6-K 1 d536889d6k.htm 6-K 6-K
Table of Contents

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN ISSUER

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

the Securities Exchange Act of 1934

July 14, 2023

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, 2023 regarding “Second quarter report 2023”.

 

 

 


Table of Contents

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, 2023


Table of Contents

LOGO

Second quarter report 2023

Stockholm, July 14, 2023

Second quarter highlights – In line with expectations

 

   

Group organic sales1 declined by -9% YoY. Segment Networks sales1 declined by -13%, while segment Enterprise sales1 grew by 20%. Reported sales was SEK 64.4 (62.5) b.

 

   

The sharp decline in sales in North America was partly offset by strong sales development in India.

 

   

Gross income excluding restructuring charges decreased to SEK 24.7 (26.3) b. as a result of lower sales and margins in Networks. Gross income increased in Enterprise, mainly driven by the consolidation of Vonage. Reported gross income was SEK 24.1 (26.3) b.

 

   

Gross margin excluding restructuring charges was 38.3% (42.2%) primarily impacted by changed business mix in Networks. Reported gross margin was 37.4% (42.1%).

 

   

EBITA excluding restructuring charges amounted to SEK 3.7 (7.5) b. with an EBITA margin of 5.7% (12.0%). Reported EBITA was SEK 0.5 (7.5) b. with restructuring charges amounting to SEK -3.1 (0.0) b.

 

   

Net loss was SEK -0.6 (4.7) b. primarily due to restructuring charges. EPS diluted was SEK -0.21 (1.35).

 

   

Free cash flow before M&A was SEK -5.0 (4.4) b., impacted by lower EBIT, payment to U.S. Department of Justice (DOJ) and increased working capital. Net cash on June 30, 2023, was SEK 1.9 b. compared with SEK 13.6 b. on March 31, 2023.

 

SEK b.

   Q2
2023
    Q2
2022
    YoY
change
    Q1
2023
    QoQ
change
    Jan-Jun
2023
    Jan-Jun
2022
    YoY
change
 

Net sales

     64.4       62.5       3     62.6       3     127.0       117.5       8

Sales growth adj. for comparable units and currency ²

     —         —         -9     —         —         —         —         -5

Gross margin ²

     37.4     42.1     —         38.6     —         38.0     42.2     —    

EBIT

     -0.3       7.3       —         3.0       —         2.7       12.1       -77

EBIT margin ²

     -0.5     11.7     —         4.9     —         2.2     10.3     —    

EBITA ²

     0.5       7.5       -93     3.8       -86     4.4       12.4       -65

EBITA margin ²

     0.8     12.0     —         6.2     —         3.5     10.6     —    

Net income (loss)

     -0.6       4.7       —         1.6       —         1.0       7.6       -87

EPS diluted, SEK

     -0.21       1.35       —         0.45       —         0.25       2.23       -89

Measures excl. restructuring charges ²

                

Gross margin excluding restructuring charges

     38.3     42.2     —         39.8     —         39.0     42.2     —    

EBIT excluding restructuring charges

     2.8       7.4       -62     4.0       -30     6.8       12.1       -44

EBIT margin excluding restructuring charges

     4.4     11.8     —         6.4     —         5.4     10.3     —    

EBITA excluding restructuring charges

     3.7       7.5       -51     4.8       -24     8.5       12.5       -32

EBITA margin excluding restructuring charges

     5.7     12.0     —         7.7     —         6.7     10.6     —    

Free cash flow before M & A

     -5.0       4.4       —         -8.0       —         -13.0       2.8       —    

Net cash, end of period

     1.9       70.3       -97     13.6       -86     1.9       70.3       -97

 

1 

Sales adjusted for comparable units and currency

2 

Non-IFRS financial measures are reconciled at the end of this report to the most directly comparable IFRS measures.

 

   
1    Ericsson | Second quarter report 2023                    


Table of Contents

CEO comments

 

LOGO   Building on our strong position and despite challenging market conditions we delivered a solid quarter – meeting expectations. We continue to execute with discipline and focus without losing sight of the long term. We are leveraging our 5G technology, growing our enterprise business and driving our cultural transformation
to accelerate our growth trajectory and shape the communications industry landscape.

Q2 in line with our expectations

Performance in Q2 was in line with our expectations, despite the uncertain macro backdrop and significant changes in market mix. This is a testament to our strategy, the excellence of our portfolio, and our ability to adapt and execute.

Group organic sales declined by -9%, as a Networks decline of -13% was partly mitigated by a 20% organic growth in Enterprise. Group EBITA excluding restructuring charges was SEK 3.7 (7.5) b. or 5.7% (12.0%) of sales.

In Networks, we saw strong execution with record build-out speed in India, where we now have a leading market share. Sales growth in India partly offset the expected softening we saw in other markets, notably in North America, where build-out pace moderated and customer inventory levels were reduced. Despite the business mix change and several large rollout contracts, Networks had a gross margin2 of over 39%.

In Cloud Software and Services, we continue to execute on the turnaround, including exiting subscale business and improving delivery efficiency. We are on track to deliver an EBITA2 of at least break-even for the full year 2023.

In Enterprise we saw continued strong growth in Enterprise Wireless Solutions, and we recorded positive EBITA in the Global Communications Platform business.

We landed another important 5G licensing agreement with a device vendor, further validating our IPR portfolio strength, positioning us well for continued IPR growth as we license vendors previously unlicensed for 5G.

We are well on track to reduce our annual run rate by at least SEK 11 b. by year-end, which will positively impact the P&L over the coming quarters with full effect during 2024.

Free cash flow before M&A was SEK -5.0 (4.4) b. primarily driven by lower EBIT2 and increased working capital including the payment to the US Department of Justice. We expect an improvement in cash flow during the second part of the year and gradually move towards our long-term target of 9-12% of Net sales.

Driving execution of our strategy

Ericsson is shaping the industry landscape by leveraging the full value of 5G and creating the world’s most powerful innovation platform. We remain focused on three priorities: i) bolstering our leadership in mobile networks; ii) growing our enterprise business; and iii) driving our cultural transformation.

Leadership in mobile networks is the cornerstone of our success. Our competitive advantage is clear – we deliver leading performance, energy efficiency and cost optimization. Our radios carry about half of the world’s 5G traffic outside China.

Building on this position and our market leading technologies, we are expanding into the fast-growing enterprise segment, substantially increasing our addressable market and diversifying our portfolio. 5G offers advanced capabilities such as Quality of Service, speed, latency, and location, and our platform allows these capabilities to be monetized in new ways by exposing them through network APIs. Operators and enterprises are showing great interest, as our platform will enable operators to offer differentiated performance levels and allow developers to integrate these capabilities into both existing and innovative new use cases.

We continue our relentless focus on enhancing our ethics and compliance program. Our compliance program and controls have been significantly enhanced since 2019 and our monitorship is entering its final year. We conduct testing to ensure our compliance program is effective and fully embedded across the company.

Looking ahead

For Q3 we expect similar market mix and trends as in Q2. In addition, Q3 will benefit from an early impact of our strong focus on cost-out execution. Overall, we thus expect Q3 EBITA margin2 to be in line with or slightly higher than Q2, followed by a seasonally stronger Q4.

As we look ahead, a fundamental driver of network capex is the continued rapid data traffic growth. Average smartphone usage is expected to exceed 20 GB/month in 2023 with strong growth. 240 operators have launched 5G, bringing new revenue growth with pricing model innovation. We forecast 5G subscriptions to top 1.5 billion by end-2023 and reach 4.6 billion by 2028. Fixed Wireless Access (FWA) also grows quickly, driving further traffic growth.

