38 % | 49 % | 19 % | -1 % |
| North America | 13 % | 11 % | 10 % | 21 % | 6 % | 1 % | 5 % |
| Europe and Latin America | 9 % | 14 % | 12 % | 4 % | -1 % | -6 % | -8 % |
| Middle East and Africa | -8 % | -10 % | -16 % | -17 % | -3 % | -5 % | 4 % |
| Total | -1 % | 8 % | 10 % | 13 % | 7 % | 0 % | -2 % |
| Year to date, year over year change, percent | 2021 — Jan-Sep | Jan-Jun | Jan-Mar | 2020 — Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
|---|---|---|---|---|---|---|---|
| South East Asia, Oceania and India | 4 % | 17 % | 21 % | 5 % | 1 % | -4 % | -6 % |
| North East Asia | 1 % | 27 % | 78 % | 30 % | 26 % | 12 % | -1 % |
| North America | 11 % | 11 % | 10 % | 8 % | 4 % | 3 % | 5 % |
| Europe and Latin America | 12 % | 13 % | 12 % | -2 % | -5 % | -7 % | -8 % |
| Middle East and Africa | -12 % | -13 % | -16 % | -6 % | -1 % | -1 % | 4 % |
| Total | 6 % | 9 % | 10 % | 5 % | 2 % | -1 % | -2 % |
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Gross margin by segment by quarter
| Isolated quarters, as percentage of net sales | 2021 — Q3 | Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|---|
| Networks | 47.8 % | 47.9 % | 46.1 % | 43.4 % | 46.5 % | 40.2 % | 44.4 % |
| Digital Services | 42.2 % | 37.9 % | 43.5 % | 40.9 % | 43.4 % | 43.6 % | 39.9 % |
| Managed Services | 18.7 % | 19.0 % | 19.4 % | 17.7 % | 19.9 % | 17.1 % | 16.3 % |
| Emerging Business and Other | 39.4 % | 37.9 % | 36.6 % | 35.3 % | 32.0 % | 12.6 % | 21.7 % |
| Total | 44.0 % | 43.4 % | 42.8 % | 40.6 % | 43.1 % | 37.6 % | 39.8 % |
| Year to date, as percentage of net sales | 2021 — Jan-Sep | Jan-Jun | Jan-Mar | 2020 — Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
|---|---|---|---|---|---|---|---|
| Networks | 47.3 % | 47.0 % | 46.1 % | 43.6 % | 43.7 % | 42.2 % | 44.4 % |
| Digital Services | 41.2 % | 40.5 % | 43.5 % | 41.9 % | 42.4 % | 41.9 % | 39.9 % |
| Managed Services | 19.0 % | 19.2 % | 19.4 % | 17.8 % | 17.8 % | 16.7 % | 16.3 % |
| Emerging Business and Other | 38.0 % | 37.3 % | 36.6 % | 25.6 % | 22.1 % | 17.1 % | 21.7 % |
| Total | 43.4 % | 43.1 % | 42.8 % | 40.3 % | 40.2 % | 38.6 % | 39.8 % |
EBIT margin by segment by quarter
| Isolated quarters, as percentage of net sales | 2021 — Q3 | Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|---|
| Networks | 23.7 % | 21.7 % | 20.0 % | 21.5 % | 22.0 % | 13.2 % | 16.6 % |
| Digital Services | -9.5 % | -19.9 % | -22.0 % | 3.9 % | -6.8 % | -8.1 % | -19.3 % |
| Managed Services | 7.7 % | 8.1 % | 6.4 % | 6.9 % | 8.9 % | 4.7 % | 7.1 % |
| Emerging Business and Other | -17.7 % | -81.1 % | -44.4 % | -28.5 % | -26.7 % | -60.5 % | -32.7 % |
| Total | 15.7 % | 10.6 % | 10.6 % | 15.8 % | 15.0 % | 6.9 % | 8.7 % |
| Year to date, as percentage of net sales | 2021 — Jan-Sep | Jan-Jun | Jan-Mar | 2020 — Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
|---|---|---|---|---|---|---|---|
