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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM6-K
REPORT OF FOREIGN ISSUER
Pursuant to Rule13a-16 or15d-16 of
the Securities Exchange Act of 1934
April 22, 2020
Commission File Number000-12033
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 Form20-F or Form40-F. Form20-F ☒ Form40-F ☐
Indicate by check mark if the registrant is submitting the Form6-K in paper as permitted by RegulationS-T Rule 101(b)(1): ☐
Indicate by check mark if the registrant is submitting the Form6-K in paper as permitted by RegulationS-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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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. |
• | TheCovid-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 fromCovid-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 theST-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. |
2 Ericsson | First Quarter Report 2020 |
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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 theCovid-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 toCovid-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 fromCovid-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 ofadd-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 theCovid-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 byCovid-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 byCovid-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 |
4 Ericsson | First Quarter Report 2020 | CEO comments |
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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 theST-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 theCovid-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 inEmerging 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 theST-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 ofadd-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. |
7 Ericsson | First Quarter Report 2020 | Financial highlights |
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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 | % | |||||||||||||
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Total | 49.8 | 48.9 | 2 | % | 66.4 | -25 | % | |||||||||||||
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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.
8 Ericsson | First Quarter Report 2020 | Market area sales |
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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 theback-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 theback-end tables.
• | Sales declined due to lower services and hardware sales, and a somewhat negative impact from theCovid-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 theCovid-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%.
10 Ericsson | First Quarter Report 2020 | Segment results |
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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 ofnon-strategic contracts. |
• | Gross margin excl. restr. charges increased QoQ and YoY. |
• | Further investments in automation, analytics andAI-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 bynon-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 anon-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 20191) | — | — | — | 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 downnon-cash costs of theST-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.
11 Ericsson | First Quarter Report 2020 | Segment results |
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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 | |||||||||
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Working capital changes (net operating assets and liabilities) | -0.4 | 0.3 | -7.5 | |||||||||
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Cash flow from operating activities | 4.3 | 5.8 | 0.5 | |||||||||
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Capex (net) including product development | -1.3 | -1.5 | -1.6 | |||||||||
Other investing activities and lease liabilities | -0.6 | -0.8 | -0.8 | |||||||||
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Free cash flow before M&A | 2.3 | 3.5 | -1.9 | |||||||||
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Acquisitions/divestments, net | -0.2 | 0.3 | -1.3 | |||||||||
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Free cash flow | 2.1 | 3.8 | -3.2 | |||||||||
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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 | |||||||||
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– Borrowings, current | 17.8 | 3.0 | 9.4 | |||||||||
– Borrowings,non-current | 23.4 | 32.5 | 28.3 | |||||||||
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Net cash | 38.4 | 36.1 | 34.5 | |||||||||
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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 CriticalPush-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 SEK1-2 b. due toCovid-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.
12 Ericsson | First Quarter Report 2020 | Cash flow |
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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 tonon-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.
13 Ericsson | First Quarter Report 2020 | Cash flow |
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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.
14 Ericsson | First Quarter Report 2020 | Parent Company |
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Other information
Ericsson resolves litigation with Sol IP
Ericsson has after theyear-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 wasre-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 werere-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 millionB-shares in Ericsson.
EricssonCovid-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
15 Ericsson | First Quarter Report 2020 | Other information |
Table of Contents
takespre-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 bybuilt-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 andre-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.
16 Ericsson | First Quarter Report 2020 | Other information |
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Risk factors
