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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
July 17, 2020
Commission File Number 000-12033
LM ERICSSON TELEPHONE COMPANY
(Translation of registrant’s name into English)
Torshamnsgatan 21, Kista
SE-164 83, Stockholm, Sweden
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. Form 20-F ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
Announcement of LM Ericsson Telephone Company, July 17, 2020 regarding “Second 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: July 17, 2020
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Second quarter report 2020
Stockholm, July 17, 2020
Second quarter highlights
• | Sales were SEK 55.6 (54.8) b. Sales adjusted for comparable units and currency were flat YoY. |
• | Gross margin excluding restructuring charges improved to 38.2% (36.7%), including the earlier communicated inventory write-down related to Mainland China (SEK -0.9 b., which equals to -1.6 percentage points). |
• | Operating income excluding restructuring charges improved to SEK 4.5 b. (8.2% operating margin) from SEK 3.9 b. (7.0% operating margin) driven by improvements in segment Digital Services. |
• | Networks sales1 increased by 4% YoY. Networks operating margin excluding restructuring charges was 14.1% (15.0%) impacted by strategic contracts and the inventory write-down, partly compensated by operational leverage and a favorable business mix. |
• | Digital Services operating income excluding restructuring charges was SEK -0.7 (-1.3) b. Gross margin improved driven mainly by higher software sales while sales1 declined by -5%. |
• | Net income was SEK 2.6 (1.8) b. |
• | Free cash flow before M&A was SEK 3.2 (1.6) b. Net cash June 30, 2020, was SEK 37.5 (33.8) b. |
• | The Covid-19 pandemic had a limited impact on operating income and cash flow in the quarter. |
1 | Adjusted for comparable units and currency. |
Planning assumptions highlights (please see page 5 for complete planning assumptions)
• | With current visibility Group financial targets for 2020 and 2022 are maintained. |
• | R&D investments in Digital Services are accelerated to capture additional business opportunities. In combination with lower sales, this will likely cause a delay of some quarters in reaching the 2020 financial target. 2022 operating margin target of 10-12% remains firm. |
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SEK b. | Q2 2020 | Q2 2019 | YoY change | Q1 2020 | QoQ change | Jan-Jun 2020 | Jan-Jun 2019 | YoY change | ||||||||||||||||||||||||
Net sales | 55.6 | 54.8 | 1 | % | 49.8 | 12 | % | 105.3 | 103.7 | 2 | % | |||||||||||||||||||||
Sales growth adj. for comparable units and currency | — | — | 0 | % | — | — | — | — | -1 | % | ||||||||||||||||||||||
Gross margin | 37.6 | % | 36.6 | % | — | 39.8 | % | — | 38.6 | % | 37.5 | % | — | |||||||||||||||||||
Operating income | 3.9 | 3.7 | 3 | % | 4.3 | -11 | % | 8.2 | 8.6 | -6 | % | |||||||||||||||||||||
Operating margin | 6.9 | % | 6.8 | % | — | 8.7 | % | — | 7.7 | % | 8.3 | % | — | |||||||||||||||||||
Net income | 2.6 | 1.8 | 40 | % | 2.3 | 13 | % | 4.9 | 4.3 | 14 | % | |||||||||||||||||||||
EPS diluted, SEK | 0.74 | 0.51 | 45 | % | 0.65 | 14 | % | 1.39 | 1.21 | 15 | % | |||||||||||||||||||||
Measures excl. restructuring charges and other items affecting com parability¹ | ||||||||||||||||||||||||||||||||
Gross margin excluding restructuring charges | 38.2 | % | 36.7 | % | — | 40.4 | % | — | 39.3 | % | 37.5 | % | — | |||||||||||||||||||
Operating income excl. restr. charges & items affecting com parability in 2019 ² | 4.5 | 3.9 | 18 | % | 4.6 | -2 | % | 9.1 | 7.4 | 24 | % | |||||||||||||||||||||
Operating margin excl. restr. charges & items affecting com parability in 2019 ² | 8.2 | % | 7.0 | % | — | 9.3 | % | — | 8.7 | % | 7.1 | % | — | |||||||||||||||||||
Free cash flow before M&A | 3.2 | 1.6 | 102 | % | 2.3 | 40 | % | 5.6 | 5.1 | 10 | % | |||||||||||||||||||||
Net cash, end of period | 37.5 | 33.8 | 11 | % | 38.4 | -2 | % | 37.5 | 33.8 | 11 | % |
1 | Non-IFRS financial measures are reconciled to the most directly reconcilable line items in the financial statements at the end of this report. |
2 | Excludes restructuring charges in all periods. No other adjustments made in 2020. Jan-Jun 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.). |
1 Ericsson | Second quarter report 2020 |
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CEO comments
The human toll caused by Covid-19, directly and indirectly through a weak economy, is increasingly clear. We continue to put safety of our people as first priority, and more than 80% of our employees are currently working from home. Despite the difficult environment we delivered a solid result. Q2 organic1 sales were flat and gross margin2 improved to 38.2% (36.7%) YoY, including negative effects from strategic contracts. Free cash flow before M&A improved to SEK 3.2 (1.6) b. While the effects of Covid-19 create uncertainties, with current visibility we maintain the full-year targets for the Group.
Networks grew by 4% organically1 and the gross margin2 was 40.5% (41.4%), absorbing a larger share of strategic contracts including 5G volumes in Mainland China where we also took an inventory write-down. The strengthened market position in Mainland China is strategically important as this market is expected to be a driver of critical future requirements and provide us with important scale. The Chinese 5G contracts are expected to be profitable over the life cycle, but had a negative contribution to gross margin in Q2.
Investments in R&D have established us as a leader in 5G, with proven performance and cost of ownership benefits for our customers. We have continued to increase our market share in several markets by leveraging our competitive product portfolio. Profitability in earlier awarded strategic contracts has improved according to plan. We consider strategic contracts to be a natural part of the business and we will stop our forward looking commentary unless there is an extraordinary impact.
Digital Services continues to execute on its turnaround plan with continuous improvements in the underlying business, and a Q2 gross margin2 reaching 43.6% (37.1%), supported by increased software sales. Sales is being impacted by the declining legacy portfolio and Covid-19-related market uncertainty and we expect this negative impact to continue throughout the year. There is however a strong demand for our cloud-native and 5G portfolio, and we have recorded several important tier 1 customer wins in 5G Core that will generate revenues in 2021 and beyond. Encouraged by the success of our offering, we have decided to accelerate R&D investments. These investments have a positive long-term value but will result in increased R&D costs. We are for this reason, in combination with the lower sales, likely to see a delay of some quarters in reaching the 2020 target of low single-digit margin for Digital Services, however, we are staying firm on our 2022 operating margin2 target of 10-12%.
Our patent licensing business continues to perform well due to our strong IPR portfolio. Licensing agreements are often multi-year and term-based and renewals normally require negotiations, particularly in conjunction with introducing new standards such as 5G. Next year, certain agreements are up for renewal and royalty payments can be temporarily affected. The inclusion of 5G patents is expected to strengthen our IPR business further.
At Ericsson, we are committed to conducting business responsibly and with integrity. We continue our efforts to strengthen and improve our Ethics and Compliance program. In the quarter, the three-year term of the monitorship under the resolution with the U.S. authorities started. We look forward to working together with the independent compliance monitor and to benefit from his extensive experience. We fully believe this will help us reach our ambitions.
As we prepare to exit the crisis caused by Covid-19, there is a need to restart economies and make strategic, forward looking investments which we suggest must include the future digital infrastructure. We see many regions around the world increasing investments in this space and as a European company we are concerned that Europe will fall behind. As critical national infrastructure, 5G will be a key determinant for long-term competitiveness of the general economy, and act as a stimulant to accelerate economic growth, attract future investments and speed up technology innovation. I believe Europe must prioritize actions to incentivize investments in the digital infrastructure, to include lowering the cost and speeding up the availability of spectrum.
We are ready to deliver on the promises of 5G, based on our strong 5G portfolio and a resilient balance sheet. We remain positive on the longer-term outlook. Some customers are accelerating their investments while others are temporarily cautious. With current visibility we maintain the Group targets for 2020 and 2022.
Stay healthy and well.
Börje Ekholm
President and CEO
1 | Sales adjusted for comparable units and currency |
2 | Excluding restructuring charges |
2 Ericsson | Second quarter report 2020 | CEO comments |
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Financial highlights
Net sales development
SEK b. | Q2 2020 | Q2 2019 | YoY change | YoY adj.¹ | Q1 2020 | QoQ change | Jan-Jun 2020 | Jan-Jun 2019 | YoY change | YoY adj.¹ | ||||||||||||||||||||||||||||||
Net sales | 55.6 | 54.8 | 1 | % | 0 | % | 49.8 | 12 | % | 105.3 | 103.7 | 2 | % | -1 | % | |||||||||||||||||||||||||
of which Networks | 39.8 | 37.8 | 5 | % | 4 | % | 35.1 | 13 | % | 75.0 | 71.3 | 5 | % | 2 | % | |||||||||||||||||||||||||
of which Digital Services | 8.6 | 9.0 | -5 | % | -5 | % | 7.3 | 17 | % | 15.9 | 16.8 | -5 | % | -7 | % | |||||||||||||||||||||||||
of which Managed Services | 5.6 | 6.3 | -12 | % | -12 | % | 5.7 | -2 | % | 11.3 | 12.2 | -7 | % | -9 | % | |||||||||||||||||||||||||
of which Emerging Business and Other | 1.6 | 1.7 | -4 | % | -6 | % | 1.6 | 2 | % | 3.2 | 3.4 | -8 | % | -7 | % |
1 | Sales growth adjusted for comparable units and currency. Non-IFRS financial measures are reconciled to the most directly reconcilable line items in the financial statements at the end of this report. |
Group reported sales increased by 1% YoY. Sales growth adjusted for comparable units and currency was 0%. 5G deployments in North East Asia contributed positively. Sales in India and Latin America declined, partly due to Covid-19 and macroeconomic instability.
Networks sales adjusted for comparable units and currency increased by 4% YoY with growth in North America and North East Asia while sales declined in Latin America and India.
Digital Services sales adjusted for comparable units and currency decreased by -5% YoY with reduced sales of services and hardware, partly offset by higher sales of software. Services sales declined partly due to Covid-19.
Managed Services sales adjusted for comparable units and currency decreased by -12% YoY, mainly due to lower variable sales in a
managed services contract in North America post the merger between two larger operators, and transfer of a managed services contract to Ericsson Nikola Tesla d.d. (an associated company where Ericsson has a 49% ownership).
Emerging Business and Other sales adjusted for comparable units and currency decreased by -6% YoY mainly due to lower sales in Red Bee Media.
IPR licensing revenues increased to SEK 2.8 (2.2) b. YoY mainly due to new contracts signed in the second half of 2019. IPR licensing revenues increased from SEK 2.5 b. QoQ mainly due to quarterly fluctuations in the timing of revenues in certain contracts.
Sequentially, Group reported sales increased by 12% following seasonality and ramp up of 5G deployments in Mainland China.
Income and margin development
SEK b. | Q2 2020 | Q2 2019 | YoY change | Q1 2020 | QoQ change | Jan-Jun 2020 | Jan-Jun 2019 | YoY change | ||||||||||||||||||||||||
Net sales | 55.6 | 54.8 | 1 | % | 49.8 | 12 | % | 105.3 | 103.7 | 2 | % | |||||||||||||||||||||
Gross income | 20.9 | 20.1 | 4 | % | 19.8 | 6 | % | 40.7 | 38.9 | 5 | % | |||||||||||||||||||||
Gross margin | 37.6 | % | 36.6 | % | — | 39.8 | % | — | 38.6 | % | 37.5 | % | — | |||||||||||||||||||
Research and development (R&D) expenses | -10.0 | -9.5 | — | -9.1 | — | -19.2 | -18.7 | — | ||||||||||||||||||||||||
Selling and administrative expenses | -7.1 | -7.0 | — | -6.2 | — | -13.3 | -13.0 | — | ||||||||||||||||||||||||
Impairment losses on trade receivables | 0.0 | 0.2 | -72 | % | -0.2 | — | -0.1 | 0.7 | — | |||||||||||||||||||||||
Other operating income and expenses | 0.1 | 0.1 | 98 | % | 0.1 | 47 | % | 0.2 | 0.8 | -74 | % | |||||||||||||||||||||
Operating income | 3.9 | 3.7 | 3 | % | 4.3 | -11 | % | 8.2 | 8.6 | -6 | % | |||||||||||||||||||||
of which Networks | 5.3 | 5.7 | -7 | % | 5.8 | -10 | % | 11.1 | 11.2 | -1 | % | |||||||||||||||||||||
of which Digital Services | -0.7 | -1.4 | — | -1.4 | — | -2.1 | -3.2 | — | ||||||||||||||||||||||||
of which Managed Services | 0.3 | 0.2 | 30 | % | 0.4 | -36 | % | 0.7 | 1.5 | -54 | % | |||||||||||||||||||||
of which Emerging Business & Other | -1.0 | -0.7 | — | -0.5 | — | -1.5 | -0.8 | — | ||||||||||||||||||||||||
Operating margin | 6.9 | % | 6.8 | % | — | 8.7 | % | — | 7.7 | % | 8.3 | % | — | |||||||||||||||||||
Financial income and expenses, net | 0.3 | -0.4 | — | -0.9 | — | -0.6 | -1.0 | — | ||||||||||||||||||||||||
Taxes | -1.6 | -1.5 | — | -1.1 | — | -2.7 | -3.3 | — | ||||||||||||||||||||||||
Net income | 2.6 | 1.8 | 40 | % | 2.3 | 13 | % | 4.9 | 4.3 | 14 | % | |||||||||||||||||||||
Restructuring charges | -0.7 | -0.1 | — | -0.3 | — | -1.0 | -0.3 | — | ||||||||||||||||||||||||
Measures excl. restructuring charges and other items affecting comparability¹ | ||||||||||||||||||||||||||||||||
Gross margin excluding restructuring charges | 38.2 | % | 36.7 | % | — | 40.4 | % | — | 39.3 | % | 37.5 | % | — | |||||||||||||||||||
Operating income excl. restr. charges & items affecting com parability in 2019 ² | 4.5 | 3.9 | 18 | % | 4.6 | -2 | % | 9.1 | 7.4 | 24 | % | |||||||||||||||||||||
Operating margin excl. restr. charges & items affecting com parability in 2019 ² | 8.2 | % | 7.0 | % | — | 9.3 | % | — | 8.7 | % | 7.1 | % | — | |||||||||||||||||||
Operating margin excluding restructuring charges | 8.2 | % | 7.0 | % | — | 9.3 | % | — | 8.7 | % | 8.6 | % | — |
1 | Non-IFRS financial measures are reconciled to the most directly reconcilable line items in the financial statements at the end of this report. |
2 | Excludes restructuring charges in all periods. No other adjustments made in 2020. Jan-Jun 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.). |
Gross margin
Gross margin was 37.6% (36.6%). Gross margin excluding restructuring charges improved to 38.2% (36.7%) YoY driven by improvements in Digital Services and Managed Services, as well as a higher share of IPR licensing revenues. A higher share of software sales contributed to the
improvement in Digital Services. Managed Services gross margin improved mainly as an effect of efficiency gains. Networks gross margin declined due to a write-down of SEK -0.9 b. for pre-commercial product inventory for the Chinese market as well as a larger share of strategic contracts including 5G in Mainland China. This was partly offset by a favorable business mix and operational leverage.
3 Ericsson | Second quarter report 2020 | Financial highlights |
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Sequentially, gross margin decreased to 37.6% from 39.8%. Gross margin excluding restructuring charges decreased to 38.2% from 40.4% impacted by the inventory write-down of SEK -0.9 b. related to Mainland China. Digital Services gross margin improved supported by lower costs for the remaining critical contracts. Managed Services gross margin declined due to timing of costs. The share of IPR licensing revenues remained stable between the quarters with no effect on gross margin QoQ.
Restructuring charges
Restructuring charges increased to SEK -0.7 (-0.1) b. YoY. Exit of the Edge Gravity business in segment Emerging Business and Other as well as the ongoing restructuring of the acquired antenna and filter business in segment Networks impacted restructuring charges in the quarter.
Research and development (R&D) expenses
R&D expenses increased to SEK -10.0 (-9.5) b. R&D expenses excluding restructuring charges were SEK -9.8 (-9.5) b. R&D expenses increased in segment Networks, while they declined in Digital Services due to a lower net negative impact from capitalized and amortized development expenses.
Selling and administrative (SG&A) expenses
SG&A expenses were SEK -7.1 (-7.0) b. SG&A expenses excluding restructuring charges were flat at SEK -6.9 (-6.9) b. with increased investments in digitalization and compliance. Revaluation of customer financing was SEK 0.0 (-0.2) b.
Impairment losses on trade receivables
Impairment losses on trade receivables were SEK 0.0 (0.2) b.
Other operating income and expenses
Other operating income and expenses was SEK 0.1 (0.1) b. Share in earnings of JVs and associated companies was SEK -0.2 (-0.1) b.
Operating income and margin
Operating income improved to SEK 3.9 (3.7) b. YoY. Operating income excluding restructuring charges improved to SEK 4.5 (3.9) b. with a corresponding operating margin improvement to 8.2% (7.0%). The income improvement was driven by Digital Services.
Sequentially, operating income declined to SEK 3.9 b. from SEK 4.3 b. Operating income excluding restructuring charges declined slightly to SEK 4.5 b. from SEK 4.6 b. Increased sales were offset by a reduced gross margin and by seasonally higher operating expenses.
Financial net
Financial net improved to SEK 0.3 (-0.4) b. YoY and from SEK -0.9 b. QoQ, mainly due to positive currency hedge effects following the strengthened SEK to USD. The currency hedge effect was SEK 0.6 b. compared with SEK 0.0 b. in Q2 2019 and SEK -0.5 b. in Q1 2020. The SEK strengthened against the USD between March 31, 2020 (SEK/USD rate 10.13) and June 30, 2020 (SEK/USD rate 9.37).
Taxes
Taxes were SEK -1.6 (-1.5) b. The tax rate in Q2 was 38% compared with 33% in Q1 2020. The increase is due to an increase in non-deductible costs this quarter.