| Networks | 21.9 % | 20.9 % | 20.0 % | 18.6 % | 17.4 % | 14.8 % | 16.6 % |
| Digital Services | -16.7 % | -20.9 % | -22.0 % | -5.9 % | -11.0 % | -13.3 % | -19.3 % |
| Managed Services | 7.4 % | 7.3 % | 6.4 % | 6.9 % | 6.9 % | 5.9 % | 7.1 % |
| Emerging Business and Other | -48.2 % | -64.3 % | -44.4 % | -37.0 % | -40.1 % | -46.8 % | -32.7 % |
| Total | 12.4 % | 10.6 % | 10.6 % | 12.0 % | 10.3 % | 7.7 % | 8.7 % |
43 Ericsson | Third quarter report 2021 Alternative performance measures
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Restructuring charges by function
| Isolated quarters, SEK million | 2021 — Q3 | Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|---|
| Cost of sales | -6 | -6 | -62 | -5 | -73 | -312 | -335 |
| Research and development expenses | 2 | 1 | 0 | 21 | -244 | -227 | 39 |
| Selling and administrative expenses | -1 | 1 | -15 | -8 | -13 | -144 | -5 |
| Total | -5 | -4 | -77 | 8 | -330 | -683 | -301 |
| Year to date, SEK million | 2021 — Jan-Sep | Jan-Jun | Jan-Mar | 2020 — Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
|---|---|---|---|---|---|---|---|
| Cost of sales | -74 | -68 | -62 | -725 | -720 | -647 | -335 |
| Research and development expenses | 3 | 1 | 0 | -411 | -432 | -188 | 39 |
| Selling and administrative expenses | -15 | -14 | -15 | -170 | -162 | -149 | -5 |
| Total | -86 | -81 | -77 | -1,306 | -1,314 | -984 | -301 |
Restructuring charges by segment
| Isolated quarters, SEK million | 2021 — Q3 | Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|---|
| Networks | 1 | -9 | 24 | -19 | -272 | -380 | -75 |
| of which cost of sales | 1 | -1 | 24 | -20 | -79 | -110 | -72 |
| of which operating expenses | 0 | -8 | 0 | 1 | -193 | -270 | -3 |
| Digital Services | -4 | -3 | -8 | 14 | -87 | 34 | 20 |
| of which cost of sales | -6 | -2 | -3 | -10 | -8 | 3 | -16 |
| of which operating expenses | 2 | -1 | -5 | 24 | -79 | 31 | 36 |
| Managed Services | -1 | -1 | -79 | 0 | -11 | -2 | -245 |
| of which cost of sales | -1 | 0 | -79 | 0 | -11 | -2 | -245 |
| of which operating expenses | 0 | -1 | 0 | 0 | 0 | 0 | 0 |
| Emerging Business and Other | -1 | 9 | -14 | 13 | 40 | -335 | -1 |
| of which cost of sales | 0 | -3 | -4 | 25 | 25 | -203 | -2 |
| of which operating expenses | -1 | 12 | -10 | -12 | 15 | -132 | 1 |
| Total | -5 | -4 | -77 | 8 | -330 | -683 | -301 |
| Year to date, SEK million | 2021 — Jan-Sep | Jan-Jun | Jan-Mar | 2020 — Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
|---|---|---|---|---|---|---|---|
| Networks | 16 | 15 | 24 | -746 | -727 | -455 | -75 |
| of which cost of sales | 24 | 23 | 24 | -281 | -261 | -182 | -72 |
| of which operating expenses | -8 | -8 | 0 | -465 | -466 | -273 | -3 |
| Digital Services | -15 | -11 | -8 | -19 | -33 | 54 | 20 |
| of which cost of sales | -11 | -5 | -3 | -31 | -21 | -13 | -16 |
| of which operating expenses | -4 | -6 | -5 | 12 | -12 | 67 | 36 |
