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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN ISSUER

Pursuant to Rule 13a-16 or 15d-16 of

the Securities Exchange Act of 1934

April 22, 2020

Commission File Number 000-12033

 

 

LM ERICSSON TELEPHONE COMPANY

(Translation of registrant’s name into English)

 

 

Torshamnsgatan 21, Kista

SE-164 83, Stockholm, Sweden

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. Form 20-F  ☒ Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ☐

Announcement of LM Ericsson Telephone Company, April 22, 2020 regarding “First quarter report 2020”.

 

 

 


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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: April 22, 2020


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LOGO

First quarter report 2020

Stockholm, April 22, 2020

First quarter highlights

 

   

Sales were SEK 49.8 (48.9) b. A decline by -2% adjusted for comparable units and currency.

 

   

The Covid-19 pandemic had limited impact on operating income and cash flow in the quarter.

 

   

Gross margin excluding restructuring charges improved to 40.4% (38.5%). Gross margin improved QoQ in all segments.

 

   

Operating income excluding restructuring charges was SEK 4.6 b. (9.3% operating margin). Q1 2019 operating income excluding restructuring charges and items affecting comparability was SEK 3.5 b. (7.2% operating margin).

 

   

Networks sales adjusted for comparable units and currency were flat YoY and operating margin improved to 16.6% (16.3%).

 

   

Digital Services operating income was SEK -1.4 (-1.8) b. Gross margin improved driven mainly by higher software sales. Sales adjusted for comparable units and currency declined by -9% due to lower services and legacy hardware sales, and negative impact from Covid-19.

 

   

Net income was SEK 2.3 (2.4) b.

 

   

Free cash flow before M&A was SEK 2.3 (3.5) b. further strengthening the net cash position to SEK 38.4 b. from SEK 34.5 b. in Q4 2019.

 

SEK b.

   Q1
2020
    Q1
2019
    YoY
change
    Q4
2019
    QoQ
change
 

Net sales

     49.8       48.9       2     66.4       -25

Sales growth adj. for comparable units and currency

     —         —         -2     —         —    

Gross margin

     39.8     38.4     —         36.8     —    

Gross margin excluding restructuring charges

     40.4     38.5     —         37.1     —    

Operating income

     4.3       4.9       -12     6.1       -30

Operating margin

     8.7     10.0     —         9.2     —    

Operating income excl. restr. charges & items affecting comparability in 2019 ¹

     4.6       3.5       30     6.0       -23

Operating margin excl. restr. charges & items affecting comparability in 2019 ¹

     9.3     7.2     —         9.0     —    

Net income

     2.3       2.4       -5     4.5       -49

EPS diluted, SEK

     0.65       0.70       -7     1.33       -51

Free cash flow before M&A

     2.3       3.5       -33     -1.9       —    

Net cash, end of period

     38.4       36.1       6     34.5       11

 

1 

Excludes restructuring charges in all periods. No other adjustments made in Q1 2020. Q4 2019 excludes a provision reversal related to the SEC and DOJ investigations (SEK 0.7 b.) and costs related to wind-down of the ST-Ericsson legal structure (SEK -0.3 b.). Q1 2019 excludes a capital gain related to the divestment of 51% of MediaKind (SEK 0.7 b.), divestment of certain assets in Red Bee Media (SEK 0.1 b.) and a reversal of an earlier provision for impairment of trade receivables following customer payment (SEK 0.7 b.).

Non-IFRS financial measures are reconciled to the most directly reconcilable line items in the financial statements at the end of this report.

Planning assumptions highlights (please see page 4 for complete planning assumptions.)

Market related

 

    The RAN equipment market is estimated to increase by 4% for full-year 2020 with 0% CAGR for 2019-2024. (Source: Dell’Oro Jan and Feb, 2020)

Net Sales

 

    Three-year average sales seasonality between Q1 and Q2 is 11%. For Q2 somewhat lower than normal sequential sales growth is expected as there are uncertainties impacting short-term growth negatively:
    The approved operator merger in North America is expected to build an even stronger 5G momentum and investments are expected to intensify during the second half of the year. However, the Ericsson managed services contract is expected to be negatively impacted over time, starting in Q2.

Gross margin

 

 

   
1    Ericsson | First Quarter Report 2020                        


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    Covid-19 and actions taken by governments to slow down the spread are making service delivery and supply harder due to lockdowns and travel restrictions in many countries.

 

    While there have been no material effects so far on the demand situation, it is prudent to believe that the slowdown in the general economy may lead some operators to delay their investment programs.
    The targets for full-year 2020 take into account an increasing share of strategic contracts, including 5G in China. A larger share of these contracts is expected to impact Q2, rather than being evenly distributed over the year. Operational improvements will continue and are expected to partly offset the negative impact.
 

 

   
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CEO comments

 

We are going through unprecedented times with Covid-19 which has impacted everyone around the world either directly or indirectly. Throughout this crisis, we guide our decisions by putting the safety and health of our employees, customers and partners as a first priority. Ericsson delivered a solid result during the first quarter, with limited impact from the Covid-19 pandemic. An important indicator of our strategy execution is the improvement in gross margin. The Q1 gross margin1 increased to 40.4% (38.5%) YoY, driven by improvements across segments. We expect our industry to show resilience throughout the pandemic and we are well positioned with a competitive 5G product offering and cost structure. There is near-term uncertainty around sales volumes due to Covid-19 and the macroeconomic situation, but with current visibility we have no reason to change our financial targets for 2020 and 2022.

In segment Networks, the gross margin1 increased to 44.6% (43.2%) reflecting the strong business fundamentals with high activity across multiple regions. A favorable business mix more than compensated for an increased portion of strategic contracts and the expected negative effect from the acquired antenna and filter business. The operating margin1 reached 16.8%.

We see strong underlying customer momentum in segment Digital Services. We are confident about our offering and market position. Leading operators have awarded us several 5G Core contracts, which are expected to start generating material revenues from 2021. While the rationalization of the legacy portfolio will continue, we are increasing R&D investments in our 5G and cloud-native portfolio to capture the new opportunities. Execution of the turnaround follows the plan, but earnings will vary between quarters. In the first quarter, currency adjusted sales declined by -9% due to fewer project completions and a somewhat negative impact from Covid-19 as access to some customer networks was limited. In addition, legacy hardware sales declined in line with our strategy. However, fundamental to our strategy, sales of software increased and gross margin1 reached 40%, despite a SEK -0.2 b. negative impact from one of the few remaining critical contracts.

In Managed Services our investments in automation and AI continue to contribute to improving the gross margin. There will be quarterly variations depending on timing of add-on sales and costs, but underlying margins have been established at a higher level.

Our cash position has further strengthened driven by free cash flow before M&A of SEK 2.3 b. in the quarter. This further solidified our resilience which enables us to continue to invest in our technology leadership. At the same time, we will continue our efforts to drive efficiency and cost reductions to further increase competitiveness.

Underlying business fundamentals remain strong. With growth in data in general and with working from home as the new normal in many countries, good connectivity is more important than ever. For 2020 we estimate the RAN2 market to grow by 4%, however for Q2 we expect somewhat lower than normal sequential sales growth as there are uncertainties impacting short-term growth negatively. Covid-19 and actions taken by governments to slow down the spread are making our service delivery and supply harder due to lockdowns and travel restrictions in many countries. In addition, while we have seen no material effects so far on our demand situation, it is prudent to believe that the slowdown in the general economy may lead some operators to delay investment programs.

Our 5G equipment is used in 29 live networks across four continents. As a further proofpoint of our technology leadership we were awarded an increased market share from one of the operators in China. The full value and margin impact from the 5G deployments in China will be assessed after market share decisions by all operators.

While we have been successful improving our position in Europe, we are concerned that 5G investments in Europe are delayed. This means that Europe may fall behind on a critical digital infrastructure for the future. The criticality of the digital infrastructure has been further evidenced during the pandemic. We believe governments should encourage 5G investments as a way to restart economies.

The financial targets for 2020 take into account an increasing share of strategic contracts, including 5G in China. We expect a larger share of these contracts to weigh on profitability in Q2 rather than being evenly distributed over the year. Operational improvements will continue and are expected to partly offset the negative impact.

The approved operator merger in North America is expected to build an even stronger 5G momentum and we expect investments to intensify during the second half of the year. However, our managed services contract is expected to be negatively impacted over time, starting in Q2.

We are well positioned with a resilient balance sheet and a solid competitive position based on our 5G portfolio, set to deliver on the promises of 5G. A key factor for our long-term growth is to provide our customers with leading solutions. We are determined to come out of the Covid-19 situation in a stronger competitive position and our investments in R&D is a strategic cornerstone which we will not sacrifice. We also continue investments in digital transformation which is expected to generate competitive advantages.

The massive disruption caused by Covid-19 has demonstrated the criticality of the network in today’s society and we are currently working

 

 

   
3    Ericsson | First Quarter Report 2020    CEO comments


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closely with our customers to keep their networks running. During this period, our supply and service delivery has worked with limited interruption. We made an early decision to encourage a majority of our workforce to work remotely and are very proud of our people who have relentlessly served our customers during this period. Our business continuity plans have safeguarded operations during Q1 and we will continue to work to further improve our resilience by for example increasing inventories of critical components. At the same time, the longer the lockdown in many countries continue, the more disruptions we will likely see for example of our supply chains.

The current global uncertainty requires a humble attitude towards predicting the near-term future. We remain positive on

the longer-term outlook, but the second quarter is likely to be a tad softer than normal due to timing of strategic contracts and uncertainty induced by Covid-19. Predicting when the restrictions to curb the pandemic will be lifted and how the recovery will look is impossible. However, with current visibility we maintain the targets for 2020 and 2022.

Stay healthy and well.

Börje Ekholm

President and CEO

 

1

Excluding restructuring charges

 

2 

Dell’Oro estimat

 

 

   
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Financial highlights

 

SEK b.

   Q1
2020
    Q1
2019
    YoY
change
    Q4
2019
    QoQ
change
 

Net sales

     49.8       48.9       2     66.4       -25

of which Networks

     35.1       33.5       5     44.4       -21

of which Digital Services

     7.3       7.8       -6     13.2       -44

of which Managed Services

     5.7       5.9       -2     7.0       -19

of which Emerging Business and Other

     1.6       1.8       -11     1.7       -10

Sales growth adj. for comparable units and currency

     —         —         -2     —         —    

Gross income

     19.8       18.8       5     24.4       -19

Gross margin

     39.8     38.4     —         36.8     —    

Gross margin excluding restructuring charges

     40.4     38.5     —         37.1     —    

Research and development (R&D) expenses

     -9.1       -9.2       —         -10.6       —    

Selling and administrative expenses

     -6.2       -6.0       —         -8.2       —    

Impairment losses on trade receivables

     -0.2       0.6       —         -0.2       —    

Other operating income and expenses

     0.1       0.8       -88     0.8       -88

Operating income (loss)

     4.3       4.9       -12     6.1       -30

of which Networks

     5.8       5.5       6     6.4       -9

of which Digital Services

     -1.4       -1.8       —         -0.2       —    

of which Managed Services

     0.4       1.3       -67     0.3       40

of which Emerging Business & Other

     -0.5       0.0       —         -0.4       —    

Operating margin

     8.7     10.0     —         9.2     —    

Operating income excl. restr. charges & items affecting comparability in 2019 ¹

     4.6       3.5       30     6.0       -23

Operating margin excl. restr. charges & items affecting comparability in 2019 ¹

     9.3     7.2     —         9.0     —    

Operating margin excluding restructuring charges

     9.3     10.4     —         9.7     —    

Financial income and expenses, net

     -0.9       -0.6       —         -0.1       —    

Taxes

     -1.1       -1.9       —         -1.6       —    

Net income

     2.3       2.4       -5     4.5       -49

Restructuring charges

     -0.3       -0.2       —         -0.3       —    

 

1 

Excludes restructuring charges in all periods. No other adjustments made in Q1 2020. Q4 2019 excludes a provision reversal related to SEC and DOJ investigations (SEK 0.7 b.) and costs related to wind-down of the ST-Ericsson legal structure (SEK -0.3 b.). Q1 2019 excludes a capital gain related to the divestment of 51% of MediaKind (SEK 0.7 b.), divestment of certain assets in Red Bee Media (SEK 0.1 b.) and a reversal of an earlier provision for impairment of trade receivables following customer payment (SEK 0.7 b.).

