Telefonaktiebolaget LM Ericsson (ERIC) 6-K Current report (foreign)

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 14, 2022

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 14, 2022 regarding “Second quarter report 2022”.

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/ STELLA MEDLICOTT
	Stella Medlicott
	Senior Vice President,
	Chief Marketing and Communications Officer
By:	/s/ CARL MELLANDER
	Carl Mellander
	Senior Vice President, Chief Financial Officer

Date: July 14, 2022

Second quarter report 2022

Stockholm, July 14, 2022

Second quarter highlights

• Group organic sales grew by 5% YoY driven primarily by Networks in North America and Europe. Reported sales were SEK 62.5 (54.9) b.

• Reported gross income increased to SEK 26.3 (23.9) b. driven by higher sales. Gross margin was 42.1% (43.4%) impacted by lower IPR revenues of SEK 0.9 b YoY and supply chain cost, partly offset by timing of software sales in a large contract and underlying improvements.

• Reported EBIT amounted to SEK 7.3 (5.8) b. as a result of higher sales and higher gross income. EBIT margin was 11.7% (10.6%).

• Reported EBITA amounted to SEK 7.5 (6.1) b. with an EBITA margin of 12.0% (11.1%). EBITA margin rolling four quarters was 14%.

• Networks reported EBIT margin was 19.2% (21.7%) impacted by lower IPR revenues, increased component and logistics costs, and proactive investments in supply chain resilience, partly offset by timing of software sales in a large contract.

• Reported net income was SEK 4.7 (3.9) b.

• Free cash flow before M&A was SEK 4.4 (4.1) b. Net cash on June 30, 2022, was SEK 70.3 b. compared with SEK 43.7 b. on June 30, 2021.

• Planning for a Capital Markets Day December 15, 2022.

SEK b.	Q2 2022			Q2 2021			YoY change			Q1 2022			QoQ change			Jan-Jun 2022			Jan-Jun 2021			YoY change
Net sales		62.5			54.9			14	%		55.1			13	%		117.5			104.7			12	%
Sales growth adj. for comparable units and currency ¹		—			—			5	%		—			—			—			—			4	%
Gross margin ¹		42.1	%		43.4	%		—			42.3	%		—			42.2	%		43.1	%		—
EBIT		7.3			5.8			26	%		4.7			54	%		12.1			11.1			9	%
EBIT margin ¹		11.7	%		10.6	%		—			8.6	%		—			10.3	%		10.6	%		—
Net income		4.7			3.9			19	%		2.9			60	%		7.6			7.1			7	%
EPS diluted, SEK		1.35			1.10			23	%		0.88			53	%		2.23			2.06			8	%
Measures excl. restructuring charges ¹
Gross margin excluding restructuring charges		42.2	%		43.4	%		—			42.3	%		—			42.2	%		43.2	%		—
EBIT excluding restructuring charges		7.4			5.8			26	%		4.8			54	%		12.1			11.2			9	%
EBIT margin excluding restructuring charges		11.8	%		10.6	%		—			8.7	%		—			10.3	%		10.7	%		—
Free cash flow before M & A		4.4			4.1			9	%		-1.7			—			2.8			5.6			-51	%
Net cash, end of period		70.3			43.7			61	%		65.2			8	%		70.3			43.7			61	%

¹ Non-IFRS financial measures are reconciled at the end of this report to the most directly reconcilable line items in the financial statements.

1    Ericsson | Second quarter report 2022

CEO comments

Strong business momentum continued during the second quarter. Rollout of 5G networks and market share gains resulted in a 5% organic sales1 growth in the quarter. We have adjusted our group structure to strengthen execution of our strategy to be a leading mobile infrastructure provider and to establish a focused enterprise business. Consumers, enterprises, and society will be digitalized through 5G in a way we have not seen before. With our strategy, we are in a position to capture these opportunities to enable further growth.

Technology leadership is a foundation for our growth strategy. Since 2017, our increased R&D investments have created significant value. The geopolitical situation has also required proactive investments to de-risk our supply chain and ensure that we can deliver on our strategy to gain footprint. The global supply chain situation remains challenging and inflationary pressures are strong. Combined, this results in cost increases which we work hard to mitigate as far as possible. As contracts expire, we aim to adjust pricing. However, we believe the best way to compensate for cost increases is the continued investment in technology to increase the cadence of bringing new innovative solutions to the market.

Fulfilling customer commitments under current challenging conditions, comes at a cost which dilutes gross margin. The increased costs have been largely absorbed through our investments in innovation and continuous improvements. Increased sales resulted in a gross income improvement in absolute terms of SEK 2.4 b. compared with Q2 last year, despite lower IPR revenues of SEK 0.9 b. YoY.

While 5G is the fastest scaling mobile technology, global penetration is still in an early phase. We foresee that the global 5G build-out will be larger and continue for longer than previous mobile generations. The build-out will include evolving consumer use cases, such as Fixed Wireless Access, mobile gaming and XR applications, in addition to new areas, such as enterprise and first responders.

Networks sales1 grew organically by 6% in Q2 underpinned by market share gains. Gross margin was 45.1% (47.9%), impacted by lower IPR revenues, increased component and logistics costs, and proactive investments in supply chain resilience, which enabled continued delivery performance in the quarter. We continue to invest in enhancing and expanding our offerings, and we increased R&D in the quarter primarily for Cloud RAN and acceleration of the next-generation Ericsson Silicon (ASICs).

Digital Services sales1 grew organically by 2% YoY with strong growth in cloud native 5G Core, and an EBIT of SEK -1.3 (-1.6) b. The accelerated 5G Core projects with initial deployment costs partly offset the margin improvement from increased software sales.

Managed Services sales1 were flat YoY with an EBIT margin of 11.2% (8.1%). With a 4Q rolling EBIT margin2 of 9.5%, we achieved our 2022 target two quarters ahead of plan.

The new group structure, to be reported from Q3, positions us well to execute on our strategy. Segment Cloud Software and Services is formed by merging Digital Services and Managed Services to create stronger customer propositions as our customers are moving towards

5G using cloud technologies and intelligent automation. The Digital Services business will leverage our technology leadership to accelerate customers’ transformation to cloud native networks. We are committed to turning around the business in support of the Group reaching the long-term targets.

Segment Enterprise includes Enterprise Wireless Solutions, combining Cradlepoint with Dedicated Networks to capture the growing needs for enterprise solutions. The Enterprise segment will also include the Global Network Platform, which we believe will create a paradigm shift in the industry as the full capabilities of the network will be exposed to the global developer communities and enterprises. This will inspire innovation with new opportunities for the operators to monetize network investments. The intended acquisition of Vonage is an important building block, and we are working to secure approval and close the transaction before end of July. The third element of the Enterprise segment is Technologies & New Businesses, previously within segment Emerging Business and Other.

IPR licensing revenues were affected by several expiring patent license agreements pending renewal and by 5G license negotiations in the quarter. We are confident in our strong 5G position and leading patent portfolio, positioning us well to conclude pending and future license renewals. With current contracts, revenues from IPR are estimated to be SEK 1.0–1.5 b. in Q3.

To secure deliveries we have pro-actively increased our buffer inventories. Additionally, unpredictable deliveries of components and site material led to increased inventory levels across our business. We were, however, able to partly offset the inventory increases with other working capital improvements, thereby delivering an improved free cash flow before M&A amounting to SEK 4.4 (4.1) b. Based on current visibility, we expect a gradual reduction in inventory towards the end of the year.

We continue to strengthen our governance, risk management, and compliance across the group and are fully committed to operating with integrity. We continue to engage with the Department of Justice and the Securities and Exchange Commission in relation to the 2019 Iraq investigation report and the DPA breach notices. The outcome of these matters cannot be assessed at this point in time. We are fully committed to cooperating with the US authorities.

Our strategy targets a higher growth trajectory as we aim to grow our core mobile infrastructure business and capitalize on the fast-growing enterprise market. With 5G, the world is experiencing the largest innovation platform to date, where anything that can go wireless, will go wireless. Ericsson is at the epicenter of this powerful trend, and we will continue to invest in technology leadership to ensure we capitalize on this position. EBITA margin2 rolling four quarters was 14% and we remain determined to reach our long-term target of an EBITA margin2 of 15–18% no later than in 2–3 years.

Börje Ekholm

President and CEO

¹  Sales adjusted for comparable units and currency

²  Excluding restructuring charges

2    Ericsson | Second quarter report 2022 CEO comments

Financial highlights

Net sales development

SEK b.	Q2 2022		Q2 2021		YoY change			YoY adj.¹			Q1 2022		Jan-Jun 2022		Jan-Jun 2021		YoY change			YoY adj.¹
Networks		46.0		39.9		15	%		6	%		40.7		86.7		76.1		14	%		5	%
Digital Services		8.7		7.9		10	%		2	%		7.2		15.9		14.8		7	%		0	%
Managed Services		5.4		5.1		6	%		0	%		4.9		10.4		10.0		4	%		-2	%
Emerging Business and Other		2.4		2.1		17	%		7	%		2.2		4.6		3.8		21	%		11	%
Total		62.5		54.9		14	%		5	%		55.1		117.5		104.7		12	%		4	%

¹  Sales growth adjusted for comparable units and currency. Non-IFRS financial measures are reconciled at the end of this report to the most directly reconcilable line items in the financial statements.

Group reported sales were SEK 62.5 (54.9) b. Sales adjusted for comparable units and currency increased by 5% YoY, with growth in four of the five market areas.

IPR licensing revenues decreased to SEK 1.4 (2.3) b. Q2 2021 was positively impacted by two quarters of revenue from a renewed patent license agreement.    

Networks sales adjusted for comparable units and currency increased by 6% YoY. Sales growth was driven primarily by North America and Europe. Networks accounted for 73% (73%) of total sales.

Digital Services sales adjusted for comparable units and currency increased by 2% YoY, driven primarily by cloud native 5G Core. Digital Services share of total sales was 14% (14%).

Managed Services sales adjusted for comparable units and currency were stable. Managed Services share of total sales was 9% (9%).

Emerging Business and Other sales adjusted for comparable units and currency increased by 7% YoY driven by Cradlepoint and iconectiv. Emerging Business and Other share of total sales was 4% (4%).

Income and margin development

SEK b.	Q2 2022			Q2 2021			YoY change			Q1 2022			QoQ change			Jan-Jun 2022			Jan-Jun 2021			YoY change
Net sales		62.5			54.9			14	%		55.1			13	%		117.5			104.7			12	%
Gross income		26.3			23.9			10	%		23.3			13	%		49.6			45.2			10	%
Gross margin		42.1	%		43.4	%		—			42.3	%		—			42.2	%		43.1	%		—
Research and development (R&D) expenses		-11.5			-10.5			—			-10.7			—			-22.2			-20.1			—
Selling and administrative expenses		-7.9			-7.0			—			-6.6			—			-14.5			-13.2			—
Impairment losses on trade receivables		0.0			0.1			-97	%		-0.2			—			-0.2			-0.1			—
Other operating income and expenses		0.4			-0.6			—			-1.1			—			-0.7			-0.6			—
Share in earnings of JV and associated companies		0.0			-0.1			—			0.0			—			0.0			-0.2			—
EBIT		7.3			5.8			26	%		4.7			54	%		12.1			11.1			9	%
of which Networks		8.8			8.6			2	%		6.7			31	%		15.6			15.9			-2	%
of which Digital Services		-1.3			-1.6			—			-1.4			—			-2.7			-3.1			—
of which Managed Services		0.6			0.4			45	%		0.6			2	%		1.2			0.7			64	%
of which Emerging Business & Other		-0.8			-1.7			—			-1.2			—			-2.0			-2.4			—
EBIT margin		11.7	%		10.6	%		—			8.6	%		—			10.3	%		10.6	%		—
Financial income and expenses, net		-0.8			-0.5			—			-0.6			—			-1.4			-1.0			—
Income tax		-1.9			-1.5			—			-1.2			—			-3.1			-3.0			—
Net income		4.7			3.9			19	%		2.9			60	%		7.6			7.1			7	%
Restructuring charges		0.0			0.0			—			0.0			—			-0.1			-0.1			—
Measures excl. restr. charges and other items affecting comparability ¹
Gross margin excluding restructuring charges		42.2	%		43.4	%		—			42.3	%		—			42.2	%		43.2	%		—
EBIT margin excluding restructuring charges		11.8	%		10.6	%		—			8.7	%		—			10.3	%		10.7	%		—
EBITA excluding restructuring charges		7.5			6.1			23	%		5.0			51	%		12.5			11.7			6	%
EBITA margin excluding restructuring charges		12.0	%		11.1	%		—			9.1	%		—			10.6	%		11.2	%		—

¹ Non-IFRS financial measures are reconciled at the end of this report to the most directly reconcilable line items in the financial statements.

3    Ericsson | Second quarter report 2022 Financial highlights

Gross margin

Reported gross margin was 42.1% (43.4%). The margin was impacted by lower IPR revenues of SEK 0.9 b. YoY. Furthermore, increased component and logistics costs, and proactive investments in supply chain resilience in Networks impacted the margin negatively, but this impact was partly offset by timing of software sales in a large contract and underlying improvements. Gross margin increased in Digital Services and Managed Services YoY, while it declined in Networks and in Emerging Business and Other.

Sequentially, reported gross margin declined slightly to 42.1% from 42.3%, however with an increase in Networks.

Research and development (R&D) expenses

R&D expenses amounted to SEK -11.5 (-10.5) b. including a negative currency impact of SEK -0.4 b. R&D expenses increased primarily in Networks due to further investments in Cloud RAN and in Ericsson Silicon (ASICs).

Selling and administrative (SG&A) expenses

SG&A expenses were SEK -7.9 (-7.0) b. including a negative currency impact of SEK -0.3 b. The increase is mainly in legal and compliance related expenses.

Other operating income and expenses

Other operating income and expenses was SEK 0.4 (-0.6) b. Q2 2021 was negatively impacted by SEK -0.8 b. from a commercial settlement. There was a positive impact from Ericsson Ventures of SEK 0.1 b. in the quarter.

Restructuring charges

Restructuring charges amounted to SEK 0.0 (0.0) b.

EBIT

Reported EBIT increased to SEK 7.3 (5.8) b. driven by higher sales and higher gross income. EBIT improved across all segments. EBIT margin was 11.7% (10.6%).

Sequentially, reported EBIT increased to SEK 7.3 b. from SEK 4.7 b. as a result of seasonally higher sales and higher gross income.

Reported EBIT margin rolling four quarters was 13.4%.

EBITA

Reported EBITA increased to SEK 7.5 (6.1) b. corresponding to an EBITA margin of 12.0% (11.1%).

Reported EBITA margin rolling four quarters was 13.9%.

Financial income and expenses, net

Reported financial net was SEK -0.8 (-0.5) b. The strengthened USD to SEK resulted in a negative currency hedge effect of SEK -0.5 (0.1) b.

Sequentially, financial net decreased by SEK -0.1 b. to SEK -0.8 b. The currency hedge effect was SEK -0.5 b. in the quarter, versus SEK -0.2 b. in Q1 2022. The USD strengthened against the SEK between March 31, 2022 (SEK/USD rate 9.32) and June 30, 2022 (SEK/USD rate 10.31).

Income tax

Taxes were SEK -1.9 (-1.5) b. The effective tax rate in Q2 was 29%, unchanged from Q1 2022. Tax rate in Q2 2021 was 27%.

Net income

Net income improved to SEK 4.7 (3.9) b. and EPS diluted increased to SEK 1.35 (1.10).

Employees

The number of employees on June 30, 2022, was 101,459 compared with 101,067 on March 31, 2022. The increase is related mainly to R&D.

Financial highlights, year to date (Jan-June) development

Reported sales increased by 12%. Sales adjusted for comparable units and currency increased by 4% driven primarily by sales in market areas North America and Europe and Latin America. Networks sales adjusted for comparable units and currency increased by 5%, Emerging Business and Other grew by 11%, Digital Services sales were stable while Managed Services declined by -2%.