| Managed Services | -81 | -80 | -79 | -258 | -258 | -247 | -245 |
| of which cost of sales | -80 | -79 | -79 | -258 | -258 | -247 | -245 |
| of which operating expenses | -1 | -1 | 0 | 0 | 0 | 0 | 0 |
| Emerging Business and Other | -6 | -5 | -14 | -283 | -296 | -336 | -1 |
| of which cost of sales | -7 | -7 | -4 | -155 | -180 | -205 | -2 |
| of which operating expenses | 1 | 2 | -10 | -128 | -116 | -131 | 1 |
| Total | -86 | -81 | -77 | -1,306 | -1,314 | -984 | -301 |
44 Ericsson | Third quarter report 2021 Alternative performance measures
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Gross income and gross margin excluding restructuring charges by segment
| Isolated quarters, SEK million | 2021 — Q3 | Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|---|
| Networks | 19,400 | 19,112 | 16,690 | 21,450 | 19,454 | 16,132 | 15,658 |
| Digital Services | 3,650 | 2,992 | 3,005 | 5,193 | 3,795 | 3,735 | 2,945 |
| Managed Services | 945 | 975 | 1,021 | 1,031 | 1,104 | 957 | 1,178 |
| Emerging Business and Other | 787 | 784 | 641 | 588 | 482 | 405 | 342 |
| Total | 24,782 | 23,863 | 21,357 | 28,262 | 24,835 | 21,229 | 20,123 |
| 2021 | 2020 | ||||||
| Isolated quarters, as percentage of net sales | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 |
| Networks | 47.8 % | 47.9 % | 46.0 % | 43.5 % | 46.7 % | 40.5 % | 44.6 % |
| Digital Services | 42.3 % | 37.9 % | 43.6 % | 41.0 % | 43.5 % | 43.6 % | 40.1 % |
| Managed Services | 18.7 % | 19.0 % | 21.0 % | 17.7 % | 20.1 % | 17.2 % | 20.6 % |
| Emerging Business and Other | 39.4 % | 38.1 % | 36.8 % | 33.8 % | 30.5 % | 25.3 % | 21.9 % |
| Total | 44.0 % | 43.4 % | 42.9 % | 40.6 % | 43.2 % | 38.2 % | 40.4 % |
| 2021 | 2020 | ||||||
| Year to date, SEK million | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Networks | 55,202 | 35,802 | 16,690 | 72,694 | 51,244 | 31,790 | 15,658 |
| Digital Services | 9,647 | 5,997 | 3,005 | 15,668 | 10,475 | 6,680 | 2,945 |
| Managed Services | 2,941 | 1,996 | 1,021 | 4,270 | 3,239 | 2,135 | 1,178 |
| Emerging Business and Other | 2,212 | 1,425 | 641 | 1,817 | 1,229 | 747 | 342 |
| Total | 70,002 | 45,220 | 21,357 | 94,449 | 66,187 | 41,352 | 20,123 |
| 2021 | 2020 | ||||||
| Year to date, as percentage of net sales | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Networks | 47.3 % | 47.0 % | 46.0 % | 43.8 % | 43.9 % | 42.4 % | 44.6 % |
| Digital Services | 41.2 % | 40.6 % | 43.6 % | 42.0 % | 42.5 % | 42.0 % | 40.1 % |
| Managed Services | 19.6 % | 20.0 % | 21.0 % | 18.9 % | 19.3 % | 18.9 % | 20.6 % |
| Emerging Business and Other | 38.1 % | 37.5 % | 36.8 % | 28.0 % | 25.9 % | 23.6 % | 21.9 % |
| Total | 43.5 % | 43.2 % | 42.9 % | 40.6 % | 40.7 % | 39.3 % | 40.4 % |
45 Ericsson | Third quarter report 2021 Alternative performance measures
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EBIT and EBIT margin excluding restructuring charges by segment