Net sales

 

Reported sales increased by 2% YoY. Sales adjusted for comparable units and currency decreased by -2%. Sales in North America, Saudi Arabia and Japan grew while sales in Latin America, China and India declined.

Networks sales adjusted for comparable units and currency was flat YoY. Growth in North America, Saudi Arabia and Japan was offset by a decline primarily in Latin America, India and North East Asia excluding Japan.

Digital Services sales adjusted for comparable units and currency decreased by -9% YoY due to reduced sales of services and legacy hardware. Services sales declined following fewer project completions in the quarter, and a somewhat negative impact on deliveries from the Covid-19 pandemic.

Managed Services sales adjusted for comparable units and currency declined by -5% YoY due to contract exits.

Sales adjusted for comparable units and currency in Emerging Business and Other decreased by -8% mainly due to reduced legacy sales in media. Sales in Emerging Business increased.

IPR licensing revenues were flat at SEK 2.5 (2.5) b. YoY and QoQ.

Sequentially, sales decreased by -25% following seasonality.

Gross margin

Gross margin was 39.8% (38.4%). Gross margin excluding restructuring charges improved to 40.4% (38.5%) driven by a favorable business mix, including an increased software share, in segment Networks. Digital Services gross margin improved supported by a higher share of software and stronger hardware margins. Managed Services gross margin improved mainly as an effect of efficiency gains and timing of costs.

Sequentially, gross margin increased to 39.8% from 36.8%. Gross margin excluding restructuring charges increased to 40.4% from 37.1% with improvements in all segments. A higher share of IPR licensing revenues had a positive impact QoQ. Networks gross margin improved supported by a more favorable business mix and a lower share of services sales. Digital Services gross margin was supported by a higher share of software sales and stronger hardware margins. Managed Services gross margin improved driven by seasonally lower cost and efficiencies from R&D investments in automation and AI.

 

 

   
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Items affecting comparability including restructuring charges

Restructuring charges increased slighty to SEK -0.3 (-0.2) b. YoY. Q1 2019 was impacted by capital gains (SEK 0.8 b.) related to the media businesses, and a reversal of a provision for impairment of trade receivables (SEK 0.7 b.) following customer payment. Q4 2019 was impacted by a provision reversal related to the SEC and DOJ investigations (SEK 0.7 b.) and costs related to wind-down of the ST-Ericsson legal structure (SEK -0.3 b.).

Research and development (R&D) expenses

R&D expenses decreased to SEK -9.1 (-9.2) b. R&D expenses excluding restructuring charges were SEK -9.2 (-9.0) b. The increase is mainly in segment Networks, while Digital Services had a lower net negative impact from capitalized and amortized development expenses.

Selling and administrative (SG&A) expenses

SG&A expenses increased to SEK -6.2 (-6.0) b. YoY, impacted by currency effects and increased investments in digitalization. Revaluation of customer financing was SEK -0.3 (-0.2) b.

Impairment losses on trade receivables

Impairment losses on trade receivables were negative at SEK -0.2 (0.6) b. Q1 2019 was impacted by reversal of a provision following customer payment of SEK 0.7 b.

Other operating income and expenses

Other operating income and expenses was SEK 0.1 (0.8) b. Q1 2019 was impacted by capital gains of SEK 0.8 b. related to the media businesses.

Operating income and margin

Operating income declined YoY to SEK 4.3 (4.9) b. Operating income excluding restructuring charges and items affecting comparability (see “Items affecting comparability” on page 3) improved to SEK 4.6 (3.5) b. with a corresponding operating margin improvement to 9.3% (7.2%). The improvement was driven by a stronger gross margin. Operating income excluding restructuring charges and items affecting comparability improved in all segments YoY.

Sequentially, operating income declined to SEK 4.3 b. from SEK 6.1 b. due to seasonally lower sales, partly offset by an improved gross margin and seasonally lower operating expenses. Operating margin adjusted for items affecting comparability increased to 9.3% from 9.0%.

Financial net

Financial net decreased to SEK -0.9 (-0.6) b. YoY and from SEK -0.1 b. QoQ, mainly due to negative currency hedge effects following the weakened SEK to USD. The currency hedge effect was SEK -0.5 b. compared with SEK -0.2 b. in Q1 2019 and SEK 0.2 b. in Q4 2019. The SEK weakened against the USD between December 31, 2019 (SEK/USD rate 9.32) and March 31, 2020 (SEK/USD rate 10.13).

Taxes

Taxes were SEK -1.1 (-1.9) b. corresponding to a tax rate of 33% (44%). The rate is derived from forecasted geographical distribution of profits for 2020.

Net Income

Net income declined to SEK 2.3 (2.4) b. and EPS diluted declined to SEK 0.65 (0.70) YoY due to items affecting comparability in Q1 2019 which had a positive impact. Adjusted for this impact, both net income and EPS diluted improved YoY.

Employees

The number of employees on March 31, 2020, was 99,095, a net decrease of 322 employees in the first quarter.

 

 

   
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Planning assumptions

Market related

 

    The RAN equipment market is estimated to increase by 4% for full-year 2020 with 0% CAGR for 2019-2024. (Source: Dell’Oro Jan and Feb, 2020)

Ericsson related

 

    With current visibility the financial targets for 2020 and 2022 remain.

Net sales

 

    Three-year average sales seasonality between Q1 and Q2 is 11%. For Q2 somewhat lower than normal sequential sales growth is expected as there are uncertainties impacting short-term growth negatively:

 

    Covid-19 and actions taken by governments to slow down the spread are making service delivery and supply harder due to lockdowns and travel restrictions in many countries.

 

    While there have been no material effects so far on the demand situation, it is prudent to believe that the slowdown in the general economy may lead some operators to delay their investment programs.

 

    The approved operator merger in North America is expected to build an even stronger 5G momentum and investments are expected to intensify during the second half of the year. However, the Ericsson managed services contract is expected to be negatively impacted over time, starting in Q2.

 

    The revenues from current IPR licensing contract portfolio are approximately SEK 10 b. on an annual basis.

Gross margin

 

    The financial targets for 2020 take into account an increasing share of strategic contracts, including 5G in China. A larger share of these contracts is expected to weigh on profitability in Q2 rather than being evenly distributed over the year. Operational improvements will continue and are expected to partly offset the negative impact.
    The acquired antenna and filter business is expected to have a negative impact on Networks margins in 2020, with a gradual improvement during 2H

 

    The improvements in Digital Services continue, but earnings will vary between quarters depending on business mix, sales seasonality and impact of the remainder of the 45 critical contracts.

 

    In Managed Services investments in automation and AI continue to contribute to improving the gross margin. There will be quarterly variations depending on timing of add-on sales and costs but underlying margins have been established at a higher level.

R&D and SG&A expenses

 

    Expenses typically increase between Q1 and Q2 due to seasonality.

 

    Investments in R&D will continue in line with the focused business strategy.

 

    Investments in digitalization, compliance and security will continue to impact SG&A. Somewhat higher expenses are expected for full-year 2020.

Restructuring charges

 

    Restructuring charges for full-year 2020 are estimated to be ~1% of sales.

Currency exposure

 

    Rule of thumb: A change by 10% of USD to SEK would have an impact of approximately +/-5% on net sales and approximately +/-1 percentage point on operating margin.
 

 

   
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Market area sales

 

SEK b.

   Q1
2020
     Q1
2019
     YoY
change
    Q4
2019
     QoQ
change
 

South East Asia, Oceania and India

     5.9        6.1        -4     9.2        -36

North East Asia

     3.9        3.8        2     9.7        -60

North America

     17.9        16.2        11     17.4        3

Europe and Latin America

     12.2        13.1        -7     17.5        -30

Middle East and Africa

     5.8        5.4        8     8.4        -31

Other¹

     3.9        4.2        -7     4.2        -5
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total

     49.8        48.9        2     66.4        -25
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

 

1

Market area “Other” includes primarily IPR licensing revenues and the major part of segment Emerging Business and Other.

Sales breakdown by market area by segment is available in the back-end tables.

 

•  Ericsson 5G status on March 31. 29 live networks and 86 commercial agreements with unique operators.

 

•  The business momentum in North America continued.

 

•  Sales in the Middle East and Africa were driven by 4G/5G deployments in the Middle East.

 

•  Networks sales continued to grow in Europe, demonstrating our strong product offering.

South East Asia, Oceania and India

Sales decreased YoY across both Networks and Digital Services due to timing of project deliveries and milestones. The situation in India remains challenging, and sales declined YoY.

North East Asia

Sales increased YoY. Digital Services sales grew, mainly driven by strong sales in Japan. Network sales declined as a result of slowdown of 4G deployment in Mainland China. The decline was, however, partly compensated by increased business volumes in Japan.

North America

Sales increased YoY. Networks sales increased, driven by continued 5G momentum. Digital Services sales decreased due to lower software sales after a strong Q4. Managed Services sales were flat.

Europe and Latin America

Sales decreased YoY primarily due to reduced network investments in Latin America as well as lower sales in Managed Services due to contract exits. Networks sales increased in Europe driven by earlier announced contract wins.

Middle East and Africa

Sales increased YoY. Network sales were supported by ongoing 4G/5G deployment in key markets. Digital Services sales declined due to timing of project milestones.

Other

Sales decreased YoY due to the divestment of 51% of MediaKind in 2019. IPR licensing revenues remained stable at SEK 2.5 (2.5) b.

 

 

   
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Segment results

Segment Networks

 

SEK b.

   Q1
2020
    Q1
2019
    YoY
change
    Q4
2019
 

Net sales

     35.1       33.5       5     44.4  

Sales growth adj. for comparable units and FX

     —         —         0     —    

Gross income

     15.6       14.5       8     18.3  

Gross margin

     44.4     43.2     —         41.1

Gross margin excl. restructuring charges

     44.6     43.2     —         41.1

Operating income

     5.8       5.5       6     6.4  

Operating margin

     16.6     16.3     —         14.4

Operating margin excl. restructuring charges

     16.8     16.4     —         14.5

Restructuring charges

     -0.1       0.0       —         0.0  

Breakdown of sales into products, services and IPR licensing is available in the back-end tables.

 

    Continued strong momentum for 5G.

 

    Improved operating margin YoY driven by business mix and software.

 

    Continued technology leadership investments driving financial performance.

Net sales

Reported sales increased by 5% YoY, while sales adjusted for comparable units and currency was flat. Strong growth in North America, Saudi Arabia and Japan was offset by a decline YoY primarily in Latin America, India and North East Asia excl. Japan.

Sales declined by -21% QoQ due to seasonally lower sales.

Gross margin

Gross margin increased to 44.4% (43.2%) YoY. Gross margin excluding restructuring charges increased to 44.6% (43.2%), supported by a favorable business mix, including a higher share of software sales. Operational leverage compensated for an increased share of strategic contracts demonstrating the strong underlying business fundamentals. The strategic contracts are taken to strengthen the market position and their negative impact on gross margin may vary between quarters.