Traffic growth and operators’ desire to meet expectations for network quality with cost and energy efficiency, will stimulate investments. We estimate 75% of all base station sites outside China are not yet updated with 5G mid-band, and migration to 5G standalone will continue in order to deliver on 5G’s full potential.

We are confident that the market will recover as a consequence of these factors, and Ericsson is well positioned to benefit from increased investments. The exact timing of these increased network investments is, of course, in the hands of our customers, but we expect that the market will see a gradual recovery in late 2023 and improve in 2024.

Our technology leadership, solid performance and growth potential, position us well for the future. We are navigating the current environment with discipline and focus, and we tackle areas within our control. We execute on the Cloud Software and Services turnaround, portfolio adjustments, enhanced R&D productivity, IPR growth and cost reductions. Based on the expected recovery of the mobile networks market towards the end of the year, we remain focused on reaching the lower end of the 15-18% EBITA margin2 long-term target range in 2024.

Börje Ekholm

President and CEO

 

1

Sales adjusted for comparable units and currency

 

2

Excluding restructuring charges

 

 

   
2    Ericsson | Second quarter report 2023    CEO comments


Table of Contents

Financial highlights

Net sales Segments

 

SEK b.

   Q2
2023
     Q2
2022
     YoY
change
    YoY
adj.¹
    Q1
2023
     QoQ
change
    Jan-Jun
2023
     Jan-Jun
2022
     YoY
change
    YoY
adj.¹
 

Networks

     42.4        46.0        -8     -13     42.5        0     84.9        86.7        -2     -8

Cloud Software and Services

     15.1        14.0        8     1     13.4        13     28.5        26.1        9     3

Enterprise

     6.4        1.7        275     20     6.0        6     12.4        3.3        275     20

Other

     0.5        0.8        -32     -18     0.7        -25     1.2        1.4        -15     -8

Total

     64.4        62.5        3     -9     62.6        3     127.0        117.5        8     -5

 

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 comparable IFRS measures.

Net sales Market Areas

 

SEK b.

   Q2
2023
     Q2
2022
     YoY
change
    YoY
adj.¹
    Q1
2023
     QoQ
change
    Jan-Jun
2023
     Jan-Jun
2022
     YoY
change
    YoY
adj.¹
 

South East Asia, Oceania and India

     13.8        8.0        74     71     13.9        -1     27.8        13.8        101     97

North East Asia

     5.1        7.3        -31     -32     4.4        16     9.4        12.7        -26     -26

North America

     14.4        22.8        -37     -42     16.9        -15     31.4        43.6        -28     -35

Europe and Latin America

     16.0        15.3        4     -3     14.2        12     30.2        30.6        -1     -8

Middle East and Africa

     5.3        5.2        2     -4     4.2        28     9.5        9.5        0     -6

Other²

     9.8        3.8        158     38     8.9        9     18.7        7.3        157     33

Total

     64.4        62.5        3     -9     62.6        3     127.0        117.5        8     -5

 

1 

Sales growth adjusted for comparable units and currency.

2

Market area “Other” includes primarily IPR licensing revenues and a major part of segment Enterprise.

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

 

Segments

Group sales increased by 3% to SEK 64.4 (62.5) b. Sales adjusted for comparable units and currency declined by -9%.

Networks sales adjusted for comparable units and currency declined by -13% YoY. Networks sales doubled in market area South East Asia, Oceania and India while it declined in the other market areas, especially in North America where customers have lowered their capex spend and reduced inventory levels following high investment levels in 2021 and 2022. Networks accounted for 66% (74%) of Group sales.

Cloud Software and Services sales adjusted for comparable units and currency grew by 1% YoY, including 10% sales growth in North America. Sales in the quarter were supported by higher sales of 5G and IPR licensing revenues. Cloud Software and Services accounted for 23% (22%) of Group sales.

Enterprise sales adjusted for comparable units and currency increased by 20% YoY driven by Enterprise Wireless Solutions. Global Communications Platform (the consolidation of Vonage) sales were SEK 4.2 (0.0) b. in the quarter. Enterprise accounted for 10% (3%) of Group sales.

IPR licensing revenues increased to SEK 3.2 (1.4) b YoY. The increase is primarily related to a contract signed in the fourth quarter 2022 and a new contract with a device vendor signed in the second quarter 2023. The new contract includes revenue for past unlicensed quarters.

Market Areas

Sales adjusted for comparable units and currency increased in market area South East Asia, Oceania and India, while sales declined in the other four market areas.

In market area South East Asia, Oceania and India, sales adjusted for comparable units and currency increased by 71% YoY primarily driven by 5G market share gains in India. Reported sales increased by 74% YoY.

In market area North America, sales adjusted for comparable units and currency declined by -42% YoY as a result of customers lowering their capex spend and reducing inventory levels following high investment levels in 2021 and 2022. Cloud Software and Services grew by 10% in constant currency, driven by 5G. Reported sales decreased by -37% YoY.

In market area Europe and Latin America, sales adjusted for comparable units and currency decreased by -3% YoY. Sales in Europe declined by -6% following high investment levels in 2022, while sales in Latin America increased by 3% mainly driven by 5G deployments. Reported sales increased by 4% YoY.

In market area North East Asia, sales adjusted for comparable units and currency declined by -32% YoY as investments declined in several 5G front-runner markets after elevated 5G investment levels in 2022. Reported sales declined by -31% YoY.    

In market area Middle East and Africa, sales adjusted for comparable units and currency decreased by -4% YoY driven by the macro environment. Reported sales increased by 2% YoY.

Market area Other primarily includes IPR licensing revenues and the majority of sales from segment Enterprise. Sales adjusted for comparable units and currency increased by 38% YoY driven mainly by IPR licensing revenues and Enterprise Wireless Solutions.

 

 

   
3    Ericsson | Second quarter report 2023    Financial highlights


Table of Contents

Income and margin development

 

SEK b.

   Q2
2023
    Q2
2022
    YoY
change
    Q1
2023
    QoQ
change
    Jan-Jun
2023
    Jan-Jun
2022
    YoY
change
 

Net sales

     64.4       62.5       3     62.6       3     127.0       117.5       8

Gross income

     24.1       26.3       -8     24.2       0     48.3       49.6       -3

Gross margin

     37.4     42.1     —         38.6     —         38.0     42.2     —    

Research and development (R&D) expenses

     -13.8       -11.5       —         -12.0       —         -25.7       -22.2       —    

Selling and administrative expenses

     -10.6       -7.9       —         -9.1       —         -19.8       -14.5       —    

Impairment losses on trade receivables

     -0.3       0.0       —         0.0       —         -0.4       -0.2       —    

Other operating income and expenses

     0.3       0.4       -33     0.0       —         0.3       -0.7       —    

Share in earnings of JV´s and associated companies

     0.1       0.0       —         0.0       —         0.0       0.0       —    

EBIT

     -0.3       7.3       —         3.0       —         2.7       12.1       -77

EBIT margin ¹

     -0.5     11.7     —         4.9     —         2.2     10.3     —    

EBITA ¹

     0.5       7.5       -93     3.8       -86     4.4       12.4       -65

EBITA margin ¹

     0.8     12.0     —         6.2       3.5     10.6  

Financial income and expenses, net

     -0.4       -0.8       —         -0.9       —         -1.3       -1.4       —    

Income tax

     0.1       -1.9       —         -0.6       —         -0.4       -3.1       —    

Net income (loss)

     -0.6       4.7       —         1.6       —         1.0       7.6       -87

Restructuring charges

     -3.1       0.0       —         -1.0       —         -4.1       -0.1       —    

Measures excl. restr. charges and other items affecting comparability ¹

                

Gross margin excluding restructuring charges

     38.3     42.2     —         39.8     —         39.0     42.2     —    

EBIT excluding restructuring charges

     2.8       7.4       -62     4.0       -30     6.8       12.1       -44

EBIT margin excluding restructuring charges

     4.4     11.8     —         6.4     —         5.4     10.3     —    

EBITA excluding restructuring charges

     3.7       7.5       -51     4.8       -24     8.5       12.5       -32

EBITA margin excluding restructuring charges

     5.7     12.0     —         7.7     —         6.7     10.6     —    

 

1 

Non-IFRS financial measures are reconciled at the end of this report to the most directly comparable IFRS measures.