Ericsson is exposed to a number of risks in its activities. To stimulate identification and support cross-functional treatment within the Ericsson Group, risks are grouped in a number of categories,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
17 Ericsson | First Quarter Report 2020 | Risk factors |
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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
18 Ericsson | First Quarter Report 2020 | Editor’s note |
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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 |
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20 Ericsson | First Quarter Report 2020 | Financial statements and other information |
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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 expenses1) | 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 inJan-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
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 | ||||||
Othernon-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 andnon-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 standards1) | — | -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 withnon-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 expenses1) | 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 andnon-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 |
Table of Contents
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 expenses1) | 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 inJan-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 |
Table of Contents
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 |
Table of Contents
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 theCovid-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 toCovid-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 |
Table of Contents
Sales growth adjusted for comparable units and currency
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 America1) 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 | |||||||||||||||
Other1) 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 America1) 2) | -30 | % | 22 | % | 2 | % | 7 | % | -27 | % | ||||||||||
Middle East and Africa | -31 | % | 39 | % | 7 | % | 4 | % | -21 | % | ||||||||||
Other1) 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 America1) 2) | -7 | % | -2 | % | -3 | % | 1 | % | 1 | % | ||||||||||
Middle East and Africa | 8 | % | 23 | % | 4 | % | -3 | % | -8 | % | ||||||||||
Other1) 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 America1) 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 | |||||||||||||||
Other1) 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 America1) 2) | -7 | % | -1 | % | 0 | % | 1 | % | 1 | % | ||||||||||
Middle East and Africa | 8 | % | 5 | % | -2 | % | -5 | % | -8 | % | ||||||||||
Other1) 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
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
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
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
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 classA-shares (million) | 262 | 262 | 262 | |||||||||
Of which classB-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. |
2020 | 2019 | |||||||||||||||||||
End of period | Mar 31 | Dec 31 | Sep 30 | Jun 30 | Mar 31 | |||||||||||||||
South East Asia, Oceania and India | 24,942 | 24,559 | 24,322 | 23,942 | 24,051 | |||||||||||||||
North East Asia | 13,786 | 13,783 | 13,608 | 13,334 | 13,169 | |||||||||||||||
North America | 9,718 | 9,643 | 9,487 | 9,342 | 9,246 | |||||||||||||||
Europe and Latin America1) | 46,402 | 47,135 | 44,150 | 43,846 | 43,833 | |||||||||||||||
Middle East and Africa | 4,247 | 4,297 | 4,320 | 4,292 | 4,281 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | 99,095 | 99,417 | 95,887 | 94,756 | 94,580 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
1) Of which Sweden | 12,746 | 12,730 | 12,679 | 12,549 | 12,455 |
37 Ericsson | First Quarter Report 2020 | Additional information |
Table of Contents
Items excluding restructuring charges
Restructuring charges by function
2020 | 2019 | |||||||||||||||||||
Isolated quarters, SEK million | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||
Cost of sales | -335 | -218 | -28 | -26 | -65 | |||||||||||||||
Research and development expenses | 39 | -79 | -98 | -49 | -118 | |||||||||||||||
Selling and administrative expenses | -5 | -30 | -21 | -43 | -23 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | -301 | -327 | -147 | -118 | -206 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
2020 | 2019 | |||||||||||||||||||
Year to date, SEK million | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |||||||||||||||
Cost of sales | -335 | -337 | -119 | -91 | -65 | |||||||||||||||
Research and development expenses | 39 | -344 | -265 | -167 | -118 | |||||||||||||||
Selling and administrative expenses | -5 | -117 | -87 | -66 | -23 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | -301 | -798 | -471 | -324 | -206 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
Restructuring charges by segment
2020 | 2019 | |||||||||||||||||||
Isolated quarters, SEK million | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||
Networks | -75 | -48 | -5 | -5 | -10 | |||||||||||||||
of which cost of sales | -72 | -24 | 12 | 9 | -3 | |||||||||||||||
of which operating expenses | -3 | -24 | -17 | -14 | -7 | |||||||||||||||
Digital Services | 20 | -206 | -128 | -93 | -187 | |||||||||||||||
of which cost of sales | -16 | -125 | -32 | -27 | -60 | |||||||||||||||
of which operating expenses | 36 | -81 | -96 | -66 | -127 | |||||||||||||||
Managed Services | -245 | -42 | -2 | 1 | -2 | |||||||||||||||
of which cost of sales | -245 | -40 | -2 | 3 | -1 | |||||||||||||||
of which operating expenses | 0 | -2 | 0 | -2 | -1 | |||||||||||||||
Emerging Business and Other | -1 | -31 | -12 | -21 | -7 | |||||||||||||||
of which cost of sales | -2 | -29 | -6 | -11 | -1 | �� | ||||||||||||||
of which operating expenses | 1 | -2 | -6 | -10 | -6 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | -301 | -327 | -147 | -118 | -206 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
2020 | 2019 | |||||||||||||||||||
Year to date, SEK million | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |||||||||||||||
Networks | -75 | -68 | -20 | -15 | -10 | |||||||||||||||
of which cost of sales | -72 | -6 | 18 | 6 | -3 | |||||||||||||||