Reported gross income increased to SEK 49.6 (45.2) b. as a result of higher sales. Gross margin decreased to 42.2% (43.1%) impacted by investments in supply chain resilience in Networks as well as increased component and supply chain costs.

Reported EBIT increased YoY to SEK 12.1 (11.1) b. The higher gross income was partly offset by higher operating expenses. R&D expenses increased by SEK -2.1 b. including a currency impact of SEK -0.8 b. R&D expenses increased primarily in Networks as a result of further investments in Cloud RAN and in Ericsson Silicon (ASICs). SG&A expenses increased by SEK -1.3 b. including a currency impact of SEK -0.6 b. The increase is mainly related to legal and compliance expenses.

Reported EBITA increased to SEK 12.4 (11.7) b. YoY, corresponding to an EBITA margin of 10.6% (11.1%).

Net income year to date improved to SEK 7.6 (7.1) b. where the improved EBIT more than offset a more negative financial net and slightly higher taxes.

4    Ericsson | Second quarter report 2022 Financial highlights

Market area sales

SEK b.	Q2 2022		Q2 2021		YoY change			YoY adj.¹			Q1 2022		QoQ change			Jan-Jun 2022		YoY change
South East Asia, Oceania and India		8.0		7.1		12	%		6	%		5.8		36	%		13.8		0	%
North East Asia		7.3		7.1		3	%		-1	%		5.4		35	%		12.7		-6	%
North America		22.8		18.0		27	%		12	%		20.7		10	%		43.6		24	%
Europe and Latin America		15.3		14.0		9	%		4	%		15.3		0	%		30.6		15	%
Middle East and Africa		5.2		4.5		17	%		8	%		4.3		21	%		9.5		8	%
Other²		3.8		4.3		-12	%		—			3.5		9	%		7.3		7	%
Total		62.5		54.9		14	%		5	%		55.1		13	%		117.5		12	%

¹ Sales growth adjusted for comparable units and currency.

² Market area “Other” includes primarily IPR licensing revenues and the major part of segment Emerging Business and Other.

Sales breakdown by market area by segment is available at the end of this report.

• Continued momentum in North America.

• Continued Networks sales growth in Europe despite suspended business in Russia.

• Organic growth in four of the five market areas.

South East Asia, Oceania and India

Currency adjusted sales increased by 6% YoY. Networks sales grew, primarily driven by project milestones in several markets. Digital Services grew as a result of market share gains as well as project milestones. Managed Services sales increased mainly due to timing of variable sales and a new contract signed in the second half of 2021. Reported sales increased by 12% YoY.

North East Asia

Currency adjusted sales declined by -1% YoY. Sales in Networks declined, while sales in Digital Services increased as a result of project timing. Reported sales increased by 3% YoY.

North America

Currency adjusted sales increased by 12% YoY driven by strong demand for 5G solutions in Networks. Sales in Digital Services were stable. Reported sales increased by 27% YoY.

Europe and Latin America

Currency adjusted sales increased by 4% YoY with 4% growth in Europe and stable sales in Latin America. The invasion of Ukraine by Russia and the subsequent suspension of the affected business impacted sales by SEK -1.2 b. YoY. Sales in Networks showed double-digit growth as a result of market share gains. Sales in Digital Services declined due to suspension of affected business in Russia. Managed Services sales declined as a result of rescoping and renegotiations of contracts. Reported sales increased by 9% YoY.

Middle East and Africa

Currency adjusted sales increased by 8% YoY. Sales increased in Networks driven predominantly by 4G rollouts in Africa. Digital Services sales grew due to software upgrades in Africa. Reported sales increased by 17% YoY.

Other

IPR licensing revenues decreased to SEK 1.4 (2.3) b. impacted by expired patent license agreements pending renewal. Q2 2021 was positively impacted by two quarters of revenue from a renewed patent license agreement.

Sequentially, IPR licensing revenues were stable at SEK 1.4 b.

5    Ericsson | Second quarter report 2022 Market area sales

Segment results

Segment Networks

SEK b.	Q2 2022			Q2 2021			YoY change			Q1 2022
Net sales		46.0			39.9			15	%		40.7
Of which IPR licensing revenues		1.2			1.9			-38	%		1.1
Sales growth adj. for comparable units and FX		—			—			6	%		—
Gross income		20.7			19.1			8	%		18.2
Gross margin		45.1	%		47.9	%		—			44.7	%
EBIT		8.8			8.6			2	%		6.7
EBIT margin		19.2	%		21.7	%		—			16.6	%
Restructuring charges		0.0			0.0			—			0.0
Measures excl. restructuring charges
Gross margin excl. restructuring charges		45.2	%		47.9	%		—			44.8	%
EBIT excl. restructuring charges		8.9			8.7			2	%		6.8
EBIT margin excl. restructuring charges		19.3	%		21.7	%		—			16.6	%

Breakdown of sales into products, services and IPR licensing is available in note 3.

• Sales adjusted for comparable units and currency grew by 6%.

• Component prices and supply chain costs affected gross margin.

• Continued increased investments in Cloud RAN and in Ericsson Silicon (ASICs) and supply chain.

Net sales

Sales adjusted for comparable units and currency increased by 6% YoY with continued good momentum in 5G. Sales growth was driven primarily by North America and Europe. Reported sales increased by 15% YoY.

Sequentially, reported sales increased by 13%, with growth in four of the five market areas.    

Gross margin

Reported gross margin decreased to 45.1% (47.9%). Gross margin was impacted by lower IPR licensing revenues, increased component and logistics costs, and proactive investments in supply chain resilience to secure deliveries to customers. These impacts were partly offset by the shift from Q1 to Q2 of software sales in a large contract as well as underlying improvements from new product introductions.

Reported gross margin increased QoQ due to timing of software sales in a large contract. The increase was partly offset by continued high component and supply chain costs.

EBIT

Reported EBIT increased to SEK 8.8 (8.6) b. with an EBIT margin of 19.2% (21.7%). EBIT margin was impacted by increased investments in R&D in Cloud RAN and in Ericsson Silicon (ASICs).

Sequentially, reported EBIT increased to SEK 8.8 b. from SEK 6.7 b. driven primarily by higher sales and gross income.

Net sales rolling four quarters were SEK 178.4 b. and reported EBIT margin rolling four quarters was 20.7%.

Segment Digital Services

SEK b.	Q2 2022			Q2 2021			YoY change			Q1 2022
Net sales		8.7			7.9			10	%		7.2
Of which IPR licensing revenues		0.3			0.4			-38	%		0.3
Sales growth adj. for comparable units and FX		—			—			2	%		—
Gross income		3.5			3.0			16	%		3.1
Gross margin		39.9	%		37.9	%		—			42.9	%
EBIT (loss)		-1.3			-1.6			—			-1.4
EBIT margin		-15.3	%		-19.9	%		—			-19.7	%
Restructuring charges		0.0			0.0			—			0.0
Measures excl. restructuring charges
Gross margin excl. restructuring charges		39.9	%		37.9	%		—			42.9	%
EBIT (loss) excl. restructuring charges		-1.3			-1.6			—			-1.4
EBIT margin excl. restructuring charges		-15.3	%		-19.8	%		—			-19.2	%

Breakdown of sales into products, services and IPR licensing is available in note 3.

• Sales adjusted for comparable units and currency grew by 2%.

• Double-digit growth in cloud native 5G Core.

• Continued investments in cloud native 5G portfolio and service orchestration.

Net sales

Sales adjusted for comparable units and currency increased by 2% YoY. Sales grew in constant currency in the Middle East and Africa, North East Asia and in South East Asia, Oceania and India. Reported sales increased by 10% YoY driven by cloud native 5G Core.

Sequentially, reported sales increased by 20%, with double-digit growth in all market areas.

Gross margin

Reported gross margin was 39.9% (37.9%). Gross margin in the quarter was impacted by initial deployment costs for the cloud native 5G Core portfolio, as well as by a lower share of IPR licensing revenues compared with Q2 2021. In Q2 2021 there was a negative impact of -3.6 percentage points on the gross margin due to a write-down of pre-commercial product investments for the Chinese market.

Reported gross margin decreased QoQ, due to initial deployment costs as cloud native 5G Core deployments are accelerating.

EBIT (loss)

Reported EBIT (loss) was SEK -1.3 (-1.6) b. with an EBIT margin of -15.3% (-19.9%). EBIT improved due to higher sales and higher gross margin. EBIT was impacted by continued investments in the cloud native 5G portfolio and in service orchestration. EBIT in Q2 2021 was impacted by a write-down of pre-commercial product investments for the Chinese market.

Sequentially, reported EBIT was SEK -1.3 b. compared to SEK -1.4 b. in Q1 driven by higher sales in the quarter.

Net sales rolling four quarters were SEK 37.2 b. and reported EBIT margin rolling four quarters was -8.8%.

6    Ericsson | Second quarter report 2022 Segment results

Segment Managed Services

SEK b.	Q2 2022			Q2 2021			YoY change			Q1 2022
Net sales		5.4			5.1			6	%		4.9
Sales growth adj. for comparable units and FX		—			—			0	%		—
Gross income		1.2			1.0			28	%		1.1
Gross margin		23.0	%		19.0	%		—			23.2	%
EBIT		0.6			0.4			45	%		0.6
EBIT margin		11.2	%		8.1	%		—			12.0	%
Restructuring charges		0.0			0.0			—			0.0
Measures excl. restructuring charges
Gross margin excl. restructuring charges		23.0	%		19.0	%		—			23.0	%
EBIT excl. restructuring charges		0.6			0.4			45	%		0.6
EBIT margin excl. restructuring charges		11.1	%		8.1	%		—			11.8	%

• Network Optimization sales growth in all market areas.

• EBIT margin, excl. restructuring charges, rolling 4Q was 9.5%, reaching 2022 target early.

• Continued investments in automation, analytics and AI offerings – supporting 5G and efficiency in service delivery.

Net sales

Sales adjusted for comparable units and currency were stable YoY. Sales in Network Optimization showed growth in all market areas, and variable sales grew. Reported sales increased by 6% YoY.

Gross margin

Reported gross margin increased to 23.0% (19.0%) driven by increased variable sales and increased Network Optimization sales.

Reported gross margin decreased slightly to 23.0% from 23.2% QoQ.

EBIT

Reported EBIT increased to SEK 0.6 (0.4) b. with an EBIT margin of 11.2% (8.1%). The improvement was driven by increased gross margin.

Reported EBIT was flat at SEK 0.6 b. QoQ.

Net sales rolling four quarters were SEK 20.8 b. EBIT margin (excluding restructuring charges) rolling four quarters was 9.5%, reaching the 2022 EBIT target of 9–11% two quarters early.

Segment Emerging Business and Other

SEK b.	Q2 2022			Q2 2021			YoY change			Q1 2022
Net sales		2.4			2.1			17	%		2.2
Sales growth adj. for comparable units and FX		—			—			7	%		—
Gross income		0.9			0.8			10	%		0.8
Gross margin		35.8	%		37.9	%		—			38.1	%
EBIT (loss)		-0.8			-1.7			—			-1.2
EBIT margin		-33.1	%		-81.1	%		—			-53.8	%
Restructuring charges		0.0			0.0			—			0.0
Measures excl. restructuring charges
Gross margin excl. restructuring charges		35.8	%		38.1	%		—			38.1	%
EBIT (loss) excl. restructuring charges		-0.8			-1.7			—			-1.2
EBIT margin excl. restructuring charges		-32.9	%		-81.5	%		—			-53.5	%

• Cradlepoint and iconectiv drove sales growth.

• Positive EBIT impact of SEK 0.1 b. from Ericsson Ventures investments.

Net sales

Sales adjusted for comparable units and currency increased by 7% YoY driven by Cradlepoint and iconectiv. Reported sales increased by 17% YoY.

Gross margin

Reported gross margin decreased to 35.8% (37.9%). The decrease relates mainly to Cradlepoint, where Q2 2021 was positively impacted by SEK 0.1 b. from the changes between the preliminary and final PPA (Purchase Price Allocation), impacting net sales, gross margin and EBIT. Cradlepoint gross margin continues to be well above group average.

Reported gross margin decreased to 35.8% from 38.1% QoQ, with decline across several businesses.

EBIT (loss)

Reported EBIT (loss) was SEK -0.8 (-1.7) b.

Reported EBIT in the quarter was positively impacted by SEK 0.1 b. related to Ericsson Ventures investments. In Q2 2021, reported EBIT was negatively impacted by SEK -0.8 b. from a commercial settlement.

Reported EBIT (loss) decreased to SEK -0.8 b. from SEK -1.2 b. QoQ. In Q1 2022, reported EBIT was negatively impacted by SEK -0.3 b. from revaluation of Ericsson Ventures investments.

Net sales rolling four quarters were SEK 8.7 b. and reported EBIT margin rolling four quarters was -32.9%.

7    Ericsson | Second quarter report 2022 Segment results

Cash flow and financial position

Free cash flow bridge, SEK b.	Q2 2022		Q2 2021		Q1 2022		Jan-Jun 2022		Jan-Jun 2021
EBIT excl. restructuring charges		7.4		5.8		4.8		12.1		11.2
Depreciation, amortization and impairment losses		2.2		2.1		2.1		4.4		4.0
Restructuring charges		0.0		0.0		0.0		-0.1		-0.1
Changes in working capital1)		-1.3		0.2		-5.5		-6.8		-3.6
Interest paid/received, taxes paid, and other		-1.9		-2.2		-1.4		-3.3		-2.3
Cash flow from operating activities		6.3		5.9		0.0		6.3		9.1
Capex net and other investing activities		-1.3		-1.3		-1.1		-2.4		-2.4
Repayment of lease liabilities		-0.6		-0.6		-0.6		-1.2		-1.2
Free cash flow before M & A		4.4		4.1		-1.7		2.8		5.6
M & A		0.1		-0.1		0.0		0.2		-0.1
Free cash flow after M & A		4.6		4.0		-1.6		3.0		5.6
Cash flow from operating activities		6.3		5.9		0.0		6.3		9.1
Cash flow from investing activities		21.9		-7.1		14.4		36.4		-8.1
Cash flow from financing activities		-14.5		4.3		7.8		-6.7		-1.9

SEK b.	Jun 30 2022			Jun 30 2021			Mar 31 2022
Gross cash		100.4			77.1			104.2
-Borrowings, current		3.7			11.7			10.4
-Borrowings, non-current		26.4			21.7			28.6
Net cash		70.3			43.7			65.2
Equity		127.8			91.7			109.9
Total assets		332.5			281.0			323.9
Capital turnover (times)		1.2			1.3			1.2
Return on capital employed (% )		12.8	%		13.5	%		10.2	%

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

¹  Defined as Changes in operating net assets

• Free cash flow before M&A was SEK 4.4 (4.1) b.

• Net cash position increased to SEK 70.3 (43.7) b.

• Bond repayment of USD -1.0 b. (SEK -10.0 b.).

Cash flow from operating activities

Reported cash flow from operating activities was SEK 6.3 (5.9) b. Cash flow was supported by improved EBIT, partly offset by an increase in working capital. Inventory increased but was partly offset by higher customer collections. Q2 2021 was positively impacted by higher IPR payments. Taxes paid were SEK -1.0 b.

Free cash flow

Free cash flow before M&A was SEK 4.4 (4.1) b. Capex net and other investing activities were SEK -1.3 (-1.1) b. mainly related to investments in test equipment in Networks. Repayment of lease liabilities was stable at SEK -0.6 b. YoY. There were limited M&A activities in the quarter and free cash flow after M&A was SEK 4.6 (4.0) b.

Cash flow from investing activities

Reported cash flow from investing activities was SEK 21.9 (-7.1) b. mainly due to the disposal of interest-bearing securities.

Cash flow from financing activities

Reported cash flow from financing activities was SEK -14.5 (4.3) b. driven primarily by the repayment of a USD -1.0 b. (SEK -10.0 b.) bond and the first of two equal dividend payouts of SEK -4.2 b. The second payout of SEK 1.25 per share (SEK -4.2 b.) will be paid out in October.