 

Gross income

Gross income decreased to SEK 24.1 (26.3) b. Gross income excluding restructuring charges decreased to SEK 24.7 (26.3) b. as a consequence of lower sales and lower gross margin in Networks. Gross margin excluding restructuring charges was 38.3% (42.2%).

Networks gross income and gross margin excluding restructuring charges decreased as a result of lower sales and changed business mix, partly mitigated by higher IPR revenues in the sales mix. Cloud Software and Services gross income and gross margin excluding restructuring charges increased, supported by higher sales and higher IPR revenues in the sales mix. Enterprise gross income excluding restructuring charges increased while gross margin excluding restructuring charges decreased as a result of changed business mix after the Vonage consolidation.

Research and development (R&D) expenses

R&D expenses amounted to SEK -13.8 (-11.5) b. including a negative currency effect of SEK -0.4 b. and restructuring charges of SEK -1.7 (0.0) b. R&D expenses increased in segment Enterprise through the acquisition of Vonage and increased investments to expand the Enterprise Wireless Solutions portfolio. R&D expenses decreased in Networks and segment Other.

Selling and administrative (SG&A) expenses

SG&A expenses were SEK -10.6 (-7.9) b. including a negative currency effect of SEK -0.2 b. and restructuring charges of SEK -0.9 (0.0) b. The increase is related to Enterprise where the acquisition of Vonage had an impact of SEK -2.0 b. (of which amortization of intangible assets amounted to SEK -0.7 b.). Furthermore, SG&A expenses increased due to continued investments in the go-to-market activities in Enterprise Wireless Solutions.

Other operating income and expenses

Other operating income and expenses was SEK 0.3 (0.4) b.

Restructuring charges

Restructuring charges amounted to SEK -3.1 (0.0) b. as a result of the ongoing cost-reduction activities, mainly redundancy costs. For full-year 2023, total restructuring charges are estimated to be SEK -7 b.

EBITA

EBITA decreased to SEK 0.5 (7.5) b. corresponding to an EBITA margin of 0.8% (12.0%). EBITA excluding restructuring charges declined by SEK -3.8 b. YoY to SEK 3.7 b. In addition to the decrease in gross income driven by Networks, operating expenses excluding amortization of intangible assets and restructuring charges increased by SEK -2.1 b., mainly due to the consolidation of Vonage in segment Enterprise. EBITA margin excluding restructuring charges was 5.7% (12.0%).

EBITA margin excluding restructuring charges rolling four quarters was 9.1%.

EBIT

EBIT decreased to SEK -0.3 (7.3) b. with an EBIT margin of -0.5% (11.7%). EBIT excluding restructuring charges decreased by SEK -4.5 b. to SEK 2.8 b. The result includes an increase in amortization of intangible assets of SEK -0.7 b., mainly related to the acquisition of Vonage in 2022. EBIT margin excluding restructuring charges was 4.4% (11.8%).

 

 

   
4    Ericsson | Second quarter report 2023    Financial highlights


Table of Contents

Financial income and expenses, net

Financial income and expenses was SEK -0.4 (-0.8) b. The currency hedge effect was SEK -0.1 (-0.5) b. YoY. The USD strengthened against the SEK between March 31, 2023 (SEK/USD 10.37) and June 30, 2023 (SEK/USD 10.88).

Income tax

Taxes were SEK 0.1 (-1.9) b. The reported positive tax is a result of the negative income after financial items. A tax rate of 30% is estimated for the full year.

Net income (loss)

Net income declined to a loss of SEK -0.6 (4.7) b. impacted by restructuring charges of SEK -3.1 (0.0) b., lower gross income excluding restructuring charges of SEK -1.7 b. YoY as well as increased operating expenses excluding restructuring charges of SEK -2.8 b. YoY. The decline was partly mitigated by lower tax impact of SEK 2.0 b. YoY. EPS diluted decreased to SEK -0.21 (1.35).

Employees

The number of employees on June 30, 2023, was 103,890 compared with 104,931 on March 31, 2023. The impact from the cost-reduction activities will be increasingly visible over coming quarters.

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

Reported sales increased by SEK 9.5 b. or 8% to SEK 127.0 b. Reported sales declined by -2% to SEK 84.9 b. in Networks, sales in Cloud Software and Services grew by 9% to SEK 28.5 b., while Enterprise grew by 275% to SEK 12.4 b. on the back of the acquisition of Vonage.

Sales adjusted for comparable units and currency decreased by -5%. Sales doubled in market area South East Asia, Oceania and India, while sales declined in the other market areas. Sales were supported by increased IPR licensing revenues. Networks sales adjusted for comparable units and currency decreased by -8%, Cloud Software and Services sales grew by 3% and Enterprise sales grew by 20%.

Reported gross income decreased to SEK 48.3 (49.6) b. with a gross margin of 38.0% (42.2%). Gross income excluding restructuring charges was stable at SEK 49.6 (49.6) b., with Global Communications Platform (the consolidation of Vonage) contributing SEK 3.4 b., resulting in a gross margin of 39.0% (42.2%). Gross income and gross margin were impacted by lower sales and gross margin in Networks as a result of reduction in capex spend by several operators and business mix shift from front-runner markets to large deployment in other geographies.

Reported EBITA decreased to SEK 4.4 (12.4) b. corresponding to an EBITA margin of 3.5% (10.6%). EBITA excluding restructuring charges decreased to SEK 8.5 (12.5) b. with an EBITA margin of 6.7% (10.6%). While gross income excluding restructuring charges was stable, operating expenses excluding amortization and restructuring charges increased by SEK -5.0 b. including a negative currency effect of SEK -1.2 b. The increase in operating expenses was driven by the Enterprise segment through the acquisition of Vonage as well as continued investments in R&D and the go-to-market activities in Enterprise Wireless Solutions.

Reported EBIT decreased to SEK 2.7 (12.1) b. YoY, corresponding to an EBIT margin of 2.2% (10.3%). EBIT excluding restructuring charges decreased to SEK 6.8 (12.1) b. YoY with an EBIT margin of 5.4% (10.3%).

Net income year to date declined to SEK 1.0 (7.6) b. impacted by restructuring charges of SEK -4.1 (-0.1) b. and higher operating expenses excluding restructuring charges of SEK -6.3 b. YoY, primarily in segment Enterprise through the consolidation of Vonage with an impact from amortization of intangible assets of SEK -1.3 b. This result was partly mitigated by lower tax impact of SEK 2.7 b. YoY. EPS diluted decreased to SEK 0.25 (2.23).

 

 

   
5    Ericsson | Second quarter report 2023    Financial highlights


Table of Contents

Segment results

Mobile networks – Segment Networks

 

SEK b.