Gross margin increased to 44.4% from 41.1% QoQ driven by a more favorable business mix including a higher share of IPR licensing revenues as well as a lower share of services sales.

Operating income and margin

Operating income increased to SEK 5.8 (5.5) b. YoY while operating margin increased to 16.6% (16.3%). Excluding restructuring charges, the operating margin increased to 16.8% (16.4%), with a continued negative impact of the acquired antenna and filter business of SEK -0.3 b. The higher gross margin compensated for accelerated R&D investments in 5G and antenna products as well as an increase in SG&A expenses partly driven by the increased group investments in digital transformation.

Operating income excluding restructuring charges declined by SEK -0.5 b. QoQ, due to seasonally lower sales, while operating margin excluding restructuring charges increased to 16.8% from 14.5% QoQ as a result of a positive impact from the higher gross margin. The negative impact from the acquired antenna and filter business declined QoQ to SEK -0.3 b. from SEK -0.5 b.

Net sales rolling four quarters were SEK 156.7 b. and operating margin excluding restructuring charges was 16.1%.

 

 

   
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Segment Digital Services

 

SEK b.

   Q1
2020
    Q1
2019
    YoY
change
    Q4
2019
 

Net sales

     7.3       7.8       -6     13.2  

Sales growth adj. for comparable units and FX

     —         —         -9     —    

Gross income

     2.9       2.9       2     4.9  

Gross margin

     39.9     36.8     —         37.2

Gross margin excl. restructuring charges

     40.1     37.6     —         38.1

Operating income (loss)

     -1.4       -1.8       —         -0.2  

Operating margin

     -19.3     -23.0     —         -1.2

Operating margin excl. restructuring charges

     -19.6     -20.6     —         0.3

Restructuring charges

     0.0       -0.2       —         -0.2  

 

Breakdown of sales into products, services and IPR licensing is available in the back-end tables.

 

    Sales declined due to lower services and hardware sales, and a somewhat negative impact from the Covid-19 pandemic.

 

    Gross margin improved supported by a higher share of software.

 

    Important 5G Core contracts awarded.

Net sales

Reported sales decreased by -6% YoY. Sales adjusted for comparable units and currency decreased by -9% YoY due to reduced sales of services and legacy hardware. Services sales declined following fewer project completions, and a somewhat negative impact on deliveries from the Covid-19 pandemic as access to customer networks have been limited in certain countries. Legacy hardware sales declined in line with strategy to focus on cloud-native software.

The business momentum is strong for the new portfolio of 5G and cloud-native products. Sales of the new portfolio increased by 10% in the quarter and by 7% rolling 12 months. Important 5G Core contracts have been signed with several tier 1 operators in 2020.

Gross margin

Gross margin increased to 39.9% (36.8%) YoY. Gross margin excluding restructuring charges increased to 40.1% (37.6%)

supported by a higher share of software sales and by improved hardware margins. One of the remaining critical contracts had a negative impact of SEK -0.2 b. in the quarter.

Gross margin excluding restructuring charges increased to 40.1% from 38.1% QoQ, supported by a higher share of software sales and by stronger hardware margins. A higher share of IPR licensing revenues had a positive impact on gross margin QoQ.

Operating income (loss)

Operating income was SEK -1.4 (-1.8) b. Operating income excluding restructuring charges was SEK -1.4 (-1.6) b. The negative impact from lower sales was offset by a stronger gross margin. Operating expenses excluding restructuring charges declined by SEK -0.2 b. YoY due to a lower negative impact from capitalized and amortized development expenses (SEK 0.0 b. Q1 2020 compared with SEK -0.3 b. Q1 2019). While rationalization of the legacy portfolio continues, R&D investments are made in the new portfolio of 5G and cloud-native products.

Operating income excluding restructuring charges declined QoQ mainly due to sales seasonality.

Net sales rolling four quarters were SEK 39.4 b. and operating margin excluding restructuring charges was -8.2%.

 

 

   
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Segment Managed Services

 

SEK b.

   Q1
2020
    Q1
2019
    YoY
change
    Q4
2019
 

Net sales

     5.7       5.9       -2     7.0  

Sales growth adj. for comparable units and FX

     —         —         -5     —    

Gross income

     0.9       1.0       -10     1.0  

Gross margin

     16.3     17.7     —         14.8

Gross margin excl. restructuring charges

     20.6     17.7     —         15.4

Operating income

     0.4       1.3       -67     0.3  

Operating margin

     7.1     21.4     —         4.2

Operating margin excl. restructuring charges

     11.4     21.4     —         4.8

Restructuring charges

     -0.2       0.0       —         0.0  

 

    Sales declined YoY driven by exits of non-strategic contracts.

 

    Gross margin excl. restr. charges increased QoQ and YoY.

 

    Further investments in automation, analytics and AI-driven offerings – supporting 5G and efficiency in service delivery.

Net sales

Reported sales declined by -2%. Sales adjusted for comparable units and currency decreased by -5% YoY, driven by non-strategic contract exits. Sales in Optimization (project business) showed growth.

Gross margin

Gross margin declined to 16.3% (17.7%) YoY. Gross margin excluding restructuring charges increased to 20.6% (17.7%) mainly as a result of efficiency gains and timing of costs.

Gross margin increased to 16.3% from 14.8% QoQ. Gross margin excluding restructuring charges increased to 20.6% from 15.4% driven by seasonally lower cost and efficiencies from R&D investments in automation and AI.

Gross margin rolling four quarters was 16.4%, excluding restructuring charges.

Operating income and margin

Operating income excluding restructuring charges was SEK 0.7 b. (Q1 2019 SEK 0.5 b., adjusted for a provision reversal of SEK 0.7 b.). The improvement was driven by higher gross margin.

Restructuring charges in the quarter amounted to SEK -0.2 b., mainly related to exiting a non-strategic contract.

Net sales rolling four quarters were SEK 25.4 b, and operating margin excluding restructuring charges was 6.9%.

Segment Emerging Business and Other

 

SEK b.

   Q1
2020
    Q1
2019
    YoY
change
    Q4
2019
 

Net sales

     1.6       1.8       -11     1.7  

Of which Emerging Business and iconectiv

     1.1       1.0       5     1.1  

Of which Red Bee Media

     0.6       0.6       -6     0.6  

Of which Media Solutions

     -0.1       0.1       —         0.0  

Sales growth adj. for comparable units and FX

     —         —         -8     —    

Gross income

     0.3       0.4       -17     0.2  

Gross margin

     21.7     23.4     —         13.4

Gross margin excl. restructuring charges

     21.9     23.5     —         15.1

Operating income (loss)

     -0.5       0.0       —         -0.4  

Of which Em. Business, iconectiv & common costs

     -0.4       -0.5       —         -0.6  

Of which Red Bee Media

     0.0       0.0       —         0.0  

Of which Media Solutions

     -0.1       0.4       —         -0.3  

Of which adjustments in Q4 2019 1)

     —         —         —         0.5  

Operating margin

     -32.7     -1.7     —         -23.2

Operating margin excl. restructuring charges

     -32.7     -1.3     —         -21.4

Restructuring charges

     0.0       0.0       —         0.0  

 

1) 

Includes a partial release, of SEK 0.7 b. of the cost provision related to the resolution of the SEC and DOJ investigations and winding down non-cash costs of the ST-Ericsson legal structure of SEK -0.3 b.

 

    Continued growth in Emerging Business.

 

    Operating income adjusted for items affecting comparability improved YoY.

Net sales

Reported sales decreased by -11% YoY, due to the 51% divestment of MediaKind in Q1 2019 and lower sales related to legacy media business. Sales adjusted for comparable units and currency decreased by -8% mainly due to lower sales in the legacy media business. Sales in Emerging Business increased.

Gross margin

Gross margin declined to 21.7% (23.4%) YoY. Gross margin excluding restructuring charges declined to 21.9% (23.5%). The decline was mainly due to the divestment of 51% of MediaKind and legacy project costs, partly offset by improvements in Red Bee Media.

Gross margin increased QoQ to 21.7% from 13.4% with improvements in Emerging Business. Q4 2019 was negatively impacted by project losses in the legacy media business.

Operating income (loss)

Operating income excluding restructuring charges was SEK -0.5 (0.0) b.

Media Solutions operating income was SEK -0.1 (0.4) b. The operating income includes Ericsson’s 49% share in earnings of the MediaKind business. Q1 2019 income was positively impacted by a capital gain of SEK 0.7 b.

Red Bee Media operating income, excluding a capital gain of SEK 0.1 b. in Q1 2019, improved as a result of higher gross margin.

Operating income in Emerging Business, iconectiv and common costs was SEK -0.4 (-0.5) b.

 

 

   
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Cash flow and financial position

 

SEK b.

   Q1
2020
    Q1
2019
    Q4
2019
 

Net income adjusted for non-cash items

     4.7       5.5       8.0  
  

 

 

   

 

 

   

 

 

 

Working capital changes (net operating assets and liabilities)

     -0.4       0.3       -7.5  
  

 

 

   

 

 

   

 

 

 

Cash flow from operating activities

     4.3       5.8       0.5  
  

 

 

   

 

 

   

 

 

 

Capex (net) including product development

     -1.3       -1.5       -1.6  

Other investing activities and lease liabilities

     -0.6       -0.8       -0.8  
  

 

 

   

 

 

   

 

 

 

Free cash flow before M&A

     2.3       3.5       -1.9  
  

 

 

   

 

 

   

 

 

 

Acquisitions/divestments, net

     -0.2       0.3       -1.3  
  

 

 

   

 

 

   

 

 

 

Free cash flow

     2.1       3.8       -3.2  
  

 

 

   

 

 

   

 

 

 

Cash flow from investing activities

     -5.0       3.3       -4.8  

Cash flow from financing activities

     1.4       -2.6       0.1  

Net change in cash and cash equivalents

     3.3       7.1       -6.1  

SEK b.

   Mar 31
2020
    Mar 31
2019
    Dec 31
2019
 

Gross cash

     79.5       71.7       72.2  
  

 

 

   

 

 

   

 

 

 

– Borrowings, current

     17.8       3.0       9.4  

– Borrowings, non-current

     23.4       32.5       28.3  
  

 

 

   

 

 

   

 

 

 

Net cash

     38.4       36.1       34.5  
  

 

 

   

 

 

   

 

 

 

Equity

     79.1       84.5       81.9  

Total assets

     292.3       284.0       276.4  

Capital turnover (times)

     1.2       1.3       1.4  

Return on capital employed (%)

     10.2     12.6     6.7

 

    Free cash flow before M&A was SEK 2.3 (3.5) b.

 

    Solid net cash position at SEK 38.4 (36.1) b.

 

    The average maturity of long-term borrowings as of March 31, 2020, was 2.4 years.

Cash flow from operating activities

Cash flow from operating activities was SEK 4.3 (5.8) b. A reversal of a provision for impairment of trade receivables of SEK 0.7 b. following customer payment impacted Q1 2019. Reduced trade payables and somewhat higher inventories were offset by lower trade receivables following a seasonally strong Q4. Provisions of SEK 0.7 b. were utilized in the quarter of which SEK 0.2 b. was related to restructuring.

Free cash flow

Free cash flow before M&A was SEK 2.3 (3.5) b. Investments in property, plant and equipment were SEK -1.1 (-1.3) b. and capitalized development expenses were SEK -0.3 (-0.5) b.

Free cash flow after M&A amounted to SEK 2.1 (3.8) b. M&A (acquisitions/divestments net) was SEK -0.2 (0.3) b. Genaker, a provider of Mission Critical Push-to-talk solutions, was acquired in the quarter while M&A was positive in Q1 2019 mainly as a result of the divestment of 51% of MediaKind.