Financial position

Gross cash declined by SEK -3.8 b. QoQ to SEK 100.4 b. The repayment of a USD -1.0 b. (SEK -10.0 b.) bond and the payout of the dividend to shareholders were partly offset by the positive free cash flow and positive FX effect on cash positions held in foreign currency. Net cash increased by SEK 5.2 b. QoQ, from SEK 65.2 b. to SEK 70.3 b. as a result of the positive free cash flow and FX effect on cash, partly offset by dividend paid to shareholders and increase in reported debt held in foreign currency.

The average maturity of long-term borrowings as of June 30, 2022, was 4.4 years, an increase from 4.0 years 12 months earlier.

Liabilities for post-employment benefits decreased to SEK 25.3 b. from SEK 30.6 b. in the quarter, due to significantly higher discount rates. The Swedish defined benefit obligation (DBO) was calculated using a discount rate based on the yields of Swedish government bonds. If the discount rate had been based on Swedish covered mortgage bonds, the liability for post-employment benefits would have been approximately SEK 6.8 b. (SEK 18.5 b. lower than current DBO).

Return on capital employed (ROCE) was 12.8% (13.5%), where the decline was driven by an increase in capital employed, partly offset by improved EBIT.

8    Ericsson | Second quarter report 2022 Cash flow and financial position

Key data points

Market related

• The global RAN equipment market is estimated to grow by 5% (5%) in 2022. North America is expected to grow by 12% (8%), Europe by 5% (5%) and Mainland China by 4% (4%).

Source: Dell’Oro Mobile RAN Quarterly report 1Q 22. Numbers in brackets from Dell’Oro Mobile RAN outlook report February 2022.

Ericsson related

Group long-term financial targets

• EBITA margin, excluding restructuring: 15–18%.

• Free Cash flow (before M&A): 9–12% of sales.

Net sales

Reported average seasonality last 3 years (2019–2021), %

	Q4gQ1			Q1gQ2			Q2gQ3			Q3gQ4
Ericsson Group		-26	%		+11	%		+3	%		+21	%
Networks		-22	%		+12	%		+3	%		+19	%
Digital Services		-43	%		+15	%		+7	%		+42	%

Net sales may show large variations between quarters.

Sales to Russia amounted to SEK 4.1 b. in 2021.

Operating expenses excluding restructuring

Reported average seasonality last 3 years (2019–2021), SEK b.

Positive numbers = decrease in operating expenses.

Negative numbers = increase in operating expenses.

	Q4gQ1		Q1gQ2		Q2gQ3		Q3gQ4
Ericsson Group		+3.2		-1.4		+1.3		-3.1

Operating expenses may show large variations between quarters.

M&A

Working to secure approval and close the Vonage transaction before end of July 2022.

Currency exposure

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

9    Ericsson | Second quarter report 2022 Key data points

Parent Company

Income after financial items January–June 2022, was SEK 18.0 (5.7) b.

At the end of the quarter, gross cash (cash, cash equivalents, short-term investments and interest-bearing securities, non-current) amounted to SEK 85.1 (62.9) b.

There was a decrease in intercompany lending of SEK 3.7 b. and in intercompany borrowing of SEK 0.8 b. in the second quarter.

The Parent Company has recognized dividends from subsidiaries of SEK 16.7 (0.6) b. in the quarter.

The holding of treasury stock on June 30, 2022, was 4,009,306 Class B shares.

10    Ericsson | Second quarter report 2022 Parent Company

Other information

Legal proceedings

On October 4, 2021, Ericsson asked the U.S. District Court for the Eastern District of Texas for a declaration that Ericsson has, in its negotiations with Apple, complied with its FRAND commitment and all other applicable laws and policies that would affect the terms of Ericsson’s and Apple’s prospective license. On December 17, 2021, Apple filed a responsive case against Ericsson in the U.S. District Court for the Eastern District of Texas alleging, among other things, that Ericsson breached obligations associated with the licensing of its standard essential patents under FRAND terms.

Ericsson and Apple were not able to renew the now expired patent license agreement between the parties in a timely manner. On January 18, 2022, Ericsson filed three complaints with the US International Trade Commission (ITC) alleging infringement of 12 patents by certain Apple products. In addition, Ericsson filed companion lawsuits in the Western District of Texas alleging infringement of the same 12 patents. On January 19, 2022 Apple responded by filing a complaint against Ericsson in the ITC alleging that certain Ericsson products infringe three Apple patents.

In January of 2022, Ericsson also filed lawsuits in several jurisdictions in Europe (Germany, the Netherlands, and Belgium) and South America (Brazil and Colombia) alleging that certain Apple products infringe Ericsson patents. Apple likewise filed lawsuits in Germany and China alleging that certain Ericsson products infringe Apple patents and utility models. In the following months, Ericsson made further filings in the United Kingdom, the Netherlands, and Brazil alleging Apple products infringe additional Ericsson patents. Apple filed further lawsuits in Germany alleging Ericsson products infringe additional Apple patents.

PRESS RELEASES

April 20, 2022 | Ericsson’s Nomination Committee appointed

On April 20, 2022, Ericsson’s Nomination Committee for the Annual General Meeting 2023 has been 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;

• Anders Oscarsson, AMF – Tjänstepension och Fonder;

• Jonas Synnergren, Cevian Capital Partners Limited; and

• Ronnie Leten, the Chair of the Board of Directors.

Johan Forssell is the Chair of the Nomination Committee.

Shareholders who wish to submit proposals to the Nomination Committee are welcome to contact the Nomination Committee. Proposals must be received in due time before the Annual General Meeting to ensure that the proposals can be considered by the Nomination Committee.

CONTACT THE NOMINATION COMMITTEE:

Telefonaktiebolaget LM Ericsson

The Nomination Committee

c/o The Board of Directors Secretariat

SE-164 83 Stockholm

Sweden

E-mail: nomination.committee@ericsson.com

https://www.ericsson.com/en/press-releases/2022/4/ericssons-nomination-committee-appointed

May 18, 2022 | Ericsson changes Group structure and Executive Team to execute on growth strategy

Ericsson’s strategy is to be a leader in mobile infrastructure and to establish an enterprise business. Today, Ericsson announces changes to the group structure and Executive Team to position itself to execute on its strategy and growth ambitions while continuing to invest in R&D to maintain its technology leadership. The new Executive Team roles and the new organization will take effect June 1, 2022.

Business Area Cloud Software and Services

To lead in the mobile infrastructure business, a Business Area Cloud Software and Services is created by merging Business Area Digital Services and Business Area Managed Services. This will enable Ericsson to capitalize on the convergence of cloud, software and services. Through the new structure, Ericsson will be able to leverage investments in R&D, increase cloud native expertise and build its combined offerings for automation and AI for service delivery. This will allow Ericsson to build on the success in recent years which includes strong development in the cloud native 5G core portfolio where 16 out of the 20 largest operators globally have chosen Ericsson. Managed Services has undergone a significant transformation in recent years with the introduction of the AI-driven Ericsson Operation Engine, enabling proactive and predictive network and IT operations and optimization, and a shift towards a more software-driven offering.

Per Narvinger is appointed Senior Vice President and head of Business Area Cloud Software and Services and will be a member of the Ericsson Executive Team. Narvinger is currently Head of Product Area Networks within Business Area Networks.

Jan Karlsson, currently head of Business Area Digital Services, will leave the Executive Team and instead drive the development of the Global Network Platform, reporting to CEO Börje Ekholm. As previously communicated, Peter Laurin, currently head of Business Area Managed Services will leave Ericsson for opportunities outside Ericsson.

“Through the new Business Area Cloud Software and Services we provide solutions that will help our customers automate the increasingly complex networks for cost advantages and speed to market. By combining the two business areas we can coordinate our investments in orchestration and AI solutions leveraging insight from our network operations. This will allow us to remain a technology leader in a constantly evolving market. I look forward to working with Per as we take the next steps in reaching Ericsson’s growth ambitions. I also want to thank Jan and Peter for their contributions to the Executive Team. They have both been instrumental in executing on our focused strategy and Ericsson’s turnaround”, says Börje Ekholm.

Business Area Enterprise Wireless Solutions

A new Business Area Enterprise Wireless Solutions, comprised of the current Cradlepoint business and Dedicated Networks, is created to take full accountability and focus to develop solutions to meet the growing needs of enterprises and create a dedicated go-to-market organization for enterprise customers including leveraging the established relationship with service providers. The new Business Area will enable Ericsson to build on recent success which includes strong growth for Cradlepoint as 5G coverage increases on the US C-band and the launch of Ericsson Private 5G (EP5G) in several leading markets.

11    Ericsson | Second quarter report 2022 Other information

George Mulhern is appointed Senior Vice President and head of Business Area Enterprise Wireless Solutions and will be a member of the Ericsson Executive Team. Mulhern is currently CEO of Cradlepoint.

Åsa Tamsons will continue in her role as Senior Vice President and head of Business Area Technologies & New Businesses which will continue to focus on developing new business solutions to accelerate growth across Ericsson’s core and enterprise businesses – building on the successful model established to incubate new growth businesses, such as Dedicated Networks and Cradlepoint.

“With this change we are taking important steps in our journey to execute on our strategy. The new Business Area Enterprise Wireless Solutions will provide the focus and conditions we need to thrive in the enterprise market and secure the next wave of success for this business. We are also excited to continue to invest in new businesses for our long-term growth through the proven model established in Business Area Technologies & New Businesses. I want to extend a warm welcome to George as he joins Ericsson’s Executive Team“, says Börje Ekholm.

Group Function Global Operations

The company is also changing its group function structure by adding a Group Function Global Operations. This function will combine the many support functions that are currently spread across the Company, including Sourcing, IT, Digital Transformation, Group Sales, Real Estate and the operations parts of the People and Finance Functions. By creating a global operations function, Ericsson will be able to run its global operations more effectively and consistently across the organization.

Moti Gyamlani is appointed Senior Vice President and head of Group Function Global Operations and will be a member of the Ericsson Executive Team. Moti is currently working as Head of Group Sourcing.

“Global Operations is created to achieve best-in class customer and employee experience by simplifying and digitalizing end-to-end process flows in the company. By creating this function, we will be able to better serve the needs of our customers and better support our people, making us more agile and more competitive. It is great to welcome Moti to the Executive Team and look forward to working together with him to create a world class global operations function”, says Börje Ekholm.

Executive Team changes

Arun Bansal, currently Executive Vice President and Head of Market Area Europe and Latin America, will leave the company to pursue other opportunities and will therefore step down from his EVP role with immediate effect. He has been with Ericsson since 1995 and has been in his current role for the last five years. The Acting Head of Market Area Europe and Latin America will be announced separately.

“Arun has been leading our Market Area Europe and Latin America for the last five years and has been instrumental in driving change across the organization, and in establishing and nurturing some of our most important customer relationships. I wish Arun all the best in his future endeavors”, says Börje Ekholm.

“After turning around the company, Ericsson is entering a new phase of growth. The changed group structure that we announce today represents exciting opportunities for our people, our customers and our business and will allow us to continue to grow our core mobile infrastructure business and capitalize on the fast-growing enterprise market. Within 2-3 years, we want to achieve our long-term goal of growing faster than the market and an EBITA margin (excluding restructuring costs) of 15-18% for the Group. I look forward to working together with the new Executive Team, and the whole Ericsson team, as we accelerate our work to execute on our strategy, strengthen our company culture and continue to grow the company with increased profitability”, concludes Ekholm.

Reporting segments

Following the new group structure, Ericsson will have the following reporting segments:

• Segment Networks (unchanged)

• Segment Cloud Software and Services (corresponding to former Digital Services and Managed Services)

• Segment Enterprise (Enterprise Wireless Solutions and Technologies & New Businesses). On completion of the acquisition, Vonage will form a separate Business Area included in this segment.

• Segment Other (including media businesses and one-offs) The new segment reporting structure will be applied from Q3 2022. Restated financials for new segments for 2020 – 2022 will be published in September 2022 ahead of the Q3 quarterly report.

https://www.ericsson.com/en/press-releases/2022/5/ericsson-changes-group-structure-and-executive-team-to-execute-on-growth-strategy

June 9, 2022 | Update on Ericsson engagement with U.S. authorities

As previously announced, Ericsson has been engaged with authorities regarding the review and investigation of the Company’s conduct in Iraq. The United States Securities and Exchange Commission (SEC) has notified the Company that it has opened an investigation concerning the matters described in the company’s 2019 Iraq investigation report. It is too early to determine or predict the outcome of the investigation, but Ericsson is fully cooperating with the SEC.

https://www.ericsson.com/en/press-releases/2022/6/update-on-ericsson-engagement-with-u.s.-authorities

June 28, 2022 | Update on Ericsson’s proposed acquisition of Vonage

Ericsson continues to work closely with the Committee on Foreign Investment in the United States as it reviews its proposed acquisition of Vonage Holdings Corp. The merger has cleared all other requisite foreign and US regulatory approval requirements, and the parties are working to conclude the regulatory process as expeditiously as possible. Ericsson and Vonage remain fully committed to this transaction and are working towards closing before end of July, 2022.

https://www.ericsson.com/en/press-releases/2022/6/update-on-ericssons-proposed-acquisition-of-vonage

12    Ericsson | Second quarter report 2022 Other information

Risk factors

Ericsson is exposed to a number of risks in its activities. To stimulate identification and support cross-functional treatment within the Ericsson Group, risks are grouped in a number of categories, including for example risks relating to technology, IPR, compliance, project execution, operations, products and services, treasury and accounting, the geopolitical environment, M&A, cyber security and occupational health and safety.

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

Risk factors and uncertainties of relevance to Ericsson are described in the Annual Report 2021 and in the Annual Report on Form 20-F 2021 (in the following the “Annual Report 2021”). 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 risks described below:

Deferred Prosecution Agreement with the United States Department of Justice

On December 6, 2019, Ericsson entered into a Deferred Prosecution Agreement (DPA) with the United States Department of Justice (DOJ). In October 2021, Ericsson received correspondence from the DOJ stating its determination that the Company had breached its obligations under its DPA by failing to provide certain documents and factual information. On March 1, 2022, the DOJ informed Ericsson that the disclosure made by the Company prior to the DPA about its internal investigation into conduct in Iraq in the period 2011 until 2019 was insufficient. Furthermore, it determined that the Company breached the DPA by failing to make subsequent disclosure related to the investigation post-DPA. As mentioned in the Annual Report 2021, the Company is in communication with the DOJ regarding the facts and circumstances of the breach determinations and is committed to co-operating with the DOJ to resolve the matters. While the length of the process cannot be determined, the resolution of these matters could result in a range of actions by DOJ, and may likely include additional monetary payments, the magnitude of which cannot at this time be reliably estimated. Accordingly, no provisions have been recorded for such potential exposure.

Business in Russia

As mentioned in the Annual Report 2021, including in the risk factor 1.1 and 3.2, conducting business throughout the world makes Ericsson subject to the effects of general global economic conditions as well as conditions unique to specific countries or regions. In addition to the risk factors described in the Annual Report 2021 and the provision recorded by the Company in Q1 2022, the large uncertainties relating to the Russian market, including the applicable and changed sanctions landscape, lead to large uncertainties relating to other potential costs and consequences that may follow. All of the above could have a material adverse effect on the Company, including its reputation, business, financial condition, results of operations (EBIT), cash flows, or prospects.

We are subject to certain US and other anti-corruption (including anti-bribery, anti-money-laundering, sanctions, terror finance and anti-terrorism) laws, rules and regulations. Ericsson may be subject to further adverse consequences under the DPA with the DOJ and the injunction issued in connection with the settlement with the SEC, both from 2019, and other investigations by the DOJ and SEC

As mentioned in the Annual Report 2021, including in the risk factor 3.3, in February 2022, the Company publicly disclosed a 2019 internal investigation that included a review of the conduct of Ericsson employees, vendors and suppliers in Iraq during the period 2011–2019. The Company is responding to investigative inquiries from the DOJ and SEC about the matters described in the Iraq investigation report, including allegations relating to illegal financing of terrorism and bribery.