of which operating expenses | -3 | -62 | -38 | -21 | -7 | |||||||||||||||
Digital Services | 20 | -614 | -408 | -280 | -187 | |||||||||||||||
of which cost of sales | -16 | -244 | -119 | -87 | -60 | |||||||||||||||
of which operating expenses | 36 | -370 | -289 | -193 | -127 | |||||||||||||||
Managed Services | -245 | -45 | -3 | -1 | -2 | |||||||||||||||
of which cost of sales | -245 | -40 | 0 | 2 | -1 | |||||||||||||||
of which operating expenses | 0 | -5 | -3 | -3 | -1 | |||||||||||||||
Emerging Business and Other | -1 | -71 | -40 | -28 | -7 | |||||||||||||||
of which cost of sales | -2 | -47 | -18 | -12 | -1 | |||||||||||||||
of which operating expenses | 1 | -24 | -22 | -16 | -6 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | -301 | -798 | -471 | -324 | -206 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
38 Ericsson | First Quarter Report 2020 | Items excluding restructuring charges |
Table of Contents
Gross income and gross margin excluding restructuring charges by segment
2020 | 2019 | |||||||||||||||||||
Isolated quarters, SEK million | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||
Networks | 15,658 | 18,289 | 16,315 | 15,661 | 14,458 | |||||||||||||||
Digital Services | 2,945 | 5,023 | 3,781 | 3,338 | 2,938 | |||||||||||||||
Managed Services | 1,178 | 1,079 | 1,138 | 776 | 1,037 | |||||||||||||||
Emerging Business and Other | 342 | 261 | 334 | 322 | 411 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | 20,123 | 24,652 | 21,568 | 20,097 | 18,844 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
2020 | 2019 | |||||||||||||||||||
Isolated quarters, as percentage of net sales | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||
Networks | 44.6 | % | 41.1 | % | 41.6 | % | 41.4 | % | 43.2 | % | ||||||||||
Digital Services | 40.1 | % | 38.1 | % | 38.3 | % | 37.1 | % | 37.6 | % | ||||||||||
Managed Services | 20.6 | % | 15.4 | % | 17.9 | % | 12.3 | % | 17.7 | % | ||||||||||
Emerging Business and Other | 21.9 | % | 15.1 | % | 20.5 | % | 19.2 | % | 23.5 | % | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | 40.4 | % | 37.1 | % | 37.8 | % | 36.7 | % | 38.5 | % | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
2020 | 2019 | |||||||||||||||||||
Year to date, SEK million | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |||||||||||||||
Networks | 15,658 | 64,723 | 46,434 | 30,119 | 14,458 | |||||||||||||||
Digital Services | 2,945 | 15,080 | 10,057 | 6,276 | 2,938 | |||||||||||||||
Managed Services | 1,178 | 4,030 | 2,951 | 1,813 | 1,037 | |||||||||||||||
Emerging Business and Other | 342 | 1,328 | 1,067 | 733 | 411 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | 20,123 | 85,161 | 60,509 | 38,941 | 18,844 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
2020 | 2019 | |||||||||||||||||||
Year to date, as percentage of net sales | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |||||||||||||||
Networks | 44.6 | % | 41.8 | % | 42.0 | % | 42.2 | % | 43.2 | % | ||||||||||
Digital Services | 40.1 | % | 37.8 | % | 37.7 | % | 37.3 | % | 37.6 | % | ||||||||||
Managed Services | 20.6 | % | 15.8 | % | 15.9 | % | 14.9 | % | 17.7 | % | ||||||||||
Emerging Business and Other | 21.9 | % | 19.6 | % | 21.1 | % | 21.4 | % | 23.5 | % | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | 40.4 | % | 37.5 | % | 37.6 | % | 37.5 | % | 38.5 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
39 Ericsson | First Quarter Report 2020 | Items excluding restructuring charges |
Table of Contents
Operating income (loss) and operating margin excluding restructuring charges by segment
2020 | 2019 | |||||||||||||||||||
Isolated quarters, SEK million | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||
Networks | 5,902 | 6,447 | 7,221 | 5,685 | 5,482 | |||||||||||||||
Digital Services | -1,437 | 42 | -532 | -1,312 | -1,611 | |||||||||||||||
Managed Services | 653 | 334 | 564 | 202 | 1,254 | |||||||||||||||
Emerging Business and Other | -511 | -371 | -11,302 | -718 | -23 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | 4,607 | 6,452 | -4,049 | 3,857 | 5,102 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
2020 | 2019 | |||||||||||||||||||
Isolated quarters, as percentage of net sales | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||
Networks | 16.8 | % | 14.5 | % | 18.4 | % | 15.0 | % | 16.4 | % | ||||||||||
Digital Services | -19.6 | % | 0.3 | % | -5.4 | % | -14.6 | % | -20.6 | % | ||||||||||
Managed Services | 11.4 | % | 4.8 | % | 8.9 | % | 3.2 | % | 21.4 | % | ||||||||||
Emerging Business and Other | -32.7 | % | -21.4 | % | -695.1 | % | -42.8 | % | -1.3 | % | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | 9.3 | % | 9.7 | % | -7.1 | % | 7.0 | % | 10.4 | % | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
2020 | 2019 | |||||||||||||||||||
Year to date, SEK million | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |||||||||||||||
Networks | 5,902 | 24,835 | 18,388 | 11,167 | 5,482 | |||||||||||||||
Digital Services | -1,437 | -3,413 | -3,455 | -2,923 | -1,611 | |||||||||||||||
Managed Services | 653 | 2,354 | 2,020 | 1,456 | 1,254 | |||||||||||||||
Emerging Business and Other | -511 | -12,414 | -12,043 | -741 | -23 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | 4,607 | 11,362 | 4,910 | 8,959 | 5,102 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
2020 | 2019 | |||||||||||||||||||
Year to date, as percentage of net sales | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |||||||||||||||
Networks | 16.8 | % | 16.0 | % | 16.6 | % | 15.7 | % | 16.4 | % | ||||||||||
Digital Services | -19.6 | % | -8.6 | % | -12.9 | % | -17.4 | % | -20.6 | % | ||||||||||
Managed Services | 11.4 | % | 9.2 | % | 10.9 | % | 12.0 | % | 21.4 | % | ||||||||||
Emerging Business and Other | -32.7 | % | -183.0 | % | -238.2 | % | -21.6 | % | -1.3 | % | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | 9.3 | % | 5.0 | % | 3.1 | % | 8.6 | % | 10.4 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
40 Ericsson | First Quarter Report 2020 | Items excluding restructuring charges |
Table of Contents
Alternative performance measures
This section includes a reconciliation of certain Alternative Performance Measures (APMs) to the most directly reconcilable line items in the financial statements. The presentation of APMs has limitations as analytical tools and should not be considered in isolation or as a substitute for related financial measures prepared in accordance with IFRS.