Cash flow from investing and financing activities

Cash flow from investing activities was SEK -5.0 (3.3) b. mainly due to purchase of interest-bearing securities.

Cash flow from financing activities was SEK 1.4 (-2.6) b. due to increased external borrowings.

Financial position

Gross and net cash increased QoQ supported by free cash flow. Liabilities for post-employment benefits increased in the quarter, to SEK 43.0 b. from SEK 35.8 b., due to lower interest rates. The Swedish defined benefit obligation (DBO) was calculated using a discount rate based on the yields of Swedish government bonds. If the discount rate had been based on Swedish covered mortgage bonds, the liability for post-employment benefits would have been approximately SEK 16.9 b. lower. As reported in the 2019 Annual Report there is a funding need for the Swedish pension plan in 2020 which will be met in the second quarter by a combination of contributing cash and providing additional business mortgages as guarantee. The funding need is now estimated to be SEK 3-4 b. compared with previous estimate of SEK 1-2 b. due to Covid-19 impact on financial markets.

The financial strategy is to secure financial resilience and to enhance profit and cash generation abilities. The execution on this strategy has secured a strong financial position, with SEK 79.5 (71.7) b. in gross cash and SEK 38.4 (36.1) b. in net cash. The average maturity of long-term borrowings as of March 31, 2020, was 2.4 years, a decrease from 3.1 years 12 months earlier.

 

 

   
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The funding strategy relies on a variety of funding sources with bonds in both the US and European market as well as bilateral loans. In addition, the Company has an undrawn committed credit facility of EUR 250 million with the European Investment Bank (EIB). Finally, the Company has a long-term committed multi-currency revolving credit facility of USD 2 billion. The main increase in current borrowings this quarter compared with a year ago is due to non-current borrowings being moved to current borrowing as they mature within 12 months. These are the EIB loan of USD 684 million and the loan of USD 170 million with Swedish Export Credit Corporation (SEK) which both mature in the fourth quarter of 2020 and the EUR 500 million bond maturing in the first quarter of 2021. The capital ambitions remain unchanged from those communicated at the Investor Update 2019; strong free cash flow, positive net cash, and investment grade rating.

 

 

   
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Parent Company

 

Income after financial items was SEK 1.0 (-0.1) b.

At the end of the quarter, gross cash (cash, cash equivalents, short-term investments and interest-bearing securities, non-current) amounted to SEK 65.1 (60.6) b.

There was an increase in intercompany lending of SEK 4.6 b. and no change in intercompany borrowing in the quarter.

In the quarter, a dividend of SEK 5.0 b. was recognized, as anticipated, after decision by the Annual General Meeting on March 31. The first of two equal dividend payouts was made in the second week of April. The second payout will be in October.

In accordance with the conditions of the long-term variable compensation program (LTV) for Ericsson employees, 4,396,831 shares from treasury stock were distributed or sold to employees during the first quarter. The holding of treasury stock at March 31, 2020 was 15,456,416 Class B shares.

 

 

   
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Other information

 

Ericsson resolves litigation with Sol IP

Ericsson has after the year-end 2019 resolved the previously communicated litigation with Sol IP, concerning alleged infringement of 20 patents declared to the LTE standard. The patents originated from Electronics and Telecommunications Research Institute (ETRI), a Korean government-funded research institution. The settlement resolves the litigation with Sol IP and involves a patent license agreement between Ericsson, Sol IP and ETRI. The settlement will have a negative impact for 2020 of approximately USD 13 million on operating income within Segment Networks of which USD 10 million was recorded in Q1 2020 and the balance spread equally over the remaining quarters. This quarterly license fee amortization will continue in subsequent periods. The exact terms of the agreement are confidential.

Update on Ericsson’s AGM 2020 addressing the Corona virus

On March 17, 2020, Ericsson announced that it would hold its Annual General Meeting of shareholders 2020 as scheduled on March 31, however, with a limited scope, due to the Corona virus. Euroclear Sweden AB would offer shareholders who are individuals the option to vote via proxy.

Ericsson takes further precautionary measures for its AGM 2020 and the Nomination Committee proposes unchanged Board fees

On March 26, 2020, Ericsson announced further precautionary measures for its AGM in order to limit the scope and duration of its AGM 2020. The scope of the meeting would be further reduced to focus on legal requirements only. Shareholders were encouraged to use the opportunity to vote by proxy and to follow the meeting via webcast.

The Nomination Committee proposed that current Board fees remain unchanged.

Resolutions at the AGM

On March 31, 2020, Ericsson held its AGM in Kista, Stockholm.

The proposed dividend of SEK 1.50 per share was approved by the AGM. The dividend will be paid in two equal installments; SEK 0.75 per share with the record date Thursday, April 2, 2020, and SEK 0.75 per share with the record date Friday, October 2, 2020.

The AGM elected Board members in accordance with the proposal of the Nomination Committee. Ronnie Leten was re-elected as Chair of the Board and Jon Fredrik Baksaas, Jan Carlson, Nora Denzel, Börje Ekholm, Eric A. Elzvik, Kurt Jofs, Ronnie Leten, Kristin S. Rinne, Helena Stjernholm and Jacob Wallenberg were re-elected as Board members. The unions have appointed Torbjörn Nyman, Kjell-Åke Soting and Roger Svensson employee representatives in the Board with Per Holmberg, Anders Ripa and Loredana Roslund as deputies.

The AGM resolved on fees to the Board of Directors, in accordance with the Nomination Committee’s proposal.

The AGM elected Deloitte AB as new auditor for the period up until the end of the AGM 2021.

The AGM resolved to approve the guidelines for remuneration to Group Management, in accordance with the Board of Directors’ proposal.

In accordance with the Board of Directors’ proposals, the AGM resolved on implementation of LTV 2020 for the members of the Executive Team (currently 15 individuals), comprising a maximum of 2.5 million B-shares in Ericsson.

Ericsson Covid-19 actions

Ericsson Global Crisis Management Council and task forces in each country have been activated throughout the course of the quarter. Decisions are taken based on facts and guidance from WHO as well as local government guidelines with the primary aim to keep employees, partners, customers and other stakeholders safe and healthy.

In January restrictions were put in place for travel to and from China; in February global travel restrictions were implemented which remain in place.

On February 7, Ericsson withdrew from Mobile World Congress ahead of the conference being cancelled; in March all attendance and sponsorship of global events was suspended for 3 months; during April this suspension was further extended until end August 2020.

On March 13, all employees were encouraged to work from home wherever possible and appr. 85,000 of the total workforce are working from home using collaboration tools. Remote access capability across the globe has been scaled up and existing mobile ways of working have ensured that remote teams are able to continue to perform their roles effectively.

Ericsson is taking a proactive approach to risk management and scenario planning along with driving actions to support the execution of business continuity plans.

With countries in lockdown network traffic patterns are changing from public places to residential sites as millions of people are working and studying from home. It has been possible to manage increased network demands with only minor disruptions.

Supply: Ericsson´s global supply chain ensures that the company works closely with customers through its European, Asian and American operations. Ericsson’s production site in China was closed until February 9, in line with recommendations from the Chinese authorities. The company’s strategy since long has been to secure a dual mode production. This structure and many other precautionary actions have kept the supply chain operational. Ericsson conducts active business continuity assessments and

 

 

   
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takes pre-emptive and mitigative actions to secure the continuity of supply chain operations and to minimize risks for customers. These include securing multi-source components and geographically spread multi-site production plants. The situation is continuously monitored.

Service Delivery: Ericsson is working proactively with its customers to ensure the consistent performance of their networks. With global Service Delivery Units located in seven different countries, Ericsson is able to leverage skill and scale to manage changes in demand by flexibly allocating resources. In doing so the Company has maintained full-service continuity 24x7 for customers and their networks.

Buffer stocks have been proactively increased and stock has been moved to local warehouses, closer to the customers, minimizing impact from logistics disturbances. This ensures delivery of vital equipment to maintain customer networks.

R&D: Where possible, R&D teams are working from home and are deploying routines to minimize the impact on hardware and software development. Ericsson has a multi-site strategy for interoperability testing and can optimize activities based on availability of testing resources at a given location. New routines to perform testing remotely have been implemented.

Network Operation Centers: Business continuity plans with managed services customers are tested in regular cycles. These plans include the ability to shift workload between global and regional Network Operation Centers. This is supported by built-in redundancy and resilience within the IT systems and tools. Network Operations Centre employees have been able to shift to remote working. Ericsson has four Global Service Delivery Centers – India, Romania, China and Mexico. Global skill and scale enable services to be moved to alternative locations.

By continuing to maintain close relationships with the governments and regulatory agencies in countries with critical delivery centers, Ericsson has been able to swiftly obtain the necessary documentation to ensure continuity of services to all customers.

Ericsson remains close to customers, building customized plans to address their specific business needs and to maintain service continuity.

POST-CLOSING EVENTS

U.S. class action lawsuit against Ericsson dismissed by court

In April 2018, Telefonaktiebolaget LM Ericsson, the present President and CEO and the Chief Financial Officer of Ericsson as well as three former executives were named defendants in a putative class action filed in the United States District Court for the Southern District of New York. The complaint alleged violations of United States securities laws, principally in connection with service revenues and recognition of expenses on long-term service projects. Ericsson filed motion to dismiss the complaint. On January 11, 2020 the court granted Ericsson’s motion to dismiss. The decision became final and binding on April 15, 2020.

The acquired antenna and filter business – efficiency program

On Oct 2, 2019 Ericsson acquired the Kathrein antenna and filter business. For the acquired and filter business a focused business strategy is being implemented, expanding the technology platform and investing in the product portfolio. Focus will be on offering a broad portfolio, demonstrating the strength of offering combined antenna and radio solutions. Improving profitability and cost control are key to achieve a competitive offering and an internal efficiency program was launched on April 21. During 2020 a number of activities are planned to take place, including downsizing and re-organizing across all functions and geographies. As a result, Ericsson is anticipating a total head count reduction of around 400 persons until Q1 2021, for the acquired antenna and filter business globally. Discussions with representatives of the respective employee organizations have started. Restructuring charges of SEK 0.5 b. are expected for 2020, with anticipated annual run rate savings of SEK 0.3 b.

 

 

   
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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, includ-ing for example risks relating to technology, IPR, compliance, project execution, operations, products and services, treasury and accounting, the geopolitical environment, M&A, cyber security and occupational health and safety.

Ericsson’s risk management is embedded into strategy development and operational processes and is a part of the Ericsson Group Management System to ensure accountability, effectiveness, efficiency, business continuity and compliance. Risks are defined in both a short-term and long-term perspective and are related to long-term objectives as per the strategic direction as well as to short-term objectives.

Risk factors and uncertainties of relevance to Ericsson are described in the Annual Report 2019. Updates to these risk factors and uncertainties observed by Ericsson that are deemed of short-term relevance include, but are not limited to, the following:

Pandemics, such as for example the one caused by the novel Coronavirus, Covid-19, could severely impact our local and global operations

Pandemics, such as for example the one caused by the novel Coronavirus, could severely impact our local and global operations related to e.g. Service Delivery, Research & Development, Sales and Supply, as well as our customers and suppliers, with significant financial and other consequences. As an example, the Coronavirus pandemic has caused challenges and risks relating to travel and lockdowns limiting access to sites, transportation and logistics and impacting the flow of goods. Although we work to put in place business continuity measures to be able to continue to support our customers’ needs and mitigate any impact to our business, disruptions to the global economy and to the operations and business of our customers, suppliers, and partners could cause disturbances in our operations and may have a material adverse effects on our business and financial position.

Stockholm, April 22, 2020

Telefonaktiebolaget LM Ericsson

Börje Ekholm, President and CEO

Org. no. 556016-0680

This report has not been reviewed by Telefonaktiebolaget LM

Ericsson’s auditors.