   Q2
2023
    Q2
2022
    YoY
change
    Q1
2023
 

Net sales

     42.4       46.0       -8     42.5  

Of which IPR licensing revenues

     2.6       1.2       119     2.0  

Sales growth adj. for comparable units and FX

     —         —         -13     —    

Gross income

     16.3       20.7       -21     16.9  

Gross margin

     38.4     45.1     —         39.7

EBIT

     2.6       8.9       -70     6.0  

EBIT margin

     6.2     19.3     —         14.2

EBITA

     2.7       8.9       -70     6.0  

EBITA margin

     6.3     19.3     —         14.2

Restructuring charges

     -2.2       0.0       —         -0.4  

Measures excl. restructuring charges

        

Gross margin excl. restructuring charges

     39.3     45.2     —         40.6

EBIT excl. restructuring charges

     4.8       8.9       -46     6.4  

EBIT margin excl. restructuring charges

     11.3     19.4     —         15.1

EBITA excluding restructuring charges

     4.9       8.9       -46     6.4  

EBITA margin excl. restructuring charges

     11.4     19.4     —         15.2

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

 

    Continued momentum in India, now Ericsson’s 2nd largest market.
    Network traffic growth continues with new use cases like FWA.
    Organic sales in North America declined by -50%.
    Building next-generation smart manufacturing and technology hub in Estonia.

Net sales

Sales adjusted for comparable units and currency decreased by -13% YoY, primarily driven by a -50% sales drop in North America with operators reducing their capex spend and adjusting inventories. Sales in market area South East Asia, Oceania and India doubled, as a result of market share gains in India, with high deployment levels. Networks reported sales decreased by -8%.

Gross income

Gross income decreased by SEK -4.4 b. to SEK 16.3 b. resulting in a gross margin of 38.4% (45.1%). Gross income excluding restructuring charges decreased to SEK 16.7 (20.8) b., with a gross margin of 39.3% (45.2%). As expected, the gross margin was impacted by a business mix shift caused by a slowdown in investments in 5G front-runner markets, combined with large deployments with an initial dilutive effect on the margins in other geographies. Adjustments of the supply chain continue, with focus on adaptability to demand changes and geopolitical requirements, impacting gross margin negatively. The increase in IPR licensing revenues, also including retroactive revenues, had a positive impact on the margin in the quarter.

Gross margin in Q3 is estimated to be 38-40%, with a negative impact from business mix shift partly offset by cost optimization.

EBIT and EBITA

EBIT excluding restructuring charges decreased to SEK 4.8 (8.9) b. with an EBIT margin of 11.3% (19.4%). EBITA excluding restructuring charges declined to SEK 4.9 (8.9) b. as a result of a lower gross income due to lower sales as well as a margin impact due to business mix shift. EBITA margin excluding restructuring charges was 11.4% (19.4%).

Reported EBIT declined to SEK 2.6 (8.9) b. while reported EBITA declined to SEK 2.7 (8.9) b. In addition to the lower gross income, EBIT and EBITA were impacted by restructuring charges of SEK -2.2 (0.0) b.

Net sales rolling four quarters were SEK 191.7 b. and the EBITA margin excluding restructuring charges rolling four quarters was 17.5%.

Mobile networks – Segment Cloud Software and Services

 

SEK b.

   Q2
2023
    Q2
2022
    YoY
change
    Q1
2023
 

Net sales

     15.1       14.0       8     13.4  

Of which IPR licensing revenues

     0.6       0.3       119     0.4  

Sales growth adj. for comparable units and FX

     —         —         1     —    

Gross income

     4.9       4.7       5     4.5  

Gross margin

     32.7     33.5     —         33.4

EBIT (loss)

     -1.2       -0.7       —         -0.9  

EBIT margin

     -7.9     -5.2     —         -7.0

EBITA (loss)

     -1.2       -0.7       —         -0.9  

EBITA margin

     -7.9     -5.1     —         -6.9

Restructuring charges

     -0.9       0.0       —         -0.5  

Measures excl. restructuring charges

        

Gross margin excl. restructuring charges

     33.9     33.5     —         36.1

EBIT (loss) excl. restructuring charges

     -0.3       —0.7       —         -0.4  

EBIT margin excl. restructuring charges

     -1.9     -5.2     —         -3.3

EBITA (loss) excluding restructuring charges

     -0.3       —0.7       —         -0.4  

EBITA margin excl. restructuring charges

     -1.9     -5.1     —         -3.2

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

 

    Sales increased by 1% adjusted for comparable units and currency.
    EBITA excl. restructuring charges improved YoY to SEK -0.3 (-0.7) b.
    On track to reach break-even for full-year 2023.

Net sales

Sales adjusted for comparable units and currency increased by 1% YoY, primarily driven by 5G sales in North America, while sales decreased in managed services. Reported sales increased by 8% YoY.

Gross income

Gross income increased by SEK 0.3 b. to SEK 4.9 b. with a gross margin of 32.7% (33.5%). Gross income excluding restructuring charges was SEK 5.1 (4.7) b. resulting in a gross margin of 33.9% (33.5%). The increase in IPR licensing revenues in the sales mix as well as improved delivery performance had a positive impact on the margin YoY.

EBIT (loss) and EBITA (loss)

EBIT (loss) and EBITA (loss) excluding restructuring charges were SEK -0.3 (-0.7) b. with an EBIT margin excluding restructuring charges of -1.9% (-5.2%) and an EBITA margin excluding restructuring charges of -1.9% (-5.1%). The improvement is driven by higher gross income as a result of improved operational performance including exiting subscale business and improving delivery efficiency.

Reported EBIT (loss) and EBITA (loss) were both SEK -1.2 (-0.7) b. with an EBIT margin of -7.9% (-5.2%) and an EBITA margin of -7.9% (-5.1%). A higher gross income was offset by restructuring charges of SEK -0.9 (0.0) b.

The EBITA excluding restructuring charges for Cloud Software and Services is expected to reach at least break-even for full-year 2023. Strategy execution continues, by limiting subscale software development, accelerating automation to reduce deployment and maintenance efforts, and changing the focus from market share gains to profitable business. Results will vary between quarters. EBITA excluding restructuring charges in Q3 is expected to be in line with Q2.

Net sales rolling four quarters were SEK 62.9 b. and the EBITA margin excluding restructuring charges rolling four quarters was -1.1%.

 

 

   
6    Ericsson | Second quarter report 2023    Segment results


Table of Contents

Enterprise – Segment Enterprise

 

SEK b.

   Q2
2023
    Q2
2022
    YoY
change
    Q1
2023 1
 

Net sales

     6.4       1.7       275     6.0  

Of which Global Comms Platform (Vonage)

     4.2       —         —         3.9  

Of which Enterprise Wireless Solutions

     1.0       0.6       69     0.8  

Sales growth adj. for comparable units and FX

     —         —         20     —    

Gross income

     3.0       0.9       228     2.8  

Gross margin

     46.3     52.8     —         47.4

EBIT (loss)

     -1.7       -0.6       —         -1.7  

EBIT margin

     -26.3     -34.8     —         -28.6

EBITA (loss)

     -0.9       -0.5       —         -0.9  

EBITA margin

     -14.0     -28.5     —         -15.8

Restructuring charges

     -0.1       0.0       —         -0.1  

Measures excl. restructuring charges

        

Gross margin excl. restructuring charges

     46.3     52.8     —         47.6

Global Comms Platform (Vonage)

     40.7     —         —         43.5

Enterprise Wireless Solutions

     58.2     52.9     —         56.7

EBIT (loss) excl. restructuring charges²

     -1.6       -0.6       —         -1.6  

EBIT margin excl. restructuring charges²

     -25.5     -34.6     —         -27.1

EBITA (loss) excluding restructuring charges²

     -0.8       -0.5       —         -0.9  

Of which Global Comms Platform (Vonage)

     0.0       —         —         0.0  

Of which Enterprise Wireless Solutions

     -0.9       -0.5       —         -0.8  

EBITA margin excl. restructuring charges²

     -13.2     -28.3     —         -14.3

 

1 

Financial information by segment has been restated for the quarters 2022, where the divested IoT business in Q1 2023 has moved from segment Enterprise to segment Other.