APMs are presented to enhance an investor’s evaluation of ongoing operating results, to aid in forecasting future periods and to facilitate meaningful comparison of results between periods.
Management uses these APMs to, among other things, evaluate ongoing operations in relation to historical results, for internal planning and forecasting purposes and in the calculation of certain performance-based compensation.
The APMs presented in this report may differ from similarly titled measures used by other companies.
For additional information, see Alternative Performance Measures in the Ericsson Annual Report 2019.
Sales growth adjusted for comparable units and currency
Sales growth adjusted for the impact of acquisitions and divestments as well as the effects of foreign currency fluctuations.
2020 | 2019 | |||||||||||||||||||
Isolated quarters, year over year change | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||
Reported net sales | 49,750 | 66,373 | 57,127 | 54,810 | 48,906 | |||||||||||||||
Acquired business | -319 | -96 | — | — | — | |||||||||||||||
Net FX impact | -1,654 | -2,748 | -2,457 | -2,538 | -2,932 | |||||||||||||||
Comparable net sales, excluding FX impact | 47,777 | 63,529 | 54,670 | 52,272 | 45,974 | |||||||||||||||
Comparable quarter net sales adjusted for divested business1) | 48,798 | 63,037 | 53,077 | 49,055 | 42,961 | |||||||||||||||
Sales growth adjusted for comparable units and currency (%) | -2 | % | 1 | % | 3 | % | 7 | % | 7 | % | ||||||||||
2020 | 2019 | |||||||||||||||||||
Year to date, year over year change | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |||||||||||||||
Reported net sales | 49,750 | 227,216 | 160,843 | 103,716 | 48,906 | |||||||||||||||
Acquired business | -319 | -96 | — | — | — | |||||||||||||||
Net FX impact | -1,654 | -10,675 | -7,927 | -5,470 | -2,932 | |||||||||||||||
Comparable net sales, excluding FX impact | 47,777 | 216,445 | 152,916 | 98,246 | 45,974 | |||||||||||||||
Comparable year to date net sales adjusted for divested business1) | 48,798 | 208,130 | 145,093 | 92,016 | 42,961 | |||||||||||||||
Sales growth adjusted for comparable units and currency (%) | -2 | % | 4 | % | 5 | % | 7 | % | 7 | % |
1) | Adjusted for MediaKind divestment. |
41 Ericsson | First Quarter Report 2020 | Alternative performance measures |
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Items excluding restructuring charges
Gross income, operating expenses, and operating income (loss) are presented excluding restructuring charges and, for certain measures, as a percentage of net sales.