Date for next report: July 17, 2020

 

 

   
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Editor’s note

 

Press briefing and live webcast

Ericsson invites media, investors and analysts to a conference call on April 22, 2020 starting at 9:00 am CET.

Live audio webcast of the conference call as well as supporting slides will be available at:

www.ericsson.com/investors and

www.ericsson.com/press

Replay of the conference call will be available approximately one hour after the call has ended and will remain available for seven days.

For further information, please contact:

Carl Mellander, Senior Vice President, Chief Financial Officer

Phone: +46 10 713 89 70

E-mail: investor.relations@ericsson.com or

media.relations@ericsson.com

Stella Medlicott, Senior Vice President, Chief Marketing and Communications Officer Phone: +46 10 713 65 39

E-mail: investor.relations@ericsson.com or

media.relations@ericsson.com

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 10 714 64 99, +46 70 575 29 06

E-mail: peter.nyquist@ericsson.com

Lena Häggblom, Director,

Investor Relations

Phone: +46 10 713 27 78, +46 72 593 27 78

E-mail: lena.haggblom@ericsson.com

Stefan Jelvin, Director,

Investor Relations

Phone: +46 10 714 20 39, +46 70 986 02 27

E-mail: stefan.jelvin@ericsson.com

Rikard Tunedal, Director,

Investor Relations

Phone: +46 10 714 54 00, +46 761 005 400

E-mail: rikard.tunedal@ericsson.com

Media

Peter Olofsson, Head of Corporate Communication

Phone: +46 10 719 18 80

E-mail: media.relations@ericsson.com

Corporate Communications

Phone: +46 10 719 69 92

E-mail: media.relations@ericsson.com

 

 

   
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Forward-looking statements

 

This report includes forward-looking statements, including statements reflecting management’s current views relating to the growth of the market, future market conditions, future events, financial condition, and expected operational and financial performance, including, in particular the following:

 

    Our goals, targets, strategies, planning assumptions and operational or financial performance expectations, such as the investor day key messages and our targets and strategies as described in the introductory bullets, the CEO comments, the Segment descriptions and in Other information

 

    Industry trends, future characteristics and development of the markets in which we operate

 

    Our future liquidity, capital resources, capital expenditures, cost savings and profitability

 

    The expected demand for our existing and new products and services as well as plans to launch new products and services including research and development expenditures

 

    The ability to deliver on future plans and to realize potential for future growth

 

    The expected operational or financial performance of strategic cooperation activities and joint ventures

 

    The time until acquired entities and businesses will be integrated and accretive to income

 

    Technology and industry trends including the regulatory and standardization environment in which we operate, competition and our customer structure.

The words “believe,” “expect,” “foresee,” “anticipate,” “assume,” “intend,” “likely,” “projects,” “may,” “could,” “plan,” “estimate,” “forecast,” “will,” “should,” “would,” “predict,” “aim,” “ambition,” “seek,” “potential,” “target,” “might,” “continue,” or, in each case, their negative or variations, and similar words or expressions are used to identify forward-looking statements. Any statement that refers to expectations, projections or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements.

We caution investors that these statements are subject to risks and uncertainties many of which are difficult to predict and generally beyond our control that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements.

Important factors that could affect whether and to what extent any of our forward-looking statements materialize include, but are not limited to, the factors described in the section “Risk Factors”, and in “Risk Factors” in the Annual Report 2019.

These forward-looking statements also represent our estimates and assumptions only as of the date that they were made. We expressly disclaim a duty to provide updates to these forward-looking statements, and the estimates and assumptions associated with them, after the date of this report, to reflect events or changes in circumstances or changes in expectations or the occurrence of anticipated events, whether as a result of new information, future events or otherwise, except as required by applicable law or stock exchange regulation.

 

 

   
19    Ericsson | First Quarter Report 2020    Forward-looking statements


Table of Contents

Financial statements

and other information

Contents

Financial statements

21   

Consolidated income statement

21   

Statement of comprehensive income (loss)

22   

Consolidated balance sheet

23   

Consolidated statement of cash flows

24   

Consolidated statement of changes in equity

24   

Consolidated income statement – isolated quarters

25   

Consolidated statement of cash flows – isolated quarters

26   

Parent Company income statement

26   

Parent Company statement of comprehensive income (loss)

27   

Parent Company balance sheet

Additional information

28   

Accounting policies

29   

Net sales by segment by quarter

30   

Sales growth adjusted for comparable units and currency

30   

Gross income (loss) and gross margin by segment by quarter

31   

Operating income (loss) and operating margin by segment by quarter

32   

EBITA and EBITA margin by segment by quarter

33   

Net sales by market area by quarter

34   

Top 5 countries in sales

34   

Net sales by market area by segment

35   

IPR licensing revenues by segment by quarter

35   

Provisions

36   

Information on investments

37   

Other information

37   

Number of employees

Items excluding restructuring charges

38   

Restructuring charges by function

38   

Restructuring charges by segment

39   

Gross income and gross margin excluding restructuring charges by segment

40   

Operating income (loss) and operating margin excluding restructuring charges by segment

Alternative performance measures

41   

Sales growth adjusted for comparable units and currency

42   

Items excluding restructuring charges

43   

EBITA and EBITA margin

43   

Cash conversion

44   

Gross cash and net cash, end of period

44   

Capital employed

44   

Capital turnover

45   

Return on capital employed

45   

Equity ratio

45   

Return on equity

46   

Earnings (loss) per share (non-IFRS)

46   

Free cash flow and free cash flow before M&A

 

 

   
20    Ericsson | First Quarter Report 2020    Financial statements and other information


Table of Contents

Financial statements

Consolidated income statement

 

     Q1     Jan-Dec
2019
 

SEK million

   2020     2019     Change  

Net sales

     49,750       48,906       2     227,216  

Cost of sales

     -29,962       -30,127       -1     -142,392  
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross income

     19,788       18,779       5     84,824  
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin (%)

     39.8     38.4       37.3

Research and development expenses

     -9,145       -9,167       0     -38,815  

Selling and administrative expenses

     -6,238       -6,031       3     -26,137  

Impairment losses on trade receivables

     -160       559       -129     737  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

     -15,543       -14,639       6     -64,215  
  

 

 

   

 

 

   

 

 

   

 

 

 

Other operating income and expenses 1)

     89       773       -88     -9,710  

Shares in earnings of JV and associated companies

     -28       -17       65     -335  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     4,306       4,896       -12     10,564  
  

 

 

   

 

 

   

 

 

   

 

 

 

Financial income and expenses, net

     -902       -605       49     -1,802  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income after financial items

     3,404       4,291       -21     8,762  
  

 

 

   

 

 

   

 

 

   

 

 

 

Taxes

     -1,124       -1,888       -40     -6,922  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     2,280       2,403       -5     1,840  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to:

        

Owners of the Parent Company

     2,156       2,317         2,223  

Non-controlling interests

     124       86         -383  

Other information

        

Average number of shares, basic (million)

     3,317       3,300         3,306  

Earnings (loss) per share, basic (SEK) 2)

     0.65       0.70         0.67  

Earnings (loss) per share, diluted (SEK) 3)

     0.65       0.70         0.67  

 

1) 

Includes cost of SEK -10.7 billion in Jan-Dec 2019 related to the resolution of the SEC and the DOJ investigations.

2) 

Based on net income (loss) attributable to owners of the Parent Company.

3) 

Potential ordinary shares are not considered when their conversion to ordinary shares would increase earnings per share.

Statement of comprehensive income (loss)

 

     Q1     Jan-Dec
2019
 

SEK million

   2020     2019  

Net income (loss)

     2,280       2,403       1,840  
  

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

      

Items that will not be reclassified to profit or loss

      

Remeasurements of defined benefits pension plans incl. asset ceiling

     -4,683       -2,826       -6,182  

Revaluation of borrowings due to change in credit risk

     1,725       -427       -651  

Tax on items that will not be reclassified to profit or loss

     705       656       1,363  

Items that have been or may be reclassified to profit or loss

      

Cash flow hedge reserve

      

Gains/losses arising during the period

     -241       -169       -290  

Reclassification adjustments on gains/losses included in profit or loss

     70                  

Adjustments for amounts transferred to initial carrying amount of hedged items

                        

Changes in cumulative translation adjustments

     2,211       1,407       1,979  

Share of other comprehensive income on JV and associated companies

     88       38       131  

Tax on items that have been or may be reclassified to profit or loss

     35       35       60  
  

 

 

   

 

 

   

 

 

 

Total other comprehensive income (loss), net of tax

     -90       -1,286       -3,590  
  

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss)

     2,190       1,117       -1,750  
  

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) attributable to:

      

Owners of the Parent Company

     2,162       1,010       -1,403  

Non-controlling interests

     28       107       -347  

 

   
21    Ericsson | First Quarter Report 2020    Financial statements


Table of Contents

Consolidated balance sheet

 

SEK million

   Mar 31
2020
     Dec 31
2019
 

Assets

     

Non-current assets

     

Intangible assets

     

Capitalized development expenses

     4,217        4,040  

Goodwill

     33,082        31,200  

Intellectual property rights, brands and other intangible assets

     2,583        2,491  

Property, plant and equipment

     14,244        13,850  

Right-of-use assets

     8,589        8,487  

Financial assets

     

Equity in JV and associated companies

     1,618        1,565  

Other investments in shares and participations

     1,410        1,432  

Customer finance, non-current

     1,843        2,262  

Interest-bearing securities, non-current

     23,335        20,354  

Other financial assets, non-current

     7,682        5,614  

Deferred tax assets

     31,611        31,174  
  

 

 

    

 

 

 
     130,214        122,469  
  

 

 

    

 

 

 

Current assets

     

Inventories

     32,588        30,863  

Contract assets

     10,256        12,171  

Trade receivables

     42,572        43,069  

Customer finance, current

     1,113        1,494  

Other current receivables

     19,383        14,479  

Interest-bearing securities, current

     7,834        6,759  

Cash and cash equivalents

     48,347        45,079  
  

 

 

    

 

 

 
     162,093        153,914  
  

 

 

    

 

 

 

Total assets

     292,307        276,383  
  

 

 

    

 

 

 

Equity and liabilities

     

Equity

     

Stockholders’ equity

     79,841        82,559  

Non-controlling interest in equity of subsidiaries

     -728        -681  
  

 

 

    

 

 

 
     79,113        81,878  
  

 

 

    

 

 

 

Non-current liabilities

     

Post-employment benefits

     43,029        35,817  

Provisions, non-current

     2,703        2,679  

Deferred tax liabilities

     1,060        1,224  

Borrowings, non-current

     23,381        28,257  

Lease liabilities, non-current

     7,705        7,595  

Other non-current liabilities

     2,178        2,114  
  

 

 

    

 

 

 
     80,056        77,686  
  

 

 

    

 

 

 

Current liabilities

     

Provisions, current

     8,357        8,244  

Borrowings, current

     17,759        9,439  

Lease liabilities, current

     2,396        2,287  

Contract liabilities

     34,265        29,041  

Trade payables

     29,840        30,403  

Other current liabilities

     40,521        37,405  
  

 

 

    

 

 

 
     133,138        116,819  
  

 

 

    

 

 

 

Total equity and liabilities

     292,307        276,383  
  

 

 

    

 

 

 

Assets pledged as collateral

     5,866        5,901  

Contingent liabilities

     1,446        1,527  

 

   
22    Ericsson | First Quarter Report 2020    Financial statements


Table of Contents

Consolidated statement of cash flows

 

     Q1      Jan-Dec
2019
 

SEK million

   2020      2019  

Operating activities

        

Net income

     2,280        2,403        1,840  

Adjustments to reconcile net income to cash

        