2 

Common costs are included at segment level only (not distributed within the segment).

 

    Reported sales growth driven by the Vonage acquisition.
    Organic sales growth driven by Enterprise Wireless Solutions.
    Increased gross income excl. restructuring charges to SEK 3.0 (0.9) b.
    Global Communications Platform was EBITA positive.

Net sales

Reported sales were SEK 6.4 (1.7) b. The increase of SEK 4.7 b. YoY was driven primarily by Global Communications Platform (the consolidation of Vonage) which contributed SEK 4.2 b. Sales adjusted for comparable units and currency increased by 20%, driven by Enterprise Wireless Solutions. Enterprise Wireless Solutions reported sales of SEK 1.0 (0.6) b. representing a sales growth of 69%.

Vonage was not consolidated in Q2 2022, however when comparing the pre- and post-acquisition figures, the Vonage Communications Platform (VCP) sales grew by 12% in USD YoY, while sales from the current communications API offerings grew by 19%.

Investments continue in line with the strategic imperative to build the Global Network Platform (network APIs).

Gross income

Gross income was SEK 3.0 (0.9) b. with a gross margin of 46.3% (52.8%). Gross income excluding restructuring charges was SEK 3.0 (0.9) b. driven mainly by Global Communications Platform (the consolidation of Vonage) and Enterprise Wireless Solutions. Gross margin excluding restructuring charges declined to 46.3% (52.8%) due to the consolidation of Vonage with lower gross margin than the remaining part of the Enterprise segment.

EBITA (loss)

EBITA (loss) was SEK -0.9 (-0.5) b. EBITA (loss) excluding restructuring charges was SEK -0.8 (-0.5) b., where the decline was mainly driven by Enterprise Wireless Solutions, due to increased growth investments in R&D and go-to market activities. In addition, operating expenses were higher due to the consolidation of all costs for Private Cellular Networks (Dedicated Networks). Technologies and New Businesses reported a positive EBITA. The segment’s operating expenses were impacted by a negative currency effect. EBITA margin excluding restructuring charges was -13.2% (-28.3%).

EBIT (loss)

EBIT (loss) was SEK -1.7 (-0.6) b. EBIT (loss) excluding restructuring charges was SEK -1.6 (-0.6) b. impacted by amortization of intangible assets of SEK -0.8 b., from acquired businesses.

Segment Other

 

SEK b.

   Q2
2023
    Q2
2022
    YoY
change
    Q1
2023 1
 

Net sales

     0.5       0.8       -32     0.7  

Sales growth adj. for comparable units and FX

     —         —         -18     —    

Gross income

     -0.1       0.0       —         0.0  

Gross margin

     -22.2     -3.3     —         -2.6

EBIT (loss)

     -0.1       -0.2       —         -0.3  

EBIT margin

     -10.8     -29.7     —         -46.3

EBITA (loss)

     -0.1       -0.2       —         -0.3  

EBITA margin

     -10.6     -29.7     —         -46.3

Restructuring charges

     0.0       0.0       —         0.0  

Measures excl. restructuring charges

        

Gross margin excl. restructuring charges

     -22.6     -3.3     —         -2.6

EBIT (loss) excl. restructuring charges

     -0.1       -0.2       —         -0.3  

EBIT margin excl. restructuring charges

     -11.2     -29.7     —         -48.2

EBITA (loss) excluding restructuring charges

     -0.1       -0.2       —         -0.3  

EBITA margin excl. restructuring charges

     -11.0     -29.7     —         -48.2

 

1 

Financial information by segment has been restated for the quarters 2022, where the divested IoT business in Q1 2023 has moved from segment Enterprise to segment Other.

Net sales

Reported sales declined to SEK 0.5 (0.8) b. mainly related to the divestment of the IoT business in Q1 2023.

Gross income

Gross income and gross income excluding restructuring charges were both SEK -0.1 (0.0) b. Gross margin was -22.2% (-3.3%) while gross margin excluding restructuring charges was -22.6% (-3.3%).

EBITA (loss)

EBITA (loss) and EBITA (loss) excluding restructuring charges were both SEK -0.1 (-0.2) b. EBITA margin was -10.6% (-29.7%). EBITA margin excluding restructuring charges was -11.0% (-29.7%).

EBITA improved mainly due to the divestment of the IoT business.

EBIT (loss)

EBIT (loss) and EBIT (loss) excluding restructuring charges were both SEK -0.1 (-0.2) b. EBIT margin was -10.8% (-29.7%). EBIT margin excluding restructuring charges was -11.2% (-29.7%).

 

 

   
7    Ericsson | Second quarter report 2023    Segment results


Table of Contents

Cash flow and financial position

 

Free cash flow bridge, SEK b.

   Q2
2023
     Q2
2022
     Q1
2023
     Jan-Jun
2023
     Jan-Jun
2022
 

EBIT excl. restructuring charges

     2.8        7.4        4.0        6.8        12.1  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Depreciation, amortization and impairment losses

     2.8        2.2        3.1        5.9        4.4  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Restructuring charges

     -3.1        0.0        -1.0        -4.1        -0.1  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Changes in working capital 1)

     -3.7        -1.3        -11.8        -15.5        -6.8  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Interest paid/received, taxes paid, and other

     -1.7        -1.9        -0.2        -1.9        -3.3  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash flow from operating activities

     -2.9        6.3        -5.8        -8.7        6.3  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Capex net and other investing activities

     -1.4        -1.3        -1.5        -2.9        -2.4  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Repayment of lease liabilities

     -0.7        -0.6        -0.7        -1.4        -1.2  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Free cash flow before M&A

     -5.0        4.4        -8.0        -13.0        2.8  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

M&A

     -0.9        0.1        -0.8        -1.8        0.2  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Free cash flow after M&A

     -5.9        4.6        -8.9        -14.8        3.0  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash flow from operating activities

     -2.9        6.3        -5.8        -8.7        6.3  

Cash flow from investing activities

     -2.4        21.9        2.4        0.0        36.4  

Cash flow from financing activities

     -7.1        -14.5        -0.8        -7.8        -6.7  

 

SEK b.

   Jun 30
2023
    Jun 30
2022
    Mar 31
2023
 

Gross cash

     35.7       100.4       47.3  
  

 

 

   

 

 

   

 

 

 

-Borrowings, current

     10.4       3.7       11.6  

-Borrowings, non-current

     23.5       26.4       22.2  
  

 

 

   

 

 

   

 

 

 

Net cash

     1.9       70.3       13.6  
  

 

 

   

 

 

   

 

 

 

Equity

     132.4       127.8       125.8  

Total assets

     343.4       332.5       345.7  

Capital turnover (times)

     1.3       1.2       1.3  

Return on capital employed (%)

     2.7     12.8     6.1

Non-IFRS financial measures are reconciled at the end of this report to the most directly comparable IFRS measures.

1

Defined as Changes in operating net assets.

 

   

Free cash flow before M&A was SEK -5.0 (4.4) b.

 

   

Net cash decreased by SEK -11.7 b. QoQ to SEK 1.9 b.

 

   

A new revolving credit facility of USD 0.5 b. was established.

 

Cash flow from operating activities

Cash flow from operating activities decreased to SEK -2.9 (6.3) b. due to lower EBIT and increased working capital YoY. Working capital increased in the quarter following the current business mix shift including large rollout projects with longer order-to-cash cycle. Cash flow was also impacted by payment of the earlier provisioned USD -0.2 b. (SEK -2.1 b.) fine to the U.S. Department of Justice (DOJ) regarding non-criminal breaches of the 2019 Deferred Prosecution Agreement (DPA). Taxes paid were SEK -1.5 (-1.0) b.