Net income
Net income improved to SEK 2.6 (1.8) b. and EPS diluted improved to SEK 0.74 (0.51) YoY driven by the stronger operating income and the improved financial net.
Employees
The number of employees on June 30, 2020, was 99,800, a net increase of 705 employees in the quarter. The increase is mainly in R&D and service delivery.
Financial highlights, year to date (Jan-June) development
Reported sales increased by 2%. Sales adjusted for comparable units and currency decreased by -1% mainly due to lower services and legacy hardware sales in Digital Services, as well as contract exits in Managed Services. There has been limited negative impact on sales from the Covid-19 pandemic year to date. Networks sales adjusted for comparable units and currency increased by 2%. In the market area dimension, growth in North East Asia and North America has been offset by a decline in market area South East Asia, Oceania and India and in market area Europe and Latin America.
Gross margin increased to 38.6% (37.5%) driven by improvements in Digital Services, mainly due to a sales mix with a higher share of software.
Operating income declined YoY to SEK 8.2 (8.6) b. impacted by increased restructuring charges of SEK -1.0 (-0.3) b. In addition, operating income Q1 2019 was positively impacted by capital gains (SEK 0.8 b.) related to the media businesses, and a reversal of a provision for impairment of trade receivables (SEK 0.7 b.) following customer payment.
Net income year to date improved to SEK 4.9 (4.3) b. supported by an improved financial income and expenses net of SEK -0.6 (-1.0) b.
4 Ericsson | Second quarter report 2020 | Financial highlights |
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Planning assumptions
Market related
• | The RAN equipment market is estimated to grow by 4% for full-year 2020 (Source: Dell’Oro May 2020) with 0% CAGR for 2019-2024 (Source: Dell’Oro Jan 2020). |
• | The momentum in North America remains strong and the market is estimated to grow 4% in 2020 (Source: Dell’Oro). The momentum is supported by the merger between two larger operators, upcoming spectrum auctions and an overall demand for 5G. |
Ericsson related
Financial targets
• | While the effects of Covid-19 create uncertainties, with current visibility Ericsson sees no reason to adjust 2020 and 2022 full-year targets for the Group. |
• | R&D investments in Digital Services are accelerated to capture additional business opportunities. In combination with lower sales, this will likely cause a delay of some quarters in reaching the 2020 target of low single-digit margin for the segment. The 2022 operating margin target for Digital Services of 10-12% remains firm. |
Net sales
• | Three-year average reported sales seasonality between Q2 and Q3 is 4%. |
• | The revenues from current IPR licensing contract portfolio are approximately SEK 10 b. on an annual basis. |
Gross margin
• | 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 there will be quarterly variations depending on timing of add-on sales and costs, but underlying margins have been established at a higher level. |
R&D and SG&A expenses
• | Expenses typically decrease between Q2 and Q3 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. |
5 Ericsson | Second quarter report 2020 | Financial highlights |
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Market area sales
SEK b. | Q2 2020 | Q2 2019 | YoY change | Q1 2020 | QoQ change | Jan-Jun 2020 | YoY change | |||||||||||||||||||||
South East Asia, Oceania and India | 6.6 | 7.0 | -5 | % | 5.9 | 11 | % | 12.5 | -5 | % | ||||||||||||||||||
North East Asia | 7.8 | 6.5 | 20 | % | 3.9 | 99 | % | 11.7 | 13 | % | ||||||||||||||||||
North America | 18.4 | 17.7 | 4 | % | 17.9 | 3 | % | 36.3 | 7 | % | ||||||||||||||||||
Europe and Latin America | 13.1 | 14.1 | -7 | % | 12.2 | 7 | % | 25.3 | -7 | % | ||||||||||||||||||
Middle East and Africa | 5.4 | 5.6 | -4 | % | 5.8 | -7 | % | 11.3 | 2 | % | ||||||||||||||||||
Other¹ | 4.3 | 3.9 | 10 | % | 3.9 | 9 | % | 8.3 | 1 | % | ||||||||||||||||||
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Total | 55.6 | 54.8 | 1 | % | 49.8 | 12 | % | 105.3 | 2 | % | ||||||||||||||||||
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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 July 17; 54 live networks and 99 commercial agreements with unique operators.
• Strong growth in North East Asia and continued business momentum in North America.
• Networks sales continued to grow in Europe, demonstrating our strong product offering. |
South East Asia, Oceania and India
Sales declined YoY in Networks due to timing of project deliveries. Sales in India declined mainly due to Covid-19. Managed Services remained stable while Digital Services sales increased YoY due to timing of project milestones.
North East Asia
Sales increased YoY. Networks sales grew, primarily driven by 5G deployment in Mainland China and increased business volumes across the market area. Digital Services sales increased driven by strong sales in Mainland China.
North America
Sales increased YoY. Networks sales grew driven by continued 5G momentum. Digital Services sales decreased due to lower hardware volumes. Managed Services sales decreased, with declining variable sales, post the merger between two larger operators.
Europe and Latin America
Sales decreased YoY due to earlier decisions on Managed Services contract exits and reduced sales in Latin America due to the macroeconomic uncertainty following Covid-19. Networks sales increased in Europe as a result of market share gains, partly offsetting the sales decline in Latin America.
Middle East and Africa
Sales decreased YoY primarily due to macroeconomic uncertainty and delayed investments in Networks and Digital Services. Continued 5G deployments in the Middle East contributed positively. Managed Services sales were stable.
Other
IPR licensing revenues grew to SEK 2.8 (2.2) b. mainly due to new contracts signed in the second half of 2019.
6 Ericsson | Second quarter report 2020 | Market area sales |
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Segment results
Segment Networks
SEK b. | Q2 2020 | Q2 2019 | YoY change | Q1 2020 | ||||||||||||
Net sales | 39.8 | 37.8 | 5 | % | 35.1 | |||||||||||
Sales growth adj. for comparable units and FX | — | — | 4 | % | — | |||||||||||
Gross income | 16.0 | 15.7 | 2 | % | 15.6 | |||||||||||
Gross margin | 40.2 | % | 41.4 | % | — | 44.4 | % | |||||||||
Operating income | 5.3 | 5.7 | -7 | % | 5.8 | |||||||||||
Operating margin | 13.2 | % | 15.0 | % | — | 16.6 | % | |||||||||
Restructuring charges | -0.4 | 0.0 | — | -0.1 | ||||||||||||
Measures excl. restructuring charges | ||||||||||||||||
Gross margin excl. restructuring charges | 40.5 | % | 41.4 | % | — | 44.6 | % | |||||||||
Operating income excl. restructuring charges | 5.6 | 5.7 | -1 | % | 5.9 | |||||||||||
Operating margin excl. restructuring charges | 14.1 | % | 15.0 | % | — | 16.8 | % |
Breakdown of sales into products, services and IPR licensing is available in the back-end tables.
• Continued strong momentum for 5G.
• Continued investments in technology leadership are important to drive gross margin improvements.
• Operational leverage and favorable business mix partly mitigated the negative impact from strategic contracts. |
Net sales
Reported sales increased by 5% YoY, while sales adjusted for comparable units and currency increased by 4%. Sales growth was strong YoY in North America and North East Asia while sales declined YoY in Latin America and India.
Sales increased by 13% QoQ. Growth is mainly driven by 5G investments in North East Asia across several countries.
Gross margin
Gross margin declined to 40.2% (41.4%) YoY. Gross margin excluding restructuring charges declined to 40.5% (41.4%), as a result of an inventory write-down of SEK -0.9 b. for pre-commercial product inventory for the Chinese market and a larger share of strategic contracts including 5G in Mainland China. A favorable business mix, operational leverage and higher IPR licensing revenues had a positive impact on gross margin YoY.
Gross margin excluding restructuring charges decreased to 40.5% from 44.6% QoQ driven by the inventory write-down in Mainland China as well as a larger share of strategic contracts.
Operating income and margin
Operating income decreased to SEK 5.3 (5.7) b. YoY while operating margin decreased to 13.2% (15.0%). Operating margin excluding restructuring charges decreased to 14.1% (15.0%), including a continued negative impact of the acquired antenna and filter business of SEK -0.3 b. Operating expenses increased by SEK -0.8 b., including SEK -0.3 b. of restructuring charges, accelerated R&D investments in 5G and in a broader portfolio of antenna and site solutions as well as an increase in SG&A expenses driven by the increased Group investments in digitalization and compliance.
Operating income excluding restructuring charges declined by SEK -0.3 b. QoQ, while operating margin excluding restructuring charges decreased to 14.1% from 16.8% QoQ. The negative impact from the acquired antenna and filter business remained flat at SEK -0.3 b. QoQ.
Net sales rolling four quarters were SEK 158.7 b. and operating margin excluding restructuring charges was 15.9%.
Segment Digital Services
SEK b. | Q2 2020 | Q2 2019 | YoY change | Q1 2020 | ||||||||||||
Net sales | 8.6 | 9.0 | -5 | % | 7.3 | |||||||||||
Sales growth adj. for comparable units and FX | — | — | -5 | % | — | |||||||||||
Gross income | 3.7 | 3.3 | 13 | % | 2.9 | |||||||||||
Gross margin | 43.6 | % | 36.8 | % | — | 39.9 | % | |||||||||
Operating income (loss) | -0.7 | -1.4 | — | -1.4 | ||||||||||||
Operating margin | -8.1 | % | -15.6 | % | — | -19.3 | % | |||||||||
Restructuring charges | 0.0 | -0.1 | — | 0.0 | ||||||||||||
Measures excl. restructuring charges | ||||||||||||||||
Gross margin excl. restructuring charges | 43.6 | % | 37.1 | % | — | 40.1 | % | |||||||||
Operating income (loss)excl. restructuring charges | -0.7 | -1.3 | — | -1.4 | ||||||||||||
Operating margin excl. restructuring charges | -8.5 | % | -14.6 | % | — | -19.6 | % |
Breakdown of sales into products, services and IPR licensing is available in the back-end tables.
• Gross margin improved to 43.6% (36.8%) YoY supported by a favorable sales mix with a higher share of software.
• Sales declined due to lower services and hardware sales.
• The new portfolio sales grew by 18% in the quarter mainly driven by Cloud Core. |
Net sales
Sales as reported and sales adjusted for comparable units and currency both decreased by -5% YoY with reduced sales of services and hardware, partly offset by higher software sales. Services sales declined partly due to market uncertainty related to Covid-19.
The business momentum is strong for the new portfolio which grew by 18% in the quarter and 10% rolling 12 months. Sales of Core products were strong in the quarter and important 5G Core contracts have been signed with several tier 1 operators in 2020, expected to generate revenues in 2021 and beyond.
Gross margin
Gross margin increased to 43.6% (36.8%) YoY supported by a business mix with a higher share of software sales. In addition, increased IPR licensing revenues and lower negative impact from the critical contracts contributed positively.
Gross margin excluding restructuring charges increased to 43.6% from 40.1% QoQ. Q1 2020 was negatively impacted by SEK -0.2 b. in costs from one of the critical contracts while the impact in Q2 2020 was limited. Increased sales had a positive impact on gross margin QoQ.
Operating income (loss)
Operating income (loss) was SEK -0.7 (-1.4) b. Operating income (loss) excluding restructuring charges was SEK -0.7 (-1.3) b. The negative impact from lower sales was compensated by a stronger gross margin. Operating expenses excluding restructuring charges declined by SEK -0.2 b. YoY due to a lower net negative impact from capitalized and amortized development expenses (SEK 0.0 b. Q2 2020 compared with SEK -0.3 b. Q2 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 improved QoQ supported by seasonally higher sales and a stronger gross margin.
Net sales rolling four quarters were SEK 39.0 b. and operating margin excluding restructuring charges was -6.8%.
7 Ericsson | Second quarter report 2020 | Segment results |
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Segment Managed Services
SEK b. | Q2 2020 | Q2 2019 | YoY change | Q1 2020 | ||||||||||||
Net sales | 5.6 | 6.3 | -12 | % | 5.7 | |||||||||||
Sales growth adj. for comparable units and FX | — | — | -12 | % | — | |||||||||||
Gross income | 1.0 | 0.8 | 23 | % | 0.9 | |||||||||||
Gross margin | 17.1 | % | 12.3 | % | — | 16.3 | % | |||||||||
Operating income | 0.3 | 0.2 | 30 | % | 0.4 | |||||||||||
Operating margin | 4.7 | % | 3.2 | % | — | 7.1 | % | |||||||||
Restructuring charges | 0.0 | 0.0 | — | -0.2 | ||||||||||||
Measures excl. restructuring charges | ||||||||||||||||
Gross margin excl. restructuring charges | 17.2 | % | 12.3 | % | — | 20.6 | % | |||||||||
Operating income excl. restructuring charges | 0.3 | 0.2 | 31 | % | 0.7 | |||||||||||
Operating margin excl. restructuring charges | 4.8 | % | 3.2 | % | — | 11.4 | % |
• Sales declined YoY mainly due to reduced variable sales.
• Gross margin excl. restr. charges increased YoY mainly as a result of efficiency gains.
• Further investments in automation, analytics and AI-driven offerings – supporting 5G and efficiency in service delivery. |
Net sales
Reported sales declined by -12% YoY. Sales adjusted for comparable units and currency decreased by -12% YoY, mainly due to reduced variable sales in a large contract in North America post the merger between two larger operators, and transfer of a contract from Ericsson to Ericsson Nikola Tesla d.d. (an associated company where Ericsson has a 49% ownership).
Gross margin
Gross margin excluding restructuring charges increased to 17.2% (12.3%) YoY, mainly as a result of efficiency gains.
Gross margin excluding restructuring charges decreased to 17.2% from 20.6% QoQ due to lower sales and seasonally lower costs in Q1.
Gross margin excluding restructuring charges rolling four quarters was 17.6%, a continued increase driven by efficiency gains and automation investments.
Operating income and margin
Operating income excluding restructuring charges was SEK 0.3 (0.2) b. The improvement was driven by higher gross margin.
Operating income excluding restructuring charges declined to SEK 0.3 b. from SEK 0.7 b. QoQ due to seasonally lower costs in Q1 and continued investments in R&D.
Net sales rolling four quarters were SEK 24.7 b. Operating margin excluding restructuring charges rolling four quarters was 7.4%.
Segment Emerging Business and Other
SEK b. | Q2 2020 | Q2 2019 | YoY change | Q1 2020 | ||||||||||||
Net sales | 1.6 | 1.7 | -4 | % | 1.6 | |||||||||||
Of which Emerging Business and iconectiv | 1.1 | 1.0 | 3 | % | 1.1 | |||||||||||
Of which Red Bee Media | 0.5 | 0.6 | -15 | % | 0.6 | |||||||||||
Of which Media Solutions | 0.0 | 0.0 | — | -0.1 | ||||||||||||
Sales growth adj. for comparable units and FX | — | — | -6 | % | — | |||||||||||
Gross income | 0.2 | 0.3 | -35 | % | 0.3 | |||||||||||
Gross margin | 12.6 | % | 18.5 | % | — | 21.7 | % | |||||||||
Operating income (loss) | -1.0 | -0.7 | — | -0.5 | ||||||||||||
Of which Em. Business, iconectiv & common costs | -0.8 | -0.6 | — | -0.4 | ||||||||||||
Of which Red Bee Media | 0.0 | 0.0 | — | 0.0 | ||||||||||||
Of which Media Solutions | -0.1 | -0.1 | — | -0.1 | ||||||||||||
Operating margin | -60.5 | % | -44.1 | % | — | -32.7 | % | |||||||||
Restructuring charges | -0.3 | 0.0 | — | 0.0 | ||||||||||||
Measures excl. restructuring charges | ||||||||||||||||
Gross margin excl. restructuring charges | 25.3 | % | 19.2 | % | — | 21.9 | % | |||||||||
Operating income (loss) excl. restructuring charges | -0.6 | -0.7 | — | -0.5 | ||||||||||||
Operating margin excl. restructuring charges | -39.6 | % | -42.8 | % | — | -32.7 | % |
• Continued sales and gross margin growth in Emerging Business.
• Operating income excl. restructuring charges improved YoY.
• iconectiv delivered stable sales and solid profitability. |
Net sales
Reported sales decreased by -4% YoY. Sales adjusted for comparable units and currency decreased by -6% mainly due to lower sales in Red Bee Media. Sales in Emerging Business increased slightly.
Gross margin
Gross margin decreased to 12.6% (18.5%) YoY. Gross margin excluding restructuring charges increased to 25.3% (19.2%). The increase was driven by Emerging Business.
Gross margin decreased to 12.6% from 21.7% QoQ. Gross margin excluding restructuring charges increased to 25.3% from 21.9% QoQ. The improvement was driven by reduced project losses in the legacy media business.
Operating income (loss)
Operating income (loss) excluding restructuring charges was SEK -0.6 (-0.7) b.
Media Solutions operating income was SEK -0.1 (-0.1) b. Operating income includes Ericsson’s 49% share in earnings of the MediaKind business.
Red Bee Media operating income improved as a result of lower operating expenses.
Operating income included restructuring charges of SEK -0.3 b. related to the exit of Edge Gravity (edge content delivery business) in Q2 2020.
Net sales rolling four quarters were SEK 6.5 b.