Taxes

     -420        804        1,652  

Earnings/dividends in JV and associated companies

     30        24        406  

Depreciation, amortization and impairment losses

     2,120        2,326        9,089  

Other

     734        -76        1,079  
  

 

 

    

 

 

    

 

 

 

Net income reconciled to cash

     4,744        5,481        14,066  
  

 

 

    

 

 

    

 

 

 

Changes in operating net assets

        

Inventories

     -538        -2,951        261  

Customer finance, current and non-current

     817        -911        -858  

Trade receivables and contract assets

     5,559        4,345        10,995  

Trade payables

     -2,176        20        -372  

Provisions and post-employment benefits

     218        -3,459        -3,729  

Contract liabilities

     3,987        8,463        -1,579  

Other operating assets and liabilities, net

     -8,309        -5,223        -1,911  
  

 

 

    

 

 

    

 

 

 
     -442        284        2,807  
  

 

 

    

 

 

    

 

 

 

Cash flow from operating activities

     4,302        5,765        16,873  

Investing activities

        

Investments in property, plant and equipment

     -1,113        -1,314        -5,118  

Sales of property, plant and equipment

     26        232        744  

Acquisitions/divestments of subsidiaries and other operations, net

     -208        299        -1,505  

Product development

     -262        -457        -1,545  

Other investing activities

     -42        -165        -331  

Interest-bearing securities

     -3,432        4,673        4,214  
  

 

 

    

 

 

    

 

 

 

Cash flow from investing activities

     -5,031        3,268        -3,541  
  

 

 

    

 

 

    

 

 

 

Cash flow before financing activities

     -729        9,033        13,332  

Financing activities

        

Dividends paid

     -9        -986        -4,450  

Repayment of lease liabilities

     -596        -604        -2,990  

Other financing activities

     2,036        -1,010        540  
  

 

 

    

 

 

    

 

 

 

Cash flow from financing activities

     1,431        -2,600        -6,900  
  

 

 

    

 

 

    

 

 

 

Effect of exchange rate changes on cash

     2,566        631        258  

Net change in cash and cash equivalents

     3,268        7,064        6,690  
  

 

 

    

 

 

    

 

 

 

Cash and cash equivalents, beginning of period

     45,079        38,389        38,389  
  

 

 

    

 

 

    

 

 

 

Cash and cash equivalents, end of period

     48,347        45,453        45,079  
  

 

 

    

 

 

    

 

 

 

 

   
23    Ericsson | First Quarter Report 2020    Financial statements


Table of Contents

Consolidated statement of changes in equity

 

     Jan-Mar      Jan-Dec

2019
 

SEK million

   2020      2019  

Opening balance

     81,878        87,770        87,770  

Adjustment due to new accounting standards 1)

     —          -249        -249  
  

 

 

    

 

 

    

 

 

 

Adjusted opening balance

     81,878        87,521        87,521  
  

 

 

    

 

 

    

 

 

 

Total comprehensive income (loss)

     2,190        1,117        -1,750  

Sale/repurchase of own shares

     43        43        197  

Long-term variable compensation plans

     54        139        377  

Dividends paid

     -5,053        -4,288        -4,450  

Transactions with non-controlling interests

     1        —          -17  
  

 

 

    

 

 

    

 

 

 

Closing balance

     79,113        84,532        81,878  
  

 

 

    

 

 

    

 

 

 

 

1) 

Opening balance adjustment in 2019 due to IFRS 16.

Consolidated income statement - isolated quarters

 

     2020

Q1
    2019  

Isolated quarters, SEK million

  Q4     Q3     Q2     Q1  

Net sales

     49,750       66,373       57,127       54,810       48,906  

Cost of sales

     -29,962       -41,939       -35,587       -34,739       -30,127  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross income

     19,788       24,434       21,540       20,071       18,779  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin (%)

     39.8     36.8     37.7     36.6     38.4

Research and development expenses

     -9,145       -10,633       -9,497       -9,518       -9,167  

Selling and administrative expenses

     -6,238       -8,222       -4,920       -6,964       -6,031  

Impairment losses on trade receivables

     -160       -173       200       151       559  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

     -15,543       -19,028       -14,217       -16,331       -14,639  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other operating income and expenses 1)

     89       756       -11,305       66       773  

Shares in earnings of JV and associated companies

     -28       -37       -214       -67       -17  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     4,306       6,125       -4,196       3,739       4,896  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Financial income and expenses, net

     -902       -71       -685       -441       -605  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income after financial items

     3,404       6,054       -4,881       3,298       4,291  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Taxes

     -1,124       -1,570       -2,013       -1,451       -1,888  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     2,280       4,484       -6,894       1,847       2,403  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to:

          

Owners of the Parent Company

     2,156       4,430       -6,229       1,705       2,317  

Non-controlling interests

     124       54       -665       142       86  

Other information

          

Average number of shares, basic (million)

     3,317       3,313       3,308       3,304       3,300  

Earnings (loss) per share, basic (SEK) 2)

     0.65       1.34       -1.89       0.52       0.70  

Earnings (loss) per share, diluted (SEK) 3)

     0.65       1.33       -1.89       0.51       0.70  

 

1) 

Includes cost provisions related to the resolution of the SEC and DOJ investigations of SEK -11.5 b. in Q3 2019 and a partial release of the same provision of SEK 0.7 b. in Q4 2019.

2) 

Based on net income (loss) attributable to owners of the Parent Company.

3) 

Potential ordinary shares are not considered when their conversion to ordinary shares would increase earnings per share.

 

   
24    Ericsson | First Quarter Report 2020    Financial statements


Table of Contents

Consolidated statement of cash flows - isolated quarters

 

     2020
Q1
     2019  

Isolated quarters, SEK million

   Q4      Q3      Q2      Q1  

Operating activities

              

Net income (loss)

     2,280        4,484        -6,894        1,847        2,403  

Adjustments to reconcile net income to cash

              

Taxes

     -420        949        -411        310        804  

Earnings/ dividends in JV and associated companies

     30        33        278        71        24  

Depreciation, amortization and impairment losses

     2,120        2,290        2,199        2,274        2,326  

Other

     734        197        508        450        -76  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net income reconciled to cash

     4,744        7,953        -4,320        4,952        5,481  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Changes in operating net assets

              

Inventories

     -538        5,200        1,077        -3,065        -2,951  

Customer finance, current and non-current

     817        -66        -265        384        -911  

Trade receivables and contract assets

     5,559        -3,216        6,528        3,338        4,345  

Trade payables

     -2,176        688        -2,913        1,833        20  

Provisions and post-employment benefits

     218        -10,509        10,719        -480        -3,459  

Contract liabilities

     3,987        -4,413        -3,988        -1,641        8,463  

Other operating assets and liabilities, net

     -8,309        4,859        151        -1,698        -5,223  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     -442        -7,457        11,309        -1,329        284  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash flow from operating activities

     4,302        496        6,989        3,623        5,765  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Investing activities

              

Investments in property, plant and equipment

     -1,113        -1,475        -1,231        -1,098        -1,314  

Sales of property, plant and equipment

     26        206        122        184        232  

Acquisitions/divestments of subsidiaries and other operations, net

     -208        -1,341        -466        3        299  

Product development

     -262        -329        -313        -446        -457  

Other investing activities

     -42        -74        -56        -36        -165  

Interest-bearing securities

     -3,432        -1,759        -1,114        2,414        4,673  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash flow from investing activities

     -5,031        -4,772        -3,058        1,021        3,268  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash flow before financing activities

     -729        -4,276        3,931        4,644        9,033  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Financing activities

              

Dividends paid

     -9        -15        -141        -3,308        -986  

Repayment of lease liabilities

     -596        -711        -1,052        -623        -604  

Other financing activities

     2,036        834        1,396        -680        -1,010  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash flow from financing activities

     1,431        108        203        -4,611        -2,600  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Effect of exchange rate changes on cash

     2,566        -1,936        1,550        13        631  

Net change in cash and cash equivalents

     3,268        -6,104        5,684        46        7,064  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash and cash equivalents, beginning of period

     45,079        51,183        45,499        45,453        38,389  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash and cash equivalents, end of period

     48,347        45,079        51,183        45,499        45,453  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

   
25    Ericsson | First Quarter Report 2020    Financial statements


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Parent Company income statement

 

     Q1      Jan-Dec  

SEK million

   2020      2019      2019  

Net sales

     —          —          —    

Cost of sales

     —          —          —    

Gross income

     —          —          —    

Operating expenses

     -251        -521        -1,531  

Other operating income and expenses 1)

     580        451        -8,148  
  

 

 

    

 

 

    

 

 

 

Operating income

     329        -70        -9,679  
  

 

 

    

 

 

    

 

 

 

Financial net

     693        -53        6,610  
  

 

 

    

 

 

    

 

 

 

Income after financial items

     1,022        -123        -3,069  
  

 

 

    

 

 

    

 

 

 

Transfers to (–) / from untaxed reserves

     —          —          -1,961  

Taxes

     -174        -31        87  
  

 

 

    

 

 

    

 

 

 

Net income (loss)

     848        -154        -4,943  
  

 

 

    

 

 

    

 

 

 

 

1) 

Includes costs of SEK -10.7 billion in Jan-Dec 2019 related to the resolution of the SEC and DOJ investigations.

Parent Company statement of comprehensive income (loss)

 

     Q1      Jan-Dec  

SEK million

   2020      2019      2019  

Net income (loss)

     848        -154        -4,943  

Revaluation of borrowings due to change in credit risk

     1,725        -427        -651  

Tax on items that will not be reclassified to profit or loss

     -355        88        134  
  

 

 

    

 

 

    

 

 

 

Total other comprehensive income, net of tax

     1,370        -339        -517  
  

 

 

    

 

 

    

 

 

 

Total comprehensive income (loss)

     2,218        -493        -5,460  
  

 

 

    

 

 

    

 

 

 

 

   
26    Ericsson | First Quarter Report 2020    Financial statements


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Parent Company balance sheet

 

     Mar 31      Dec 31  

SEK million

   2020      2019  

Assets

     

Fixed assets

     

Intangible assets

     49        58  

Tangible assets

     334        303  

Financial assets

     111,621        106,156  
  

 

 

    

 

 

 
     112,004      106,517  
  

 

 

    

 

 

 

Current assets

     

Inventories

     —          —    

Receivables

     25,622        23,166  

Short-term investments

     7,222        6,328  

Cash and cash equivalents

     34,531        29,800  
  

 

 

    

 

 

 
     67,374        59,294  
  

 

 

    

 

 

 

Total assets

     179,378        165,811  
  

 

 

    

 

 

 

Stockholders’ equity, provisions and liabilities

     

Equity

     

Restricted equity

     48,164        48,164  

Non-restricted equity

     29,520        32,222  
  

 

 

    

 

 

 
     77,684        80,386  
  

 

 

    

 

 

 

Provisions

     673        668  

Non-current liabilities

     23,566        28,341  

Current liabilities

     77,455        56,416  
  

 

 

    

 

 

 

Total stockholders’ equity, provisions and liabilities

     179,378        165,811  
  

 

 

    

 

 

 

1}  Of which interest-bearing securities, non-current

     23,335        20,560  
  

 

 

    

 

 

 

 

   
27    Ericsson | First Quarter Report 2020    Financial statements


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Additional information

Accounting policies

 

The group

This interim report is prepared in accordance with IAS 34. The term “IFRS” used in this document refers to the application of IAS and IFRS as well as interpretations of these standards as issued by IASB’s Standards Interpretation Committee (SIC) and IFRS Interpretations Committee (IFRIC). The accounting policies adopted are consistent with those of the annual report for the year ended December 31, 2019 and should be read in conjunction with that annual report. There are no amendments of IFRS during 2020 that are estimated to have a material impact on the result and financial position of the Company.