Free cash flow

Free cash flow before M&A was SEK -5.0 (4.4) b. due to lower cash flow from operating activities. Capex net and other investing activities increased to SEK -1.4 (-1.3) b., primarily driven by increased product development, partly offset by decreased investment in property, plant and equipment. Repayment of lease liabilities was SEK -0.7 (-0.6) b. YoY, mainly related to property leases. M&A activities of SEK -0.9 b. were primarily related to an acquisition within Enterprise Wireless Solutions. Free cash flow after M&A was SEK -5.9 (4.6) b. Free cash flow before M&A rolling four quarters was SEK 6.4 b., or 2.3% in relation to sales.

Cash flow from investing activities

Cash flow from investing activities was SEK -2.4 (21.9) b. In Q2 2022, Ericsson disposed of interest-bearing securities of SEK 22.7 b.

 

Cash flow from financing activities

Cash flow from financing activities was SEK -7.1 (-14.5) b. The YoY change was mainly driven by repayment of a USD -1.0 b. (SEK -10.0 b.) bond in Q2 2022. Dividends of SEK -4.6 b. were paid out in the quarter, and an additional SEK 1.35 per share (totaling SEK -4.5 b.) will be paid out in October. Furthermore, Ericsson repaid borrowing of SEK -2.8 b., and borrowed SEK 1.0 b. under its commercial paper program.

Financial position

Sequentially, gross cash decreased by SEK -11.6 b. to SEK 35.7 b. and net cash decreased by SEK -11.7 b. to SEK 1.9 b. The sequential change was a result of the negative free cash flow after M&A and the dividend paid to shareholders. In addition, gross cash was affected by repayment of borrowings.

Ericsson has an unutilized revolving credit facility of USD 2.0 b., linked to two of Ericsson’s long-term sustainability goals. The facility is set to expire in 2027 with a one-year extension option. In addition to this facility, Ericsson has signed a new unutilized revolving credit facility of USD 0.5 b. for general corporate purposes.

The average maturity of long-term borrowings was 3.6 years as of June 30, 2023, a decrease from 4.4 years 12 months earlier.

Liabilities for post-employment benefits decreased to SEK 22.8 b. from SEK 26.8 b. due to changes in financial assumptions. 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 9.0 b. (SEK 13.8 b. lower than current DBO).

Return on capital employed (ROCE) was 2.7% (12.8%) as a result of lower EBIT and higher capital employed.

 

 

   
8    Ericsson | Second quarter report 2023    Cash flow and financial position


Table of Contents

Key data points

Market

The global RAN equipment market is estimated to be stable at 0% (1%) in 2023. North America is expected to decline by -13% (-7%), Europe by 0% (0%) and China by -4% (-4%).

Source: Dell’Oro Mobile RAN 5-year forecast, July 2023. Numbers in parenthesis are from Dell’Oro Mobile RAN Quarterly Report 1Q23, May 2023.

Ericsson

Net sales

Reported average seasonality last 3 years (2020–2022), %

 

     Q4gQ1     Q1gQ2     Q2gQ3     Q3gQ4  

Networks

     -23     +12     +4     +22

Cloud Software and Services

     -35     +12     +2     +35

Net sales may show large variations between quarters, including currency changes.

Operating expenses excluding Global Communications Platform (consolidation of Vonage) and restructuring charges

Reported average seasonality last 3 years (2020–2022), SEK b.

Positive numbers = decrease in operating expenses.

Negative numbers = increase in operating expenses.

 

     Q4gQ1      Q1gQ2      Q2gQ3      Q3gQ4  

Ericsson Group

     +3.3        -1.5        +0.7        -2.4  

Operating expenses may show large variations between quarters, including currency changes.

EBITA

The Q3 EBITA margin excluding restructuring charge is expected to be in line with, or slightly better than Q2, with similar trends and business mix and early benefits of cost-out execution, followed by a seasonally stronger Q4.

Currency exposure

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

Amortization of intangible assets

Amortization of intangible assets is expected to continue to be around SEK -0.9 b. per quarter of which approximately SEK -0.8 b. related to segment Enterprise.

Restructuring charges

Restructuring charges is expected to be around SEK 7 b. for the full year. For 2024, restructuring charges are expected to normalize at about 0.5% of sales.

 

Segments

Networks

Gross margin excluding restructuring charges is estimated to be in the range of 38-40% in Q3.

Cloud Software and Services

EBITA excluding restructuring charges in Q3 is expected to be in line with Q2.

The EBITA excluding restructuring charges is expected to reach at least break-even for full-year 2023.

Enterprise

Amortization of intangible assets is expected to be approximately SEK -0.8 b. per quarter.

 

 

   
9    Ericsson | Second quarter report 2023    Key data points


Table of Contents

Parent Company

Income after financial items January–June 2023, was SEK 16.4 (20.0) b.

At the end of the quarter, gross cash (cash, cash equivalents plus interest-bearing securities, current and non-current) amounted to SEK 20.8 (85.1) b.

There was a decrease in intercompany lending of SEK 2.4 b. and an increase in intercompany borrowing of SEK 2.5 b. in the quarter.

The Parent Company has recognized dividends from subsidiaries of SEK 16.1 (16.7) b. in the quarter.

The holding of treasury stock on June 30, 2023, was 14,009,306 Class B shares.

 

 

   
10    Ericsson | Second quarter report 2023    Parent Company


Table of Contents

Other information

Legal proceedings not involving governmental authorities

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 purchasers of Ericsson ADS in the United States, in the United States District Court for the Eastern District of New York. An amended complaint was filed on September 9, 2022, which added a former Ericsson officer as a defendant. The amended complaint alleged violations of United States securities laws, in connection with allegedly false and misleading statements principally concerning the Company’s adherence with its compliance and anti-corruption policies and obligations and the conduct of its business in Iraq. On May 24, 2023, the court granted Ericsson’s motion to dismiss and dismissed the case with prejudice, concluding that Ericsson did not violate any disclosure obligation to investors. On June 23, 2023, plaintiff filed a notice of appeal. Ericsson will continue to vigorously defend this matter.

In August 2022, a civil lawsuit was filed in the United States District Court for the District of Columbia against Telefonaktiebolaget LM Ericsson and Ericsson Inc. The lawsuit was brought by US military service members and employees of US government contractors who were killed or injured in terrorist attacks in Iraq, Afghanistan and Syria from 2005 to 2021, as well as by their family members. The lawsuit asserts claims against Ericsson under the US Anti-Terrorism Act alleging that Ericsson made payments that ultimately aided the terrorist organizations that committed, planned or authorized the attacks. In November 2022, Ericsson filed a motion to dismiss the complaint.

On December 20, 2022, plaintiffs filed an amended complaint, which added additional plaintiffs, including a plaintiff injured in Turkey, named Ericsson AB, CEO Börje Ekholm and a former employee as additional defendants and also asserted additional allegations and claims. In March 2023, the Ericsson corporate defendants and Mr. Ekholm filed motions to dismiss the amended complaint. On June 2, 2023, plaintiffs filed an opposition to defendants’ motion to dismiss the amended complaint. Defendants’ reply brief in support of their motion to dismiss was filed on July 12, 2023.

In addition to the proceedings discussed above, the Company is, and in the future may be, involved in various other regulatory investigations, lawsuits, claims and proceedings incidental to the ordinary course of business.