2020 | 2019 | |||||||||||||||||||
Isolated quarters, SEK million | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||
Gross income | 19,788 | 24,434 | 21,540 | 20,071 | 18,779 | |||||||||||||||
Net sales | 49,750 | 66,373 | 57,127 | 54,810 | 48,906 | |||||||||||||||
Gross margin (%) | 39.8 | % | 36.8 | % | 37.7 | % | 36.6 | % | 38.4 | % | ||||||||||
Gross income | 19,788 | 24,434 | 21,540 | 20,071 | 18,779 | |||||||||||||||
Restructuring charges included in cost of sales | 335 | 218 | 28 | 26 | 65 | |||||||||||||||
Gross income excluding restructuring charges | 20,123 | 24,652 | 21,568 | 20,097 | 18,844 | |||||||||||||||
Net sales | 49,750 | 66,373 | 57,127 | 54,810 | 48,906 | |||||||||||||||
Gross margin excluding restructuring charges (%) | 40.4 | % | 37.1 | % | 37.8 | % | 36.7 | % | 38.5 | % | ||||||||||
Operating expenses | -15,543 | -19,028 | -14,217 | -16,331 | -14,639 | |||||||||||||||
Restructuring charges included in R&D expenses | -39 | 79 | 98 | 49 | 118 | |||||||||||||||
Restructuring charges included in selling and administrative expenses | 5 | 30 | 21 | 43 | 23 | |||||||||||||||
Operating expenses excluding restructuring charges | -15,577 | -18,919 | -14,098 | -16,239 | -14,498 | |||||||||||||||
Operating income (loss) | 4,306 | 6,125 | -4,196 | 3,739 | 4,896 | |||||||||||||||
Net sales | 49,750 | 66,373 | 57,127 | 54,810 | 48,906 | |||||||||||||||
Operating margin (%) | 8.7 | % | 9.2 | % | -7.3 | % | 6.8 | % | 10.0 | % | ||||||||||
Operating income (loss) | 4,306 | 6,125 | -4,196 | 3,739 | 4,896 | |||||||||||||||
Total restructuring charges | 301 | 327 | 147 | 118 | 206 | |||||||||||||||
Operating income (loss) excluding restructuring charges | 4,607 | 6,452 | -4,049 | 3,857 | 5,102 | |||||||||||||||
Net sales | 49,750 | 66,373 | 57,127 | 54,810 | 48,906 | |||||||||||||||
Operating margin excluding restructuring charges (%) | 9.3 | % | 9.7 | % | -7.1 | % | 7.0 | % | 10.4 | % | ||||||||||
2020 | 2019 | |||||||||||||||||||
Year to date, SEK million | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |||||||||||||||
Gross income | 19,788 | 84,824 | 60,390 | 38,850 | 18,779 | |||||||||||||||
Net sales | 49,750 | 227,216 | 160,843 | 103,716 | 48,906 | |||||||||||||||
Gross margin (%) | 39.8 | % | 37.3 | % | 37.5 | % | 37.5 | % | 38.4 | % | ||||||||||
Gross income | 19,788 | 84,824 | 60,390 | 38,850 | 18,779 | |||||||||||||||
Restructuring charges included in cost of sales | 335 | 337 | 119 | 91 | 65 | |||||||||||||||
Gross income excluding restructuring charges | 20,123 | 85,161 | 60,509 | 38,941 | 18,844 | |||||||||||||||
Net sales | 49,750 | 227,216 | 160,843 | 103,716 | 48,906 | |||||||||||||||
Gross margin excluding restructuring charges (%) | 40.4 | % | 37.5 | % | 37.6 | % | 37.5 | % | 38.5 | % | ||||||||||
Operating expenses | -15,543 | -64,215 | -45,187 | -30,970 | -14,639 | |||||||||||||||
Restructuring charges included in R&D expenses | -39 | 344 | 265 | 167 | 118 | |||||||||||||||
Restructuring charges included in selling and administrative expenses | 5 | 117 | 87 | 66 | 23 | |||||||||||||||
Operating expenses excluding restructuring charges | -15,577 | -63,754 | -44,835 | -30,737 | -14,498 | |||||||||||||||
Operating income (loss) | 4,306 | 10,564 | 4,439 | 8,635 | 4,896 | |||||||||||||||
Net sales | 49,750 | 227,216 | 160,843 | 103,716 | 48,906 | |||||||||||||||
Operating margin (%) | 8.7 | % | 4.6 | % | 2.8 | % | 8.3 | % | 10.0 | % | ||||||||||
Operating income (loss) | 4,306 | 10,564 | 4,439 | 8,635 | 4,896 | |||||||||||||||
Total restructuring charges | 301 | 798 | 471 | 324 | 206 | |||||||||||||||
Operating income (loss) excluding restructuring charges | 4,607 | 11,362 | 4,910 | 8,959 | 5,102 | |||||||||||||||
Net sales | 49,750 | 227,216 | 160,843 | 103,716 | 48,906 | |||||||||||||||
Operating margin excluding restructuring charges (%) | 9.3 | % | 5.0 | % | 3.1 | % | 8.6 | % | 10.4 | % |
42 Ericsson | First Quarter Report 2020 | Alternative performance measures |
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Earnings (loss) before interest, taxes, amortization and write-downs of acquired intangibles, also expressed as a percentage of net sales.
2020 | 2019 | |||||||||||||||||||
Isolated quarters, SEK million | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||
Net income (loss) | 2,280 | 4,484 | -6,894 | 1,847 | 2,403 | |||||||||||||||
Taxes | 1,124 | 1,570 | 2,013 | 1,451 | 1,888 | |||||||||||||||
Financial income and expenses, net | 902 | 71 | 685 | 441 | 605 | |||||||||||||||
Amortization and write-downs of acquired intangibles | 321 | 269 | 229 | 226 | 314 | |||||||||||||||
EBITA | 4,627 | 6,394 | -3,967 | 3,965 | 5,210 | |||||||||||||||
Net sales | 49,750 | 66,373 | 57,127 | 54,810 | 48,906 | |||||||||||||||
EBITA margin (%) | 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 | |||||||||||||||
Net income (loss) | 2,280 | 1,840 | -2,644 | 4,250 | 2,403 | |||||||||||||||
Taxes | 1,124 | 6,922 | 5,352 | 3,339 | 1,888 | |||||||||||||||
Financial income and expenses, net | 902 | 1,802 | 1,731 | 1,046 | 605 | |||||||||||||||
Amortization and write-downs of acquired intangibles | 321 | 1,038 | 769 | 540 | 314 | |||||||||||||||
EBITA | 4,627 | 11,602 | 5,208 | 9,175 | 5,210 | |||||||||||||||
Net sales | 49,750 | 227,216 | 160,843 | 103,716 | 48,906 | |||||||||||||||
EBITA margin (%) | 9.3 | % | 5.1 | % | 3.2 | % | 8.8 | % | 10.7 | % |
Cash flow from operating activities divided by the sum of net income (loss) and adjustments to reconcile net income to cash, expressed as a percentage.