8 Ericsson | Second quarter report 2020 | Segment results |
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Cash flow and financial position
SEK b. | Q2 2020 | Q2 2019 | Q1 2020 | Jan-Jun 2020 | Jan-Jun 2019 | |||||||||||||||
Net income adjusted for non-cash items | 5.6 | 5.0 | 4.7 | 10.3 | 10.4 | |||||||||||||||
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Working capital changes (net operating assets and liabilities) | -0.1 | -1.3 | -0.4 | -0.6 | -1.0 | |||||||||||||||
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Cash flow from operating activities | 5.4 | 3.6 | 4.3 | 9.8 | 9.4 | |||||||||||||||
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Capex (net) including product development | -1.5 | -1.4 | -1.3 | -2.8 | -2.9 | |||||||||||||||
Other investing activities and lease liabilities | -0.7 | -0.7 | -0.6 | -1.4 | -1.4 | |||||||||||||||
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Free cash flow before M&A | 3.2 | 1.6 | 2.3 | 5.6 | 5.1 | |||||||||||||||
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Acquisitions/divestments, net | 0.0 | 0.0 | -0.2 | -0.3 | 0.3 | |||||||||||||||
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Free cash flow | 3.2 | 1.6 | 2.1 | 5.3 | 5.4 | |||||||||||||||
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Cash flow from investing activities | -0.5 | 1.0 | -5.0 | -5.5 | 4.3 | |||||||||||||||
Cash flow from financing activities | -4.6 | -4.6 | 1.4 | -3.1 | -7.2 | |||||||||||||||
Net change in cash and cash equivalents | -2.7 | 0.0 | 3.3 | 0.6 | 7.1 |
SEK b. | Jun 30 2020 | Jun 30 2019 | Mar 31 2020 | |||||||||
Gross cash | 75.4 | 69.0 | 79.5 | |||||||||
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– Borrowings, current | 15.3 | 2.2 | 17.8 | |||||||||
– Borrowings, non-current | 22.6 | 33.0 | 23.4 | |||||||||
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Net cash | 37.5 | 33.8 | 38.4 | |||||||||
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Equity | 78.5 | 84.5 | 79.1 | |||||||||
Total assets | 276.8 | 280.4 | 292.3 | |||||||||
Capital turnover (times) | 1.3 | 1.3 | 1.2 | |||||||||
Return on capital employed (%) | 9.9 | % | 11.0 | % | 10.2 | % |
Non-IFRS financial measures are reconciled to the most directly reconcilable line items in the financial statements at the end of this report.
• | Free cash flow before M&A was SEK 3.2 (1.6) b. |
• | Solid net cash position at SEK 37.5 (33.8) b. |
• | Moody’s upgraded Ericsson’s ratings to Ba1 with stable outlook. |
Cash flow from operating activities
Cash flow from operating activities was SEK 5.4 (3.6) b. Despite sales growth, net operating assets and liabilities remained stable in the quarter. Provisions of SEK 2.1 b. were utilized of which SEK 0.1 b. was related to restructuring. A payment of SEK -1.0 b. was made into the Swedish Pension Trust, as described under “Financial position” below.
Free cash flow
Free cash flow before M&A was SEK 3.2 (1.6) b. Investments in property, plant and equipment were SEK -1.3 (-1.1) b. and capitalized development expenses were SEK -0.2 (-0.4) b.
Free cash flow was SEK 3.2 (1.6) b.
Cash flow from investing and financing activities
Cash flow from investing activities was SEK -0.5 (1.0) b.
Cash flow from financing activities was SEK -4.6 (-4.6) b. Payment of dividends of SEK -2.5 b. were made in the quarter. The dividend is paid in two equal instalments, SEK 0.75 per share in April and SEK 0.75 per share with the record date October 2, 2020.
Cash flow, year to date (Jan-June) development
Free cash flow before M&A year to date was SEK 5.6 (5.1) b. supported by cash flow from operating activities of SEK 9.8 (9.4) b.
Cash flow from investing activities was SEK -5.5 (4.3) b. mainly due to purchase of interest-bearing securities while investments in property, plant and equipment and capitalized development expenses remained stable YoY.
Cash flow from financing activities was SEK -3.1 (-7.2) b. of which payment of dividends was SEK -2.5 (-4.3) b.
Financial position
Gross cash was SEK 75.4 (69.0) b. Gross cash declined by SEK -4.1 b. QoQ mainly as a result of the payment of dividends. Net cash was SEK 37.5 (33.8) b. and decreased by SEK -0.8 b. QoQ.
Liabilities for post-employment benefits decreased in the quarter, to SEK 38.6 b. from SEK 43.0 b., due to higher interest rates in Sweden and due to a payment of SEK -1.0 b. made into the Swedish Pension Trust. The Swedish defined benefit obligation (DBO) was calculated using a discount rate based on the yields of Swedish government bonds. If the discount rate had been based on Swedish covered mortgage bonds, the liability for post-employment benefits would have been approximately SEK 10.8 b. lower.
As reported in the Q1 2020 earnings report there is a funding need for the Swedish pension plan in 2020. The total need is approximately SEK 4 b. of which SEK 3 b. will be covered by payments into the Swedish Pension Trust. In Q2, SEK 1 b. was paid into the trust and SEK 2 b. is expected to be paid in Q3 2020. The remaining SEK 1 b. funding need is covered by providing a pledged business mortgage to PRI Pensionsgaranti. Details regarding Ericsson’s pension plans can be found in note G1 of the Annual Report.
The average maturity of long-term borrowings as of June 30, 2020, was 2.2 years, a decrease from 2.9 years 12 months earlier.
On June 15, 2020, Moody’s upgraded Ericsson’s ratings to Ba1 with stable outlook.
9 Ericsson | Second quarter report 2020 | Cash flow |
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Parent Company
Income after financial items Jan-June, 2020, was SEK 2.3 (0.8) b.
At the end of the quarter, gross cash (cash, cash equivalents, short-term investments and interest-bearing securities, non-current) amounted to SEK 63.3 (51.1) b.
There was a decrease in intercompany lending of SEK 1.0 b. and in intercompany borrowing of SEK 1.5 b. in the second quarter.
In accordance with the conditions of the long-term variable compensation program (LTV) for Ericsson employees, 4,923,514 shares from treasury stock were distributed or sold to employees during the second quarter. The holding of treasury stock on June 30, 2020 was 10,532,902 Class B shares.
10 Ericsson | Second quarter report 2020 | Parent Company |
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Other information
Ericsson’s Nomination Committee appointed
On April 23, 2020, Ericsson’s Nomination Committee for the Annual General Meeting 2021 was appointed in accordance with the Instruction for the Nomination Committee resolved by the Annual General Meeting 2012.
The Nomination Committee consists of:
• | Johan Forssell, Investor AB; |
• | Karl Åberg, AB Industrivärden and Svenska Handelsbankens Pensionsstiftelse; |
• | Jonas Synnergren, Cevian Capital Partners Limited; |
• | Anders Oscarsson, AMF – Försäkring och Fonder; and |
• | Ronnie Leten, the Chair of the Board of Directors. |
Johan Forssell is the Chair of the Nomination Committee.
Arun Bansal appointed Executive Vice President of Ericsson
On June 10, 2020, it was announced that Ericsson’s Board of Directors has appointed Arun Bansal Executive Vice President (EVP). Bansal will remain in his position as Senior Vice President and Head of Market Area Europe & Latin America. Fredrik Jejdling, will remain as Executive Vice President and Head of Business Area Networks.
With the appointment of Arun Bansal, Ericsson will have two Executive Vice Presidents – one based in Sweden and one outside of Sweden, thus providing Ericsson with greater flexibility for Executive Vice President duties. Fredrik Jejdling will be the first EVP and Arun Bansal the second EVP.
Arun Bansal joined Ericsson in 1995 and is now head of a market area that spans over 110 countries across Europe and Latin America, a position he has held since 2017.
Covid-19 update
The Covid-19 pandemic continues to impact people, society and businesses around the world. The close monitoring of the situation has continued and the Ericsson Global Crisis Management Council and task forces in each Market Area have remained activated throughout the quarter. The health and safety of employees, customers, partners and other stakeholders is Ericsson’s top priority. In June, travel and event restrictions were prolonged until the end of the year and it is also anticipated that most Ericsson employees will be working from home until year-end.
Overall, a limited impact on the Ericsson business has been seen during the first half of the year. The ability to execute early on the business continuity plans secured mitigation in supply, sourcing, logistics and service delivery. Ericsson has remained close to its customers and local suppliers, building customized plans to address specific business needs and to maintain service continuity. The dual mode production strategy and regionalized supply chains have been successful, making it possible to keep the supply chain operational.
11 Ericsson | Second quarter report 2020 | Other information |
Table of Contents
Risk factors
Ericsson is exposed to a number of risks in its activities. To stimulate identification and support cross-functional treatment within the Ericsson Group, risks are grouped in a number of categories, including for example risks relating to technology, IPR, compliance, project execution, operations, products and services, treasury and accounting, the geopolitical environment, M&A, cyber security and occupational health and safety.
Ericsson’s risk management is embedded into strategy development and operational processes and is a part of the Ericsson Group Management System to ensure accountability, effectiveness, efficiency, business continuity and compliance. Risks are defined in both a short-term and long-term perspective and are related to long-term objectives as per the strategic direction as well as to short-term objectives.
Risk factors and uncertainties of relevance to Ericsson are described in the Annual Report 2019. Updates to these risk factors and uncertainties observed by Ericsson that are deemed of short-term relevance include, but are not limited to, the following:
Pandemics, such as for example the one caused by the novel Coronavirus, Covid-19, could severely impact our local and global operations
Pandemics, such as for example the one caused by the novel Coronavirus, could severely impact our local and global operations related to e.g. Service Delivery, Research & Development, Sales and Supply, as well as our customers and suppliers, with significant financial and other consequences. As
an example, the Coronavirus pandemic has caused challenges and risks relating to travel and lockdowns limiting access to sites, transportation and logistics and impacting the flow of goods. Although we 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.
Our ability to benefit from intellectual property rights (IPR), may be limited by the loss of patent licenses to or from third-parties
Patent licensing agreements are generally multi-year and term based and the process for renewal of these licenses normally requires negotiations, particularly in conjunction with technology shifts and the introduction of new standards, such as 5G. Such renewals and negotiations may take time to resolve, sometimes involve litigation and may have material adverse impact on our business and financial position, including on the timing for and level of revenues from the IPR licensing contract portfolio.
This report has not been reviewed by Telefonaktiebolaget LM
Ericsson’s auditors.
Date for next report: October 21, 2020
12 Ericsson | Second quarter report 2020 | Risk factors |
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Board assurance
The Board of Directors and the CEO certify that the financial report for the six months gives a fair view of the performance of the business, position and profit or loss of the Company and the Group, and describes the principal risks and uncertainties that the Company and the companies in the Group face.
Stockholm, July 17, 2020
Telefonaktiebolaget LM Ericsson (publ)
Org. Nr. 556016-0680
Helena Stjernholm | Ronnie Leten | Jacob Wallenberg | ||
Deputy Chair | Chair | Deputy Chair | ||
Jon Fredrik Baksaas | Jan Carlson | Nora Denzel | ||
Member of the Board | Member of the Board | Member of the Board | ||
Eric A. Elzvik | Kurt Jofs | Kristin S. Rinne | ||
Member of the Board | Member of the Board | Member of the Board | ||
Börje Ekholm | ||||
President, CEO and member of the Board | ||||
Torbjörn Nyman | Kjell-Åke Soting | Roger Svensson | ||
Member of the Board | Member of the Board | Member of the Board |
13 Ericsson | Second quarter report 2020 | Board assurance |
Table of Contents
Editor’s note
Press briefing and live webcast
Ericsson invites media, investors and analysts to a conference call on July 17, 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
14 Ericsson | Second quarter report 2020 | Editor’s note |
Table of Contents
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.
15 Ericsson | Second quarter report 2020 | Forward-looking statements |
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Financial statements
and other information
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Condensed consolidated statement of cash flows – isolated quarters | 21 | |||
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Gross income and gross margin excluding restructuring charges by segment | 35 | |||
Operating income (loss) and operating margin excluding restructuring charges by segment | 36 | |||
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16 Ericsson | Second quarter report 2020 | Financial statements and other information |
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Condensed consolidated income statement
Q2 | Jan-Jun | |||||||||||||||||||||||
SEK million | 2020 | 2019 | Change | 2020 | 2019 | Change | ||||||||||||||||||
Net sales | 55,578 | 54,810 | 1 | % | 105,328 | 103,716 | 2 | % | ||||||||||||||||
Cost of sales | -34,661 | -34,739 | 0 | % | -64,623 | -64,866 | 0 | % | ||||||||||||||||
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Gross income | 20,917 | 20,071 | 4 | % | 40,705 | 38,850 | 5 | % | ||||||||||||||||
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Gross margin (%) | 37.6 | % | 36.6 | % | 38.6 | % | 37.5 | % | ||||||||||||||||
Research and development expenses | -10,035 | -9,518 | 5 | % | -19,180 | -18,685 | 3 | % | ||||||||||||||||
Selling and administrative expenses | -7,052 | -6,964 | 1 | % | -13,290 | -12,995 | 2 | % | ||||||||||||||||
Impairment losses on trade receivables | 42 | 151 | -72 | % | -118 | 710 | -117 | % | ||||||||||||||||
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Operating expenses | -17,045 | -16,331 | 4 | % | -32,588 | -30,970 | 5 | % | ||||||||||||||||
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Other operating income and expenses | 131 | 66 | 98 | % | 220 | 839 | -74 | % | ||||||||||||||||
Shares in earnings of JV and associated companies | -152 | -67 | 127 | % | -180 | -84 | 114 | % | ||||||||||||||||
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Operating income | 3,851 | 3,739 | 3 | % | 8,157 | 8,635 | -6 | % | ||||||||||||||||
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Financial income and expenses, net | 292 | -441 | -166 | % | -610 | -1,046 | -42 | % | ||||||||||||||||
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Income after financial items | 4,143 | 3,298 | 26 | % | 7,547 | 7,589 | -1 | % | ||||||||||||||||
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Income tax | -1,558 | -1,451 | 7 | % | -2,682 | -3,339 | -20 | % | ||||||||||||||||
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Net income | 2,585 | 1,847 | 40 | % | 4,865 | 4,250 | 14 | % | ||||||||||||||||
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Net income attributable to: | ||||||||||||||||||||||||
Owners of the Parent Company | 2,452 | 1,705 | 4,608 | 4,022 | ||||||||||||||||||||
Non-controlling interests | 133 | 142 | 257 | 228 | ||||||||||||||||||||
Other information | ||||||||||||||||||||||||
Average number of shares, basic (million) | 3,322 | 3,304 | 3,320 | 3,302 | ||||||||||||||||||||
Earnings (loss) per share, basic (SEK) ¹) | 0.74 | 0.52 | 1.39 | 1.22 | ||||||||||||||||||||
Earnings (loss) per share, diluted (SEK) ²) | 0.74 | 0.51 | 1.39 | 1.21 |
1) | Based on net income (loss) attributable to owners of the Parent Company. |
2) | Potential ordinary shares are not considered when their conversion to ordinary shares would increase earnings per share. |
Condensed statement of comprehensive income (loss)
Q2 | Jan-Jun | |||||||||||||||
SEK million | 2020 | 2019 | 2020 | 2019 | ||||||||||||
Net income (loss) | 2,585 | 1,847 | 4,865 | 4,250 | ||||||||||||
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| |||||||||
Other comprehensive income (loss) | ||||||||||||||||
Items that will not be reclassified to profit or loss | ||||||||||||||||
Remeasurements of defined benefits pension plans incl. asset ceiling | 1,482 | -2,624 | -3,201 | -5,450 | ||||||||||||
Revaluation of borrowings due to change in credit risk | -1,032 | -108 | 693 | -535 | ||||||||||||
Tax on items that will not be reclassified to profit or loss | -146 | 601 | 559 | 1,257 | ||||||||||||
Items that have been or may be reclassified to profit or loss | ||||||||||||||||
Cash flow hedge reserve | ||||||||||||||||
Gains/ losses arising during the period | 146 | -37 | -95 | -206 | ||||||||||||
Reclassification adjustments on gains/ losses included in profit or loss | 71 | — | 141 | — | ||||||||||||
Changes in cumulative translation adjustments | -3,690 | 188 | -1,479 | 1,595 | ||||||||||||
Share of other comprehensive income on JV and associated companies | -90 | 8 | -2 | 46 | ||||||||||||
Tax on items that have been or may be reclassified to profit or loss | -44 | 7 | -9 | 42 | ||||||||||||
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Total other comprehensive income (loss), net of tax | -3,303 | -1,965 | -3,393 | -3,251 | ||||||||||||
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Total comprehensive income (loss) | -718 | -118 | 1,472 | 999 | ||||||||||||
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Total comprehensive income (loss) attributable to: | ||||||||||||||||
Owners of the Parent Company | -916 | -257 | 1,246 | 753 | ||||||||||||
Non-controlling interests | 198 | 139 | 226 | 246 |
17 Ericsson | Second quarter report 2020 | Financial statements |
Table of Contents
Condensed consolidated balance sheet
Jun 30 | Mar 31 | Dec 31 | ||||||||||
SEK million | 2020 | 2020 | 2019 | |||||||||
Assets | ||||||||||||
Non-current assets | ||||||||||||
Intangible assets | ||||||||||||
Capitalized development expenses | 4,078 | 4,217 | 4,040 | |||||||||
Goodwill | 31,130 | 33,082 | 31,200 | |||||||||
Intellectual property rights, brands and other intangible assets | 2,189 | 2,583 | 2,491 | |||||||||
Property, plant and equipment | 13,996 | 14,244 | 13,850 | |||||||||
Right-of-use assets | 8,251 | 8,589 | 8,487 | |||||||||
Financial assets | ||||||||||||