Legal proceedings involving governmental authorities

In February 2022, the Company publicly disclosed that an internal investigation in 2019 included a review of the conduct of Ericsson employees, vendors and suppliers in Iraq during the period between 2011 to 2019. The investigation found serious breaches of compliance rules and the Company’s Code of Business Ethics, and identified evidence of corruption related misconduct and other serious violations, including payments to intermediaries and the potential use of alternate transport routes in connection with circumventing Iraqi Customs at a time when terrorist organizations, including ISIS, controlled some transport routes. The investigation also identified payment schemes and cash transactions that potentially created the risk of money laundering. The investigators could not determine the ultimate recipients of any payments, nor identify that any Ericsson employee was directly involved in financing terrorist organizations. In March 2022, the DOJ informed Ericsson it had determined that, before entering into the DPA, the Company provided insufficient information to the DOJ about the Company’s 2019 internal investigation into conduct in Iraq. The DOJ also determined that the Company breached the DPA by failing to inform the DOJ about the investigation after entering into the DPA.

In June 2022, the SEC informed Ericsson that it opened an investigation concerning matters described in the Company’s 2019 Iraq investigation report. Under Ericsson’s consent judgment with the SEC, Ericsson is permanently enjoined from violating the antibribery, books and records and internal controls provisions in the Foreign Corrupt Practices Act (FCPA). Violations of the injunction, consent judgment or securities law could subject the Company to new civil and criminal penalties as well as new enforcement actions.

On March 2, 2023, the Company reached a resolution (Plea Agreement) with the DOJ regarding the non-criminal breaches of the DPA. Under the Plea Agreement, Ericsson pleaded guilty to previously deferred charges relating to conduct that occurred prior to 2017. In addition, Ericsson agreed to pay a fine of USD 206,728,848. The entry of the Plea Agreement brought the DPA to an end. The Company’s internal investigation and its cooperation with authorities in relation to the matters discussed in the 2019 internal Iraq investigation report remain open and ongoing and are not covered by the Plea Agreement.

On May 24, 2023, Nasdaq Stockholm concluded its review of Ericsson’s public disclosure obligations concerning its 2019 Iraq internal investigation report and dismissed the matter, stating that Nasdaq could not conclude that a reasonable investor would have used the content of the report as part of an investment decision. After having reviewed Nasdaq Stockholm’s investigation and conclusion, on June 8, 2023, the Swedish Financial Supervisory Authority also decided to formally close its review of Ericsson’s prior disclosures relating to the 2019 Iraq internal investigation report.

As previously disclosed, the Company’s 2019 internal Iraq investigation did not conclude that Ericsson made or was responsible for any payments to any terrorist organization. With respect to the matters discussed in the 2019 internal Iraq investigation report, the Company continues to investigate in full cooperation with the DOJ and the SEC. This includes a comprehensive review of the 2019 investigation and further investigation of matters relating to historical operations in Iraq. As additional information continues to be identified and evaluated during the ongoing investigation, we expect that we will continue our cooperation with the DOJ and the SEC and that we will be unable to make conclusive determinations on the outcome of any such investigation until all pertinent information has been identified. The scope and duration of the remaining process are currently uncertain.

As part of its defense to a now settled patent infringement lawsuit filed by Ericsson in 2013 in the Delhi High Court against Indian handset company Micromax, Micromax filed a complaint against Ericsson with the Competition Commission of India (CCI). The CCI decided to refer the case to the Director General’s Office for an in-depth investigation. The CCI opened similar investigations against Ericsson in January 2014 based on claims made by Intex Technologies (India) Limited and, in 2015, based on a now settled claim from iBall. Ericsson has challenged CCI’s jurisdiction in these cases before the Delhi High Court. On July 13 2023, the Division Bench of the Delhi High Court found that in this instance the CCI has no power to conduct the pending investigations against Ericsson. This order may be further appealed to Supreme Court of India by the CCI (which has an initial 90-day period to appeal subject to further extensions which can be granted by the Court).

PRESS RELEASES

Apr 05, 2023 | Acquisition of cloud-based security specialist Ericom by Cradlepoint, part of Ericsson

 

 

   
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The Cradlepoint acquisition of Ericom strengthens Ericsson’s global enterprise ambitions.

Ericom’s zero-trust and cloud-based security solutions will form the basis of the new Cradlepoint NetCloud Threat Defense cloud service, expanding the company’s mobile-capable and router-integrated SASE (secure access service edge) and zero-trust portfolio of solutions for fixed-site, remote worker, in-vehicle and IoT use cases.

Link to Cradlepoint’s press release (Apr 04, 2023):

https://cradlepoint.com/press-release/cradlepoint-acquires
-ericom-and-its-cloud-based-enterprise-security-solution/

Apr 20, 2023 | Ericsson’s Nomination Committee appointed

Ericsson’s (NASDAQ:ERIC) Nomination Committee for the Annual General Meeting 2024 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 & AMF Fonder;

 

    Christer Gardell, Cevian Capital Partners Limited; and

 

    Jan Carlson, 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/2023/4/ericssons-nomination-committee-appointed

May 02, 2023 | Ericsson resolves on an acquisition offer for C shares for LTV II 2023, LTV 2022 and LTV 2021

In accordance with the resolutions by the Annual General Meeting 2023, Ericsson (NASDAQ:ERIC) expands its treasury stock in order to provide shares for the Long-Term Variable Compensation Programs LTV II 2023, LTV 2022 and LTV 2021 for Ericsson’s executive team and other executives.

The Board of Directors of Ericsson has today resolved, by virtue of authorizations given by the Annual General Meeting on March 29, 2023 (the “AGM 2023”), to direct an acquisition offer to all holders of C shares to acquire these shares. The acquisition shall be made during the period May 11 – May 25, 2023, and payment for acquired shares shall be made in cash with approximately SEK 5 per share (corresponding to the quota value of the Ericsson share).

The offer is part of the financing of Ericsson’s Long-Term Variable Compensation Programs LTV II 2023, LTV 2022 and LTV 2021 and includes all 10 million C shares which the AGM 2023 resolved to issue to Investor AB for these programs. Investor AB have today subscribed for all 10 million C shares and informed Ericsson that they intend to accept the acquisition offer.

Once all 10 million C shares have been acquired by Ericsson, the Board intends to convert them to B shares. After the conversion, the total number of shares in Ericsson will amount to 3,344,151,735, of which 261,755,983 are A shares and 3,082,395,752 are B shares. Ericsson currently holds 4,009,306 B shares as treasury stock.

https://www.ericsson.com/en/press-releases/2023/5/ericsson
-resolves-on-an-acquisition-offer-for-c-shares-for-ltv-ii-2023-ltv-2022-and-ltv-2021

May 24, 2023 | Nasdaq Stockholm closes review of 2019 Iraq report disclosures

Nasdaq Stockholm has concluded its review of Ericsson’s (NASDAQ: ERIC) public disclosure obligations concerning its 2019 Iraq internal investigation report.

In dismissing the matter, Nasdaq stated that it “cannot come to the conclusion that the content of the report was such that a reasonable investor would have used such information as part of his/her investment decision.”

Ericsson has previously addressed Nasdaq Stockholm’s review (including previous responses to the Swedish Shareholders Association).

https://www.ericsson.com/en/press-releases/2023/5/nasdaq
-stockholm-closes-review-of-2019-iraq-report-disclosures

May 25, 2023 | U.S. District Court dismisses securities claim against Ericsson

Yesterday, the U.S. District Court for the Eastern District of New York dismissed with prejudice the securities litigation against Ericsson (NASDAQ: ERIC) brought by certain shareholders.

In its ruling, the court rejected in full the plaintiff’s claims that Ericsson misled investors and concluded that Ericsson did not violate any disclosure obligation to investors.