Covid-19 impacts on the Financial statements

The turbulence in the financial markets due to the Covid-19 pandemic has impacted certain lines within the Company´s financial statements at Q1 2020.

Fiscal stimulus provided by governments worldwide has reduced government bond yields – in Sweden, this has increased the valuation of pensions liabilities by SEK 5.5 b.

Borrowings issued by the Parent Company are held at fair value with changes in value due to changes in credit risk recognized in other comprehensive income (OCI). The widening of credit spreads for corporate bonds in the quarter has decreased the fair value of the borrowings, resulting in a positive impact of SEK 1.7 b. recognized in the OCI.

Foreign exchanges rates have fluctuated significantly during the period. The strengthening of USD against SEK resulted in a loss on the hedge loan balances used to manage FX execution risk of SEK 0.5 b. which is recognized within Financial income and expenses in the in the Consolidated income statement.

In the Consolidated balance sheet, borrowings issued by the Parent Company are denominated in USD and in EUR, which has resulted in an increase in the SEK value by SEK 2.8 b. In general, a weaker SEK has also resulted in a positive currency translation adjustment of SEK 2.2 b. on consolidation, recognized in OCI.

 

The weaker SEK against USD and EUR also resulted in higher unrealized losses on certain derivatives contracts used to offset balance sheet exposures, thereby increasing the cash collaterals paid to counterparties by SEK 1 b.

The Company currently does not expect material changes to the profitability of future business plans 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 has not adjusted any alternative performance measures (APM) for effects directly related to Covid-19 in Q1 2020.

 

 

   
28    Ericsson | First Quarter Report 2020    Additional information


Table of Contents

Net sales by segment by quarter

 

     2020     2019  

Isolated quarters, SEK million

   Q1     Q4     Q3     Q2     Q1  

Networks

     35,126       44,448       39,261       37,819       33,481  

Of which Products

     24,748       31,159       27,500       26,698       23,765  

Of which Services

     10,378       13,289       11,761       11,121       9,716  

Digital Services

     7,345       13,168       9,881       8,991       7,817  

Of which Products

     3,798       7,338       5,594       4,611       3,937  

Of which Services

     3,547       5,830       4,287       4,380       3,880  

Managed Services

     5,714       7,027       6,359       6,323       5,856  

Emerging Business and Other

     1,565       1,730       1,626       1,677       1,752  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     49,750       66,373       57,127       54,810       48,906  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2020     2019  

Sequential change, percent

   Q1     Q4     Q3     Q2     Q1  

Networks

     -21     13     4     13     -20

Of which Products

     -21     13     3     12     -20

Of which Services

     -22     13     6     14     -18

Digital Services

     -44     33     10     15     -40

Of which Products

     -48     31     21     17     -47

Of which Services

     -39     36     -2     13     -30

Managed Services

     -19     11     1     8     -15

Emerging Business and Other

     -10     6     -3     -4     -23
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -25     16     4     12     -23
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2020     2019  

Year over year change, percent

   Q1     Q4     Q3     Q2     Q1  

Networks

     5     7     9     17     17

Of which Products

     4     5     9     20     22

Of which Services

     7     12     11     10     6

Digital Services

     -6     1     10     2     8

Of which Products

     -4     -2     22     3     0

Of which Services

     -9     5     -3     0     17

Managed Services

     -2     2     -2     -3     -1

Emerging Business and Other

     -11     -24     -33     -18     6
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     2     4     6     10     13
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2020     2019  

Year to date, SEK million

   Jan-Mar     Jan-Dec     Jan-Sep     Jan-Jun     Jan-Mar  

Networks

     35,126       155,009       110,561       71,300       33,481  

Of which Products

     24,748       109,122       77,963       50,463       23,765  

Of which Services

     10,378       45,887       32,598       20,837       9,716  

Digital Services

     7,345       39,857       26,689       16,808       7,817  

Of which Products

     3,798       21,480       14,142       8,548       3,937  

Of which Services

     3,547       18,377       12,547       8,260       3,880  

Managed Services

     5,714       25,565       18,538       12,179       5,856  

Emerging Business and Other

     1,565       6,785       5,055       3,429       1,752  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     49,750       227,216       160,843       103,716       48,906  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2020     2019  

Year over year change, percent

   Jan-Mar     Jan-Dec     Jan-Sep     Jan-Jun     Jan-Mar  

Networks

     5     12     14     17     17

Of which Products

     4     13     16     21     22

Of which Services

     7     10     9     9     6

Digital Services

     -6     5     6     4     8

Of which Products

     -4     5     9     2     0

Of which Services

     -9     4     4     8     17

Managed Services

     -2     -1     -2     -2     -1

Emerging Business and Other

     -11     -19     -18     -7     6
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     2     8     9     11     13
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

   
29    Ericsson | First Quarter Report 2020    Additional information


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Sales growth adjusted for comparable units and currency

 

     2020     2019  

Isolated quarter, year over year change, percent

   Q1     Q4     Q3     Q2     Q1  

Networks

     0     2     4     11     10

Digital Services

     -9     -3     5     -3     0

Managed Services

     -5     -1     -5     -6     -5

Emerging Business and Other 1)

     -8     9     -7     24     38
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total 1)

     -2     1     3     7     7
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2020     2019  

Year to date, year over year change, percent

   Jan-Mar     Jan-Dec     Jan-Sep     Jan-Jun     Jan-Mar  

Networks

     0     6     8     11     10

Digital Services

     -9     -1     1     -2     0

Managed Services

     -5     -4     -5     -6     -5

Emerging Business and Other 1)

     -8     14     15     30     38
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total 1)

     -2     4     5     7     7
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

1)   Adjusted for MediaKind divestment.

          

 

Gross income and gross margin by segment by quarter

 

          
     2020     2019  

Isolated quarters, SEK million

   Q1     Q4     Q3     Q2     Q1  

Networks

     15,586       18,265       16,327       15,670       14,455  

Digital Services

     2,929       4,898       3,749       3,311       2,878  

Managed Services

     933       1,039       1,136       779       1,036  

Emerging Business and Other

     340       232       328       311       410  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     19,788       24,434       21,540       20,071       18,779  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2020     2019  

Isolated quarters, as percentage of net sales

   Q1     Q4     Q3     Q2     Q1  

Networks

     44.4     41.1     41.6     41.4     43.2

Digital Services

     39.9     37.2     37.9     36.8     36.8

Managed Services

     16.3     14.8     17.9     12.3     17.7

Emerging Business and Other

     21.7     13.4     20.2     18.5     23.4
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     39.8     36.8     37.7     36.6     38.4
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2020     2019  

Year to date, SEK million

   Jan-Mar     Jan-Dec     Jan-Sep     Jan-Jun     Jan-Mar  

Networks

     15,586       64,717       46,452       30,125       14,455  

Digital Services

     2,929       14,836       9,938       6,189       2,878  

Managed Services

     933       3,990       2,951       1,815       1,036  

Emerging Business and Other

     340       1,281       1,049       721       410  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     19,788       84,824       60,390       38,850       18,779  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2020     2019  

Year to date, as percentage of net sales

   Jan-Mar     Jan-Dec     Jan-Sep     Jan-Jun     Jan-Mar  

Networks

     44.4     41.8     42.0     42.3     43.2

Digital Services

     39.9     37.2     37.2     36.8     36.8

Managed Services

     16.3     15.6     15.9     14.9     17.7

Emerging Business and Other

     21.7     18.9     20.8     21.0     23.4
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     39.8     37.3     37.5     37.5     38.4
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

   
30    Ericsson | First Quarter Report 2020    Additional information


Table of Contents

Operating income (loss) and operating margin by segment by quarter

 

     2020     2019  

Isolated quarters, SEK million

   Q1     Q4     Q3     Q2     Q1  

Networks

     5,827       6,399       7,216       5,680       5,472  

Digital Services

     -1,417       -164       -660       -1,405       -1,798  

Managed Services

     408       292       562       203       1,252  

Emerging Business and Other

     -512       -402       -11,314       -739       -30  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     4,306       6,125       -4,196       3,739       4,896  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2020     2019  

Isolated quarters, as percentage of net sales

   Q1     Q4     Q3     Q2     Q1  

Networks

     16.6     14.4     18.4     15.0     16.3

Digital Services

     -19.3     -1.2     -6.7     -15.6     -23.0

Managed Services

     7.1     4.2     8.8     3.2     21.4

Emerging Business and Other

     -32.7     -23.2     -695.8     -44.1     -1.7
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     8.7     9.2     -7.3     6.8     10.0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2020     2019  

Year to date, SEK million

   Jan-Mar     Jan-Dec     Jan-Sep     Jan-Jun     Jan-Mar  

Networks

     5,827       24,767       18,368       11,152       5,472  

Digital Services

     -1,417       -4,027       -3,863       -3,203       -1,798  

Managed Services

     408       2,309       2,017       1,455       1,252  

Emerging Business and Other

     -512       -12,485       -12,083       -769       -30  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     4,306       10,564       4,439       8,635       4,896  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2020     2019  

Year to date, as percentage of net sales

   Jan-Mar     Jan-Dec     Jan-Sep     Jan-Jun     Jan-Mar  

Networks

     16.6     16.0     16.6     15.6     16.3

Digital Services

     -19.3     -10.1     -14.5     -19.1     -23.0

Managed Services

     7.1     9.0     10.9     11.9     21.4

Emerging Business and Other

     -32.7     -184.0     -239.0     -22.4     -1.7
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     8.7     4.6     2.8     8.3     10.0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

   
31    Ericsson | First Quarter Report 2020    Additional information


Table of Contents

EBITA and EBITA margin by segment by quarter

 

     2020     2019  

Isolated quarters, SEK million

   Q1     Q4     Q3     Q2     Q1  

Networks

     5,957       6,447       7,253       5,716       5,552  

Digital Services

     -1,283       -23       -521       -1,268       -1,638  

Managed Services

     409       293       563       205       1,253  

Emerging Business and Other

     -456       -323       -11,262       -688       43  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     4,627       6,394       -3,967       3,965       5,210  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2020     2019  

Isolated quarters, as percentage of net sales

   Q1     Q4     Q3     Q2     Q1  

Networks

     17.0     14.5     18.5     15.1     16.6

Digital Services

     -17.5     -0.2     -5.3     -14.1     -21.0

Managed Services

     7.2     4.2     8.9     3.2     21.4

Emerging Business and Other

     -29.1     -18.7     -692.6     -41.0     2.5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     9.3     9.6     -6.9     7.2     10.7
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2020     2019  

Year to date, SEK million

   Jan-Mar     Jan-Dec     Jan-Sep     Jan-Jun     Jan-Mar  

Networks

     5,957       24,968       18,521       11,268       5,552  

Digital Services

     -1,283       -3,450       -3,427       -2,906       -1,638  

Managed Services

     409       2,314       2,021       1,458       1,253  

Emerging Business and Other

     -456       -12,230       -11,907       -645       43  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     4,627       11,602       5,208       9,175       5,210  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2020     2019  

Year to date, as percentage of net sales

   Jan-Mar     Jan-Dec     Jan-Sep     Jan-Jun     Jan-Mar  

Networks

     17.0     16.1     16.8     15.8     16.6

Digital Services

     -17.5     -8.7     -12.8     -17.3     -21.0

Managed Services

     7.2     9.1     10.9     12.0     21.4

Emerging Business and Other

     -29.1     -180.3     -235.5     -18.8     2.5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     9.3     5.1     3.2     8.8     10.7
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

   
32    Ericsson | First Quarter Report 2020    Additional information


Table of Contents

Net sales by market area by quarter

 