Equity in JV and associated companies | 1,415 | 1,618 | 1,565 | |||||||||
Other investments in shares and participations | 1,472 | 1,410 | 1,432 | |||||||||
Customer finance, non-current | 1,553 | 1,843 | 2,262 | |||||||||
Interest-bearing securities, non-current | 24,025 | 23,335 | 20,354 | |||||||||
Other financial assets, non-current | 5,944 | 7,682 | 5,614 | |||||||||
Deferred tax assets | 31,082 | 31,611 | 31,174 | |||||||||
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| |||||||
125,135 | 130,214 | 122,469 | ||||||||||
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Current assets | ||||||||||||
Inventories | 31,917 | 32,588 | 30,863 | |||||||||
Contract assets | 10,971 | 10,256 | 12,171 | |||||||||
Trade receivables | 38,325 | 42,572 | 43,069 | |||||||||
Customer finance, current | 1,001 | 1,113 | 1,494 | |||||||||
Other current receivables | 18,035 | 19,383 | 14,479 | |||||||||
Interest-bearing securities, current | 5,739 | 7,834 | 6,759 | |||||||||
Cash and cash equivalents | 45,655 | 48,347 | 45,079 | |||||||||
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| |||||||
151,643 | 162,093 | 153,914 | ||||||||||
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| |||||||
Total assets | 276,778 | 292,307 | 276,383 | |||||||||
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| |||||||
Equity and liabilities | ||||||||||||
Equity | ||||||||||||
Stockholders’ equity | 79,005 | 79,841 | 82,559 | |||||||||
Non-controlling interest in equity of subsidiaries | -533 | -728 | -681 | |||||||||
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| |||||||
78,472 | 79,113 | 81,878 | ||||||||||
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| |||||||
Non-current liabilities | ||||||||||||
Post-employment benefits | 38,605 | 43,029 | 35,817 | |||||||||
Provisions, non-current | 2,240 | 2,703 | 2,679 | |||||||||
Deferred tax liabilities | 1,164 | 1,060 | 1,224 | |||||||||
Borrowings, non-current | 22,581 | 23,381 | 28,257 | |||||||||
Lease liabilities, non-current | 7,400 | 7,705 | 7,595 | |||||||||
Other non-current liabilities | 1,813 | 2,178 | 2,114 | |||||||||
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| |||||||
73,803 | 80,056 | 77,686 | ||||||||||
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| |||||||
Current liabilities | ||||||||||||
Provisions, current | 8,363 | 8,357 | 8,244 | |||||||||
Borrowings, current | 15,290 | 17,759 | 9,439 | |||||||||
Lease liabilities, current | 2,302 | 2,396 | 2,287 | |||||||||
Contract liabilities | 31,532 | 34,265 | 29,041 | |||||||||
Trade payables | 32,182 | 29,840 | 30,403 | |||||||||
Other current liabilities | 34,834 | 40,521 | 37,405 | |||||||||
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| |||||||
124,503 | 133,138 | 116,819 | ||||||||||
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| |||||||
Total equity and liabilities | 276,778 | 292,307 | 276,383 | |||||||||
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| |||||||
Assets pledged as collateral | 6,805 | 5,866 | 5,901 | |||||||||
Contingent liabilities | 1,164 | 1,446 | 1,527 |
18 Ericsson | Second quarter report 2020 | Financial statements |
Table of Contents
Condensed consolidated statement of cash flows
Q2 | Jan-Jun | Jan-Dec 2019 | ||||||||||||||||||
SEK million | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||
Operating activities | ||||||||||||||||||||
Net income | 2,585 | 1,847 | 4,865 | 4,250 | 1,840 | |||||||||||||||
Adjustments to reconcile net income to cash | ||||||||||||||||||||
Taxes | 1,132 | 310 | 712 | 1,114 | 1,652 | |||||||||||||||
Earnings/dividends in JV and associated companies | 155 | 71 | 185 | 95 | 406 | |||||||||||||||
Depreciation, amortization and impairment losses | 2,156 | 2,274 | 4,276 | 4,600 | 9,089 | |||||||||||||||
Other | -440 | 450 | 294 | 374 | 1,079 | |||||||||||||||
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5,588 | 4,952 | 10,332 | 10,433 | 14,066 | ||||||||||||||||
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Changes in operating net assets | ||||||||||||||||||||
Inventories | -1,253 | -3,065 | -1,791 | -6,016 | 261 | |||||||||||||||
Customer finance, current and non-current | 307 | 384 | 1,124 | -527 | -858 | |||||||||||||||
Trade receivables and contract assets | 0 | 3,338 | 5,559 | 7,683 | 10,995 | |||||||||||||||
Trade payables | 4,104 | 1,833 | 1,928 | 1,853 | -372 | |||||||||||||||
Provisions and post-employment benefits | -1,189 | -480 | -971 | -3,939 | -3,729 | |||||||||||||||
Contract liabilities | -1,000 | -1,641 | 2,987 | 6,822 | -1,579 | |||||||||||||||
Other operating assets and liabilities, net | -1,108 | -1,698 | -9,417 | -6,921 | -1,911 | |||||||||||||||
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-139 | -1,329 | -581 | -1,045 | 2,807 | ||||||||||||||||
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Cash flow from operating activities | 5,449 | 3,623 | 9,751 | 9,388 | 16,873 | |||||||||||||||
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Investing activities | ||||||||||||||||||||
Investments in property, plant and equipment | -1,327 | -1,098 | -2,440 | -2,412 | -5,118 | |||||||||||||||
Sales of property, plant and equipment | 69 | 184 | 95 | 416 | 744 | |||||||||||||||
Acquisitions/divestments of subsidiaries and other operations, net | -45 | 3 | -253 | 302 | -1,505 | |||||||||||||||
Product development | -211 | -446 | -473 | -903 | -1,545 | |||||||||||||||
Other investing activities | -126 | -36 | -168 | -201 | -331 | |||||||||||||||
Interest-bearing securities | 1,141 | 2,414 | -2,291 | 7,087 | 4,214 | |||||||||||||||
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Cash flow from investing activities | -499 | 1,021 | -5,530 | 4,289 | -3,541 | |||||||||||||||
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Cash flow before financing activities | 4,950 | 4,644 | 4,221 | 13,677 | 13,332 | |||||||||||||||
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Financing activities | ||||||||||||||||||||
Dividends paid | -2,489 | -3,308 | -2,498 | -4,294 | -4,450 | |||||||||||||||
Repayment of lease liabilities | -618 | -623 | -1,214 | -1,227 | -2,990 | |||||||||||||||
Other financing activities | -1,451 | -680 | 585 | -1,690 | 540 | |||||||||||||||
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Cash flow from financing activities | -4,558 | -4,611 | -3,127 | -7,211 | -6,900 | |||||||||||||||
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Effect of exchange rate changes on cash | -3,084 | 13 | -518 | 644 | 258 | |||||||||||||||
Net change in cash and cash equivalents | -2,692 | 46 | 576 | 7,110 | 6,690 | |||||||||||||||
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Cash and cash equivalents, beginning of period | 48,347 | 45,453 | 45,079 | 38,389 | 38,389 | |||||||||||||||
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Cash and cash equivalents, end of period | 45,655 | 45,499 | 45,655 | 45,499 | 45,079 | |||||||||||||||
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19 Ericsson | Second quarter report 2020 | Financial statements |
Table of Contents
Condensed consolidated statement of changes in equity
Jan-Jun | Jan-Dec 2019 | |||||||||||
SEK million | 2020 | 2019 | ||||||||||
Opening balance | 81,878 | 87,770 | 87,770 | |||||||||
Adjustment due to new accounting standards 1) | — | -249 | -249 | |||||||||
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Adjusted opening balance | 81,878 | 87,521 | 87,521 | |||||||||
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Total comprehensive income (loss) | 1,472 | 999 | -1,750 | |||||||||
Sale/repurchase of own shares | 81 | 86 | 197 | |||||||||
Long-term variable compensation plans | 97 | 221 | 377 | |||||||||
Dividends to shareholders 2) | -5,056 | -4,294 | -4,450 | |||||||||
Transactions with non-controlling interests | — | — | -17 | |||||||||
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Closing balance | 78,472 | 84,533 | 81,878 | |||||||||
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1) | Opening balance adjustment in 2019 due to IFRS 16. |
2) | SEK 0.75 per share of the dividend decided by the AGM in April will be paid out in Q3 2020. |
Condensed consolidated income statement – isolated quarters
2020 | 2019 | |||||||||||||||||||||||
Isolated quarters, SEK million | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||
Net sales | 55,578 | 49,750 | 66,373 | 57,127 | 54,810 | 48,906 | ||||||||||||||||||
Cost of sales | -34,661 | -29,962 | -41,939 | -35,587 | -34,739 | -30,127 | ||||||||||||||||||
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Gross income | 20,917 | 19,788 | 24,434 | 21,540 | 20,071 | 18,779 | ||||||||||||||||||
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Gross margin (% ) | 37.6 | % | 39.8 | % | 36.8 | % | 37.7 | % | 36.6 | % | 38.4 | % | ||||||||||||
Research and development expenses | -10,035 | -9,145 | -10,633 | -9,497 | -9,518 | -9,167 | ||||||||||||||||||
Selling and administrative expenses | -7,052 | -6,238 | -8,222 | -4,920 | -6,964 | -6,031 | ||||||||||||||||||
Impairment losses on trade receivables | 42 | -160 | -173 | 200 | 151 | 559 | ||||||||||||||||||
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Operating expenses | -17,045 | -15,543 | -19,028 | -14,217 | -16,331 | -14,639 | ||||||||||||||||||
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Other operating income and expenses 1) | 131 | 89 | 756 | -11,305 | 66 | 773 | ||||||||||||||||||
Shares in earnings of JV and associated companies | -152 | -28 | -37 | -214 | -67 | -17 | ||||||||||||||||||
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Operating income (loss) | 3,851 | 4,306 | 6,125 | -4,196 | 3,739 | 4,896 | ||||||||||||||||||
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Financial income and expenses, net | 292 | -902 | -71 | -685 | -441 | -605 | ||||||||||||||||||
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Income after financial items | 4,143 | 3,404 | 6,054 | -4,881 | 3,298 | 4,291 | ||||||||||||||||||
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Taxes | -1,558 | -1,124 | -1,570 | -2,013 | -1,451 | -1,888 | ||||||||||||||||||
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Net income (loss) | 2,585 | 2,280 | 4,484 | -6,894 | 1,847 | 2,403 | ||||||||||||||||||
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Net income (loss) attributable to: | ||||||||||||||||||||||||
Owners of the Parent Company | 2,452 | 2,156 | 4,430 | -6,229 | 1,705 | 2,317 | ||||||||||||||||||
Non-controlling interests | 133 | 124 | 54 | -665 | 142 | 86 | ||||||||||||||||||
Other information | ||||||||||||||||||||||||
Average number of shares, basic (million) | 3,322 | 3,317 | 3,313 | 3,308 | 3,304 | 3,300 | ||||||||||||||||||
Earnings (loss) per share, basic (SEK) 2) | 0.74 | 0.65 | 1.34 | -1.89 | 0.52 | �� | 0.70 | |||||||||||||||||
Earnings (loss) per share, diluted (SEK) 3) | 0.74 | 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. |
20 Ericsson | Second quarter report 2020 | Financial statements |
Table of Contents
Condensed consolidated statement of cash flows – isolated quarters
2020 | 2019 | |||||||||||||||||||||||
Isolated quarters, SEK million | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||
Operating activities | ||||||||||||||||||||||||
Net income (loss) | 2,585 | 2,280 | 4,484 | -6,894 | 1,847 | 2,403 | ||||||||||||||||||
Adjustments to reconcile net income to cash | ||||||||||||||||||||||||
Taxes | 1,132 | -420 | 949 | -411 | 310 | 804 | ||||||||||||||||||
Earnings/ dividends in JV and associated companies | 155 | 30 | 33 | 278 | 71 | 24 | ||||||||||||||||||
Depreciation, amortization and impairment losses | 2,156 | 2,120 | 2,290 | 2,199 | 2,274 | 2,326 | ||||||||||||||||||
Other | -440 | 734 | 197 | 508 | 450 | -76 | ||||||||||||||||||
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5,588 | 4,744 | 7,953 | -4,320 | 4,952 | 5,481 | |||||||||||||||||||
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Changes in operating net assets | ||||||||||||||||||||||||
Inventories | -1,253 | -538 | 5,200 | 1,077 | -3,065 | -2,951 | ||||||||||||||||||
Customer finance, current and non-current | 307 | 817 | -66 | -265 | 384 | -911 | ||||||||||||||||||
Trade receivables and contract assets | 0 | 5,559 | -3,216 | 6,528 | 3,338 | 4,345 | ||||||||||||||||||
Trade payables | 4,104 | -2,176 | 688 | -2,913 | 1,833 | 20 | ||||||||||||||||||
Provisions and post-em ployment benefits | -1,189 | 218 | -10,509 | 10,719 | -480 | -3,459 | ||||||||||||||||||
Contractliabilities | -1,000 | 3,987 | -4,413 | -3,988 | -1,641 | 8,463 | ||||||||||||||||||
Other operating assets and liabilities, net | -1,108 | -8,309 | 4,859 | 151 | -1,698 | -5,223 | ||||||||||||||||||
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-139 | -442 | -7,457 | 11,309 | -1,329 | 284 | |||||||||||||||||||
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Cash flow from operating activities | 5,449 | 4,302 | 496 | 6,989 | 3,623 | 5,765 | ||||||||||||||||||
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Investing activities | ||||||||||||||||||||||||
Investments in property, plant and equipment | -1,327 | -1,113 | -1,475 | -1,231 | -1,098 | -1,314 | ||||||||||||||||||
Sales of property, plant and equipment | 69 | 26 | 206 | 122 | 184 | 232 | ||||||||||||||||||
Acquisitions/divestments of subsidiaries and other operations, net | -45 | -208 | -1,341 | -466 | 3 | 299 | ||||||||||||||||||
Product development | -211 | -262 | -329 | -313 | -446 | -457 | ||||||||||||||||||
Other investing activities | -126 | -42 | -74 | -56 | -36 | -165 | ||||||||||||||||||
Interest-bearing securities | 1,141 | -3,432 | -1,759 | -1,114 | 2,414 | 4,673 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Cash flow from investing activities | -499 | -5,031 | -4,772 | -3,058 | 1,021 | 3,268 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Cash flow before financing activities | 4,950 | -729 | -4,276 | 3,931 | 4,644 | 9,033 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Financing activities | ||||||||||||||||||||||||
Dividends paid | -2,489 | -9 | -15 | -141 | -3,308 | -986 | ||||||||||||||||||
Repayment of lease liabilities | -618 | -596 | -711 | -1,052 | -623 | -604 | ||||||||||||||||||
Other financing activities | -1,451 | 2,036 | 834 | 1,396 | -680 | -1,010 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Cash flow from financing activities | -4,558 | 1,431 | 108 | 203 | -4,611 | -2,600 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Effect of exchange rate changes on cash | -3,084 | 2,566 | -1,936 | 1,550 | 13 | 631 | ||||||||||||||||||
Net change in cash and cash equivalents | -2,692 | 3,268 | -6,104 | 5,684 | 46 | 7,064 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Cash and cash equivalents, beginning of period | 48,347 | 45,079 | 51,183 | 45,499 | 45,453 | 38,389 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Cash and cash equivalents, end of period | 45,655 | 48,347 | 45,079 | 51,183 | 45,499 | 45,453 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
21 Ericsson | Second Quarter Report 2020 | Financial statements |
Table of Contents
Condensed Parent Company income statement
Q2 | Jan-Jun | Jan-Dec | ||||||||||||||||||
SEK million | 2020 | 2019 | 2020 | 2019 | 2019 | |||||||||||||||
Net sales | — | — | — | — | — | |||||||||||||||
Cost of sales | — | — | — | — | — | |||||||||||||||
Gross income | — | — | — | — | — | |||||||||||||||
Operating expenses | -241 | -236 | -492 | -757 | -1,531 | |||||||||||||||
Other operating income and expenses¹) | 354 | 518 | 934 | 969 | -8,148 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Operating income | 113 | 282 | 442 | 212 | -9,679 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Financial net | 1,140 | 649 | 1,833 | 596 | 6,610 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
income after financial items | 1,253 | 931 | 2,275 | 808 | -3,069 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Transfers to (-)/from untaxed reserves | — | — | — | — | -1,961 | |||||||||||||||
Taxes | -144 | -45 | -318 | -76 | 87 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net income (loss) | 1,109 | 886 | 1,957 | 732 | -4,943 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
1) | Includes costs of SEK -10.7 billion in Jan-Dec 2019 related to the resolution of the SEC and DOJ investigations. |
Condensed Parent Company statement of comprehensive income (loss)
Q2 | Jan-Jun | Jan-Dec | ||||||||||||||||||
SEK million | 2020 | 2019 | 2020 | 2019 | 2019 | |||||||||||||||
Net income (loss) | 1,109 | 886 | 1,957 | 732 | -4,943 | |||||||||||||||
Revaluation of borrowings due to change in credit risk | -1,032 | -108 | 693 | -535 | -651 | |||||||||||||||
Tax on items that will not be reclassified to profit or loss | 212 | 22 | -143 | 110 | 134 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total other comprehensive income, net of tax | -820 | -86 | 550 | -425 | -517 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total comprehensive income (loss) | 289 | 800 | 2,507 | 307 | -5,460 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
22 Ericsson | Second Quarter Report 2020 | Financial statements |
Table of Contents
Condensed Parent Company balance sheet
Jun 30 | Dec 31 | |||||||
SEK million | 2020 | 2019 | ||||||
Assets | ||||||||
Fixed assets | ||||||||
Intangible assets | 41 | 58 | ||||||
Tangible assets | 369 | 303 | ||||||
Financial assets1) | 111,319 | 106,156 | ||||||
|
|
|
| |||||
111,729 | 106,517 | |||||||
|
|
|
| |||||
Current assets | ||||||||
Inventories | — | — | ||||||
Receivables | 25,863 | 23,166 | ||||||
Short-term investments | 5,508 | 6,328 | ||||||
Cash and cash equivalents | 33,813 | 29,800 | ||||||
|
|
|
| |||||
65,184 | 59,294 | |||||||
|
|
|
| |||||
Total assets | 176,913 | 165,811 | ||||||
|
|
|
| |||||
Stockholders’ equity, provisions and liabilities | ||||||||
Equity | ||||||||
Restricted equity | 48,164 | 48,164 | ||||||
Non-restricted equity | 29,861 | 32,222 | ||||||
|
|
|
| |||||
78,025 | 80,386 | |||||||
|
|
|
| |||||
Provisions | 630 | 668 | ||||||
Non-current liabilities | 22,803 | 28,341 | ||||||
Current liabilities | 75,455 | 56,416 | ||||||
|
|
|
| |||||
Total stockholders’ equity, provisions and liabilities | 176,913 | 165,811 | ||||||
|
|
|
| |||||
1) Of which interest-bearing securities, non-current | 24,025 | 20,354 | ||||||
|
|
|
|
23 Ericsson | Second quarter report 2020 | Financial statements |
Table of Contents
The group
This interim report is prepared in accordance with IAS 34 “Interim Financial Reporting”. The term “IFRS” used in this document refers to the application of IAS and IFRS as well as interpretations of these standards as issued by IASB’s Standards Interpretation Committee (SIC) and IFRS Interpretations Committee (IFRIC). The accounting policies adopted are consistent with those of the annual report for the year ended December 31, 2019 and should be read in conjunction with that annual report. There are no amendments of IFRS during 2020 that are estimated to have a material impact on the result and financial position of the Company.