Ericsson is involved in lawsuits, legal proceedings and investigations which, if determined unfavorably, could require the Company to pay substantial damages, fines and/or penalties

As previously disclosed, on March 3, 2022, Telefonaktiebolaget LM Ericsson and certain officers of Ericsson were named as defendants in a putative class action filed on behalf of investors in Ericsson securities in the United States District Court for the Eastern District of New York. The complaint alleges violations of United States securities laws, in connection with allegedly false and misleading statements principally concerning the Company’s adherence with its compliance and disclosure policies and obligations and the conduct of its business in Iraq.

This report has not been reviewed by Telefonaktiebolaget LM Ericsson auditors

Date for next report: October 20, 2022

13    Ericsson | Second quarter report 2022 Risk factors

Board assurance

The Board of Directors and the President and 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 14, 2022

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
Carolina Dybeck Happe	Eric A. Elzvik	Kurt Jofs
Member of the Board	Member of the Board	Member of the Board
Kristin S. Rinne	Börje Ekholm
Member of the Board	President, CEO and member of the Board
Torbjörn Nyman	Anders Ripa	Kjell-Åke Soting
Member of the Board	Member of the Board	Member of the Board

14    Ericsson | Second quarter report 2022 Board assurance

Editor’s note

Media and analyst briefing

Ericsson invites media, investors and analysts to a conference call and live video webcast at 9:00 AM CEST on July 14, 2022.

Link to the webcast, dial-in to audio conference, supporting material and replay will be available at:

www.ericsson.com/investors and

www.ericsson.com/newsroom

For further information, please contact:

Carl Mellander, Senior Vice President, Chief Financial Officer

Phone: +46 72 583 88 70

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

media.relations@ericsson.com

Stella Medlicott, Senior Vice President, Chief Marketing and Communications Officer

Phone: +46 73 095 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 70 575 29 06

E-mail: peter.nyquist@ericsson.com

Lena Häggblom, Director,

Investor Relations

Phone: +46 72 593 27 78

E-mail: lena.haggblom@ericsson.com

Stefan Jelvin, Director,

Investor Relations

Phone: +46 70 986 02 27

E-mail: stefan.jelvin@ericsson.com

Media

Kristoffer Edshage, Director of Corporate Media

Phone: +46 72 220 44 46

E-mail: media.relations@ericsson.com

Corporate Communications

Phone: +46 10 719 69 92

E-mail: media.relations@ericsson.com

15    Ericsson | Second quarter report 2022 Editor’s note

Forward-looking statements

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

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

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

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

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

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

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

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

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

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

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

Important factors that could affect whether and to what extent any of our forward-looking statements materialize include, but are not limited to, the factors described in the section “Risk Factors”, and in “Risk Factors” in the Annual Report 2021.

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.

16    Ericsson | Second quarter report 2022 Forward-looking statements

Financial statements and other information

Contents

Financial statements (unaudited)	18
Condensed consolidated income statement	18
Condensed statement of comprehensive income (loss)	18
Condensed consolidated balance sheet	19
Condensed consolidated statement of cash flows	20
Condensed consolidated statement of changes in equity	21
Condensed consolidated income statement – isolated quarters	21
Condensed consolidated statement of cash flows – isolated quarters	22
Condensed Parent Company income statement	23
Condensed Parent Company statement of comprehensive income (loss)	23
Condensed Parent Company balance sheet	24
Accounting policies and Explanatory notes (unaudited)	25
Note 1 – Accounting policies	25
Note 2 – Critical accounting estimates and judgements	25
Note 3 – Segment information	26
Note 4 – Provisions	30
Note 5 – Financial risk management	31
Note 6 – Cash flow	32
Note 7 – Contingent liabilities and Assets pledged as collateral	32
Note 8 – Share information	33
Note 9 – Employee information	33
Alternative performance measures (unaudited)	34
Sales growth adjusted for comparable units and currency	34
Items excluding restructuring charges	35
EBITA and EBITA margin / EBITA and EBITA margin excluding restructuring charges	36
Rolling four quarters of net sales and EBIT margin excluding restructuring charges (%)	36
Gross cash and net cash, end of period	37
Capital employed	37
Capital turnover	37
Return on capital employed	38
Equity ratio	38
Return on equity	38
Adjusted earnings per share	39
Free cash flow before M&A / Free cash flow after M&A	39
Sales growth by segment adjusted for comparable units and currency	40
Sales growth by market area adjusted for comparable units and currency	40
Gross margin by segment by quarter	41
EBIT margin by segment by quarter	41
Restructuring charges by function	42
Restructuring charges by segment	42
Gross income and gross margin excluding restructuring charges by segment	43
EBIT and EBIT margin excluding restructuring charges by segment	44
Rolling four quarters of net sales by segment	44
Rolling four quarters of EBIT margin excluding restructuring charges by segment (%)	44
EBITA and EBITA margin by segment by quarter	45
Other ratios	45

17    Ericsson | Second quarter report 2022 Financial statements and other information

Financial statements (unaudited)

Condensed consolidated income statement

			Q2							Jan-Jun
SEK million	Note		2022		2021		Change			2022		2021
Net sales		3		62,465		54,941		14	%		117,526		104,719
Cost of sales				-36,163		-31,084		16	%		-67,935		-59,567
Gross income		3		26,302		23,857		10	%		49,591		45,152
Research and development expenses				-11,496		-10,480		10	%		-22,201		-20,056
Selling and administrative expenses				-7,872		-6,972		13	%		-14,460		-13,160
Impairment losses on trade receivables				3		100		-97	%		-177		-112
Operating expenses				-19,365		-17,352		12	%		-36,838		-33,328
Other operating income and expenses ¹)				393		-579		-168	%		-672		-566
Share in earnings of JV and associated companies				-22		-103		-79	%	��	-29		-174
Earnings before financial items and income tax (EBIT)		3		7,308		5,823		26	%		12,052		11,084
Financial income and expenses, net				-759		-454		67	%		-1,402		-987
Income after financial items				6,549		5,369		22	%		10,650		10,097
Income tax				-1,899		-1,469		29	%		-3,088		-3,029
Net income				4,650		3,900		19	%		7,562		7,068
Net income attributable to:
Owners of the Parent Company				4,504		3,679					7,444		6,866
Non-controlling interests				146		221					118		202
Other information
Average number of shares, basic (million)		8		3,330		3,329					3,330		3,329
Earnings per share, basic (SEK) ²)				1.36		1.10					2.24		2.06
Earnings per share, diluted (SEK) ³)				1.35		1.10					2.23		2.06

¹⁾  Jan-June 2022 includes a provision of SEK -0.9 billion (-0.9 b. in Q1) for impairment of assets and other one-time costs due to the suspension of affected business in Russia, and the impact of Ericsson Ventures investments of SEK -0.2 billion (-0.3 b. in Q1 and 0.1 b. in Q2).

²⁾ Based on net income attributable to owners of the Parent Company.

³⁾ Potential ordinary shares are not considered when their conversion to ordinary shares would improve earnings per share.

Condensed statement of comprehensive income (loss)

	Q2				Jan-Jun
SEK million	2022		2021		2022		2021
Net income		4,650		3,900		7,562		7,068
Other comprehensive income
Items that will not be reclassified to profit or loss
Remeasurements of defined benefits pension plans incl. asset ceiling		7,543		595		14,469		6,641
Revaluation of borrowings due to change in credit risk		1,064		39		1,980		-16
Cash flow hedge reserve - gains/losses arising during the year		3,893		—		4,351		—
Tax on items that will not be reclassified to profit or loss		-2,431		-93		-4,192		-1,326
Items that have been or may be reclassified to profit or loss
Cash flow hedge reserve
Gains/losses arising during the period		-1,295		-123		-1,174		-154
Reclassification adjustments on gains/ losses included in profit or loss		43		-24		85		-48
Translation reserves
Changes in translation reserves		4,167		-476		5,752		1,245
Reclassification to profit and loss		-26		-9		-34		-9
Share of other comprehensive income (loss) of JV and associated companies		41		-4		40		31
Tax on items that have been or may be reclassified to profit or loss		258		31		224		42
Total other comprehensive income (loss), net of tax		13,257		-64		21,501		6,406
Total comprehensive income		17,907		3,836		29,063		13,474
Total comprehensive income attributable to:
Owners of the Parent Company		17,896		3,597		29,133		13,352
Non-controlling interests		11		239		-70		122

18    Ericsson | Second quarter report 2022 Financial statements

Condensed consolidated balance sheet

			Jun 30		Dec 31
SEK million	Note		2022		2021
Assets
Non-current assets
Intangible assets
Capitalized development expenses				3,358		3,528
Goodwill				42,210		38,204
Intellectual property rights, brands and other intangible assets				3,911		3,830
Property, plant and equipment				13,942		13,580
Right-of-use assets				7,951		7,948
Financial assets
Equity in JV and associated companies				1,071		941
Other investments in shares and participations		5		1,867		2,258
Customer finance, non-current		5		379		568
Interest-bearing securities, non-current		5		3,061		30,626
Other financial assets, non-current		5		8,363		6,217
Deferred tax assets				22,982		23,109
				109,095		130,809
Current assets
Inventories				47,866		35,164
Contract assets				10,186		10,506
Trade receivables		5		47,156		45,399
Customer finance, current		5		3,221		2,719
Current tax assets				7,299		6,379
Other current receivables				10,297		7,656
Interest-bearing securities, current		5		3,715		12,932
Cash and cash equivalents		5		93,618		54,050
				223,358		174,805
Total assets				332,453		305,614
Equity and liabilities
Equity
Stockholders’ equity				129,620		108,775
Non-controlling interest in equity of subsidiaries				-1,821		-1,676
				127,799		107,099
Non-current liabilities
Post-employment benefits				25,326		36,050
Provisions, non-current		4		4,020		3,722
Deferred tax liabilities				1,250		884
Borrowings, non-current		5		26,363		22,241
Lease liabilities, non-current				7,086		7,079
Other non-current liabilities				762		1,587
				64,807		71,563
Current liabilities
Provisions, current		4		5,648		5,782
Borrowings, current		5		3,686		9,590
Lease liabilities, current				2,378		2,224
Contract liabilities				41,547		32,834
Trade payables		5		39,539		35,684
Current tax liabilities				6,703		2,917
Other current liabilities				40,346		37,921
				139,847		126,952
Total equity and liabilities				332,453		305,614

19    Ericsson | Second quarter report 2022 Financial statements

Condensed consolidated statement of cash flows

			Q2				Jan-Jun
SEK million	Note		2022		2021		2022		2021
Operating activities
Net income				4,650		3,900		7,562		7,068
Adjustments for
Taxes				1,751		1,230		2,772		2,814
Earnings/ dividends in JV and associated companies				88		112		96		188
Depreciation, amortization and impairment losses		6		2,224		2,097		4,370		4,032
Other				345		631		1,244		816
				9,058		7,970		16,044		14,918
Changes in operating net assets
Inventories				-4,728		-701		-10,074		-1,936
Customer finance, current and non-current				134		454		11		673
Trade receivables and contract assets				3,350		-4,034		4,251		-2,055
Trade payables				1,324		744		-47		-3,368
Provisions and post-employment benefits				-321		-1,461		648		-938
Contract liabilities				-721		4,603		5,539		9,057
Other operating assets and liabilities, net				-333		608		-7,100		-5,073
				-1,295		213		-6,772		-3,640
Interest received				-17		2		61		70
Interest paid				-437		-384		-648		-544
Taxes paid				-1,022		-1,861		-2,368		-1,659
Cash flow from operating activities				6,287		5,940		6,317		9,145
Investing activities
Investments in property, plant and equipment		6		-1,053		-1,007		-1,871		-1,922
Sales of property, plant and equipment				61		17		99		41
Acquisitions/divestments of subsidiaries and other operations, net				123		-69		169		-64
Product development		6		-301		-266		-589		-470
Purchase of interest-bearing securities				-1,037		-13,207		-1,037		-16,887
Sale of interest-bearing securities				22,747		7,408		38,774		11,249
Other investing activities				1,384		—		805		-5
Cash flow from investing activities				21,924		-7,124		36,350		-8,058
Financing activities
Proceeds from issuance of long-term debt				—		7,804		7,788		7,881
Repayment of long-term debt				-9,993		-510		-9,993		-5,752
Dividends paid				-4,164		-3,328		-4,164		-3,333
Repayment of lease liabilities				-577		-617		-1,170		-1,165
Other financing activities				243		940		812		491
Cash flow from financing activities				-14,491		4,289		-6,727		-1,878
Effect of exchange rate changes on cash				3,042		-375		3,628		452
Net change in cash and cash equivalents				16,762		2,730		39,568		-339
Cash and cash equivalents, beginning of period				76,856		40,543		54,050		43,612
Cash and cash equivalents, end of period				93,618		43,273		93,618		43,273

20    Ericsson | Second quarter report 2022 Financial statements

Condensed consolidated statement of changes in equity

	Jan-Jun
SEK million	2022		2021
Opening balance		107,099		85,177
Total comprehensive income		29,063		13,474
Sale/repurchase of own shares		—		—
Long-term variable compensation plans		46		43
Dividends to shareholders1)		-8,410		-6,873
Transactions with non-controlling interests		1		-126
Closing balance		127,799		91,695

¹⁾  Includes accrual of SEK 4,173 (3,335) million in Jan-Jun for the dividend approved by the Annual General Meeting on March 29, 2022. SEK 1.25 per share of the total SEK 2.50 per share of the dividend will be paid out in Q4 2022.

Condensed consolidated income statement – isolated quarters

	2022				2021
Isolated quarters, SEK million	Q2		Q1		Q4		Q3		Q2		Q1
Net sales		62,465		55,061		71,332		56,263		54,941		49,778
Cost of sales		-36,163		-31,772		-40,511		-31,487		-31,084		-28,483
Gross income		26,302		23,289		30,821		24,776		23,857		21,295
Research and development expenses		-11,496		-10,705		-11,863		-10,155		-10,480		-9,576
Selling and administrative expenses		-7,872		-6,588		-7,620		-6,177		-6,972		-6,188
Impairment losses on trade receivables		3		-180		99		-27		100		-212
Operating expenses		-19,365		-17,473		-19,384		-16,359		-17,352		-15,976
Other operating income and expenses1)		393		-1,065		428		500		-579		13
Share in earnings of JV and associated companies		-22		-7		-4		-82		-103		-71
Earnings before financial items and income tax (EBIT)		7,308		4,744		11,861		8,835		5,823		5,261
Financial income and expenses, net		-759		-643		-945		-598		-454		-533
Income after financial items		6,549		4,101		10,916		8,237		5,369		4,728
Income tax		-1,899		-1,189		-770		-2,471		-1,469		-1,560
Net income		4,650		2,912		10,146		5,766		3,900		3,168
Net income (loss) attributable to:
Owners of the Parent Company		4,504		2,940		10,076		5,752		3,679		3,187
Non-controlling interests		146		-28		70		14		221		-19
Other information
Average number of shares, basic (million)		3,330		3,330		3,330		3,330		3,329		3,328
Earnings per share, basic (SEK)2)		1.36		0.88		3.03		1.73		1.10		0.96
Earnings per share, diluted (SEK)3)		1.35		0.88		3.02		1.73		1.10		0.96

¹⁾  Q2 2022 includes revaluation/disposals of Ericsson Ventures investments of SEK 0.1 billion. Q1 2022 includes a provision of SEK -0.9 billion for impairment of assets and other one-time costs due to the suspension of the affected business in Russia, and revaluation of Ericsson Venture investments of SEK -0.3 billion. Q4 2021 includes a gain from divestment of a data center and revaluation of Ericsson Ventures investments of SEK 0.4 billion. Q3 2021 includes an Ericsson Ventures investment revaluation of SEK 0.5 billion. Q2 2021 includes cost of SEK -0.8 billion as a result of the Nokia settlement related to the 2019 resolutions with SEC and DOJ.

²⁾  Based on net income attributable to owners of the Parent Company.

³⁾ Potential ordinary shares are not considered when their conversion to ordinary shares would increase earnings per share.