     2020     2019  

Isolated quarters, SEK million

   Q1     Q4     Q3     Q2     Q1  

South East Asia, Oceania and India

     5,917       9,231       7,432       6,965       6,148  

North East Asia

     3,907       9,704       6,356       6,516       3,824  

North America

     17,911       17,368       18,985       17,699       16,171  

Europe and Lath America 1) 2)

     12,241       17,489       14,308       14,085       13,124  

Middle East and Africa

     5,829       8,426       6,046       5,641       5,412  

Other 1) 2)

     3,945       4,155       4,000       3,904       4,227  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     49,750       66,373       57,127       54,810       48,906  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1)   Of which in Sweden

     227       235       13       149       192  

2)   Of which in EU*

     6,259       10,572       8,815       8,385       7,957  
     2020     2019  

Sequential change, percent

   Q1     Q4     Q3     Q2     Q1  

South East Asia, Oceania and India

     -36     24     7     13     -25

North East Asia

     -60     53     -2     70     -54

North America

     3     -9     7     9     -10

Europe and Latin America 1) 2)

     -30     22     2     7     -27

Middle East and Africa

     -31     39     7     4     -21

Other 1) 2)

     -5     4     2     -8     -5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -25     16     4     12     -23
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1)   Of which in Sweden

     -3     1708     -91     -22     -49

2)   Of which in EU*

     -29     20     5     5     -23
     2020     2019  

Year over year change, percent

   Q1     Q4     Q3     Q2     Q1  

South East Asia, Oceania and India

     -4     12     -7     0     -4

North East Asia

     2     16     10     37     13

North America

     11     -4     27     23     43

Europe and Latin America 1) 2)

     -7     -2     -3     1     1

Middle East and Africa

     8     23     4     -3     -8

Other 1) 2)

     -7     -6     -13     -1     21
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     2     4     6     10     13
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1)   Of which in Sweden

     18     -37     -97     -75     -79

2)   Of which in EU*

     -4     2     4     -3     -7
     2020     2019  

Year to date, SEK million

   Jan-Mar     Jan-Dec     Jan-Sep     Jan-Jun     Jan-Mar  

South East Asia, Oceania and India

     5,917       29,776       20,545       13,113       6,148  

North East Asia

     3,907       26,400       16,696       10,340       3,824  

North America

     17,911       70,223       52,855       33,870       16,171  

Europe and Latin America 1) 2)

     12,241       59,006       41,517       27,209       13,124  

Middle East and Africa

     5,829       25,525       17,099       11,053       5,412  

Other 1) 2)

     3,945       16,286       12,131       8,131       4,227  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     49,750       227,216       160,843       103,716       48,906  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1)   Of which in Sweden

     227       589       354       341       192  

2)   Of which in EU*

     6,259       35,729       25,157       16,342       7,957  
     2020     2019  

Year to date, year over year change, percent

   Jan-Mar     Jan-Dec     Jan-Sep     Jan-Jun     Jan-Mar  

South East Asia, Oceania and India

     -4     1     -4     -2     -4

North East Asia

     2     18     20     27     13

North America

     11     20     30     32     43

Europe and Latin America 1) 2)

     -7     -1     0     1     1

Middle East and Africa

     8     5     -2     -5     -8

Other 1) 2)

     -7     -1     1     9     21
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     2     8     9     11     13
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1)   Of which in Sweden

     18     -75     -82     -77     -79

2)   Of which in EU*

     -4     -1     -2     -5     -7

 

*)

No sales to UK are included as from 2020.

 

   
33    Ericsson | First quarter report 2020    Additional information


Table of Contents

Top 5 countries in sales

 

     Q1     Jan-Dec  

Country, percentage of net sales

   2020     2019     2019  

United States

     38     35     32

Japan

     4     3     4

China

     4     5     7

Saudi Arabia

     4     3     3

Australia

     3     3     3

Net sales by market area by segment

 

     Q1 2020  

SEK million

   Networks     Digital
Services
    Managed
Services
    Emerging
Business
and Other
    Total  

South East Asia, Oceania and India

     4,209       772       919       17       5,917  

North East Asia

     2,781       857       203       66       3,907  

North America

     15,230       1,547       1,122       12       17,911  

Europe and Latin America

     7,205       2,384       2,566       86       12,241  

Middle East and Africa

     3,576       1,343       903       7       5,829  

Other

     2,125       442       1       1,377       3,945  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     35,126       7,345       5,714       1,565       49,750  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Share of total

     71     15     11     3     100
     Q1 2020  

Sequential change, percent

   Networks     Digital
Services
    Managed
Services
    Emerging
Business
and Other
    Total  

South East Asia, Oceania and India

     -38     -44     -12     0     -36

North East Asia

     -62     -56     -39     -24     -60

North America

     15     -47     -6     -25     3

Europe and Latin America

     -28     -41     -23     -21     -30

Middle East and Africa

     -27     -44     -19     -46     -31

Other

     -4     0     —         -7     -5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -21     -44     -19     -10     -25
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Q1 2020  

Year over year change, percent

   Networks     Digital
Services
    Managed
Services
    Emerging
Business
and Other
    Total  

South East Asia, Oceania and India

     -7     -6     18     42     -4

North East Asia

     -1     22     -23     65     2

North America

     15     -14     5     -45     11

Europe and Latin America

     -5     -8     -11     -8     -7

Middle East and Africa

     15     -7     5     250     8

Other

     -3     -3     —         -13     -7
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     5     -6     -2     -11     2
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

   
34    Ericsson | First Quarter Report 2020    Additional information


Table of Contents

IPR licensing revenues by segment by quarter

 

     2020      2019  

Isolated quarters, SEK million

   Q1      Q4      Q3      Q2      Q1  

Networks

     2,019        2,014        1,972        1,845        2,066  

Digital Services

     443        443        433        404        454  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     2,462        2,457        2,405        2,249        2,520  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     2020      2019  

Year to date, SEK million

   Jan-Mar      Jan-Dec      Jan-Sep      Jan-Jun      Jan-Mar  

Networks

     2,019        7,897        5,883        3,911        2,066  

Digital Services

     443        1,734        1,291        858        454  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     2,462        9,631        7,174        4,769        2,520  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
Provisions               
     2020      2019  

Isolated quarters, SEK million

   Q1      Q4      Q3      Q2      Q1  

Opening balance

     10,923        22,007        11,358        12,033        16,008  

Additions 1)

     793        2,438        12,774        1,423        1,401  

Utilization/Cash out 1)

     -673        -12,529        -2,151        -2,084        -1,676  

Of which restructuring

     -186        -143        -711        -378        -557  

Reversal of excess amounts

     -124        -842        -128        -88        -125  

Reclassification, translation difference and other

     141        -151        154        74        -3,575  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Closing balance

     11,060        10,923        22,007        11,358        12,033  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Of which restructuring

     1,202        1,095        1,099        1,743        2,059  
     2020      2019  

Year to date, SEK million

   Jan-Mar      Jan-Dec      Jan-Sep      Jan-Jun      Jan-Mar  

Opening balance

     10,923        16,008        16,008        16,008        16,008  

Additions

     793        7,172        15,598        2,824        1,401  

Utilization/Cash out

     -673        -7,576        -5,911        -3,760        -1,676  

Of which restructuring

     -186        -1,789        -1,646        -935        -557  

Reversal of excess amounts

     -124        -1,183        -341        -213        -125  

Reclassification, translation difference and other

     141        -3,498        -3,347        -3,501        -3,575  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Closing balance

     11,060        10,923        22,007        11,358        12,033  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Of which restructuring

     1,202        1,095        1,099        1,743        2,059  

 

1) 

Includes additions of cost provisions related to the resolution of the SEC and DOJ investigations of SEK -11.5 b. in Q3 2019. Includes payment of SEK 10.1 b. to SEC and DOJ in Q4 2019.

 

   
35    Ericsson | First Quarter Report 2020    Additional information


Table of Contents

Information on investments

Investments in assets subject to depreciation, amortization, impairment and write-downs

 

     2020      2019  

Isolated quarters, SEK million

   Q1      Q4      Q3      Q2      Q1  

Additions

              

Property, plant and equipment

     1,113        1,475        1,231        1,098        1,314  

Capitalized development expenses

     262        329        313        446        457  

IPR, brands and other intangible assets

     1        1        2        —          1  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     1,376        1,805        1,546        1,544        1,772  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Depreciation, amortization and impairment losses

              

Property, plant and equipment

     1,009        1,100        1,048        919        880  

Capitalized development expenses

     174        256        330        449        520  

Goodwill, IPR, brands and other intangible assets

     321        269        229        226        314  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     1,504        1,625        1,607        1,594        1,714  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     2020      2019  

Year to date, SEK million

   Jan-Mar      Jan-Dec      Jan-Sep      Jan-Jun      Jan-Mar  

Additions

              

Property, plant and equipment

     1,113        5,118        3,643        2,412        1,314  

Capitalized development expenses

     262        1,545        1,216        903        457  

IPR, brands and other intangible assets

     1        4        3        1        1  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     1,376        6,667        4,862        3,316        1,772  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Depreciation, amortization and impairment losses

              

Property, plant and equipment

     1,009        3,947        2,847        1,799        880  

Capitalized development expenses

     174        1,555        1,299        969        520  

Goodwill, IPR, brands and other intangible assets

     321        1,038        769        540        314  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     1,504        6,540        4,915        3,308        1,714  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

   
36    Ericsson | First Quarter Report 2020    Additional information


Table of Contents

Other information

 

     Q1     Jan-Dec  

SEK million

   2020     2019     2019  

Number of shares and earnings per share

      

Number of shares, end of period (million)

     3,334       3,334       3,334  

Of which class A-shares (million)

     262       262       262  

Of which class B-shares (million)

     3,072       3,072       3,072  

Number of treasury shares, end of period (million)

     15       33       20  

Number of shares outstanding, basic, end of period (million)

     3,319       3,302       3,314  

Numbers of shares outstanding, diluted, end of period (million)

     3,329       3,326       3,328  

Average number of treasury shares (million)

     17       34       28  

Average number of shares outstanding, basic (million)

     3,317       3,300       3,306  

Average number of shares outstanding, diluted (million) 1)

     3,328       3,325       3,320  

Earnings (loss) per share, basic (SEK) 2)

     0.65       0.70       0.67  

Earnings (loss) per share, diluted (SEK) 1)

     0.65       0.70       0.67  

Earnings (loss) per share (Non-IFRS), diluted (SEK) 3)

     0.79       0.80       1.07  

Ratios

      

Days sales outstanding

     94       108       75  

Inventory turnover days

     97       94       77  

Payable days

     92       92       77  

Alternative Performance Measures (APMs)

      

Equity ratio (%)

     27.1     29.8     29.6

Return on equity (%)

     10.6     10.8     2.6

Return on capital employed (%)

     10.2     12.6     6.7

Capital turnover (times)

     1.2       1.3       1.4  

Free cash flow

     2,107       3,756       6,128  

Free cash flow before M&A

     2,315       3,457       7,633  

Exchange rates used in the consolidation

      

SEK/EUR- closing rate

     11.09       10.40       10.43  

SEK/USD- closing rate

     10.13       9.26       9.32  
  

 

 

   

 

 

   

 

 

 

Other

      

Market area inventory, end of period

     20,201       19,346       17,530  

Export sales from Sweden

     27,402       22,486       120,822  

 

1) 

Potential ordinary shares are not considered when their conversion to ordinary shares would increase earnings per share.

2) 

Based on net income (loss) attributable to owners of the Parent Company.

3) 

Excluding amortizations and write-downs of acquired intangibles and restructuring charges.

Number of employees

 

     2020      2019  

End of period