Covid-19 impacts on the Financial statements
As noted in our Q1 report, the Covid-19 pandemic has impacted certain lines within our financial statements. Fiscal stimulus provided by governments worldwide has reduced government bond yields and resulted in the significant movement in the capital and equity markets in Q1, although most of these trends have partially reversed in Q2. This meant that movements in certain line items reported in Q1 have largely been offset or reversed in Q2. Figures below are year to date.
In Sweden, the decrease in government bond yields in Q1 was partially reversed in Q2. With additional cash contribution of SEK 1.0 b. and improvement in investment returns in Q2, net pensions liability in Sweden increased by SEK 2.1 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 seen in Q1 was partially reversed in Q2, resulting in a positive impact of SEK 0.7 b. recognized in the OCI.
Foreign exchanges rates continued to fluctuate significantly during the period with USD weakening against SEK in Q2, reversing the trend in Q1. This resulted in a net gain on the hedge loan balances used to manage FX execution risk of SEK 0.1 b. recognized within Financial income and expenses in the Consolidated income statement. In general, a weaker SEK in Q1 was strengthened in Q2, resulting in a negative currency translation adjustment of SEK -1.5 b. on consolidation, recognized in the OCI.
The Company currently expect no material changes to expected future cash flows which could impact recoverability of assets such as deferred tax assets and intangible assets. Risk assessment on the business plans is carried out on a regular basis and an impairment review will be performed if conditions suggest that such assets may be impaired.
The Company also assessed the wider economic impact in the foreseeable future on the expected credit losses model for trade receivables. The Company concluded that the impact is not material but will continue to perform such analysis on a regular basis.
24 Ericsson | Second quarter report 2020 | Additional information |
Table of Contents
Net sales by segment by quarter
2020 | 2019 | |||||||||||||||||||||||
Isolated quarters, SEK million | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||
Networks | 39,827 | 35,126 | 44,448 | 39,261 | 37,819 | 33,481 | ||||||||||||||||||
Of which Products | 28,966 | 24,748 | 31,159 | 27,500 | 26,698 | 23,765 | ||||||||||||||||||
Of which Services | 10,861 | 10,378 | 13,289 | 11,761 | 11,121 | 9,716 | ||||||||||||||||||
Digital Services | 8,575 | 7,345 | 13,168 | 9,881 | 8,991 | 7,817 | ||||||||||||||||||
Of which Products | 4,598 | 3,798 | 7,338 | 5,594 | 4,611 | 3,937 | ||||||||||||||||||
Of which Services | 3,977 | 3,547 | 5,830 | 4,287 | 4,380 | 3,880 | ||||||||||||||||||
Managed Services | 5,573 | 5,714 | 7,027 | 6,359 | 6,323 | 5,856 | ||||||||||||||||||
Emerging Business and Other | 1,603 | 1,565 | 1,730 | 1,626 | 1,677 | 1,752 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 55,578 | 49,750 | 66,373 | 57,127 | 54,810 | 48,906 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
2020 | 2019 | |||||||||||||||||||||||
Sequential change, percent | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||
Networks | 13 | % | -21 | % | 13 | % | 4 | % | 13 | % | -20 | % | ||||||||||||
Of which Products | 17 | % | -21 | % | 13 | % | 3 | % | 12 | % | -20 | % | ||||||||||||
Of which Services | 5 | % | -22 | % | 13 | % | 6 | % | 14 | % | -18 | % | ||||||||||||
Digital Services | 17 | % | -44 | % | 33 | % | 10 | % | 15 | % | -40 | % | ||||||||||||
Of which Products | 21 | % | -48 | % | 31 | % | 21 | % | 17 | % | -47 | % | ||||||||||||
Of which Services | 12 | % | -39 | % | 36 | % | -2 | % | 13 | % | -30 | % | ||||||||||||
Managed Services | -2 | % | -19 | % | 11 | % | 1 | % | 8 | % | -15 | % | ||||||||||||
Emerging Business and Other | 2 | % | -10 | % | 6 | % | -3 | % | -4 | % | -23 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 12 | % | -25 | % | 16 | % | 4 | % | 12 | % | -23 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
2020 | 2019 | |||||||||||||||||||||||
Year over year change, percent | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||
Networks | 5 | % | 5 | % | 7 | % | 9 | % | 17 | % | 17 | % | ||||||||||||
Of which Products | 8 | % | 4 | % | 5 | % | 9 | % | 20 | % | 22 | % | ||||||||||||
Of which Services | -2 | % | 7 | % | 12 | % | 11 | % | 10 | % | 6 | % | ||||||||||||
Digital Services | -5 | % | -6 | % | 1 | % | 10 | % | 2 | % | 8 | % | ||||||||||||
Of which Products | 0 | % | -4 | % | -2 | % | 22 | % | 3 | % | 0 | % | ||||||||||||
Of which Services | -9 | % | -9 | % | 5 | % | -3 | % | 0 | % | 17 | % | ||||||||||||
Managed Services | -12 | % | -2 | % | 2 | % | -2 | % | -3 | % | -1 | % | ||||||||||||
Emerging Business and Other | -4 | % | -11 | % | -24 | % | -33 | % | -18 | % | 6 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 1 | % | 2 | % | 4 | % | 6 | % | 10 | % | 13 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
2020 | 2019 | |||||||||||||||||||||||
Year to date, SEK million | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | ||||||||||||||||||
Networks | 74,953 | 35,126 | 155,009 | 110,561 | 71,300 | 33,481 | ||||||||||||||||||
Of which Products | 53,714 | 24,748 | 109,122 | 77,963 | 50,463 | 23,765 | ||||||||||||||||||
Of which Services | 21,239 | 10,378 | 45,887 | 32,598 | 20,837 | 9,716 | ||||||||||||||||||
Digital Services | 15,920 | 7,345 | 39,857 | 26,689 | 16,808 | 7,817 | ||||||||||||||||||
Of which Products | 8,396 | 3,798 | 21,480 | 14,142 | 8,548 | 3,937 | ||||||||||||||||||
Of which Services | 7,524 | 3,547 | 18,377 | 12,547 | 8,260 | 3,880 | ||||||||||||||||||
Managed Services | 11,287 | 5,714 | 25,565 | 18,538 | 12,179 | 5,856 | ||||||||||||||||||
Emerging Business and Other | 3,168 | 1,565 | 6,785 | 5,055 | 3,429 | 1,752 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 105,328 | 49,750 | 227,216 | 160,843 | 103,716 | 48,906 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
2020 | 2019 | |||||||||||||||||||||||
Year over year change, percent | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | ||||||||||||||||||
Networks | 5 | % | 5 | % | 12 | % | 14 | % | 17 | % | 17 | % | ||||||||||||
Of which Products | 6 | % | 4 | % | 13 | % | 16 | % | 21 | % | 22 | % | ||||||||||||
Of which Services | 2 | % | 7 | % | 10 | % | 9 | % | 9 | % | 6 | % | ||||||||||||
Digital Services | -5 | % | -6 | % | 5 | % | 6 | % | 4 | % | 8 | % | ||||||||||||
Of which Products | -2 | % | -4 | % | 5 | % | 9 | % | 2 | % | 0 | % | ||||||||||||
Of which Services | -9 | % | -9 | % | 4 | % | 4 | % | 8 | % | 17 | % | ||||||||||||
Managed Services | -7 | % | -2 | % | -1 | % | -2 | % | -2 | % | -1 | % | ||||||||||||
Emerging Business and Other | -8 | % | -11 | % | -19 | % | -18 | % | -7 | % | 6 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 2 | % | 2 | % | 8 | % | 9 | % | 11 | % | 13 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
25 Ericsson | Second quarter report 2020 | Additional information |
Table of Contents
Sales growth adjusted for comparable units and currency
2020 | 2019 | |||||||||||||||||||||||
Isolated quarter, year over year change, percent | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||
Networks 1) | 4 | % | 0 | % | 2 | % | 4 | % | 11 | % | 10 | % | ||||||||||||
Digital Services | -5 | % | -9 | % | -3 | % | 5 | % | -3 | % | 0 | % | ||||||||||||
Managed Services | -12 | % | -5 | % | -1 | % | -5 | % | -6 | % | -5 | % | ||||||||||||
Emerging Business and Other 2) | -6 | % | -8 | % | 9 | % | -7 | % | 24 | % | 38 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total 1)2) | 0 | % | -2 | % | 1 | % | 3 | % | 7 | % | 7 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
2020 | 2019 | |||||||||||||||||||||||
Year to date, year over year change, percent | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | ||||||||||||||||||
Networks | 2 | % | 0 | % | 6 | % | 8 | % | 11 | % | 10 | % | ||||||||||||
Digital Services | -7 | % | -9 | % | -1 | % | 1 | % | -2 | % | 0 | % | ||||||||||||
Managed Services | -9 | % | -5 | % | -4 | % | -5 | % | -6 | % | -5 | % | ||||||||||||
Emerging Business and Other 1) | -7 | % | -8 | % | 14 | % | 15 | % | 30 | % | 38 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total 1)2) | -1 | % | -2 | % | 4 | % | 5 | % | 7 | % | 7 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
1) | Adjusted for Kathrein acquisition made in October 2019. |
2) | Adjusted for MediaKind divestment in February 2019. |
Gross income and gross margin by segment by quarter
2020 | 2019 | |||||||||||||||||||||||
Isolated quarters, SEK million | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||
Networks | 16,022 | 15,586 | 18,265 | 16,327 | 15,670 | 14,455 | ||||||||||||||||||
Digital Services | 3,738 | 2,929 | 4,898 | 3,749 | 3,311 | 2,878 | ||||||||||||||||||
Managed Services | 955 | 933 | 1,039 | 1,136 | 779 | 1,036 | ||||||||||||||||||
Emerging Business and Other | 202 | 340 | 232 | 328 | 311 | 410 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 20,917 | 19,788 | 24,434 | 21,540 | 20,071 | 18,779 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
2020 | 2019 | |||||||||||||||||||||||
Isolated quarters, as percentage of net sales | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||
Networks | 40.2 | % | 44.4 | % | 41.1 | % | 41.6 | % | 41.4 | % | 43.2 | % | ||||||||||||
Digital Services | 43.6 | % | 39.9 | % | 37.2 | % | 37.9 | % | 36.8 | % | 36.8 | % | ||||||||||||
Managed Services | 17.1 | % | 16.3 | % | 14.8 | % | 17.9 | % | 12.3 | % | 17.7 | % | ||||||||||||
Emerging Business and Other | 12.6 | % | 21.7 | % | 13.4 | % | 20.2 | % | 18.5 | % | 23.4 | % | ||||||||||||
Total | 37.6 | % | 39.8 | % | 36.8 | % | 37.7 | % | 36.6 | % | 38.4 | % | ||||||||||||
2020 | 2019 | |||||||||||||||||||||||
Year to date, SEK million | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | ||||||||||||||||||
Networks | 31,608 | 15,586 | 64,717 | 46,452 | 30,125 | 14,455 | ||||||||||||||||||
Digital Services | 6,667 | 2,929 | 14,836 | 9,938 | 6,189 | 2,878 | ||||||||||||||||||
Managed Services | 1,888 | 933 | 3,990 | 2,951 | 1,815 | 1,036 | ||||||||||||||||||
Emerging Business and Other | 542 | 340 | 1,281 | 1,049 | 721 | 410 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 40,705 | 19,788 | 84,824 | 60,390 | 38,850 | 18,779 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
2020 | 2019 | |||||||||||||||||||||||
Year to date, as percentage of net sales | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | ||||||||||||||||||
Networks | 42.2 | % | 44.4 | % | 41.8 | % | 42.0 | % | 42.3 | % | 43.2 | % | ||||||||||||
Digital Services | 41.9 | % | 39.9 | % | 37.2 | % | 37.2 | % | 36.8 | % | 36.8 | % | ||||||||||||
Managed Services | 16.7 | % | 16.3 | % | 15.6 | % | 15.9 | % | 14.9 | % | 17.7 | % | ||||||||||||
Emerging Business and Other | 17.1 | % | 21.7 | % | 18.9 | % | 20.8 | % | 21.0 | % | 23.4 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 38.6 | % | 39.8 | % | 37.3 | % | 37.5 | % | 37.5 | % | 38.4 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
26 Ericsson | Second quarter report 2020 | Additional information |
Table of Contents
Operating income (loss) and operating margin by segment by quarter
2020 | 2019 | |||||||||||||||||||||||
Isolated quarters, SEK million | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||
Networks | 5,255 | 5,827 | 6,399 | 7,216 | 5,680 | 5,472 | ||||||||||||||||||
Digital Services | -697 | -1,417 | -164 | -660 | -1,405 | -1,798 | ||||||||||||||||||
Managed Services | 263 | 408 | 292 | 562 | 203 | 1,252 | ||||||||||||||||||
Emerging Business and Other | -970 | -512 | -402 | -11,314 | -739 | -30 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 3,851 | 4,306 | 6,125 | -4,196 | 3,739 | 4,896 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
2020 | 2019 | |||||||||||||||||||||||
Isolated quarters, as percentage of net sales | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||
Networks | 13.2 | % | 16.6 | % | 14.4 | % | 18.4 | % | 15.0 | % | 16.3 | % | ||||||||||||
Digital Services | -8.1 | % | -19.3 | % | -1.2 | % | -6.7 | % | -15.6 | % | -23.0 | % | ||||||||||||
Managed Services | 4.7 | % | 7.1 | % | 4.2 | % | 8.8 | % | 3.2 | % | 21.4 | % | ||||||||||||
Emerging Business and Other | -60.5 | % | -32.7 | % | -23.2 | % | -695.8 | % | -44.1 | % | -1.7 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 6.9 | % | 8.7 | % | 9.2 | % | -7.3 | % | 6.8 | % | 10.0 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
2020 | 2019 | |||||||||||||||||||||||
Year to date, SEK million | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | ||||||||||||||||||
Networks | 11,082 | 5,827 | 24,767 | 18,368 | 11,152 | 5,472 | ||||||||||||||||||
Digital Services | -2,114 | -1,417 | -4,027 | -3,863 | -3,203 | -1,798 | ||||||||||||||||||
Managed Services | 671 | 408 | 2,309 | 2,017 | 1,455 | 1,252 | ||||||||||||||||||
Emerging Business and Other | -1,482 | -512 | -12,485 | -12,083 | -769 | -30 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 8,157 | 4,306 | 10,564 | 4,439 | 8,635 | 4,896 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
2020 | 2019 | |||||||||||||||||||||||
Year to date, as percentage of net sales | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | ||||||||||||||||||
Networks | 14.8 | % | 16.6 | % | 16.0 | % | 16.6 | % | 15.6 | % | 16.3 | % | ||||||||||||
Digital Services | -13.3 | % | -19.3 | % | -10.1 | % | -14.5 | % | -19.1 | % | -23.0 | % | ||||||||||||
Managed Services | 5.9 | % | 7.1 | % | 9.0 | % | 10.9 | % | 11.9 | % | 21.4 | % | ||||||||||||
Emerging Business and Other | -46.8 | % | -32.7 | % | -184.0 | % | -239.0 | % | -22.4 | % | -1.7 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 7.7 | % | 8.7 | % | 4.6 | % | 2.8 | % | 8.3 | % | 10.0 | % | ||||||||||||
|
|
|
|
|
|
|
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|
27 Ericsson | Second quarter report 2020 | Additional information |
Table of Contents
EBITA and EBITA margin by segment by quarter
2020 | 2019 | |||||||||||||||||||||||
Isolated quarters, SEK million | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||
Networks | 5,321 | 5,957 | 6,447 | 7,253 | 5,716 | 5,552 | ||||||||||||||||||
Digital Services | -563 | -1,283 | -23 | -521 | -1,268 | -1,638 | ||||||||||||||||||
Managed Services | 264 | 409 | 293 | 563 | 205 | 1,253 | ||||||||||||||||||
Emerging Business and Other | -913 | -456 | -323 | -11,262 | -688 | 43 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 4,109 | 4,627 | 6,394 | -3,967 | 3,965 | 5,210 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
2020 | 2019 | |||||||||||||||||||||||
Isolated quarters, as percentage of net sales | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||
Networks | 13.4 | % | 17.0 | % | 14.5 | % | 18.5 | % | 15.1 | % | 16.6 | % | ||||||||||||
Digital Services | -6.6 | % | -17.5 | % | -0.2 | % | -5.3 | % | -14.1 | % | -21.0 | % | ||||||||||||
Managed Services | 4.7 | % | 7.2 | % | 4.2 | % | 8.9 | % | 3.2 | % | 21.4 | % | ||||||||||||
Emerging Business and Other | -57.0 | % | -29.1 | % | -18.7 | % | -692.6 | % | -41.0 | % | 2.5 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 7.4 | % | 9.3 | % | 9.6 | % | -6.9 | % | 7.2 | % | 10.7 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
2020 | 2019 | |||||||||||||||||||||||
Year to date, SEK million | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | ||||||||||||||||||
Networks | 11,278 | 5,957 | 24,968 | 18,521 | 11,268 | 5,552 | ||||||||||||||||||
Digital Services | -1,846 | -1,283 | -3,450 | -3,427 | -2,906 | -1,638 | ||||||||||||||||||
Managed Services | 673 | 409 | 2,314 | 2,021 | 1,458 | 1,253 | ||||||||||||||||||
Emerging Business and Other | -1,369 | -456 | -12,230 | -11,907 | -645 | 43 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 8,736 | 4,627 | 11,602 | 5,208 | 9,175 | 5,210 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
2020 | 2019 | |||||||||||||||||||||||
Year to date, as percentage of net sales | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | ||||||||||||||||||
Networks | 15.0 | % | 17.0 | % | 16.1 | % | 16.8 | % | 15.8 | % | 16.6 | % | ||||||||||||
Digital Services | -11.6 | % | -17.5 | % | -8.7 | % | -12.8 | % | -17.3 | % | -21.0 | % | ||||||||||||
Managed Services | 6.0 | % | 7.2 | % | 9.1 | % | 10.9 | % | 12.0 | % | 21.4 | % | ||||||||||||
Emerging Business and Other | -43.2 | % | -29.1 | % | -180.3 | % | -235.5 | % | -18.8 | % | 2.5 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 8.3 | % | 9.3 | % | 5.1 | % | 3.2 | % | 8.8 | % | 10.7 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
28 Ericsson | Second quarter report 2020 | Additional information |
Table of Contents
Net sales by market area by quarter
2020 | 2019 | |||||||||||||||||||||||
Isolated quarters, SEK million | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||
South East Asia, Oceania and India | 6,582 | 5,917 | 9,231 | 7,432 | 6,965 | 6,148 | ||||||||||||||||||
North East Asia | 7,790 | 3,907 | 9,704 | 6,356 | 6,516 | 3,824 | ||||||||||||||||||
North America | 18,407 | 17,911 | 17,368 | 18,985 | 17,699 | 16,171 | ||||||||||||||||||
Europe and Latin America 1)2) | 13,061 | 12,241 | 17,489 | 14,308 | 14,085 | 13,124 | ||||||||||||||||||