21    Ericsson | Second quarter report 2022 Financial statements

Condensed consolidated statement of cash flows – isolated quarters

	2022				2021
Isolated quarters, SEK million	Q2		Q1		Q4		Q3		Q2		Q1
Operating activities
Net income		4,650		2,912		10,146		5,766		3,900		3,168
Adjustments for
Taxes		1,751		1,021		938		2,824		1,230		1,584
Earnings/ dividends in JV and associated companies		88		8		13		159		112		76
Depreciation, amortization and impairment losses		2,224		2,146		2,552		2,385		2,097		1,935
Other		345		899		398		24		631		185
		9,058		6,986		14,047		11,158		7,970		6,948
Changes in operating net assets
Inventories		-4,728		-5,346		248		-3,877		-701		-1,235
Customer finance, current and non-current		134		-123		780		-1,419		454		219
Trade receivables and contract assets		3,350		901		-5,227		8,833		-4,034		1,979
Trade payables		1,324		-1,371		3,020		1,733		744		-4,112
Provisions and post-employment benefits		-321		969		950		-130		-1,461		523
Contract liabilities		-721		6,260		-1,655		-3,388		4,603		4,454
Other operating assets and liabilities, net		-333		-6,767		4,606		3,168		608		-5,681
		-1,295		-5,477		2,722		4,920		213		-3,853
Interest received		-17		78		-104		42		2		68
Interest paid		-437		-211		-310		-120		-384		-160
Taxes paid/received		-1,022		-1,346		-1,159		-1,276		-1,861		202
Cash flow from operating activities		6,287		30		15,196		14,724		5,940		3,205
Investing activities
Investments in property, plant and equipment		-1,053		-818		-701		-1,040		-1,007		-915
Sales of property, plant and equipment		61		38		34		40		17		24
Acquisitions/divestments of subs. and other operations, net		123		46		178		-55		-69		5
Product development		-301		-288		-302		-190		-266		-204
Purchase of interest-bearing securities		-1,037		—		-8,858		-9,670		-13,207		-3,680
Sale of interest-bearing securities		22,747		16,027		7,064		1,801		7,408		3,841
Other investing activities		1,384		-579		-122		-4		—		-5
Cash flow from investing activities		21,924		14,426		-2,707		-9,118		-7,124		-934
Financing activities
Proceeds from issuance of long-term debt		—		7,788		1		—		7,804		77
Repayment of long-term debt		-9,993		—		-39		—		-510		-5,242
Dividends paid		-4,164		—		-3,395		-161		-3,328		-5
Repayment of lease liabilities		-577		-593		-623		-580		-617		-548
Other financing activities		243		569		-825		-1,807		940		-449
Cash flow from financing activities		-14,491		7,764		-4,881		-2,548		4,289		-6,167
Effect of exchange rate changes on cash		3,042		586		-34		145		-375		827
Net change in cash and cash equivalents		16,762		22,806		7,574		3,203		2,730		-3,069
Cash and cash equivalents, beginning of period		76,856		54,050		46,476		43,273		40,543		43,612
Cash and cash equivalents, end of period		93,618		76,856		54,050		46,476		43,273		40,543

22    Ericsson | Second quarter report 2022 Financial statements

Condensed Parent Company income statement

	Q2				Jan-Jun
SEK million	2022		2021		2022		2021
Net sales		—		—		—		—
Cost of sales		—		—		—		—
Gross income		—		—		—		—
Operating expenses		-210		-172		-565		-345
Other operating income and expenses		644		-178		1,253		436
EBIT		434		-350		688		91
Financial net		17,475		5,241		17,306		5,593
Income after financial items		17,909		4,891		17,994		5,684
Transfers to (-) / from untaxed reserves		—		—		—		—
Income tax		-213		-137		-300		-263
Net income		17,696		4,754		17,694		5,421

Condensed Parent Company statement of comprehensive income (loss)

	Q2				Jan-Jun
SEK million	2022		2021		2022		2021
Net income		17,696		4,754		17,694		5,421
Revaluation of borrowings due to change in credit risk		1,064		39		1,980		-16
Cash flow hedge reserve-gains/losses arising during the period		3,893		—		4,351		—
Tax on items that will not be reclassified to profit or loss		-1,021		-8		-1,299		3
Other comprehensive income, net of tax		3,936		31		5,032		-13
Total comprehensive income		21,632		4,785		22,726		5,408

23    Ericsson | Second quarter report 2022 Financial statements

Condensed Parent Company balance sheet

	Jun 30		Dec 31
SEK million	2022		2021
Assets
Fixed assets
Intangible assets		6		8
Tangible assets		409		413
Financial assets¹)		97,514		120,605
		97,929		121,026
Current assets
Receivables		27,970		27,364
Short-term investments		3,433		12,722
Cash and cash equivalents		78,663		37,128
		110,066		77,214
Total assets		207,995		198,240
Stockholders’ equity, provisions and liabilities
Equity
Restricted equity		48,164		48,164
Non-restricted equity		49,407		34,984
		97,571		83,148
Provisions		236		293
Non-current liabilities		26,247		22,406
Current liabilities		83,941		92,393
Total stockholders’ equity, provisions and liabilities		207,995		198,240
1) Of which interest-bearing securities, non-current		3,033		30,615

24    Ericsson | Second quarter report 2022 Financial statements

Accounting policies and Explanatory notes (unaudited)

Note 1 – Accounting policies

The group

This condensed consolidated interim financial report for the quarterly reporting period ended June 30, 2022, has been prepared in accordance with International Accounting Standard, IAS 34 “Interim Financial Reporting”. The term “IFRS” used in this document refers to the application of IAS and IFRS as well as interpretations of these standards as issued by 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, 2021 and should be read in conjunction with that annual report. There are no amendments of IFRS during 2022 that are estimated to have a material impact on the result and financial position of the Company.

Note 2 – Critical accounting estimates and judgements

Russia

In late February, Ericsson suspended all deliveries to customers in Russia. In the light of recent events and of European Union sanctions, the company will now suspend its affected business with customers in Russia indefinitely. Ericsson is engaging with customers and partners regarding the indefinite suspension of the affected business. The priority is to focus on the safety and well-being of Ericsson employees in Russia and they will be placed on paid leave.

As a consequence, Ericsson recorded a SEK 0.9 billion provision in the first quarter 2022 for impairment of assets and other exceptional costs. No staff redundancy cost is included. The provision was recorded in Other operating expenses in Segment Networks. Around one third of this amount will impact cash flow.

25    Ericsson | Second quarter report 2022 Accounting policies and Explanatory notes

Note 3 – Segment information

Net sales by segment by quarter

	2022						2021
Isolated quarters, SEK million	Q2			Q1			Q4			Q3			Q2			Q1
Networks		45,983			40,712			51,097			40,592			39,875			36,274
Of which Products		35,299			31,131			39,963			31,079			30,414			27,495
Of which Services		10,684			9,581			11,134			9,513			9,461			8,779
Digital Services		8,662			7,214			12,736			8,630			7,887			6,898
Of which Products		4,641			3,634			7,157			4,601			3,989			3,581
Of which Services		4,021			3,580			5,579			4,029			3,898			3,317
Managed Services		5,416			4,946			5,354			5,041			5,119			4,865
Emerging Business and Other		2,404			2,189			2,145			2,000			2,060			1,741
Total		62,465			55,061			71,332			56,263			54,941			49,778
	2022						2021
Sequential change, percent	Q2			Q1			Q4			Q3			Q2			Q1
Networks		13	%		-20	%		26	%		2	%		10	%		-27	%
Of which Products		13	%		-22	%		29	%		2	%		11	%		-27	%
Of which Services		12	%		-14	%		17	%		1	%		8	%		-26	%
Digital Services		20	%		-43	%		48	%		9	%		14	%		-46	%
Of which Products		28	%		-49	%		56	%		15	%		11	%		-52	%
Of which Services		12	%		-36	%		38	%		3	%		18	%		-37	%
Managed Services		10	%		-8	%		6	%		-2	%		5	%		-16	%
Emerging Business and Other		10	%		2	%		7	%		-3	%		18	%		0	%
Total		13	%		-23	%		27	%		2	%		10	%		-28	%
	2022						2021
Year over year change, percent	Q2			Q1			Q4			Q3			Q2			Q1
Networks		15	%		12	%		4	%		-3	%		0	%		3	%
Of which Products		16	%		13	%		7	%		0	%		5	%		11	%
Of which Services		13	%		9	%		-6	%		-11	%		-13	%		-15	%
Digital Services		10	%		5	%		1	%		-1	%		-8	%		-6	%
Of which Products		16	%		1	%		-4	%		0	%		-13	%		-6	%
Of which Services		3	%		8	%		6	%		-2	%		-2	%		-6	%
Managed Services		6	%		2	%		-8	%		-8	%		-8	%		-15	%
Emerging Business and Other		17	%		26	%		23	%		26	%		29	%		11	%
Total		14	%		11	%		3	%		-2	%		-1	%		0	%
	2022						2021
Year to date, SEK million	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Networks		86,695			40,712			167,838			116,741			76,149			36,274
Of which Products		66,430			31,131			128,951			88,988			57,909			27,495
Of which Services		20,265			9,581			38,887			27,753			18,240			8,779
Digital Services		15,876			7,214			36,151			23,415			14,785			6,898
Of which Products		8,275			3,634			19,328			12,171			7,570			3,581
Of which Services		7,601			3,580			16,823			11,244			7,215			3,317
Managed Services		10,362			4,946			20,379			15,025			9,984			4,865
Emerging Business and Other		4,593			2,189			7,946			5,801			3,801			1,741
Total		117,526			55,061			232,314			160,982			104,719			49,778
	2022						2021
Year over year change, percent	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Networks		14	%		12	%		1	%		0	%		2	%		3	%
Of which Products		15	%		13	%		5	%		5	%		8	%		11	%
Of which Services		11	%		9	%		-11	%		-13	%		-14	%		-15	%
Digital Services		7	%		5	%		-3	%		-5	%		-7	%		-6	%
Of which Products		9	%		1	%		-5	%		-6	%		-10	%		-6	%
Of which Services		5	%		8	%		0	%		-3	%		-4	%		-6	%
Managed Services		4	%		2	%		-10	%		-10	%		-12	%		-15	%
Emerging Business and Other		21	%		26	%		22	%		22	%		20	%		11	%
Total		12	%		11	%		0	%		-1	%		-1	%		0	%

26    Ericsson | Second quarter report 2022 Accounting policies and Explanatory notes

Gross income by segment by quarter

	2022				2021
Isolated quarters, SEK million	Q2		Q1		Q4		Q3		Q2		Q1
Networks		20,735		18,211		23,643		19,401		19,111		16,714
Digital Services		3,460		3,097		5,456		3,644		2,990		3,002
Managed Services		1,247		1,148		974		944		975		942
Emerging Business and Other		860		833		748		787		781		637
Total		26,302		23,289		30,821		24,776		23,857		21,295
	2022				2021
Year to date, SEK million	Jan-Jun		Jan-Mar		Jan-Dec		Jan-Sep		Jan-Jun		Jan-Mar
Networks		38,946		18,211		78,869		55,226		35,825		16,714
Digital Services		6,557		3,097		15,092		9,636		5,992		3,002
Managed Services		2,395		1,148		3,835		2,861		1,917		942
Emerging Business and Other		1,693		833		2,953		2,205		1,418		637
Total		49,591		23,289		100,749		69,928		45,152		21,295

EBIT (loss) by segment by quarter

`	2022				2021
Isolated quarters, SEK million	Q2		Q1		Q4		Q3		Q2		Q1
Networks		8,822		6,747		11,757		9,624		8,645		7,240
Digital Services		-1,323		-1,418		304		-822		-1,567		-1,519
Managed Services		605		592		353		386		416		313
Emerging Business and Other		-796		-1,177		-553		-353		-1,671		-773
Total		7,308		4,744		11,861		8,835		5,823		5,261
	2022				2021
Year to date, SEK million	Jan-Jun		Jan-Mar		Jan-Dec		Jan-Sep		Jan-Jun		Jan-Mar
Networks		15,569		6,747		37,266		25,509		15,885		7,240
Digital Services		-2,741		-1,418		-3,604		-3,908		-3,086		-1,519
Managed Services		1,197		592		1,468		1,115		729		313
Emerging Business and Other		-1,973		-1,177		-3,350		-2,797		-2,444		-773
Total		12,052		4,744		31,780		19,919		11,084		5,261

27    Ericsson | Second quarter report 2022 Accounting policies and Explanatory notes

Net sales by market area by quarter

	2022						2021
Isolated quarters, SEK million	Q2			Q1			Q4			Q3			Q2			Q1
South East Asia, Oceania and India		7,962			5,836			8,604			6,450			7,099			6,676
North East Asia		7,319			5,421			9,816			5,691			7,123			6,491
North America		22,849			20,727			22,264			20,161			17,950			17,081
Europe and Latin America1)2)		15,325			15,290			19,236			14,378			14,011			12,647
Middle East and Africa		5,223			4,301			6,948			4,985			4,459			4,393
Other1)2)		3,787			3,486			4,464			4,598			4,299			2,490
Total		62,465			55,061			71,332			56,263			54,941			49,778
1) Of which in Sweden		950			678			1,078			478			404			389
2) Of which in EU		8,511			8,611			10,181			7,069			7,256			6,801
	2022						2021
Sequential change, percent	Q2			Q1			Q4			Q3			Q2			Q1
South East Asia, Oceania and India		36	%		-32	%		33	%		-9	%		6	%		-32	%
North East Asia		35	%		-45	%		72	%		-20	%		10	%		-49	%
North America		10	%		-7	%		10	%		12	%		5	%		-11	%
Europe and Latin America1)2)		0	%		-21	%		34	%		3	%		11	%		-26	%
Middle East and Africa		21	%		-38	%		39	%		12	%		2	%		-33	%
Other1)2)		9	%		-22	%		-3	%		7	%		73	%		-42	%
Total		13	%		-23	%		27	%		2	%		10	%		-28	%
1) Of which in Sweden		40	%		-37	%		126	%		18	%		4	%		7	%
2) Of which in EU		-1	%		-15	%		44	%		-3	%		7	%		-23	%
	2022						2021
Year over year change, percent	Q2			Q1			Q4			Q3			Q2			Q1
South East Asia, Oceania and India		12	%		-13	%		-12	%		-17	%		8	%		13	%
North East Asia		3	%		-16	%		-23	%		-35	%		-9	%		66	%
North America		27	%		21	%		17	%		10	%		-2	%		-5	%
Europe and Latin America1)2)		9	%		21	%		12	%		8	%		7	%		3	%
Middle East and Africa		17	%		-2	%		7	%		-10	%		-18	%		-25	%
Other1)2)		-12	%		40	%		4	%		26	%		0	%		-37	%
Total		14	%		11	%		3	%		-2	%		-1	%		0	%
1) Of which in Sweden		135	%		74	%		197	%		92	%		42	%		71	%
2) Of which in EU		17	%		27	%		15	%		0	%		0	%		9	%
	2022						2021
Year to date, SEK million	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
South East Asia, Oceania and India		13,798			5,836			28,829			20,225			13,775			6,676
North East Asia		12,740			5,421			29,121			19,305			13,614			6,491
North America		43,576			20,727			77,456			55,192			35,031			17,081
Europe and Latin America1)2)		30,615			15,290			60,272			41,036			26,658			12,647
Middle East and Africa		9,524			4,301			20,785			13,837			8,852			4,393
Other1)2)		7,273			3,486			15,851			11,387			6,789			2,490
Total		117,526			55,061			232,314			160,982			104,719			49,778
1) Of which in Sweden		1,628			678			2,349			1,271			793			389
2) Of which in EU		17,122			8,611			31,307			21,126			14,057			6,801
	2022						2021
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		0	%		-13	%		-4	%		0	%		10	%		13	%
North East Asia		-6	%		-16	%		-13	%		-6	%		16	%		66	%
North America		24	%		21	%		5	%		1	%		-4	%		-5	%
Europe and Latin America1)2)		15	%		21	%		8	%		6	%		5	%		3	%
Middle East and Africa		8	%		-2	%		-11	%		-18	%		-21	%		-25	%
Other1)2)		7	%		40	%		-2	%		-4	%		-18	%		-37	%
Total		12	%		11	%		0	%		-1	%		-1	%		0	%
1) Of which in Sweden		105	%		74	%		109	%		67	%		55	%		71	%
2) Of which in EU		22	%		27	%		6	%		2	%		4	%		9	%

28    Ericsson | Second quarter report 2022 Accounting policies and Explanatory notes

Net sales by market area by segment

	Q2 2022															Jan-Jun 2022
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		5,723			997			1,231			11			7,962			9,633			1,793			2,355			17			13,798
North East Asia		6,210			825			231			53			7,319			10,751			1,507			373			109			12,740
North America		19,871			2,104			858			16			22,849			38,080			3,793			1,664			39			43,576
Europe and Latin America		10,150			2,910			2,155			110			15,325			20,775			5,472			4,151			217			30,615
Middle East and Africa		2,713			1,560			941			9			5,223			4,899			2,793			1,819			13			9,524
Other1)		1,316			266			0			2,205			3,787			2,557		��	518			0			4,198			7,273
Total		45,983			8,662			5,416			2,404			62,465			86,695			15,876			10,362			4,593			117,526
Share of total		73	%		14	%		9	%		4	%		100	%		74	%		13	%		9	%		4	%		100	%

¹⁾ Includes IPR licensing revenues.