2020 | 2019 | |||||||||||||||||||
Isolated quarters, SEK million | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||
Net income (loss) | 2,280 | 4,484 | -6,894 | 1,847 | 2,403 | |||||||||||||||
Net income reconciled to cash | 4,744 | 7,953 | -4,320 | 4,952 | 5,481 | |||||||||||||||
Cash flow from operating activities | 4,302 | 496 | 6,989 | 3,623 | 5,765 | |||||||||||||||
Cash conversion (%) | 90.7 | % | 6.2 | % | -161.8 | % | 73.2 | % | 105.2 | % | ||||||||||
2020 | 2019 | |||||||||||||||||||
Year to date, SEK million | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |||||||||||||||
Net income (loss) | 2,280 | 1,840 | -2,644 | 4,250 | 2,403 | |||||||||||||||
Net income reconciled to cash | 4,744 | 14,066 | 6,113 | 10,433 | 5,481 | |||||||||||||||
Cash flow from operating activities | 4,302 | 16,873 | 16,377 | 9,388 | 5,765 | |||||||||||||||
Cash conversion (%) | 90.7 | % | 120.0 | % | 267.9 | % | 90.0 | % | 105.2 | % |
43 Ericsson | First Quarter Report 2020 | Alternative performance measures |
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Gross cash and net cash, end of period
Gross cash: Cash and cash equivalents plus interest-bearing securities (current andnon-current).
Net cash: Cash and cash equivalents plus interest-bearing securities (current andnon-current) less borrowings (current andnon-current).
2020 | 2019 | |||||||||||||||||||
SEK million | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||
Cash and cash equivalents | 48,347 | 45,079 | 51,183 | 45,498 | 45,453 | |||||||||||||||
+ Interest-bearing securities, current | 7,834 | 6,759 | 5,866 | 6,367 | 3,183 | |||||||||||||||
+ Interest-bearing securities,non-current | 23,335 | 20,354 | 19,157 | 17,091 | 23,022 | |||||||||||||||
Gross cash, end of period | 79,516 | 72,192 | 76,206 | 68,956 | 71,658 | |||||||||||||||
- Borrowings, current | 17,759 | 9,439 | 1,622 | 2,160 | 3,015 | |||||||||||||||
- Borrowings,non-current | 23,381 | 28,257 | 37,153 | 33,040 | 32,533 | |||||||||||||||
Net cash, end of period | 38,376 | 34,496 | 37,431 | 33,756 | 36,110 |
Total assets lessnon-interest-bearing provisions and liabilities.
2020 | 2019 | |||||||||||||||||||
SEK million | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||
Total assets | 292,307 | 276,383 | 288,531 | 280,447 | 283,958 | |||||||||||||||
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Non-interest-bearing provisions and liabilities | ||||||||||||||||||||
Provisions,non-current | 2,703 | 2,679 | 2,308 | 2,646 | 2,670 | |||||||||||||||
Deferred tax liabilities | 1,060 | 1,224 | 857 | 1,178 | 792 | |||||||||||||||
Othernon-current liabilities | 2,178 | 2,114 | 2,163 | 2,160 | 2,118 | |||||||||||||||
Provisions, current | 8,357 | 8,244 | 19,699 | 8,712 | 9,363 | |||||||||||||||
Contract liabilities | 34,265 | 29,041 | 34,499 | 37,264 | 38,605 | |||||||||||||||
Trade payables | 29,840 | 30,403 | 30,672 | 31,388 | 30,842 | |||||||||||||||
Other current liabilities | 40,521 | 37,405 | 34,624 | 33,351 | 38,528 | |||||||||||||||
Capital employed | 173,383 | 165,273 | 163,709 | 163,748 | 161,040 |
Annualized net sales divided by average capital employed.