Middle East and Africa | 5,431 | 5,829 | 8,426 | 6,046 | 5,641 | 5,412 | ||||||||||||||||||
Other 1)2) | 4,307 | 3,945 | 4,155 | 4,000 | 3,904 | 4,227 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 55,578 | 49,750 | 66,373 | 57,127 | 54,810 | 48,906 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
1) Of which in Sweden | 284 | 227 | 235 | 13 | 149 | 192 | ||||||||||||||||||
2) Of which in EU* | 7,278 | 6,259 | 10,572 | 8,815 | 8,385 | 7,957 | ||||||||||||||||||
2020 | 2019 | |||||||||||||||||||||||
Sequential change, percent | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||
South East Asia, Oceania and India | 11 | % | -36 | % | 24 | % | 7 | % | 13 | % | -25 | % | ||||||||||||
North East Asia | 99 | % | -60 | % | 53 | % | -2 | % | 70 | % | -54 | % | ||||||||||||
North America | 3 | % | 3 | % | -9 | % | 7 | % | 9 | % | -10 | % | ||||||||||||
Europe and Latin America 1)2) | 7 | % | -30 | % | 22 | % | 2 | % | 7 | % | -27 | % | ||||||||||||
Middle East and Africa | -7 | % | -31 | % | 39 | % | 7 | % | 4 | % | -21 | % | ||||||||||||
Other 1)2) | 9 | % | -5 | % | 4 | % | 2 | % | -8 | % | -5 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 12 | % | -25 | % | 16 | % | 4 | % | 12 | % | -23 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
1) Of which in Sweden | 25 | % | -3 | % | 1708 | % | -91 | % | -22 | % | -49 | % | ||||||||||||
2) Of which in EU* | 16 | % | -29 | % | 20 | % | 5 | % | 5 | % | -23 | % | ||||||||||||
2020 | 2019 | |||||||||||||||||||||||
Year over year change, percent | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||
South East Asia, Oceania and India | -5 | % | -4 | % | 12 | % | -7 | % | 0 | % | -4 | % | ||||||||||||
North East Asia | 20 | % | 2 | % | 16 | % | 10 | % | 37 | % | 13 | % | ||||||||||||
North America | 4 | % | 11 | % | -4 | % | 27 | % | 23 | % | 43 | % | ||||||||||||
Europe and Latin America 1)2) | -7 | % | -7 | % | -2 | % | -3 | % | 1 | % | 1 | % | ||||||||||||
Middle East and Africa | -4 | % | 8 | % | 23 | % | 4 | % | -3 | % | -8 | % | ||||||||||||
Other 1)2) | 10 | % | -7 | % | -6 | % | -13 | % | -1 | % | 21 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 1 | % | 2 | % | 4 | % | 6 | % | 10 | % | 13 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
1) Of which in Sweden | 91 | % | 18 | % | -37 | % | -97 | % | -75 | % | -79 | % | ||||||||||||
2) Of which in EU* | 5 | % | -4 | % | 2 | % | 4 | % | -3 | % | -7 | % | ||||||||||||
2020 | 2019 | |||||||||||||||||||||||
Year to date, SEK million | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | ||||||||||||||||||
South East Asia, Oceania and India | 12,499 | 5,917 | 29,776 | 20,545 | 13,113 | 6,148 | ||||||||||||||||||
North East Asia | 11,697 | 3,907 | 26,400 | 16,696 | 10,340 | 3,824 | ||||||||||||||||||
North America | 36,318 | 17,911 | 70,223 | 52,855 | 33,870 | 16,171 | ||||||||||||||||||
Europe and Latin America 1)2) | 25,302 | 12,241 | 59,006 | 41,517 | 27,209 | 13,124 | ||||||||||||||||||
Middle East and Africa | 11,260 | 5,829 | 25,525 | 17,099 | 11,053 | 5,412 | ||||||||||||||||||
Other 1)2) | 8,252 | 3,945 | 16,286 | 12,131 | 8,131 | 4,227 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 105,328 | 49,750 | 227,216 | 160,843 | 103,716 | 48,906 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
1) Of which in Sweden | 511 | 227 | 589 | 354 | 341 | 192 | ||||||||||||||||||
2) Of which in EU* | 13,537 | 6,259 | 35,729 | 25,157 | 16,342 | 7,957 | ||||||||||||||||||
2020 | 2019 | |||||||||||||||||||||||
Year to date, year over year change, percent | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | ||||||||||||||||||
South East Asia, Oceania and India | -5 | % | -4 | % | 1 | % | -4 | % | -2 | % | -4 | % | ||||||||||||
North East Asia | 13 | % | 2 | % | 18 | % | 20 | % | 27 | % | 13 | % | ||||||||||||
North America | 7 | % | 11 | % | 20 | % | 30 | % | 32 | % | 43 | % | ||||||||||||
Europe and Latin America 1)2) | -7 | % | -7 | % | -1 | % | 0 | % | 1 | % | 1 | % | ||||||||||||
Middle East and Africa | 2 | % | 8 | % | 5 | % | -2 | % | -5 | % | -8 | % | ||||||||||||
Other 1)2) | 1 | % | -7 | % | -1 | % | 1 | % | 9 | % | 21 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 2 | % | 2 | % | 8 | % | 9 | % | 11 | % | 13 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
1) Of which in Sweden | 50 | % | 18 | % | -75 | % | -82 | % | -77 | % | -79 | % | ||||||||||||
2) Of which in EU* | 1 | % | -4 | % | -1 | % | -2 | % | -5 | % | -7 | % |
*) | No sales to UK are included as from 2020. |
29 Ericsson | Second quarter report 2020 | Additional information |
Table of Contents
Q2 | Jan-Jun | |||||||||||||||
Country, percentage of net sales | 2020 | 2019 | 2020 | 2019 | ||||||||||||
United States | 35 | % | 33 | % | 36 | % | 34 | % | ||||||||
China | 9 | % | 7 | % | 7 | % | 6 | % | ||||||||
Japan | 3 | % | 3 | % | 4 | % | 3 | % | ||||||||
Australia | 4 | % | 3 | % | 4 | % | 3 | % | ||||||||
Saudi Arabia | 3 | % | 2 | % | 4 | % | 3 | % |
Net sales by market area by segment
Q2 2020 | Jan-Jun 2020 | |||||||||||||||||||||||||||||||||||||||
SEK million | Networks | Digital Services | Managed Services | Emerging Business and Other | Total | Networks | Digital Services | Managed Services | Emerging Business and Other | Total | ||||||||||||||||||||||||||||||
South East Asia, Oceania and India | 4,468 | 1,078 | 1,028 | 8 | 6,582 | 8,677 | 1,850 | 1,947 | 25 | 12,499 | ||||||||||||||||||||||||||||||
North East Asia | 6,381 | 1,180 | 172 | 57 | 7,790 | 9,162 | 2,037 | 375 | 123 | 11,697 | ||||||||||||||||||||||||||||||
North America | 15,772 | 1,733 | 879 | 23 | 18,407 | 31,002 | 3,280 | 2,001 | 35 | 36,318 | ||||||||||||||||||||||||||||||
Europe and Latin America | 7,813 | 2,633 | 2,526 | 89 | 13,061 | 15,018 | 5,017 | 5,092 | 175 | 25,302 | ||||||||||||||||||||||||||||||
Middle East and Africa | 3,009 | 1,450 | 969 | 3 | 5,431 | 6,585 | 2,793 | 1,872 | 10 | 11,260 | ||||||||||||||||||||||||||||||
Other | 2,384 | 501 | -1 | 1,423 | 4,307 | 4,509 | 943 | 0 | 2,800 | 8,252 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total | 39,827 | 8,575 | 5,573 | 1,603 | 55,578 | 74,953 | 15,920 | 11,287 | 3,168 | 105,328 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Share of total | 72 | % | 15 | % | 10 | % | 3 | % | 100 | % | 71 | % | 15 | % | 11 | % | 3 | % | 100 | % |
Q2 2020 | ||||||||||||||||||||
Sequential change, percent | Networks | Digital Services | Managed Services | Emerging Business and Other | Total | |||||||||||||||
South East Asia, Oceania and India | 6 | % | 40 | % | 12 | % | -53 | % | 11 | % | ||||||||||
North East Asia | 129 | % | 38 | % | -15 | % | -14 | % | 99 | % | ||||||||||
North America | 4 | % | 12 | % | -22 | % | 92 | % | 3 | % | ||||||||||
Europe and Latin America | 8 | % | 10 | % | -2 | % | 3 | % | 7 | % | ||||||||||
Middle East and Africa | -16 | % | 8 | % | 7 | % | -57 | % | -7 | % | ||||||||||
Other | 12 | % | 13 | % | -200 | % | 3 | % | 9 | % | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | 13 | % | 17 | % | -2 | % | 2 | % | 12 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
Q2 2020 | Jan-Jun 2020 | |||||||||||||||||||||||||||||||||||||||
Year over year change, percent | Networks | Digital Services | Managed Services | Emerging Business and Other | Total | Networks | Digital Services | Managed Services | Emerging Business and Other | Total | ||||||||||||||||||||||||||||||
South East Asia, Oceania and India | -11 | % | 17 | % | -1 | % | -47 | % | -5 | % | -9 | % | 7 | % | 7 | % | -7 | % | -5 | % | ||||||||||||||||||||
North East Asia | 19 | % | 28 | % | -16 | % | 90 | % | 20 | % | 12 | % | 25 | % | -20 | % | 76 | % | 13 | % | ||||||||||||||||||||
North America | 11 | % | -22 | % | -27 | % | -28 | % | 4 | % | 13 | % | -19 | % | -12 | % | -35 | % | 7 | % | ||||||||||||||||||||
Europe and Latin America | -4 | % | -10 | % | -14 | % | -2 | % | -7 | % | -4 | % | -9 | % | -12 | % | -5 | % | -7 | % | ||||||||||||||||||||
Middle East and Africa | -3 | % | -8 | % | 1 | % | 200 | % | -4 | % | 6 | % | -8 | % | 3 | % | 233 | % | 2 | % | ||||||||||||||||||||
Other | 20 | % | 24 | % | -200 | % | -6 | % | 10 | % | 8 | % | 10 | % | -100 | % | -9 | % | 1 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total | 5 | % | -5 | % | -12 | % | -4 | % | 1 | % | 5 | % | -5 | % | -7 | % | -8 | % | 2 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
30 Ericsson | Second quarter report 2020 | Additional information |
Table of Contents
IPR licensing revenues by segment by quarter
2020 | 2019 | |||||||||||||||||||||||
Isolated quarters, SEK million | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||
Networks | 2,282 | 2,019 | 2,014 | 1,972 | 1,845 | 2,066 | ||||||||||||||||||
Digital Services | 501 | 443 | 443 | 433 | 404 | 454 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 2,783 | 2,462 | 2,457 | 2,405 | 2,249 | 2,520 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
2020 | 2019 | |||||||||||||||||||||||
Year to date, SEK million | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | ||||||||||||||||||
Networks | 4,301 | 2,019 | 7,897 | 5,883 | 3,911 | 2,066 | ||||||||||||||||||
Digital Services | 944 | 443 | 1,734 | 1,291 | 858 | 454 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 5,245 | 2,462 | 9,631 | 7,174 | 4,769 | 2,520 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
2020 | 2019 | |||||||||||||||||||||||
Isolated quarters, SEK million | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||
Opening balance | 11,060 | 10,923 | 22,007 | 11,358 | 12,033 | 16,008 | ||||||||||||||||||
Additions¹) | 2,116 | 793 | 2,438 | 12,774 | 1,423 | 1,401 | ||||||||||||||||||
Utilization/Cash out¹) | -2,066 | -673 | -12,529 | -2,151 | -2,084 | -1,676 | ||||||||||||||||||
Of which restructuring | -137 | -186 | -143 | -711 | -378 | -557 | ||||||||||||||||||
Reversal of excess amounts | -192 | -124 | -842 | -128 | -88 | -125 | ||||||||||||||||||
Reclassification, translation difference and other | -315 | 141 | -151 | 154 | 74 | -3,575 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Closing balance | 10,603 | 11,060 | 10,923 | 22,007 | 11,358 | 12,033 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Of which restructuring | 1,594 | 1,202 | 1,095 | 1,099 | 1,743 | 2,059 | ||||||||||||||||||
2020 | 2019 | |||||||||||||||||||||||
Year to date, SEK million | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | ||||||||||||||||||
Opening balance | 10,923 | 10,923 | 16,008 | 16,008 | 16,008 | 16,008 | ||||||||||||||||||
Additions | 2,909 | 793 | 7,172 | 15,598 | 2,824 | 1,401 | ||||||||||||||||||
Utilization/Cash out | -2,739 | -673 | -7,576 | -5,911 | -3,760 | -1,676 | ||||||||||||||||||
Of which restructuring | -323 | -186 | -1,789 | -1,646 | -935 | -557 | ||||||||||||||||||
Reversal of excess amounts | -316 | -124 | -1,183 | -341 | -213 | -125 | ||||||||||||||||||
Reclassification, translation difference and other | -174 | 141 | -3,498 | -3,347 | -3,501 | -3,575 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Closing balance | 10,603 | 11,060 | 10,923 | 22,007 | 11,358 | 12,033 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Of which restructuring | 1,594 | 1,202 | 1,095 | 1,099 | 1,743 | 2,059 |
1) | Includes additions of cost provisions related to the resolution of the SEC and DOJ investigations of SEK -11.5 b. in Q3 2019. Includes payment of SEK 10.1 b. to SEC and DOJ in Q4 2019. |
31 Ericsson | Second 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 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||
Additions | ||||||||||||||||||||||||
Property, plant and equipment | 1,327 | 1,113 | 1,475 | 1,231 | 1,098 | 1,314 | ||||||||||||||||||
Capitalized development expenses | 211 | 262 | 329 | 313 | 446 | 457 | ||||||||||||||||||
IPR, brands and other intangible assets | 97 | 1 | 1 | 2 | — | 1 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 1,635 | 1,376 | 1,805 | 1,546 | 1,544 | 1,772 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Depreciation, amortization and impairment losses | ||||||||||||||||||||||||
Property, plant and equipment | 1,003 | 1,009 | 1,100 | 1,048 | 919 | 880 | ||||||||||||||||||
Capitalized development expenses | 272 | 174 | 256 | 330 | 449 | 520 | ||||||||||||||||||
Goodwill, IPR, brands and other intangible assets | 258 | 321 | 269 | 229 | 226 | 314 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 1,533 | 1,504 | 1,625 | 1,607 | 1,594 | 1,714 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
2020 | 2019 | |||||||||||||||||||||||
Year to date, SEK million | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | ||||||||||||||||||
Additions | ||||||||||||||||||||||||
Property, plant and equipment | 2,440 | 1,113 | 5,118 | 3,643 | 2,412 | 1,314 | ||||||||||||||||||
Capitalized development expenses | 473 | 262 | 1,545 | 1,216 | 903 | 457 | ||||||||||||||||||
IPR, brands and other intangible assets | 98 | 1 | 4 | 3 | 1 | 1 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 3,011 | 1,376 | 6,667 | 4,862 | 3,316 | 1,772 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Depreciation, amortization and impairment losses | ||||||||||||||||||||||||
Property, plant and equipment | 2,012 | 1,009 | 3,947 | 2,847 | 1,799 | 880 | ||||||||||||||||||
Capitalized development expenses | 446 | 174 | 1,555 | 1,299 | 969 | 520 | ||||||||||||||||||
Goodwill, IPR, brands and other intangible assets | 579 | 321 | 1,038 | 769 | 540 | 314 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 3,037 | 1,504 | 6,540 | 4,915 | 3,308 | 1,714 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
32 Ericsson | Second quarter report 2020 | Additional information |
Table of Contents
Q2 | Jan-Jun | Jan-Dec | ||||||||||||||||||
SEK million | 2020 | 2019 | 2020 | 2019 | 2019 | |||||||||||||||
Number of shares and earnings per share | ||||||||||||||||||||
Number of shares, end of period (million) | 3,334 | 3,334 | 3,334 | 3,334 | 3,334 | |||||||||||||||
Of which class A-shares (million) | 262 | 262 | 262 | 262 | 262 | |||||||||||||||
Of which class B-shares (million) | 3,072 | 3,072 | 3,072 | 3,072 | 3,072 | |||||||||||||||
Number of treasury shares, end of period (million) | 11 | 29 | 11 | 29 | 20 | |||||||||||||||
Number of shares outstanding, basic, end of period (million) | 3,324 | 3,305 | 3,324 | 3,305 | 3,314 | |||||||||||||||
Numbers of shares outstanding, diluted, end of period (million) | 3,330 | 3,327 | 3,330 | 3,327 | 3,328 | |||||||||||||||
Average number of treasury shares (million) | 12 | 30 | 15 | 32 | 28 | |||||||||||||||
Average number of shares outstanding, basic (million) | 3,322 | 3,304 | 3,320 | 3,302 | 3,306 | |||||||||||||||
Average number of shares outstanding, diluted (million) ¹) | 3,329 | 3,325 | 3,326 | 3,324 | 3,320 | |||||||||||||||
Earnings (loss) per share, basic (SEK) ²) | 0.74 | 0.52 | 1.39 | 1.22 | 0.67 | |||||||||||||||
Earnings (loss) per share, diluted (SEK) ¹) | 0.74 | 0.51 | 1.39 | 1.21 | 0.67 | |||||||||||||||
Earnings (loss) per share (non-IFRS), diluted (SEK) ³) | 0.94 | 0.59 | 1.74 | 1.39 | 1.07 | |||||||||||||||
Ratios | ||||||||||||||||||||
Days sales outstanding | — | — | 80 | 95 | 75 | |||||||||||||||
Inventory turnover days | 85 | 91 | 89 | 92 | 77 | |||||||||||||||
Payable days | 82 | 82 | 88 | 86 | 77 | |||||||||||||||
Alternative Performance Measures (APMs) | ||||||||||||||||||||
Equity ratio (%) | — | — | 28.4 | % | 30.1 | % | 29.6 | % | ||||||||||||
Return on equity (%) | 12.3 | % | 8.1 | % | 11.4 | % | 9.4 | % | 2.6 | % | ||||||||||
Return on capital employed (%) | 9.1 | % | 9.2 | % | 9.9 | % | 11.0 | % | 6.7 | % | ||||||||||
Capital turnover (times) | 1.3 | 1.4 | 1.3 | 1.3 | 1.4 | |||||||||||||||
Free cash flow | 3,191 | 1,607 | 5,298 | 5,363 | 6,128 | |||||||||||||||
Free cash flow before M&A | 3,236 | 1,604 | 5,551 | 5,061 | 7,633 | |||||||||||||||
Exchange rates used in the consolidation | ||||||||||||||||||||
SEK/EUR - closing rate | — | — | 10.50 | 10.55 | 10.43 | |||||||||||||||
SEK/USD - closing rate | — | — | 9.37 | 9.27 | 9.32 | |||||||||||||||
Other | ||||||||||||||||||||
Market area inventory, end of period | 18,183 | 21,205 | 18,183 | 21,205 | 17,530 | |||||||||||||||
Export sales from Sweden | 30,178 | 28,356 | 57,580 | 50,842 | 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 | Jun 30 | Mar 31 | Dec 31 | Sep 30 | Jun 30 | Mar 31 | ||||||||||||||||||
South East Asia, Oceania and India | 25,265 | 24,942 | 24,559 | 24,322 | 23,942 | 24,051 | ||||||||||||||||||
North East Asia | 13,965 | 13,786 | 13,783 | 13,608 | 13,334 | 13,169 | ||||||||||||||||||
North America | 9,785 | 9,718 | 9,643 | 9,487 | 9,342 | 9,246 | ||||||||||||||||||
Europe and Latin America ¹) | 46,521 | 46,402 | 47,135 | 44,150 | 43,846 | 43,833 | ||||||||||||||||||
Middle East and Africa | 4,264 | 4,247 | 4,297 | 4,320 | 4,292 | 4,281 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 99,800 | 99,095 | 99,417 | 95,887 | 94,756 | 94,580 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
¹) Of which Sweden | 12,884 | 12,746 | 12,730 | 12,679 | 12,549 | 12,455 |
33 Ericsson | Second quarter report 2020 | Additional information |
Table of Contents
Items excluding restructuring charges
Restructuring charges by function
2020 | 2019 | |||||||||||||||||||||||