	Q2 2022
Sequential change, percent	Networks			Digital Services			Managed Services			Emerging Business and Other			Total
South East Asia, Oceania and India		46	%		25	%		10	%		83	%		36	%
North East Asia		37	%		21	%		63	%		-5	%		35	%
North America		9	%		25	%		6	%		-30	%		10	%
Europe and Latin America		-4	%		14	%		8	%		3	%		0	%
Middle East and Africa		24	%		27	%		7	%		125	%		21	%
Other		6	%		6	%		—			11	%		9	%
Total		13	%		20	%		10	%		10	%		13	%

	Q2 2022															Jan-Jun 2022
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	%		15	%		16	%		-21	%		12	%		-4	%		10	%		11	%		-19	%		0	%
North East Asia		0	%		18	%		45	%		2	%		3	%		-7	%		-3	%		13	%		-11	%		-6	%
North America		29	%		15	%		20	%		-52	%		27	%		26	%		15	%		23	%		-15	%		24	%
Europe and Latin America		16	%		1	%		-6	%		4	%		9	%		24	%		2	%		-6	%		6	%		15	%
Middle East and Africa		15	%		31	%		4	%		200	%		17	%		4	%		19	%		2	%		86	%		8	%
Other		-35	%		-37	%		—			19	%		-12	%		-9	%		-11	%		—			23	%		7	%
Total		15	%		10	%		6	%		17	%		14	%		14	%		7	%		4	%		21	%		12	%

29    Ericsson | Second quarter report 2022 Accounting policies and Explanatory notes

Top 5 countries in sales

	Q2						Jan-Jun
Country, percentage of net sales1)	2022			2021			2022			2021
United States		38	%		34	%		38	%		35	%
China		5	%		3	%		5	%		3	%
United Kingdom		4	%		3	%		4	%		3	%
Japan		4	%		5	%		4	%		7	%
South Korea		3	%		4	%		3	%		2	%

¹⁾  Based on Jan-June 2022. Includes IPR licensing revenues.

IPR licensing revenues by segment by quarter

	2022				2021
Isolated quarters, SEK million	Q2		Q1		Q4		Q3		Q2		Q1
Networks		1,186		1,142		1,949		2,146		1,904		671
Digital Services		261		250		428		471		418		147
Total		1,447		1,392		2,377		2,617		2,322		818
	2022				2021
Year to date, SEK million	Jan-Jun		Jan-Mar		Jan-Dec		Jan-Sep		Jan-Jun		Jan-Mar
Networks		2,328		1,142		6,670		4,721		2,575		671
Digital Services		511		250		1,464		1,036		565		147
Total		2,839		1,392		8,134		5,757		3,140		818

Note 4 – Provisions

Provisions

	2022				2021
Isolated quarters, SEK million	Q2		Q1		Q4		Q3		Q2		Q1
Opening balance		10,197		9,504		8,813		9,232		11,045		10,466
Additions		547		1,583		1,738		316		616		1,753
Utilization		-893		-1,173		-643		-408		-2,179		-979
Of which restructuring		-51		-67		-193		-95		-161		-336
Reversal of excess amounts		-316		-452		-603		-66		-170		-339
Reclassification, translation difference and other		133		735		199		-261		-80		144
Closing balance		9,668		10,197		9,504		8,813		9,232		11,045
Of which restructuring		579		604		637		732		807		950
	2022				2021
Year to date, SEK million	Jan-Jun		Jan-Mar		Jan-Dec		Jan-Sep		Jan-Jun		Jan-Mar
Opening balance		9,504		9,504		10,466		10,466		10,466		10,466
Additions		2,130		1,583		4,423		2,685		2,369		1,753
Utilization/Cash out		-2,066		-1,173		-4,209		-3,566		-3,158		-979
Of which restructuring		-118		-67		-785		-592		-497		-336
Reversal of excess amounts		-768		-452		-1,178		-575		-509		-339
Reclassification, translation difference and other		868		735		2		-197		64		144
Closing balance		9,668		10,197		9,504		8,813		9,232		11,045
Of which restructuring		579		604		637		732		807		950

30    Ericsson | Second quarter report 2022 Accounting policies and Explanatory notes

Note 5 – Financial risk management

There have been no changes to the classification of financial instruments or fair value hierarchy categorization from that presented in the latest Annual Report. Where Level 2 and Level 3 fair value hierarchies apply, the inputs and valuation methods used remained unchanged. The book values and fair values of financial instruments are as follows:

Financial instruments

SEK billion	Jun 30 2022								Dec 31 2021
	Fair value hierarchy level								Fair value hierarchy level
	Carrying value		Level 1		Level 2		Level 3		Carrying value		Level 1		Level 2		Level 3
Assets at fair value through profit or loss
Customer finance¹)		3.6		—		—		3.6		3.3		—		—		3.3
Interest-bearing securities		6.2		6.2		—		—		43.3		43.3		—		—
Cash equivalents²)		29.7		—		29.7		—		26.0		—		26.0		—
Other financial assets		1.9		0.1		—		1.7		2.3		0.6		—		1.7
Other current assets		1.8		—		1.8		—		0.3		—		0.3		—
Assets at fair value through OCI
Trade receivables		47.2		—		—		47.2		45.4		—		—		45.4
Assets at amortized costs
Interest-bearing securities		0.5		—		—		—		0.3		—		—		—
Cash equivalents²)		4.1		—		—		—		4.0		—		—		—
Other financial assets		0.6		—		—		—		0.5		—		—		—
Total financial assets		95.6								125.4
Financial liabilities at designated FVTPL
Parent company borrowings		-28.8		-16.1		-12.7		—		-31.4		-19.5		-11.9		—
Financial liabilities at FVTPL
Other current liabilities		-3.1		—		-3.1		—		-0.8		—		-0.8		—
Liabilities at amortized cost
Trade payables		-39.5		—		—		—		-35.7		—		—		—
Borrowings		-1.3		—		—		—		-0.4		—		—		—
Total financial liabilities		-72.7								-68.3

¹⁾  Year to date movements of customer finance receivables are as follows: additions of SEK 13.4 billion, disposals and repayments of SEK 13.6 billion and revaluation gain of SEK 0.5 billion.

²⁾  Total Cash and cash equivalent is SEK 93.6 (54.1) billion, of which SEK 33.8 (30.0) billion relating to Cash equivalents are presented in the table above.

Exchange rates used in the consolidation

	Jan-Jun				Jan-Dec
	2022		2021		2021
SEK/EUR -closing rate		10.73		10.11		10.24
SEK/USD -closing rate		10.31		8.51		9.05

31    Ericsson | Second quarter report 2022 Accounting policies and Explanatory notes

Note 6 – Cash flow

Information on investments

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

	2022				2021
Isolated quarters, SEK million	Q2		Q1		Q4		Q3		Q2		Q1
Additions
Property, plant and equipment		1,053		818		701		1,040		1,007		915
Capitalized development expenses		301		288		302		190		266		204
IPR, brands and other intangible assets		2		2		123		3		1		4
Total		1,356		1,108		1,126		1,233		1,274		1,123
Depreciation, amortization and impairment losses
Property, plant and equipment		1,074		964		1,134		954		910		874
Capitalized development expenses		403		401		396		394		329		224
Goodwill, IPR, brands and other intangible assets		159		198		435		464		294		283
Right-of-use assets		588		583		587		572		564		554
Total		2,224		2,146		2,552		2,384		2,097		1,935
	2022				2021
Year to date, SEK million	Jan-Jun		Jan-Mar		Jan-Dec		Jan-Sep		Jan-Jun		Jan-Mar
Additions
Property, plant and equipment		1,871		818		3,663		2,962		1,922		915
Capitalized development expenses		589		288		962		660		470		204
IPR, brands and other intangible assets		4		2		131		8		5		4
Total		2,464		1,108		4,756		3,630		2,397		1,123
Depreciation, amortization and impairment losses
Property, plant and equipment		2,038		964		3,872		2,738		1,784		874
Capitalized development expenses		804		401		1,343		947		553		224
Goodwill, IPR, brands and other intangible assets		357		198		1,477		1,041		577		283
Right-of-use assets		1,171		583		2,277		1,690		1,118		554
Total		4,370		2,146		8,969		6,416		4,032		1,935

Note 7 – Contingent liabilities and Assets pledged as collateral

Contingent liabilities and Assets pledged as collateral

SEK million	Jun 30 2022		Dec 31 2021
Contingent liabilities		2,549		1,614
Assets pledged as collateral		7,310		6,873

On December 6, 2019, Ericsson entered into a Deferred Prosecution Agreement (DPA) with the United States Department of Justice (DOJ). In October 2021, Ericsson received correspondence from the DOJ stating its determination that the Company had breached its obligations under its DPA by failing to provide certain documents and factual information. On March 1, 2022, the DOJ informed Ericsson that the disclosure made by the Company prior to the DPA about its internal investigation into conduct in Iraq in the period 2011 until 2019 was insufficient. Furthermore, it determined that the Company breached the DPA by failing to make subsequent disclosure related to the investigation post-DPA. As mentioned in the Annual Report 2021, the Company is in communication with the DOJ regarding the facts and circumstances of the breach determinations and is committed to co-operating with the DOJ to resolve the matters. While the length of the process cannot be determined, the resolution of these matters could result in a range of actions by DOJ, and may likely include additional monetary payments, the magnitude of which cannot at this time be reliably estimated. Accordingly, no provisions have been recorded for such potential exposure.

On March 3, 2022, Ericsson learned that Telefonaktiebolaget LM Ericsson and certain officers of Ericsson were named as defendants in a putative class action filed in the United States District Court for the Eastern District of New York. The complaint alleges violations of United States securities laws, in connection with allegedly false and misleading statements principally concerning the Company’s adherence with its compliance and disclosure policies and obligations and the conduct of its business in Iraq. At this stage it is premature to predict the outcome of this matter. Hence it is not possible to reliably estimate potential future cash outflows in resolving the matter.

32    Ericsson | Second quarter report 2022 Accounting policies and Explanatory notes

Note 8 – Share information

Number of shares and earnings per share

	Q2				Jan-Jun
	2022		2021		2022		2021
Number of shares, end of period (million)		3,334		3,334		3,334		3,334
Of which class A-shares (million)		262		262		262		262
Of which class B-shares (million)		3,072		3,072		3,072		3,072
Number of treasury shares, end of period (million)		4		4		4		4
Number of shares outstanding, basic, end of period (million)		3,330		3,330		3,330		3,330
Numbers of shares outstanding, diluted, end of period (million)		3,334		3,333		3,334		3,333
Average number of treasury shares (million)		4		5		4		5
Average number of shares outstanding, basic (million)		3,330		3,329		3,330		3,329
Average number of shares outstanding, diluted (million)1)		3,334		3,332		3,334		3,332
Earnings per share, basic (SEK)2)		1.36		1.10		2.24		2.06
Earnings per share, diluted (SEK)1)		1.35		1.10		2.23		2.06

¹⁾ Potential ordinary shares are not considered when their conversion to ordinary shares would increase earnings per share.

²⁾ Based on net income attributable to owners of the Parent Company.

The proposed dividend of SEK 2.50 per share was approved by the AGM on March 29, 2022. The dividend will be paid in two equal installments; SEK 1.25 per share was paid out in Q2 and SEK 1.25 per share will be paid out in Q4.

Note 9 – Employee information

Number of employees

	2022				2021
End of period	Jun 30		Mar 31		Dec 31		Sep 30		Jun 30		Mar 31
South East Asia, Oceania and India		26,127		26,255		26,369		26,363		26,325		26,123
North East Asia		13,077		12,999		13,091		14,111		14,043		14,033
North America		10,501		10,327		10,344		10,371		10,256		10,161
Europe and Latin America1)		47,240		46,994		47,064		46,903		46,616		46,482
Middle East and Africa		4,514		4,492		4,454		4,455		4,384		4,314
Total		101,459		101,067		101,322		102,203		101,624		101,113
1) Of which in Sweden		14,564		14,195		14,183		13,908		13,626		13,379

33    Ericsson | Second quarter report 2022 Accounting policies and Explanatory notes

Alternative performance measures (unaudited)

In this section, the Company presents its Alternative Performance Measures (APMs), which are not recognized measures of financial performance under IFRS. The presentation of APMs has limitations as analytical tools and should not be considered in isolation or as a substitute for related financial measures prepared in accordance with IFRS.

APMs are presented to enhance an investor’s evaluation of ongoing operating results, to aid in forecasting future periods and to facilitate meaningful comparison of results between periods.

Management uses these APMs to, among other things, evaluate ongoing operations in relation to historical results, for internal planning and forecasting purposes and in the calculation of certain performance-based compensation. APM’s should not be viewed as substitutes for income statement or cash flow items computed in accordance with IFRS.

This section also includes a reconciliation of the APMs to the most directly reconcilable line items in the financial statements. For more information about non-IFRS key operating measures, see Ericsson Annual Report 2021.

Sales growth adjusted for comparable units and currency

Sales growth adjusted for the impact of acquisitions and divestments as well as the effects of foreign currency fluctuations. Also named organic sales.

	2022						2021
Isolated quarters, year over year change	Q2			Q1			Q4			Q3			Q2			Q1
Reported net sales		62,465			55,061			71,332			56,263			54,941			49,778
Acquired business		—			—			-124			-402			-450			-225
Net FX impact		-5,034			-4,008			-385			1,196			5,455			5,341
Comparable net sales, excluding FX impact		57,431			51,053			70,823			57,057			59,946			54,894
Comparable quarter net sales adj. for acq/div business		54,941			49,778			69,590			57,472			55,578			49,750
Sales growth adjusted for comparable units and currency (%)		5	%		3	%		2	%		-1	%		8	%		10	%
	2022						2021
Year to date, year over year change	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Reported net sales		117,526			55,061			232,314			160,982			104,719			49,778
Acquired business		—			—			-1,201			-1,077			-675			-225
Net FX impact		-9,042			-4,008			11,607			11,992			10,796			5,341
Comparable net sales, excluding FX impact		108,484			51,053			242,720			171,897			114,840			54,894
Comparable quarter net sales adj. for acq/div business		104,719			49,778			232,390			162,800			105,328			49,750
Sales growth adjusted for comparable units and currency (%)		4	%		3	%		4	%		6	%		9	%		10	%

34    Ericsson | Second quarter report 2022                     Alternative performance measures

Items excluding restructuring charges

Gross income, operating expenses, and EBIT are presented excluding restructuring charges and, for certain measures, as a percentage of net sales.