| Isolated quarters, SEK million | 2021 — Q3 | Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|---|
| Networks | 9,623 | 8,653 | 7,217 | 10,623 | 9,437 | 5,635 | 5,902 |
| Digital Services | -818 | -1,565 | -1,510 | 485 | -504 | -731 | -1,437 |
| Managed Services | 387 | 417 | 392 | 401 | 502 | 265 | 653 |
| Emerging Business and Other | -352 | -1,678 | -761 | -509 | -462 | -635 | -511 |
| Total | 8,840 | 5,827 | 5,338 | 11,000 | 8,973 | 4,534 | 4,607 |
| 2021 | 2020 | ||||||
| Isolated quarters, as percentage of net sales | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 |
| Networks | 23.7 % | 21.7 % | 19.9 % | 21.5 % | 22.7 % | 14.1 % | 16.8 % |
| Digital Services | -9.5 % | -19.8 % | -21.9 % | 3.8 % | -5.8 % | -8.5 % | -19.6 % |
| Managed Services | 7.7 % | 8.1 % | 8.1 % | 6.9 % | 9.1 % | 4.8 % | 11.4 % |
| Emerging Business and Other | -17.6 % | -81.5 % | -43.7 % | -29.3 % | -29.2 % | -39.6 % | -32.7 % |
| Total | 15.7 % | 10.6 % | 10.7 % | 15.8 % | 15.6 % | 8.2 % | 9.3 % |
| 2021 | 2020 | ||||||
| Year to date, SEK million | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Networks | 25,493 | 15,870 | 7,217 | 31,597 | 20,974 | 11,537 | 5,902 |
| Digital Services | -3,893 | -3,075 | -1,510 | -2,187 | -2,672 | -2,168 | -1,437 |
| Managed Services | 1,196 | 809 | 392 | 1,821 | 1,420 | 918 | 653 |
| Emerging Business and Other | -2,791 | -2,439 | -761 | -2,117 | -1,608 | -1,146 | -511 |
| Total | 20,005 | 11,165 | 5,338 | 29,114 | 18,114 | 9,141 | 4,607 |
| 2021 | 2020 | ||||||
| Year to date, as percentage of net sales | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Networks | 21.8 % | 20.8 % | 19.9 % | 19.0 % | 18.0 % | 15.4 % | 16.8 % |
| Digital Services | -16.6 % | -20.8 % | -21.9 % | -5.9 % | -10.8 % | -13.6 % | -19.6 % |
| Managed Services | 8.0 % | 8.1 % | 8.1 % | 8.1 % | 8.5 % | 8.1 % | 11.4 % |
| Emerging Business and Other | -48.1 % | -64.2 % | -43.7 % | -32.6 % | -33.9 % | -36.2 % | -32.7 % |
| Total | 12.4 % | 10.7 % | 10.7 % | 12.5 % | 11.1 % | 8.7 % | 9.3 % |
Rolling four quarters of net sales by segment
| Rolling four quarters, SEK million | 2021 — Q3 | Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|---|
| Networks | 166,107 | 167,174 | 167,126 | 165,978 | 161,060 | 158,662 | 156,654 |
| Digital Services | 36,086 | 36,189 | 36,877 | 37,324 | 37,821 | 38,969 | 39,385 |
| Managed Services | 20,840 | 21,297 | 21,751 | 22,600 | 23,812 | 24,673 | 25,423 |
| Emerging Business and Other | 7,539 | 7,121 | 6,664 | 6,488 | 6,480 | 6,524 | 6,598 |
| Total | 230,572 | 231,781 | 232,418 | 232,390 | 229,173 | 228,828 | 228,060 |
Rolling four quarters of EBIT margin excluding restructuring charges by segment (%)
| Rolling four quarters, SEK million | 2021 — Q3 | Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|---|