Isolated quarters, SEK million | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||
Cost of sales | -312 | -335 | -218 | -28 | -26 | -65 | ||||||||||||||||||
Research and development expenses | -227 | 39 | -79 | -98 | -49 | -118 | ||||||||||||||||||
Selling and administrative expenses | -144 | -5 | -30 | -21 | -43 | -23 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | -683 | -301 | -327 | -147 | -118 | -206 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
2020 | 2019 | |||||||||||||||||||||||
Year to date, SEK million | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | ||||||||||||||||||
Cost of sales | -647 | -335 | -337 | -119 | -91 | -65 | ||||||||||||||||||
Research and development expenses | -188 | 39 | -344 | -265 | -167 | -118 | ||||||||||||||||||
Selling and administrative expenses | -149 | -5 | -117 | -87 | -66 | -23 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | -984 | -301 | -798 | -471 | -324 | -206 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring charges by segment
2020 | 2019 | |||||||||||||||||||||||
Isolated quarters, SEK million | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||
Networks | -380 | -75 | -48 | -5 | -5 | -10 | ||||||||||||||||||
of which cost of sales | -110 | -72 | -24 | 12 | 9 | -3 | ||||||||||||||||||
of which operating expenses | -270 | -3 | -24 | -17 | -14 | -7 | ||||||||||||||||||
Digital Services | 34 | 20 | -206 | -128 | -93 | -187 | ||||||||||||||||||
of which cost of sales | 3 | -16 | -125 | -32 | -27 | -60 | ||||||||||||||||||
of which operating expenses | 31 | 36 | -81 | -96 | -66 | -127 | ||||||||||||||||||
Managed Services | -2 | -245 | -42 | -2 | 1 | -2 | ||||||||||||||||||
of which cost of sales | -2 | -245 | -40 | -2 | 3 | -1 | ||||||||||||||||||
of which operating expenses | 0 | 0 | -2 | 0 | -2 | -1 | ||||||||||||||||||
Emerging Business and Other | -335 | -1 | -31 | -12 | -21 | -7 | ||||||||||||||||||
of which cost of sales | -203 | -2 | -29 | -6 | -11 | -1 | ||||||||||||||||||
of which operating expenses | -132 | 1 | -2 | -6 | -10 | -6 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | -683 | -301 | -327 | -147 | -118 | -206 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
2020 | 2019 | |||||||||||||||||||||||
Year to date, SEK million | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | ||||||||||||||||||
Networks | -455 | -75 | -68 | -20 | -15 | -10 | ||||||||||||||||||
of which cost of sales | -182 | -72 | -6 | 18 | 6 | -3 | ||||||||||||||||||
of which operating expenses | -273 | -3 | -62 | -38 | -21 | -7 | ||||||||||||||||||
Digital Services | 54 | 20 | -614 | -408 | -280 | -187 | ||||||||||||||||||
of which cost of sales | -13 | -16 | -244 | -119 | -87 | -60 | ||||||||||||||||||
of which operating expenses | 67 | 36 | -370 | -289 | -193 | -127 | ||||||||||||||||||
Managed Services | -247 | -245 | -45 | -3 | -1 | -2 | ||||||||||||||||||
of which cost of sales | -247 | -245 | -40 | 0 | 2 | -1 | ||||||||||||||||||
of which operating expenses | 0 | 0 | -5 | -3 | -3 | -1 | ||||||||||||||||||
Emerging Business and Other | -336 | -1 | -71 | -40 | -28 | -7 | ||||||||||||||||||
of which cost of sales | -205 | -2 | -47 | -18 | -12 | -1 | ||||||||||||||||||
of which operating expenses | -131 | 1 | -24 | -22 | -16 | -6 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | -984 | -301 | -798 | -471 | -324 | -206 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
34 Ericsson | Second 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 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||
Networks | 16,132 | 15,658 | 18,289 | 16,315 | 15,661 | 14,458 | ||||||||||||||||||
Digital Services | 3,735 | 2,945 | 5,023 | 3,781 | 3,338 | 2,938 | ||||||||||||||||||
Managed Services | 957 | 1,178 | 1,079 | 1,138 | 776 | 1,037 | ||||||||||||||||||
Emerging Business and Other | 405 | 342 | 261 | 334 | 322 | 411 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 21,229 | 20,123 | 24,652 | 21,568 | 20,097 | 18,844 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
2020 | 2019 | |||||||||||||||||||||||
Isolated quarters, as percentage of net sales | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||
Networks | 40.5 | % | 44.6 | % | 41.1 | % | 41.6 | % | 41.4 | % | 43.2 | % | ||||||||||||
Digital Services | 43.6 | % | 40.1 | % | 38.1 | % | 38.3 | % | 37.1 | % | 37.6 | % | ||||||||||||
Managed Services | 17.2 | % | 20.6 | % | 15.4 | % | 17.9 | % | 12.3 | % | 17.7 | % | ||||||||||||
Emerging Business and Other | 25.3 | % | 21.9 | % | 15.1 | % | 20.5 | % | 19.2 | % | 23.5 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 38.2 | % | 40.4 | % | 37.1 | % | 37.8 | % | 36.7 | % | 38.5 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
2020 | 2019 | |||||||||||||||||||||||
Year to date, SEK million | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | ||||||||||||||||||
Networks | 31,790 | 15,658 | 64,723 | 46,434 | 30,119 | 14,458 | ||||||||||||||||||
Digital Services | 6,680 | 2,945 | 15,080 | 10,057 | 6,276 | 2,938 | ||||||||||||||||||
Managed Services | 2,135 | 1,178 | 4,030 | 2,951 | 1,813 | 1,037 | ||||||||||||||||||
Emerging Business and Other | 747 | 342 | 1,328 | 1,067 | 733 | 411 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 41,352 | 20,123 | 85,161 | 60,509 | 38,941 | 18,844 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
2020 | 2019 | |||||||||||||||||||||||
Year to date, as percentage of net sales | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | ||||||||||||||||||
Networks | 42.4 | % | 44.6 | % | 41.8 | % | 42.0 | % | 42.2 | % | 43.2 | % | ||||||||||||
Digital Services | 42.0 | % | 40.1 | % | 37.8 | % | 37.7 | % | 37.3 | % | 37.6 | % | ||||||||||||
Managed Services | 18.9 | % | 20.6 | % | 15.8 | % | 15.9 | % | 14.9 | % | 17.7 | % | ||||||||||||
Emerging Business and Other | 23.6 | % | 21.9 | % | 19.6 | % | 21.1 | % | 21.4 | % | 23.5 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 39.3 | % | 40.4 | % | 37.5 | % | 37.6 | % | 37.5 | % | 38.5 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
35 Ericsson | Second 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 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||
Networks | 5,635 | 5,902 | 6,447 | 7,221 | 5,685 | 5,482 | ||||||||||||||||||
Digital Services | -731 | -1,437 | 42 | -532 | -1,312 | -1,611 | ||||||||||||||||||
Managed Services | 265 | 653 | 334 | 564 | 202 | 1,254 | ||||||||||||||||||
Emerging Business and Other | -635 | -511 | -371 | -11,302 | -718 | -23 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 4,534 | 4,607 | 6,452 | -4,049 | 3,857 | 5,102 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
2020 | 2019 | |||||||||||||||||||||||
Isolated quarters, as percentage of net sales | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||
Networks | 14.1 | % | 16.8 | % | 14.5 | % | 18.4 | % | 15.0 | % | 16.4 | % | ||||||||||||
Digital Services | -8.5 | % | -19.6 | % | 0.3 | % | -5.4 | % | -14.6 | % | -20.6 | % | ||||||||||||
Managed Services | 4.8 | % | 11.4 | % | 4.8 | % | 8.9 | % | 3.2 | % | 21.4 | % | ||||||||||||
Emerging Business and Other | -39.6 | % | -32.7 | % | -21.4 | % | -695.1 | % | -42.8 | % | -1.3 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 8.2 | % | 9.3 | % | 9.7 | % | -7.1 | % | 7.0 | % | 10.4 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
2020 | 2019 | |||||||||||||||||||||||
Year to date, SEK million | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | ||||||||||||||||||
Networks | 11,537 | 5,902 | 24,835 | 18,388 | 11,167 | 5,482 | ||||||||||||||||||
Digital Services | -2,168 | -1,437 | -3,413 | -3,455 | -2,923 | -1,611 | ||||||||||||||||||
Managed Services | 918 | 653 | 2,354 | 2,020 | 1,456 | 1,254 | ||||||||||||||||||
Emerging Business and Other | -1,146 | -511 | -12,414 | -12,043 | -741 | -23 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 9,141 | 4,607 | 11,362 | 4,910 | 8,959 | 5,102 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
2020 | 2019 | |||||||||||||||||||||||
Year to date, as percentage of net sales | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | ||||||||||||||||||
Networks | 15.4 | % | 16.8 | % | 16.0 | % | 16.6 | % | 15.7 | % | 16.4 | % | ||||||||||||
Digital Services | -13.6 | % | -19.6 | % | -8.6 | % | -12.9 | % | -17.4 | % | -20.6 | % | ||||||||||||
Managed Services | 8.1 | % | 11.4 | % | 9.2 | % | 10.9 | % | 12.0 | % | 21.4 | % | ||||||||||||
Emerging Business and Other | -36.2 | % | -32.7 | % | -183.0 | % | -238.2 | % | -21.6 | % | -1.3 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 8.7 | % | 9.3 | % | 5.0 | % | 3.1 | % | 8.6 | % | 10.4 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
36 Ericsson | Second 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 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||
Reported net sales | 55,578 | 49,750 | 66,373 | 57,127 | 54,810 | 48,906 | ||||||||||||||||||
Acquired business | -422 | -319 | -96 | — | — | — | ||||||||||||||||||
Net FX impact | -326 | -1,654 | -2,748 | -2,457 | -2,538 | -2,932 | ||||||||||||||||||
Comparable net sales, excluding FX impact | 54,830 | 47,777 | 63,529 | 54,670 | 52,272 | 45,974 | ||||||||||||||||||
Comparable quarter net sales adj. for acq/div business 1) | 54,810 | 48,798 | 63,037 | 53,077 | 49,055 | 42,961 | ||||||||||||||||||
Sales growth adjusted for comparable units and currency (%) | 0 | % | -2 | % | 1 | % | 3 | % | 7 | % | 7 | % | ||||||||||||
2020 | 2019 | |||||||||||||||||||||||
Year to date, year over year change | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | ||||||||||||||||||
Reported net sales | 105,328 | 49,750 | 227,216 | 160,843 | 103,716 | 48,906 | ||||||||||||||||||
Acquired business | -741 | -319 | -96 | — | — | — | ||||||||||||||||||
Net FX impact | -1,980 | -1,654 | -10,675 | -7,927 | -5,470 | -2,932 | ||||||||||||||||||
Comparable net sales, excluding FX impact | 102,607 | 47,777 | 216,445 | 152,916 | 98,246 | 45,974 | ||||||||||||||||||
Comparable quarter net sales adj. for acq/div business 1) | 103,608 | 48,798 | 208,130 | 145,093 | 92,016 | 42,961 | ||||||||||||||||||
Sales growth adjusted for comparable units and currency (%) | -1 | % | -2 | % | 4 | % | 5 | % | 7 | % | 7 | % |
1) | Adjusted for divestment of MediaKind in February 2019 and acquisition of Kathrein in October 2019. |
37 Ericsson | Second quarter report 2020 | Alternative performance measures |
Table of Contents
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 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||
Gross income | 20,917 | 19,788 | 24,434 | 21,540 | 20,071 | 18,779 | ||||||||||||||||||
Net sales | 55,578 | 49,750 | 66,373 | 57,127 | 54,810 | 48,906 | ||||||||||||||||||
Gross margin (%) | 37.6 | % | 39.8 | % | 36.8 | % | 37.7 | % | 36.6 | % | 38.4 | % | ||||||||||||
Gross income | 20,917 | 19,788 | 24,434 | 21,540 | 20,071 | 18,779 | ||||||||||||||||||
Restructuring charges included in cost of sales | 312 | 335 | 218 | 28 | 26 | 65 | ||||||||||||||||||
Gross income excluding restructuring charges | 21,229 | 20,123 | 24,652 | 21,568 | 20,097 | 18,844 | ||||||||||||||||||
Net sales | 55,578 | 49,750 | 66,373 | 57,127 | 54,810 | 48,906 | ||||||||||||||||||
Gross margin excluding restructuring charges (%) | 38.2 | % | 40.4 | % | 37.1 | % | 37.8 | % | 36.7 | % | 38.5 | % | ||||||||||||
Operating expenses | -17,045 | -15,543 | -19,028 | -14,217 | -16,331 | -14,639 | ||||||||||||||||||
Restructuring charges included in R&D expenses | 227 | -39 | 79 | 98 | 49 | 118 | ||||||||||||||||||
Restructuring charges included in selling and administrative expenses | 144 | 5 | 30 | 21 | 43 | 23 | ||||||||||||||||||
Operating expenses excluding restructuring charges | -16,674 | -15,577 | -18,919 | -14,098 | -16,239 | -14,498 | ||||||||||||||||||
Operating income (loss) | 3,851 | 4,306 | 6,125 | -4,196 | 3,739 | 4,896 | ||||||||||||||||||
Net sales | 55,578 | 49,750 | 66,373 | 57,127 | 54,810 | 48,906 | ||||||||||||||||||
Operating margin (%) | 6.9 | % | 8.7 | % | 9.2 | % | -7.3 | % | 6.8 | % | 10.0 | % | ||||||||||||
Operating income (loss) | 3,851 | 4,306 | 6,125 | -4,196 | 3,739 | 4,896 | ||||||||||||||||||
Total restructuring charges | 683 | 301 | 327 | 147 | 118 | 206 | ||||||||||||||||||
Operating income (loss) excluding restructuring charges | 4,534 | 4,607 | 6,452 | -4,049 | 3,857 | 5,102 | ||||||||||||||||||
Net sales | 55,578 | 49,750 | 66,373 | 57,127 | 54,810 | 48,906 | ||||||||||||||||||
Operating margin excluding restructuring charges (%) | 8.2 | % | 9.3 | % | 9.7 | % | -7.1 | % | 7.0 | % | 10.4 | % | ||||||||||||
2020 | 2019 | |||||||||||||||||||||||
Year to date, SEK million | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | ||||||||||||||||||
Gross income | 40,705 | 19,788 | 84,824 | 60,390 | 38,850 | 18,779 | ||||||||||||||||||
Net sales | 105,328 | 49,750 | 227,216 | 160,843 | 103,716 | 48,906 | ||||||||||||||||||
Gross margin (%) | 38.6 | % | 39.8 | % | 37.3 | % | 37.5 | % | 37.5 | % | 38.4 | % | ||||||||||||
Gross income | 40,705 | 19,788 | 84,824 | 60,390 | 38,850 | 18,779 | ||||||||||||||||||
Restructuring charges included in cost of sales | 647 | 335 | 337 | 119 | 91 | 65 | ||||||||||||||||||
Gross income excluding restructuring charges | 41,352 | 20,123 | 85,161 | 60,509 | 38,941 | 18,844 | ||||||||||||||||||
Net sales | 105,328 | 49,750 | 227,216 | 160,843 | 103,716 | 48,906 | ||||||||||||||||||
Gross margin excluding restructuring charges (%) | 39.3 | % | 40.4 | % | 37.5 | % | 37.6 | % | 37.5 | % | 38.5 | % | ||||||||||||
Operating expenses | -32,588 | -15,543 | -64,215 | -45,187 | -30,970 | -14,639 | ||||||||||||||||||
Restructuring charges included in R&D expenses | 188 | -39 | 344 | 265 | 167 | 118 | ||||||||||||||||||
Restructuring charges included in selling and administrative expenses | 149 | 5 | 117 | 87 | 66 | 23 | ||||||||||||||||||
Operating expenses excluding restructuring charges | -32,251 | -15,577 | -63,754 | -44,835 | -30,737 | -14,498 | ||||||||||||||||||
Operating income (loss) | 8,157 | 4,306 | 10,564 | 4,439 | 8,635 | 4,896 | ||||||||||||||||||
Net sales | 105,328 | 49,750 | 227,216 | 160,843 | 103,716 | 48,906 | ||||||||||||||||||
Operating margin (%) | 7.7 | % | 8.7 | % | 4.6 | % | 2.8 | % | 8.3 | % | 10.0 | % | ||||||||||||
Operating income (loss) | 8,157 | 4,306 | 10,564 | 4,439 | 8,635 | 4,896 | ||||||||||||||||||
Total restructuring charges | 984 | 301 | 798 | 471 | 324 | 206 | ||||||||||||||||||
Operating income (loss) excluding restructuring charges | 9,141 | 4,607 | 11,362 | 4,910 | 8,959 | 5,102 | ||||||||||||||||||
Net sales | 105,328 | 49,750 | 227,216 | 160,843 | 103,716 | 48,906 | ||||||||||||||||||
Operating margin excluding restructuring charges (%) | 8.7 | % | 9.3 | % | 5.0 | % | 3.1 | % | 8.6 | % | 10.4 | % |
38 Ericsson | Second 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 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||
Net income (loss) | 2,585 | 2,280 | 4,484 | -6,894 | 1,847 | 2,403 | ||||||||||||||||||
Taxes | 1,558 | 1,124 | 1,570 | 2,013 | 1,451 | 1,888 | ||||||||||||||||||
Financial income and expenses, net | -292 | 902 | 71 | 685 | 441 | 605 | ||||||||||||||||||
Amortization and write-downs of acquired intangibles | 258 | 321 | 269 | 229 | 226 | 314 | ||||||||||||||||||
EBITA | 4,109 | 4,627 | 6,394 | -3,967 | 3,965 | 5,210 | ||||||||||||||||||
Net sales | 55,578 | 49,750 | 66,373 | 57,127 | 54,810 | 48,906 | ||||||||||||||||||
EBITA margin (%) | 7.4 | % | 9.3 | % | 9.6 | % | -6.9 | % | 7.2 | % | 10.7 | % | ||||||||||||
2020 | 2019 | |||||||||||||||||||||||
Year to date, SEK million | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | ||||||||||||||||||
Net income (loss) | 4,865 | 2,280 | 1,840 | -2,644 | 4,250 | 2,403 | ||||||||||||||||||
Taxes | 2,682 | 1,124 | 6,922 | 5,352 | 3,339 | 1,888 | ||||||||||||||||||
Financial income and expenses, net | 610 | 902 | 1,802 | 1,731 | 1,046 | 605 | ||||||||||||||||||
Amortization and write-downs of acquired intangibles | 579 | 321 | 1,038 | 769 | 540 | 314 | ||||||||||||||||||
EBITA | 8,736 | 4,627 | 11,602 | 5,208 | 9,175 | 5,210 | ||||||||||||||||||
Net sales | 105,328 | 49,750 | 227,216 | 160,843 | 103,716 | 48,906 | ||||||||||||||||||
EBITA margin (%) | 8.3 | % | 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 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||
Net income (loss) | 2,585 | 2,280 | 4,484 | -6,894 | 1,847 | 2,403 | ||||||||||||||||||
Net income reconciled to cash | 5,588 | 4,744 | 7,953 | -4,320 | 4,952 | 5,481 | ||||||||||||||||||
Cash flow from operating activities | 5,449 | 4,302 | 496 | 6,989 | 3,623 | 5,765 | ||||||||||||||||||
Cash conversion (%) | 97.5 | % | 90.7 | % | 6.2 | % | -161.8 | % | 73.2 | % | 105.2 | % | ||||||||||||
2020 | 2019 | |||||||||||||||||||||||
Year to date, SEK million | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | ||||||||||||||||||
Net income (loss) | 4,865 | 2,280 | 1,840 | -2,644 | 4,250 | 2,403 | ||||||||||||||||||
Net income reconciled to cash | 10,332 | 4,744 | 14,066 | 6,113 | 10,433 | 5,481 | ||||||||||||||||||
Cash flow from operating activities | 9,751 | 4,302 | 16,873 | 16,377 | 9,388 | 5,765 | ||||||||||||||||||
Cash conversion (%) | 94.4 | % | 90.7 | % | 120.0 | % | 267.9 | % | 90.0 | % | 105.2 | % |