	2022						2021
Isolated quarters, SEK million	Q2			Q1			Q4			Q3			Q2			Q1
Gross income		26,302			23,289			30,821			24,776			23,857			21,295
Net sales		62,465			55,061			71,332			56,263			54,941			49,778
Gross margin (%)		42.1	%		42.3	%		43.2	%		44.0	%		43.4	%		42.8	%
Gross income		26,302			23,289			30,821			24,776			23,857			21,295
Restructuring charges included in cost of sales		42			2			199			6			6			62
Gross income excluding restructuring charges		26,344			23,291			31,020			24,782			23,863			21,357
Net sales		62,465			55,061			71,332			56,263			54,941			49,778
Gross margin excluding restructuring charges (%)		42.2	%		42.3	%		43.5	%		44.0	%		43.4	%		42.9	%
Operating expenses		-19,365			-17,473			-19,384			-16,359			-17,352			-15,976
Restructuring charges included in R&D expenses		4			33			140			-2			-1			—
Restructuring charges included in selling and administrative expenses		3			6			124			1			-1			15
Operating expenses excluding restructuring charges		-19,358			-17,434			-19,120			-16,360			-17,354			-15,961
EBIT		7,308			4,744			11,861			8,835			5,823			5,261
Net sales		62,465			55,061			71,332			56,263			54,941			49,778
EBIT margin (%)		11.7	%		8.6	%		16.6	%		15.7	%		10.6	%		10.6	%
EBIT		7,308			4,744			11,861			8,835			5,823			5,261
Total restructuring charges		49			41			463			5			4			77
EBIT excluding restructuring charges		7,357			4,785			12,324			8,840			5,827			5,338
Net sales		62,465			55,061			71,332			56,263			54,941			49,778
EBIT margin excluding restructuring charges (%)		11.8	%		8.7	%		17.3	%		15.7	%		10.6	%		10.7	%

	2022						2021
Year to date, SEK million	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Gross income		49,591			23,289			100,749			69,928			45,152			21,295
Net sales		117,526			55,061			232,314			160,982			104,719			49,778
Gross margin (%)		42.2	%		42.3	%		43.4	%		43.4	%		43.1	%		42.8	%
Gross income		49,591			23,289			100,749			69,928			45,152			21,295
Restructuring charges included in cost of sales		44			2			273			74			68			62
Gross income excluding restructuring charges		49,635			23,291			101,022			70,002			45,220			21,357
Net sales		117,526			55,061			232,314			160,982			104,719			49,778
Gross margin excluding restructuring charges (%)		42.2	%		42.3	%		43.5	%		43.5	%		43.2	%		42.9	%
Operating expenses		-36,838			-17,473			-69,071			-49,687			-33,328			-15,976
Restructuring charges included in R&D expenses		37			33			137			-3			-1			—
Restructuring charges included in selling and administrative expenses		9			6			139			15			14			15
Operating expenses excluding restructuring charges		-36,792			-17,434			-68,795			-49,675			-33,315			-15,961
EBIT		12,052			4,744			31,780			19,919			11,084			5,261
Net sales		117,526			55,061			232,314			160,982			104,719			49,778
EBIT margin (%)		10.3	%		8.6	%		13.7	%		12.4	%		10.6	%		10.6	%
EBIT		12,052			4,744			31,780			19,919			11,084			5,261
Total restructuring charges		90			41			549			86			81			77
EBIT excluding restructuring charges		12,142			4,785			32,329			20,005			11,165			5,338
Net sales		117,526			55,061			232,314			160,982			104,719			49,778
EBIT margin excluding restructuring charges (%)		10.3	%		8.7	%		13.9	%		12.4	%		10.7	%		10.7	%

35    Ericsson | Second quarter report 2022 Alternative performance measures

EBITA and EBITA margin / EBITA and EBITA margin excluding restructuring charges

Earnings before interest, taxes, amortizations, write-downs of acquired intangibles and excluding restructuring charges also expressed as a percentage of net sales.

	2022						2021
Isolated quarters, SEK million	Q2			Q1			Q4			Q3			Q2			Q1
Net income		4,650			2,912			10,146			5,766			3,900			3,168
Income tax		1,899			1,189			770			2,471			1,469			1,560
Financial income and expenses, net		759			643			945			598			454			533
Amortizations and write-downs of acquired intangibles		158			199			436			464			294			283
EBITA		7,466			4,943			12,297			9,299			6,117			5,544
Net sales		62,465			55,061			71,332			56,263			54,941			49,778
EBITA margin (%)		12.0	%		9.0	%		17.2	%		16.5	%		11.1	%		11.1	%
Restructuring charges		49			41			463			5			4			77
EBITA excluding restructuring charges		7,515			4,984			12,760			9,304			6,121			5,621
EBITA margin excluding restructuring charges (%)		12.0	%		9.1	%		17.9	%		16.5	%		11.1	%		11.3	%

	2022						2021
Year to date, SEK million	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Net income		7,562			2,912			22,980			12,834			7,068			3,168
Income tax		3,088			1,189			6,270			5,500			3,029			1,560
Financial income and expenses, net		1,402			643			2,530			1,585			987			533
Amortizations and write-downs of acquired intangibles		357			199			1,477			1,041			577			283
EBITA		12,409			4,943			33,257			20,960			11,661			5,544
Net sales		117,526			55,061			232,314			160,982			104,719			49,778
EBITA margin (%)		10.6	%		9.0	%		14.3	%		13.0	%		11.1	%		11.1	%
Restructuring charges		90			41			549			86			81			77
EBITA excluding restructuring charges		12,499			4,984			33,806			21,046			11,742			5,621
EBITA margin excluding restructuring charges (%)		10.6	%		9.1	%		14.6	%		13.1	%		11.2	%		11.3	%

Rolling four quarters of net sales and EBIT margin excluding restructuring charges (%)

Net sales, EBIT margin and restructuring charges as a sum of last four quarters.

	2022						2021
Rolling four quarters, SEK million	Q2			Q1			Q4			Q3			Q2			Q1
Net sales		245,121			237,597			232,314			230,572			231,781			232,418
EBIT		32,748			31,263			31,780			30,927			30,735			28,763
Restructuring charges		558			513			549			78			403			1,082
EBIT excl.restr. charges		33,306			31,776			32,329			31,005			31,138			29,845
EBIT margin excl.restr. charges (%)		13.6	%		13.4	%		13.9	%		13.4	%		13.4	%		12.8	%

36    Ericsson | Second quarter report 2022 Alternative performance measures

Gross cash and net cash, end of period

Gross cash: Cash and cash equivalents plus interest-bearing securities (current and non-current).

Net cash: Cash and cash equivalents plus interest-bearing securities (current and non-current) less borrowings (current and non-current).

	2022				2021
SEK million	Q2		Q1		Q4		Q3		Q2		Q1
Cash and cash equivalents		93,618		76,856		54,050		46,476		43,273		40,543
+ Interest-bearing securities, current		3,715		12,292		12,932		15,016		12,855		4,599
+ Interest-bearing securities, non-current		3,061		15,022		30,626		26,668		20,998		23,477
Gross cash, end of period		100,394		104,170		97,608		88,160		77,126		68,619
-Borrowings, current		3,686		10,403		9,590		10,155		11,737		2,353
-Borrowings, non-current		26,363		28,599		22,241		22,282		21,673		23,299
Net cash, end of period		70,345		65,168		65,777		55,723		43,716		42,967

Capital employed

Total assets less non-interest-bearing provisions and liabilities.

	2022				2021
SEK million	Q2		Q1		Q4		Q3		Q2		Q1
Total assets		332,453		323,935		305,614		290,527		281,045		270,319
Non-interest-bearing provisions and liabilities
Provisions, non-current		4,020		4,498		3,722		2,471		1,922		2,337
Deferred tax liabilities		1,250		1,012		884		909		975		1,049
Other non-current liabilities		762		1,070		1,587		1,605		1,596		1,326
Provisions, current		5,648		5,699		5,782		6,342		7,310		8,708
Contract liabilities		41,547		39,875		32,834		33,869		36,621		32,054
Trade payables		39,539		35,316		35,684		31,877		29,638		29,135
Current tax liabilities		6,703		5,701		2,917		5,409		4,676		4,761
Other current liabilities		40,346		41,919		37,921		36,025		32,477		35,761
Capital employed		192,638		188,845		184,283		172,020		165,830		155,188

Capital turnover

Annualized net sales divided by average capital employed.

Annualization factor of four is used for isolated quarter.

Annualization factor of four is used for Jan-Mar, two is used for Jan-Jun, 4/3 is used for Jan-Sep and one is used for Jan-Dec.

	2022				2021
Isolated quarters, SEK million	Q2		Q1		Q4		Q3		Q2		Q1
Net sales		62,465		55,061		71,332		56,263		54,941		49,778
Annualized net sales		249,860		220,244		285,328		225,052		219,764		199,112
Average capital employed
Capital employed at beginning of period		188,845		184,283		172,020		165,830		155,188		161,990
Capital employed at end of period		192,638		188,845		184,283		172,020		165,830		155,188
Average capital employed		190,742		186,564		178,152		168,925		160,509		158,589
Capital turnover (times)		1.3		1.2		1.6		1.3		1.4		1.3

	2022				2021
Year to date, SEK million	Jan-Jun		Jan-Mar		Jan-Dec		Jan-Sep		Jan-Jun		Jan-Mar
Net sales		117,526		55,061		232,314		160,982		104,719		49,778
Annualized net sales		235,052		220,244		232,314		214,643		209,438		199,112
Average capital employed
Capital employed at beginning of period		184,283		184,283		161,990		161,990		161,990		161,990
Capital employed at end of period		192,638		188,845		184,283		172,020		165,830		155,188
Average capital employed		188,461		186,564		173,137		167,005		163,910		158,589
Capital turnover (times)		1.2		1.2		1.3		1.3		1.3		1.3

37    Ericsson | Second quarter report 2022 Alternative performance measures

Return on capital employed

The annualized total of EBIT as a percentage of average capital employed.

Annualization factor of four is used for isolated quarter.

Annualization factor of four is used for Jan-Mar, two is used for Jan-Jun, 4/3 is used for Jan-Sep and one is used for Jan-Dec.

	2022						2021
Isolated quarters, SEK million	Q2			Q1			Q4			Q3			Q2			Q1
EBIT		7,308			4,744			11,861			8,835			5,823			5,261
Annualized EBIT		29,232			18,976			47,444			35,340			23,292			21,044
Average capital employed
Capital employed at beginning of period		188,845			184,283			172,020			165,830			155,188			161,990
Capital employed at end of period		192,638			188,845			184,283			172,020			165,830			155,188
Average capital employed		190,742			186,564			178,152			168,925			160,509			158,589
Return on capital employed (%)		15.3	%		10.2	%		26.6	%		20.9	%		14.5	%		13.3	%

	2022						2021
Year to date, SEK million	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
EBIT		12,052			4,744			31,780			19,919			11,084			5,261
Annualized EBIT		24,104			18,976			31,780			26,559			22,168			21,044
Average capital employed
Capital employed at beginning of period		184,283			184,283			161,990			161,990			161,990			161,990
Capital employed at end of period		192,638			188,845			184,283			172,020			165,830			155,188
Average capital employed		188,461			186,564			173,137			167,005			163,910			158,589
Return on capital employed (% )		12.8	%		10.2	%		18.4	%		15.9	%		13.5	%		13.3	%

Equity ratio

Equity expressed as a percentage of total assets.

	2022						2021
SEK million	Q2			Q1			Q4			Q3			Q2			Q1
Total equity		127,799			109,879			107,099			95,628			91,695			88,124
Total assets		332,453			323,935			305,614			290,527			281,045			270,319
Equity ratio (% )		38.4	%		33.9	%		35.0	%		32.9	%		32.6	%		32.6	%

Return on equity

Annualized net income attributable to owners of the Parent Company as a percentage of average stockholders’ equity.

Annualization factor of four is used for isolated quarter.

Annualization factor of four is used for Jan-Mar, two is used for Jan-Jun, 4/3 is used for Jan-Sep and one is used for Jan-Dec.

	2022						2021
Isolated quarters, SEK million	Q2			Q1			Q4			Q3			Q2			Q1
Net income attributable to owners of the Parent Company		4,504			2,940			10,076			5,752			3,679			3,187
Annualized		18,016			11,760			40,304			23,008			14,716			12,748
Average stockholders’ equity
Stockholders’ equity, beginning of period		111,701			108,775			97,323			93,331			89,782			86,674
Stockholders’ equity, end of period		129,620			111,701			108,775			97,323			93,331			89,782
Average stockholders’ equity		120,661			110,238			103,049			95,327			91,557			88,228
Return on equity (%)		14.9	%		10.7	%		39.1	%		24.1	%		16.1	%		14.4	%

	2022						2021
Year to date, SEK million	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Net income attributable to owners of the Parent Company		7,444			2,940			22,694			12,618			6,866			3,187
Annualized		14,888			11,760			22,694			16,824			13,732			12,748
Average stockholders’ equity
Stockholders’ equity, beginning of period		108,775			108,775			86,674			86,674			86,674			86,674
Stockholders’ equity, end of period		129,620			111,701			108,775			97,323			93,331			89,782
Average stockholders’ equity		119,198			110,238			97,725			91,999			90,003			88,228
Return on equity (%)		12.5	%		10.7	%		23.2	%		18.3	%		15.3	%		14.4	%

38    Ericsson | Second quarter report 2022 Alternative performance measures

Adjusted earnings per share

Adjusted earnings per share, diluted, excluding amortizations and write-downs of acquired intangible assets and excluding restructuring charges.

	2022				2021
Isolated quarters, SEK	Q2		Q1		Q4		Q3		Q2		Q1
Earnings per share, diluted		1.35		0.88		3.02		1.73		1.10		0.96
Restructuring charges		0.01		0.01		0.11		0.00		0.00		0.02
Amortizations and write-downs of acquired intangibles		0.03		0.05		0.10		0.09		0.07		0.06
Adjusted earnings per share		1.39		0.94		3.23		1.82		1.17		1.04

	2022				2021
Year to date, SEK	Jan-Jun		Jan-Mar		Jan-Dec		Jan-Sep		Jan-Jun		Jan-Mar
Earnings per share, diluted		2.23		0.88		6.81		3.79		2.06		0.96
Restructuring charges		0.02		0.01		0.13		0.02		0.02		0.02
Amortizations and write-downs of acquired intangibles		0.08		0.05		0.32		0.22		0.13		0.06
Adjusted earnings per share		2.33		0.94		7.26		4.03		2.21		1.04

Free cash flow before M&A / Free cash flow after M&A

Free cash flow before M&A: Cash flow from operating activities less net capital expenditures, other investments (excluding M&A) and repayment of lease liabilities.

Free cash flow after M&A: Cash flow from operating activities less net capital expenditures, other investments and repayment of lease liabilities.

	2022				2021
Isolated quarters, SEK million	Q2		Q1		Q4		Q3		Q2		Q1
Cash flow from operating activities		6,287		30		15,196		14,724		5,940		3,205
Net capital expenditures and other investments (excl M&A)
Investments in property, plant and equipment		-1,053		-818		-701		-1,040		-1,007		-915
Sales of property, plant and equipment		61		38		34		40		17		24
Product development		-301		-288		-302		-190		-266		-204
Other investments1)		23		-27		-122		-4		—		-5
Repayment of lease liabilities		-577		-593		-623		-580		-617		-548
Free cash flow before M&A		4,440		-1,658		13,482		12,950		4,067		1,557
Acquisitions/divestments of subs and other operations, net		123		46		178		-55		-69		5
Free cash flow after M&A		4,563		-1,612		13,660		12,895		3,998		1,562

	2022				2021
Year to date, SEK million	Jan-Jun		Jan-Mar		Jan-Dec		Jan-Sep		Jan-Jun		Jan-Mar
Cash flow from operating activities		6,317		30		39,065		23,869		9,145		3,205
Net capital expenditures and other investments (excl M&A)
Investments in property, plant and equipment		-1,871		-818		-3,663		-2,962		-1,922		-915
Sales of property, plant and equipment		99		38		115		81		41		24
Product development		-589		-288		-962		-660		-470		-204
Other investments1)		-4		-27		-131		-9		-5		-5
Repayment of lease liabilities		-1,170		-593		-2,368		-1,745		-1,165		-548
Free cash flow before M&A		2,782		-1,658		32,056		18,574		5,624		1,557
Acquisitions/divestments of subs and other operations, net		169		46		59		-119		-64		5
Free cash flow after M&A		2,951		-1,612		32,115		18,455		5,560		1,562

¹⁾ Other investments is part of the line item Other investing activities in the Consolidated cash flow statement. The differences are movements in other interest-bearing assets and the cash flow hedge reserve gain, which are not to be part of the definition of Free cash flow.