| Networks | 21.7 % | 21.5 % | 19.7 % | 19.0 % | 17.0 % | 15.9 % | 16.1 % |
| Digital Services | -9.4 % | -8.5 % | -6.1 % | -5.9 % | -7.0 % | -6.8 % | -8.2 % |
| Managed Services | 7.7 % | 8.0 % | 7.2 % | 8.1 % | 7.4 % | 7.4 % | 6.9 % |
| Emerging Business and Other | -43.8 % | -47.9 % | -35.5 % | -32.6 % | -30.5 % | -196.5 % | -195.5 % |
| Total | 13.4 % | 13.4 % | 12.8 % | 12.5 % | 10.7 % | 5.0 % | 4.8 % |
46 Ericsson | Third quarter report 2021 Alternative performance measures
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EBITA and EBITA margin by segment by quarter
| Isolated quarters, SEK million | 2021 — Q3 | Q2 | Q1 | 2020 — Q4 | Q3 | Q2 | Q1 |
|---|---|---|---|---|---|---|---|
| Networks | 9,643 | 8,679 | 7,274 | 10,636 | 9,347 | 5,321 | 5,957 |
| Digital Services | -701 | -1,445 | -1,400 | 625 | -461 | -563 | -1,283 |
| Managed Services | 396 | 417 | 314 | 403 | 492 | 264 | 409 |
| Emerging Business and Other | -39 | -1,534 | -644 | -380 | -370 | -913 | -456 |
| Total | 9,299 | 6,117 | 5,544 | 11,284 | 9,008 | 4,109 | 4,627 |
| 2021 | 2020 | ||||||
| Isolated quarters, as percentage of net sales | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 |
| Networks | 23.8 % | 21.8 % | 20.1 % | 21.5 % | 22.4 % | 13.4 % | 17.0 % |
| Digital Services | -8.1 % | -18.3 % | -20.3 % | 4.9 % | -5.3 % | -6.6 % | -17.5 % |
| Managed Services | 7.9 % | 8.1 % | 6.5 % | 6.9 % | 8.9 % | 4.7 % | 7.2 % |
| Emerging Business and Other | -2.0 % | -74.5 % | -37.0 % | -21.9 % | -23.4 % | -57.0 % | -29.1 % |
| Total | 16.5 % | 11.1 % | 11.1 % | 16.2 % | 15.7 % | 7.4 % | 9.3 % |
| 2021 | 2020 | ||||||
| Year to date, SEK million | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Networks | 25,596 | 15,953 | 7,274 | 31,261 | 20,625 | 11,278 | 5,957 |
| Digital Services | -3,546 | -2,845 | -1,400 | -1,682 | -2,307 | -1,846 | -1,283 |
| Managed Services | 1,127 | 731 | 314 | 1,568 | 1,165 | 673 | 409 |
| Emerging Business and Other | -2,217 | -2,178 | -644 | -2,119 | -1,739 | -1,369 | -456 |
| Total | 20,960 | 11,661 | 5,544 | 29,028 | 17,744 | 8,736 | 4,627 |
| 2021 | 2020 | ||||||
| Year to date, as percentage of net sales | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar |
| Networks | 21.9 % | 20.9 % | 20.1 % | 18.8 % | 17.7 % | 15.0 % | 17.0 % |
| Digital Services | -15.1 % | -19.2 % | -20.3 % | -4.5 % | -9.4 % | -11.6 % | -17.5 % |
| Managed Services | 7.5 % | 7.3 % | 6.5 % | 6.9 % | 6.9 % | 6.0 % | 7.2 % |
| Emerging Business and Other | -38.2 % | -57.3 % | -37.0 % | -32.7 % | -36.6 % | -43.2 % | -29.1 % |
| Total | 13.0 % | 11.1 % | 11.1 % | 12.5 % | 10.9 % | 8.3 % | 9.3 % |
Other ratios
| 2021 | 2020 | 2021 | 2020 | |
|---|---|---|---|---|
| Days sales outstanding | | | 79 | 78 |
| Inventory turn over days | 95 | 90 | 95 | 90 |
| Payable days | 89 | 88 | 96 | 86 |
47 Ericsson | Third quarter report 2021 Alternative performance measures