39 Ericsson | Second 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 and non-current).
Net cash: Cash and cash equivalents plus interest-bearing securities (current and non-current) less borrowings (current and non-current).
2020 | 2019 | |||||||||||||||||||||||
SEK million | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||
Cash and cash equivalents | 45,655 | 48,347 | 45,079 | 51,183 | 45,498 | 45,453 | ||||||||||||||||||
+ Interest-bearing securities, current | 5,739 | 7,834 | 6,759 | 5,866 | 6,367 | 3,183 | ||||||||||||||||||
+ Interest-bearing securities, non-current | 24,025 | 23,335 | 20,354 | 19,157 | 17,091 | 23,022 | ||||||||||||||||||
Gross cash, end of period | 75,419 | 79,516 | 72,192 | 76,206 | 68,956 | 71,658 | ||||||||||||||||||
- Borrowings, current | 15,290 | 17,759 | 9,439 | 1,622 | 2,160 | 3,015 | ||||||||||||||||||
- Borrowings, non-current | 22,581 | 23,381 | 28,257 | 37,153 | 33,040 | 32,533 | ||||||||||||||||||
Net cash, end of period | 37,548 | 38,376 | 34,496 | 37,431 | 33,756 | 36,110 |
Total assets less non-interest-bearing provisions and liabilities.
2020 | 2019 | |||||||||||||||||||||||
SEK million | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||
Total assets | 276,778 | 292,307 | 276,383 | 288,531 | 280,447 | 283,958 | ||||||||||||||||||
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Non-interest-bearing provisions and liabilities | ||||||||||||||||||||||||
Provisions, non-current | 2,240 | 2,703 | 2,679 | 2,308 | 2,646 | 2,670 | ||||||||||||||||||
Deferred tax liabilities | 1,164 | 1,060 | 1,224 | 857 | 1,178 | 792 | ||||||||||||||||||
Other non-current liabilities | 1,813 | 2,178 | 2,114 | 2,163 | 2,160 | 2,118 | ||||||||||||||||||
Provisions, current | 8,363 | 8,357 | 8,244 | 19,699 | 8,712 | 9,363 | ||||||||||||||||||
Contract liabilities | 31,532 | 34,265 | 29,041 | 34,499 | 37,264 | 38,605 | ||||||||||||||||||
Trade payables | 32,182 | 29,840 | 30,403 | 30,672 | 31,388 | 30,842 | ||||||||||||||||||
Other current liabilities | 34,834 | 40,521 | 37,405 | 34,624 | 33,351 | 38,528 | ||||||||||||||||||
Capital employed | 164,650 | 173,383 | 165,273 | 163,709 | 163,748 | 161,040 |
Annualized net sales divided by average capital employed.
2020 | 2019 | |||||||||||||||||||||||
Isolated quarters, SEK million | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||
Net sales | 55,578 | 49,750 | 66,373 | 57,127 | 54,810 | 48,906 | ||||||||||||||||||
Annualized net sales | 222,312 | 199,000 | 265,492 | 228,508 | 219,240 | 195,624 | ||||||||||||||||||
Average capital employed | ||||||||||||||||||||||||
Capital employed at beginning of period | 173,383 | 165,273 | 163,709 | 163,748 | 161,040 | 149,615 | ||||||||||||||||||
Capital employed at end of period | 164,650 | 173,383 | 165,273 | 163,709 | 163,748 | 161,040 | ||||||||||||||||||
Average capital employed | 169,017 | 169,328 | 164,491 | 163,729 | 162,394 | 155,328 | ||||||||||||||||||
Capital turnover (times) | 1.3 | 1.2 | 1.6 | 1.4 | 1.4 | 1.3 | ||||||||||||||||||
2020 | 2019 | |||||||||||||||||||||||
Year to date, SEK million | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | ||||||||||||||||||
Net sales | 105,328 | 49,750 | 227,216 | 160,843 | 103,716 | 48,906 | ||||||||||||||||||
Annualized net sales | 210,656 | 199,000 | 227,216 | 214,457 | 207,432 | 195,624 | ||||||||||||||||||
Average capital employed | ||||||||||||||||||||||||
Capital employed at beginning of period | 165,273 | 165,273 | 149,615 | 149,615 | 149,615 | 149,615 | ||||||||||||||||||
Capital employed at end of period | 164,650 | 173,383 | 165,273 | 163,709 | 163,748 | 161,040 | ||||||||||||||||||
Average capital employed | 164,962 | 169,328 | 157,444 | 156,662 | 156,682 | 155,328 | ||||||||||||||||||
Capital turnover (times) | 1.3 | 1.2 | 1.4 | 1.4 | 1.3 | 1.3 |
40 Ericsson | Second 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 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||
Operating income (loss) | 3,851 | 4,306 | 6,125 | -4,196 | 3,739 | 4,896 | ||||||||||||||||||
Annualized operating income (loss) | 15,404 | 17,224 | 24,500 | -16,784 | 14,956 | 19,584 | ||||||||||||||||||
Average capital employed | ||||||||||||||||||||||||
Capital employed at beginning of period | 173,383 | 165,273 | 163,709 | 163,748 | 161,040 | 149,615 | ||||||||||||||||||
Capital employed at end of period | 164,650 | 173,383 | 165,273 | 163,709 | 163,748 | 161,040 | ||||||||||||||||||
Average capital employed | 169,017 | 169,328 | 164,491 | 163,729 | 162,394 | 155,328 | ||||||||||||||||||
Return on capital employed (%) | 9.1 | % | 10.2 | % | 14.9 | % | -10.3 | % | 9.2 | % | 12.6 | % | ||||||||||||
2020 | 2019 | |||||||||||||||||||||||
Year to date, SEK million | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | ||||||||||||||||||
Operating income (loss) | 8,157 | 4,306 | 10,564 | 4,439 | 8,635 | 4,896 | ||||||||||||||||||
Annualized operating income (loss) | 16,314 | 17,224 | 10,564 | 5,919 | 17,270 | 19,584 | ||||||||||||||||||
Average capital employed | ||||||||||||||||||||||||
Capital employed at beginning of period | 165,273 | 165,273 | 149,615 | 149,615 | 149,615 | 149,615 | ||||||||||||||||||
Capital employed at end of period | 164,650 | 173,383 | 165,273 | 163,709 | 163,748 | 161,040 | ||||||||||||||||||
Average capital employed | 164,962 | 169,328 | 157,444 | 156,662 | 156,682 | 155,328 | ||||||||||||||||||
Return on capital employed (%) | 9.9 | % | 10.2 | % | 6.7 | % | 3.8 | % | 11.0 | % | 12.6 | % |
Equity expressed as a percentage of total assets.
2020 | 2019 | |||||||||||||||||||||||
SEK million | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||
Total equity | 78,472 | 79,113 | 81,878 | 77,475 | 84,533 | 84,532 | ||||||||||||||||||
Total assets | 276,778 | 292,307 | 276,383 | 288,531 | 280,447 | 283,958 | ||||||||||||||||||
Equity ratio (%) | 28.4 | % | 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 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||
Net income (loss) attributable to owners of the Parent Company | 2,452 | 2,156 | 4,430 | -6,229 | 1,705 | 2,317 | ||||||||||||||||||
Annualized | 9,808 | 8,624 | 17,720 | -24,916 | 6,820 | 9,268 | ||||||||||||||||||
Average stockholders’ equity | ||||||||||||||||||||||||
Stockholders’ equity, beginning of period | 79,841 | 82,559 | 78,200 | 84,488 | 84,619 | 86,978 | ||||||||||||||||||
Stockholders’ equity, end of period | 79,005 | 79,841 | 82,559 | 78,200 | 84,488 | 84,619 | ||||||||||||||||||
Average stockholders’ equity | 79,423 | 81,200 | 80,380 | 81,344 | 84,554 | 85,799 | ||||||||||||||||||
Return on equity (%) | 12.3 | % | 10.6 | % | 22.0 | % | -30.6 | % | 8.1 | % | 10.8 | % | ||||||||||||
2020 | 2019 | |||||||||||||||||||||||
Year to date, SEK million | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | ||||||||||||||||||
Net income (loss) attributable to owners of the Parent Company | 4,608 | 2,156 | 2,223 | -2,207 | 4,022 | 2,317 | ||||||||||||||||||
Annualized | 9,216 | 8,624 | 2,223 | -2,943 | 8,044 | 9,268 | ||||||||||||||||||
Average stockholders’ equity | ||||||||||||||||||||||||
Stockholders’ equity, beginning of period | 82,559 | 82,559 | 86,978 | 86,978 | 86,978 | 86,978 | ||||||||||||||||||
Stockholders’ equity, end of period | 79,005 | 79,841 | 82,559 | 78,200 | 84,488 | 84,619 | ||||||||||||||||||
Average stockholders’ equity | 80,782 | 81,200 | 84,769 | 82,589 | 85,733 | 85,799 | ||||||||||||||||||
Return on equity (%) | 11.4 | % | 10.6 | % | 2.6 | % | -3.6 | % | 9.4 | % | 10.8 | % |
41 Ericsson | Second 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 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||
Earnings (loss) per share, diluted | 0.74 | 0.65 | 1.33 | -1.89 | 0.51 | 0.70 | ||||||||||||||||||
Restructuring charges | 0.14 | 0.07 | 0.07 | 0.04 | 0.02 | 0.05 | ||||||||||||||||||
Amortization and write-downs of acquired intangibles | 0.06 | 0.07 | 0.06 | 0.05 | 0.06 | 0.05 | ||||||||||||||||||
Earnings (loss) per share (non-IRFS) | 0.94 | 0.79 | 1.46 | -1.80 | 0.59 | 0.80 | ||||||||||||||||||
2020 | 2019 | |||||||||||||||||||||||
Year to date, SEK | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | ||||||||||||||||||
Earnings (loss) per share, diluted | 1.39 | 0.65 | 0.67 | -0.67 | 1.21 | 0.70 | ||||||||||||||||||
Restructuring charges | 0.21 | 0.07 | 0.18 | 0.11 | 0.07 | 0.05 | ||||||||||||||||||
Amortization and write-downs of acquired intangibles | 0.13 | 0.07 | 0.22 | 0.16 | 0.11 | 0.05 | ||||||||||||||||||
Earnings (loss) per share (non-IRFS) | 1.73 | 0.79 | 1.07 | -0.40 | 1.39 | 0.80 |
Free cash flow and free cash flow before M&A
Free cash flow: Cash flow from operating activities less net capital expenditures and other investments.
Free cash flow before M&A: Cash flow from operating activities less net capital expenditures and other investments (excluding M&A).
2020 | 2019 | |||||||||||||||||||||||
Isolated quarters, SEK million | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||
Cash flow from operating activities | 5,449 | 4,302 | 496 | 6,989 | 3,623 | 5,765 | ||||||||||||||||||
Net capital expenditures and other investments (excluding M&A) | ||||||||||||||||||||||||
Investments in property, plant and equipment | -1,327 | -1,113 | -1,475 | -1,231 | -1,098 | -1,314 | ||||||||||||||||||
Sales of property, plant and equipment | 69 | 26 | 206 | 122 | 184 | 232 | ||||||||||||||||||
Product development | -211 | -262 | -329 | -313 | -446 | -457 | ||||||||||||||||||
Other investing activities | -126 | -42 | -74 | -56 | -36 | -165 | ||||||||||||||||||
Repayment of lease liabilities | -618 | -596 | -711 | -1,052 | -623 | -604 | ||||||||||||||||||
Free cash flow before M&A | 3,236 | 2,315 | -1,887 | 4,459 | 1,604 | 3,457 | ||||||||||||||||||
Acquisitions/divestments of subsidiaries and other operations, net | -45 | -208 | -1,341 | -466 | 3 | 299 | ||||||||||||||||||
Free cash flow | 3,191 | 2,107 | -3,228 | 3,993 | 1,607 | 3,756 | ||||||||||||||||||
2020 | 2019 | |||||||||||||||||||||||
Year to date, SEK million | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | ||||||||||||||||||
Cash flow from operating activities | 9,751 | 4,302 | 16,873 | 16,377 | 9,388 | 5,765 | ||||||||||||||||||
Net capital expenditures and other investments (excluding M&A) | ||||||||||||||||||||||||
Investments in property, plant and equipment | -2,440 | -1,113 | -5,118 | -3,643 | -2,412 | -1,314 | ||||||||||||||||||
Sales of property, plant and equipment | 95 | 26 | 744 | 538 | 416 | 232 | ||||||||||||||||||
Product development | -473 | -262 | -1,545 | -1,216 | -903 | -457 | ||||||||||||||||||
Other investing activities | -168 | -42 | -331 | -257 | -201 | -165 | ||||||||||||||||||
Repayment of lease liabilities | -1,214 | -596 | -2,990 | -2,279 | -1,227 | -604 | ||||||||||||||||||
Free cash flow before M&A | 5,551 | 2,315 | 7,633 | 9,520 | 5,061 | 3,457 | ||||||||||||||||||
Acquisitions/divestments of subsidiaries and other operations, net | -253 | -208 | -1,505 | -164 | 302 | 299 | ||||||||||||||||||
Free cash flow | 5,298 | 2,107 | 6,128 | 9,356 | 5,363 | 3,756 |
42 Ericsson | Second quarter report 2020 | Alternative performance measures |