39    Ericsson | Second quarter report 2022 Alternative performance measures

Sales growth by segment adjusted for comparable units and currency

	2022						2021
Isolated quarter, year over year change, percent	Q2			Q1			Q4			Q3			Q2			Q1
Networks		6	%		4	%		3	%		0	%		11	%		15	%
Digital Services		2	%		-2	%		0	%		1	%		0	%		3	%
Managed Services		0	%		-5	%		-8	%		-7	%		-2	%		-8	%
Emerging Business and Other		7	%		15	%		16	%		4	%		13	%		9	%
Total		5	%		3	%		2	%		-1	%		8	%		10	%

	2022						2021
Year to date, year over year change, percent	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Networks		5	%		4	%		7	%		8	%		13	%		15	%
Digital Services		0	%		-2	%		1	%		1	%		1	%		3	%
Managed Services		-2	%		-5	%		-6	%		-5	%		-5	%		-8	%
Emerging Business and Other		11	%		15	%		11	%		9	%		11	%		9	%
Total		4	%		3	%		4	%		6	%		9	%		10	%

Sales growth by market area adjusted for comparable units and currency

	2022						2021
Isolated quarter, year over year change, percent	Q2			Q1			Q4			Q3			Q2			Q1
South East Asia, Oceania and India		6	%		-17	%		-13	%		-16	%		14	%		21	%
North East Asia		-1	%		-20	%		-22	%		-33	%		1	%		78	%
North America		12	%		9	%		15	%		13	%		11	%		10	%
Europe and Latin America		4	%		15	%		12	%		9	%		14	%		12	%
Middle East and Africa		8	%		-9	%		5	%		-8	%		-10	%		-16	%
Total		5	%		3	%		2	%		-1	%		8	%		10	%

	2022						2021
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	%		-17	%		-1	%		4	%		17	%		21	%
North East Asia		-10	%		-20	%		-8	%		1	%		27	%		78	%
North America		10	%		9	%		12	%		11	%		11	%		10	%
Europe and Latin America		9	%		15	%		12	%		12	%		13	%		12	%
Middle East and Africa		0	%		-9	%		-7	%		-12	%		-13	%		-16	%
Total		4	%		3	%		4	%		6	%		9	%		10	%

40    Ericsson | Second quarter report 2022 Alternative performance measures

Gross margin by segment by quarter

	2022						2021
Isolated quarters, as percentage of net sales	Q2			Q1			Q4			Q3			Q2			Q1
Networks		45.1	%		44.7	%		46.3	%		47.8	%		47.9	%		46.1	%
Digital Services		39.9	%		42.9	%		42.8	%		42.2	%		37.9	%		43.5	%
Managed Services		23.0	%		23.2	%		18.2	%		18.7	%		19.0	%		19.4	%
Emerging Business and Other		35.8	%		38.1	%		34.9	%		39.4	%		37.9	%		36.6	%
Total		42.1	%		42.3	%		43.2	%		44.0	%		43.4	%		42.8	%

	2022						2021
Year to date, as percentage of net sales	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Networks		44.9	%		44.7	%		47.0	%		47.3	%		47.0	%		46.1	%
Digital Services		41.3	%		42.9	%		41.7	%		41.2	%		40.5	%		43.5	%
Managed Services		23.1	%		23.2	%		18.8	%		19.0	%		19.2	%		19.4	%
Emerging Business and Other		36.9	%		38.1	%		37.2	%		38.0	%		37.3	%		36.6	%
Total		42.2	%		42.3	%		43.4	%		43.4	%		43.1	%		42.8	%

EBIT margin by segment by quarter

	2022						2021
Isolated quarters, as percentage of net sales	Q2			Q1			Q4			Q3			Q2			Q1
Networks		19.2	%		16.6	%		23.0	%		23.7	%		21.7	%		20.0	%
Digital Services		-15.3	%		-19.7	%		2.4	%		-9.5	%		-19.9	%		-22.0	%
Managed Services		11.2	%		12.0	%		6.6	%		7.7	%		8.1	%		6.4	%
Emerging Business and Other		-33.1	%		-53.8	%		-25.8	%		-17.7	%		-81.1	%		-44.4	%
Total		11.7	%		8.6	%		16.6	%		15.7	%		10.6	%		10.6	%

	2022						2021
Year to date, as percentage of net sales	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Networks		18.0	%		16.6	%		22.2	%		21.9	%		20.9	%		20.0	%
Digital Services		-17.3	%		-19.7	%		-10.0	%		-16.7	%		-20.9	%		-22.0	%
Managed Services		11.6	%		12.0	%		7.2	%		7.4	%		7.3	%		6.4	%
Emerging Business and Other		-43.0	%		-53.8	%		-42.2	%		-48.2	%		-64.3	%		-44.4	%
Total		10.3	%		8.6	%		13.7	%		12.4	%		10.6	%		10.6	%

41    Ericsson | Second quarter report 2022 Alternative performance measures

Restructuring charges by function

	2022				2021
Isolated quarters, SEK million	Q2		Q1		Q4		Q3		Q2		Q1
Cost of sales		-42		-2		-199		-6		-6		-62
Research and development expenses		-4		-33		-140		2		1		0
Selling and administrative expenses		-3		-6		-124		-1		1		-15
Total		-49		-41		-463		-5		-4		-77

	2022				2021
Year to date, SEK million	Jan-Jun		Jan-Mar		Jan-Dec		Jan-Sep		Jan-Jun		Jan-Mar
Cost of sales		-44		-2		-273		-74		-68		-62
Research and development expenses		-37		-33		-137		3		1		0
Selling and administrative expenses		-9		-6		-139		-15		-14		-15
Total		-90		-41		-549		-86		-81		-77

Restructuring charges by segment

	2022				2021
Isolated quarters, SEK million	Q2		Q1		Q4		Q3		Q2		Q1
Networks		-45		-10		-278		1		-9		24
of which cost of sales		-44		-10		-77		1		-1		24
of which operating expenses		-1		0		-201		0		-8		0
Digital Services		-2		-33		-115		-4		-3		-8
of which cost of sales		0		0		-76		-6		-2		-3
of which operating expenses		-2		-33		-39		2		-1		-5
Managed Services		2		8		-43		-1		-1		-79
of which cost of sales		2		8		-40		-1		0		-79
of which operating expenses		0		0		-3		0		-1		0
Emerging Business and Other		-4		-6		-27		-1		9		-14
of which cost of sales		0		0		-6		0		-3		-4
of which operating expenses		-4		-6		-21		-1		12		-10
Total		-49		-41		-463		-5		-4		-77

	2022				2021
Year to date, SEK million	Jan-Jun		Jan-Mar		Jan-Dec		Jan-Sep		Jan-Jun		Jan-Mar
Networks		-55		-10		-262		16		15		24
of which cost of sales		-54		-10		-53		24		23		24
of which operating expenses		-1		0		-209		-8		-8		0
Digital Services		-35		-33		-130		-15		-11		-8
of which cost of sales		0		0		-87		-11		-5		-3
of which operating expenses		-35		-33		-43		-4		-6		-5
Managed Services		10		8		-124		-81		-80		-79
of which cost of sales		10		8		-120		-80		-79		-79
of which operating expenses		0		0		-4		-1		-1		0
Emerging Business and Other		-10		-6		-33		-6		-5		-14
of which cost of sales		0		0		-13		-7		-7		-4
of which operating expenses		-10		-6		-20		1		2		-10
Total		-90		-41		-549		-86		-81		-77

42    Ericsson | Second quarter report 2022 Alternative performance measures

Gross income and gross margin excluding restructuring charges by segment

	2022						2021
Isolated quarters, SEK million	Q2			Q1			Q4			Q3			Q2			Q1
Networks		20,779			18,221			23,720			19,400			19,112			16,690
Digital Services		3,460			3,097			5,532			3,650			2,992			3,005
Managed Services		1,245			1,140			1,014			945			975			1,021
Emerging Business and Other		860			833			754			787			784			641
Total		26,344			23,291			31,020			24,782			23,863			21,357
	2022						2021
Isolated quarters, as percentage of net sales	Q2			Q1			Q4			Q3			Q2			Q1
Networks		45.2	%		44.8	%		46.4	%		47.8	%		47.9	%		46.0	%
Digital Services		39.9	%		42.9	%		43.4	%		42.3	%		37.9	%		43.6	%
Managed Services		23.0	%		23.0	%		18.9	%		18.7	%		19.0	%		21.0	%
Emerging Business and Other		35.8	%		38.1	%		35.2	%		39.4	%		38.1	%		36.8	%
Total		42.2	%		42.3	%		43.5	%		44.0	%		43.4	%		42.9	%
	2022						2021
Year to date, SEK million	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Networks		39,000			18,221			78,922			55,202			35,802			16,690
Digital Services		6,557			3,097			15,179			9,647			5,997			3,005
Managed Services		2,385			1,140			3,955			2,941			1,996			1,021
Emerging Business and Other		1,693			833			2,966			2,212			1,425			641
Total		49,635			23,291			101,022			70,002			45,220			21,357
	2022						2021
Year to date, as percentage of net sales	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Networks		45.0	%		44.8	%		47.0	%		47.3	%		47.0	%		46.0	%
Digital Services		41.3	%		42.9	%		42.0	%		41.2	%		40.6	%		43.6	%
Managed Services		23.0	%		23.0	%		19.4	%		19.6	%		20.0	%		21.0	%
Emerging Business and Other		36.9	%		38.1	%		37.3	%		38.1	%		37.5	%		36.8	%
Total		42.2	%		42.3	%		43.5	%		43.5	%		43.2	%		42.9	%

43    Ericsson | Second quarter report 2022 Alternative performance measures

EBIT and EBIT margin excluding restructuring charges by segment

	2022						2021
Isolated quarters, SEK million	Q2			Q1			Q4			Q3			Q2			Q1
Networks		8,867			6,757			12,035			9,623			8,653			7,217
Digital Services		-1,321			-1,385			419			-818			-1,565			-1,510
Managed Services		603			584			396			387			417			392
Emerging Business and Other		-792			-1,171			-526			-352			-1,678			-761
Total		7,357			4,785			12,324			8,840			5,827			5,338
	2022						2021
Isolated quarters, as percentage of net sales	Q2			Q1			Q4			Q3			Q2			Q1
Networks		19.3	%		16.6	%		23.6	%		23.7	%		21.7	%		19.9	%
Digital Services		-15.3	%		-19.2	%		3.3	%		-9.5	%		-19.8	%		-21.9	%
Managed Services		11.1	%		11.8	%		7.4	%		7.7	%		8.1	%		8.1	%
Emerging Business and Other		-32.9	%		-53.5	%		-24.5	%		-17.6	%		-81.5	%		-43.7	%
Total		11.8	%		8.7	%		17.3	%		15.7	%		10.6	%		10.7	%
	2022						2021
Year to date, SEK million	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Networks		15,624			6,757			37,528			25,493			15,870			7,217
Digital Services		-2,706			-1,385			-3,474			-3,893			-3,075			-1,510
Managed Services		1,187			584			1,592			1,196			809			392
Emerging Business and Other		-1,963			-1,171			-3,317			-2,791			-2,439			-761
Total		12,142			4,785			32,329			20,005			11,165			5,338
	2022						2021
Year to date, as percentage of net sales	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Networks		18.0	%		16.6	%		22.4	%		21.8	%		20.8	%		19.9	%
Digital Services		-17.0	%		-19.2	%		-9.6	%		-16.6	%		-20.8	%		-21.9	%
Managed Services		11.5	%		11.8	%		7.8	%		8.0	%		8.1	%		8.1	%
Emerging Business and Other		-42.7	%		-53.5	%		-41.7	%		-48.1	%		-64.2	%		-43.7	%
Total		10.3	%		8.7	%		13.9	%		12.4	%		10.7	%		10.7	%

Rolling four quarters of net sales by segment

	2022		2021
Rolling four quarters, SEK million	Q2	Q1	Q4	Q3	Q2	Q1
Networks	178,384	172,276	167,838	166,107	167,174	167,126
Digital Services	37,242	36,467	36,151	36,086	36,189	36,877
Managed Services	20,757	20,460	20,379	20,840	21,297	21,751
Emerging Business and Other	8,738	8,394	7,946	7,539	7,121	6,664
Total	245,121	237,597	232,314	230,572	231,781	232,418

Rolling four quarters of EBIT margin excluding restructuring charges by segment (%)

	2022						2021
Rolling four quarters, as percentage of net sales	Q2			Q1			Q4			Q3			Q2			Q1
Networks		20.9	%		21.5	%		22.4	%		21.7	%		21.5	%		19.7	%
Digital Services		-8.3	%		-9.2	%		-9.6	%		-9.4	%		-8.5	%		-6.1	%
Managed Services		9.5	%		8.7	%		7.8	%		7.7	%		8.0	%		7.2	%
Emerging Business and Other		-32.5	%		-44.4	%		-41.7	%		-43.8	%		-47.9	%		-35.5	%
Total		13.6	%		13.4	%		13.9	%		13.4	%		13.4	%		12.8	%

44    Ericsson | Second quarter report 2022 Alternative performance measures

EBITA and EBITA margin by segment by quarter

	2022						2021
Isolated quarters, SEK million	Q2			Q1			Q4			Q3			Q2			Q1
Networks		8,850			6,775			11,787			9,643			8,679			7,274
Digital Services		-1,306			-1,369			569			-701			-1,445			-1,400
Managed Services		611			597			359			396			417			314
Emerging Business and Other		-689			-1,060			-418			-39			-1,534			-644
Total		7,466			4,943			12,297			9,299			6,117			5,544
	2022						2021
Isolated quarters, as percentage of net sales	Q2			Q1			Q4			Q3			Q2			Q1
Networks		19.2	%		16.6	%		23.1	%		23.8	%		21.8	%		20.1	%
Digital Services		-15.1	%		-19.0	%		4.5	%		-8.1	%		-18.3	%		-20.3	%
Managed Services		11.3	%		12.1	%		6.7	%		7.9	%		8.1	%		6.5	%
Emerging Business and Other		-28.7	%		-48.4	%		-19.5	%		-2.0	%		-74.5	%		-37.0	%
Total		12.0	%		9.0	%		17.2	%		16.5	%		11.1	%		11.1	%
	2022						2021
Year to date, SEK million	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Networks		15,625			6,775			37,383			25,596			15,953			7,274
Digital Services		-2,675			-1,369			-2,977			-3,546			-2,845			-1,400
Managed Services		1,208			597			1,486			1,127			731			314
Emerging Business and Other		-1,749			-1,060			-2,635			-2,217			-2,178			-644
Total		12,409			4,943			33,257			20,960			11,661			5,544
	2022						2021
Year to date, as percentage of net sales	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Networks		18.0	%		16.6	%		22.3	%		21.9	%		20.9	%		20.1	%
Digital Services		-16.8	%		-19.0	%		-8.2	%		-15.1	%		-19.2	%		-20.3	%
Managed Services		11.7	%		12.1	%		7.3	%		7.5	%		7.3	%		6.5	%
Emerging Business and Other		-38.1	%		-48.4	%		-33.2	%		-38.2	%		-57.3	%		-37.0	%
Total		10.6	%		9.0	%		14.3	%		13.0	%		11.1	%		11.1	%

Other ratios

	Q2				Jan-Jun
	2022		2021		2022		2021
Days sales outstanding		—		—		83		94
Inventory turnover days		112		89		112		90
Payable days		94		86		101		94

45    Ericsson | Second quarter report 2022 Alternative performance measures