2020 | 2019 | |||||||||||||||||||
Isolated quarters, SEK million | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||
Net sales | 49,750 | 66,373 | 57,127 | 54,810 | 48,906 | |||||||||||||||
Annualized net sales | 199,000 | 265,492 | 228,508 | 219,240 | 195,624 | |||||||||||||||
Average capital employed | ||||||||||||||||||||
Capital employed at beginning of period | 165,273 | 163,709 | 163,748 | 161,040 | 149,615 | |||||||||||||||
Capital employed at end of period | 173,383 | 165,273 | 163,709 | 163,748 | 161,040 | |||||||||||||||
Average capital employed | 169,328 | 164,491 | 163,729 | 162,394 | 155,328 | |||||||||||||||
Capital turnover (times) | 1.2 | 1.6 | 1.4 | 1.4 | 1.3 | |||||||||||||||
2020 | 2019 | |||||||||||||||||||
Year to date, SEK million | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |||||||||||||||
Net sales | 49,750 | 227,216 | 160,843 | 103,716 | 48,906 | |||||||||||||||
Annualized net sales | 199,000 | 227,216 | 214,457 | 207,432 | 195,624 | |||||||||||||||
Average capital employed | ||||||||||||||||||||
Capital employed at beginning of period | 165,273 | 149,615 | 149,615 | 149,615 | 149,615 | |||||||||||||||
Capital employed at end of period | 173,383 | 165,273 | 163,709 | 163,748 | 161,040 | |||||||||||||||
Average capital employed | 169,328 | 157,444 | 156,662 | 156,682 | 155,328 | |||||||||||||||
Capital turnover (times) | 1.2 | 1.4 | 1.4 | 1.3 | 1.3 |
44 Ericsson | First Quarter Report 2020 | Alternative performance measures |
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The annualized total of operating income (loss) as a percentage of average capital employed.
2020 | 2019 | |||||||||||||||||||
Isolated quarters, SEK million | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||
Operating income (loss) | 4,306 | 6,125 | -4,196 | 3,739 | 4,896 | |||||||||||||||
Annualized operating income (loss) | 17,224 | 24,500 | -16,784 | 14,956 | 19,584 | |||||||||||||||
Average capital employed | ||||||||||||||||||||
Capital employed at beginning of period | 165,273 | 163,709 | 163,748 | 161,040 | 149,615 | |||||||||||||||
Capital employed at end of period | 173,383 | 165,273 | 163,709 | 163,748 | 161,040 | |||||||||||||||
Average capital employed | 169,328 | 164,491 | 163,729 | 162,394 | 155,328 | |||||||||||||||
Return on capital employed (%) | 10.2 | % | 14.9 | % | -10.3 | % | 9.2 | % | 12.6 | % | ||||||||||
2020 | 2019 | |||||||||||||||||||
Year to date, SEK million | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |||||||||||||||
Operating income (loss) | 4,306 | 10,564 | 4,439 | 8,635 | 4,896 | |||||||||||||||
Annualized operating income (loss) | 17,224 | 10,564 | 5,919 | 17,270 | 19,584 | |||||||||||||||
Average capital employed | ||||||||||||||||||||
Capital employed at beginning of period | 165,273 | 149,615 | 149,615 | 149,615 | 149,615 | |||||||||||||||
Capital employed at end of period | 173,383 | 165,273 | 163,709 | 163,748 | 161,040 | |||||||||||||||
Average capital employed | 169,328 | 157,444 | 156,662 | 156,682 | 155,328 | |||||||||||||||
Return on capital employed (%) | 10.2 | % | 6.7 | % | 3.8 | % | 11.0 | % | 12.6 | % |
Equity expressed as a percentage of total assets.
2020 | 2019 | |||||||||||||||||||
SEK million | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||
Total equity | 79,113 | 81,878 | 77,475 | 84,533 | 84,532 | |||||||||||||||
Total assets | 292,307 | 276,383 | 288,531 | 280,447 | 283,958 | |||||||||||||||
Equity ratio (%) | 27.1 | % | 29.6 | % | 26.9 | % | 30.1 | % | 29.8 | % |
Annualized net income (loss) attributable to owners of the Parent Company as a percentage of average stockholders’ equity.
2020 | 2019 | |||||||||||||||||||
Isolated quarters, SEK million | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||
Net income (loss) attributable to owners of the Parent Company | 2,156 | 4,430 | -6,229 | 1,705 | 2,317 | |||||||||||||||
Annualized | 8,624 | 17,720 | -24,916 | 6,820 | 9,268 | |||||||||||||||
Average stockholders’ equity | ||||||||||||||||||||
Stockholders’ equity, beginning of period | 82,559 | 78,200 | 84,488 | 84,619 | 86,978 | |||||||||||||||
Stockholders’ equity, end of period | 79,841 | 82,559 | 78,200 | 84,488 | 84,619 | |||||||||||||||
Average stockholders’ equity | 81,200 | 80,380 | 81,344 | 84,554 | 85,799 | |||||||||||||||
Return on equity (%) | 10.6 | % | 22.0 | % | -30.6 | % | 8.1 | % | 10.8 | % | ||||||||||
2020 | 2019 | |||||||||||||||||||
Year to date, SEK million | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |||||||||||||||
Net income (loss) attributable to owners of the Parent Company | 2,156 | 2,223 | -2,207 | 4,022 | 2,317 | |||||||||||||||
Annualized | 8,624 | 2,223 | -2,943 | 8,044 | 9,268 | |||||||||||||||
Average stockholders’ equity | ||||||||||||||||||||
Stockholders’ equity, beginning of period | 82,559 | 86,978 | 86,978 | 86,978 | 86,978 | |||||||||||||||
Stockholders’ equity, end of period | 79,841 | 82,559 | 78,200 | 84,488 | 84,619 | |||||||||||||||
Average stockholders’ equity | 81,200 | 84,769 | 82,589 | 85,733 | 85,799 | |||||||||||||||
Return on equity (%) | 10.6 | % | 2.6 | % | -3.6 | % | 9.4 | % | 10.8 | % |
45 Ericsson | First Quarter Report 2020 | Alternative performance measures |
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Earnings (loss) per share(non-IFRS)
Earnings (loss) per share, diluted, excluding amortizations and write-down of acquired intangible assets and excluding restructuring charges.
2020 | 2019 | |||||||||||||||||||
Isolated quarters, SEK | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||
Earnings (loss) per share, diluted | 0.65 | 1.33 | -1.89 | 0.51 | 0.70 | |||||||||||||||
Restructuring charges | 0.07 | 0.07 | 0.04 | 0.02 | 0.05 | |||||||||||||||
Amortization and write-downs of acquired intangibles | 0.07 | 0.06 | 0.05 | 0.06 | 0.05 | |||||||||||||||
Earnings (loss) per share(non-IRFS) | 0.79 | 1.46 | -1.80 | 0.59 | 0.80 | |||||||||||||||
2020 | 2019 | |||||||||||||||||||
Year to date, SEK | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |||||||||||||||
Earnings (loss) per share, diluted | 0.65 | 0.67 | -0.67 | 1.21 | 0.70 | |||||||||||||||
Restructuring charges | 0.07 | 0.18 | 0.11 | 0.07 | 0.05 | |||||||||||||||
Amortization and write-downs of acquired intangibles | 0.07 | 0.22 | 0.16 | 0.11 | 0.05 | |||||||||||||||
Earnings (loss) per share(non-IRFS) | 0.79 | 1.07 | -0.40 | 1.39 | 0.80 |
Free cash flow and free cash flow before M&A
Free cash flow: Cash flow from operating activities less net capital expenditures and other investments.
Free cash flow before M&A: Cash flow from operating activities less net capital expenditures and other investments (excluding M&A).
2020 | 2019 | |||||||||||||||||||
Isolated quarters, SEK million | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||
Cash flow from operating activities | 4,302 | 496 | 6,989 | 3,623 | 5,765 | |||||||||||||||
Net capital expenditures and other investments (excluding M&A) | ||||||||||||||||||||
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 | |||||||||||||||
Product development | -262 | -329 | -313 | -446 | -457 | |||||||||||||||
Other investing activities | -42 | -74 | -56 | -36 | -165 | |||||||||||||||
Repayment of lease liabilities | -596 | -711 | -1,052 | -623 | -604 | |||||||||||||||
Free cash flow before M&A | 2,315 | -1,887 | 4,459 | 1,604 | 3,457 | |||||||||||||||
Acquisitions/divestments of subsidiaries and other operations, net | -208 | -1,341 | -466 | 3 | 299 | |||||||||||||||
Free cash flow | 2,107 | -3,228 | 3,993 | 1,607 | 3,756 | |||||||||||||||
2020 | 2019 | |||||||||||||||||||
Year to date, SEK million | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |||||||||||||||
Cash flow from operating activities | 4,302 | 16,873 | 16,377 | 9,388 | 5,765 | |||||||||||||||
Net capital expenditures and other investments (excluding M&A) | ||||||||||||||||||||
Investments in property, plant and equipment | -1,113 | -5,118 | -3,643 | -2,412 | -1,314 | |||||||||||||||
Sales of property, plant and equipment | 26 | 744 | 538 | 416 | 232 | |||||||||||||||
Product development | -262 | -1,545 | -1,216 | -903 | -457 | |||||||||||||||
Other investing activities | -42 | -331 | -257 | -201 | -165 | |||||||||||||||
Repayment of lease liabilities | -596 | -2,990 | -2,279 | -1,227 | -604 | |||||||||||||||
Free cash flow before M&A | 2,315 | 7,633 | 9,520 | 5,061 | 3,457 | |||||||||||||||
Acquisitions/divestments of subsidiaries and other operations, net | -208 | -1,505 | -164 | 302 | 299 | |||||||||||||||
Free cash flow | 2,107 | 6,128 | 9,356 | 5,363 | 3,756 |
46 Ericsson | First Quarter Report 2020 | Alternative performance measures |