The motion to dismiss decision is subject to appeal from the plaintiff. Ericsson will continue to vigorously defend this matter if appealed.

Ericsson has also announced this week that Nasdaq Stockholm has formally closed its review into Ericsson’s public disclosure concerning the 2019 Iraq report (read more). Nasdaq, in closing the case, stated that it: “cannot come to the conclusion that the content of the report was such that a reasonable investor would have used such information as part of his/her investment decision”.

https://www.ericsson.com/en/press-releases/2023/5/u.s.
-district-court-dismisses-securities-claim-against-ericsson

May 31, 2023 | New number of shares and votes in Telefonaktiebolaget LM Ericsson

The total number of shares in Telefonaktiebolaget LM Ericsson (NASDAQ:ERIC) as of May 31, 2023, amounts to 3,344,151,735, of which 261,755,983 are A shares and 3,082,395,752 are B shares.

The total number of votes is 569,995,558.2, of which the A shares represent 261,755,983 votes and the B shares represent 308,239,575.2 votes.

The increase in the number of shares and votes is a result of the company’s issue of 10 million C shares completed in May 2023. The C shares have subsequently been repurchased by the company and converted into B shares by virtue of a conversion clause in the articles of association. This is in accordance with the resolution by the AGM 2023 to expand the treasury stock as part of the financing of the Long-Term Variable Compensation Programs LTV II 2023, LTV 2022 and LTV 2021 for the company’s executive team and other executives. The company currently holds 14,009,306 B shares as treasury stock.

https://www.ericsson.com/en/press-releases/2023/5/new
-number-of-shares-and-votes-in-telefonaktiebolaget-lm-ericsson

 

 

   
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Risk factors

 

Ericsson is exposed to a number of risks in its activities. To stimulate identification and support cross-functional treatment within the Ericsson Group, risks are grouped in a number of categories, including, for example, risks relating to technology, IPR, compliance, project execution, operations, products and services, treasury and accounting, the geopolitical environment, M&A, cyber security and occupational health and safety. Ericsson’s risk management is embedded into strategy development and operational processes and material group risks are regularly assessed and reviewed by executives as required by Ericsson’s Material Group Risk Protocol 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 2022 and in the Annual Report on Form 20-F 2022 (in the following, the “Annual Report 2022”). 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. See also the risks set out in the section titled “Forward-Looking Statements.”

Ericsson relies on a limited number of suppliers of components, production capacity and R&D and IT services, which exposes the Company to supply disruptions and cost increases.

As described in the Annual Report 2022, including in the risk factor 1.14, Ericsson’s ability to deliver according to market demands and contractual commitments depends significantly on obtaining a timely and adequate supply of materials, components, production capacity and other vital services on competitive terms, including on occasion from single-source suppliers, or in the case of the development and supply of for example key ASIC and FPGA components, printed circuit boards, standard electronics or semiconductors (including foundry node availability) from very few suppliers, on which Ericsson depends. Some of these suppliers have in addition very limited geographical redundancy, making them vulnerable to natural disasters, conflicts or other potentially disruptive events. Due to the current tensions between the US and China, and the tense cross strait relations, this risk has increased. Accordingly, there is a risk that the Company will be unable to obtain key supplies it needs to produce Ericsson’s products and provide Ericsson’s services on commercially reasonable terms, in time, or at all. This is particularly critical in connection with large projects like the current 5G rollout in India. Failure by the Company or any of the Company’s suppliers could delay or interrupt Ericsson’s products or services supply or operations and significantly limit sales or increase Ericsson’s costs, for example through damages. To find an alternative supplier or redesign products to replace components may take significant time, which could cause significant delays or interruptions in the delivery of Ericsson’s products and services and result in a reduction in sales. Ericsson has from time to time experienced interruptions of supply, and the Company may experience such interruptions in the future.

Furthermore, the Company’s procurement of supplies requires Ericsson to predict future customer demands. If Ericsson fails to anticipate customer demand properly, an over or under supply of components and production capacity could occur. In many cases, some of Ericsson’s competitors utilize the same manufacturers, and if they have purchased capacity ahead of Ericsson, the Company could be blocked from acquiring the needed products. This factor could limit Ericsson’s ability to supply its customers and increase costs. At the

same time, Ericsson commits to certain capacity levels or component quantities, which, if unused, will result in charges for unused capacity, unrecoverable costs or the scrapping of costs used to procure such components. The Company is also exposed to financial counterpart risks to suppliers when Ericsson pays in advance for supplies. Such supply disruptions and cost increases may negatively affect the Company’s business, operating results and financial condition.

Ericsson is subject to certain US and other anti-corruption (including anti-bribery, anti-money-laundering, sanctions, terror finance and anti-terrorism) laws, rules and regulations and other regulatory requirements or conditions imposed as a result of foreign direct investment reviews and decisions. Ericsson may be subject to further adverse consequences under the Plea Agreement with the United States Department of Justice (DOJ) and the injunction issued in connection with the 2019 settlement with the U.S. Securities and Exchange Commission (SEC), as well as other ongoing investigations by governmental authorities.

As described in the Annual Report 2022, including in the risk factor 3.3, on January 12, 2023, the Company made a provision in the fourth quarter of 2022 of SEK 2.3 billion (approx. USD 220 million) in relation to the breaches of the Company’s 2019 deferred prosecution agreement (DPA) with the DOJ. The provision also included estimated expenses (SEK 0.1 billion) for the previously announced extended compliance monitorship. On March 2, 2023, the Company reached a resolution (Plea Agreement) with the DOJ regarding the non-criminal breaches of its DPA. Under the Plea Agreement, Ericsson pleaded guilty to previously deferred charges relating to conduct prior to 2017. In addition, Ericsson agreed to pay a fine of USD 206,728,848. The entry of the Plea Agreement brought the DPA to an end. As set forth in the Plea Agreement, Ericsson has certain continuing obligations through June 2024, including cooperation, reporting evidence or allegations of potential Foreign Corrupt Practices Act (FCPA) violations, continuing to engage an independent compliance monitor and continuing to improve its compliance program and internal controls. If Ericsson fails to meet those obligations and is found to have breached the Plea Agreement, the Company could face further adverse consequences, including prosecution for additional federal criminal violations. Ericsson may also be subject to other adverse consequences as a result of entering into the Plea Agreement, including potential debarment from government contracting in the United States and elsewhere, reputational risk, and reluctance by other counterparties to continue business relationships, including customers, suppliers, financial institutions and insurers.

On May 24, 2023, Nasdaq Stockholm concluded its review of Ericsson’s public disclosure obligations concerning its 2019 Iraq internal investigation report and dismissed the matter, stating that Nasdaq could not conclude that a reasonable investor would have used the content of the report as part of an investment decision. After having reviewed Nasdaq Stockholm’s investigation and conclusion, on June 8, 2023, the Swedish Financial Supervisory Authority also decided to formally close its review of Ericsson’s prior disclosures relating to the 2019 Iraq internal investigation report.

As previously disclosed, the Company’s 2019 internal Iraq investigation did not conclude that Ericsson made or was responsible for any payments to any terrorist organization. With respect to the matters discussed in the 2019 internal Iraq investigation report, the Company continues to investigate in full cooperation with the DOJ and the SEC. This includes a comprehensive review of the 2019 investigation and further investigation of matters relating to historical

 

 

   
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operations in Iraq. As additional information continues to be identified and evaluated during the ongoing investigation, we expect that we will continue our cooperation with the DOJ and the SEC and that we will be unable to make conclusive determinations on the outcome of any such investigation until all pertinent information has been identified. The scope and duration of the remaining process are currently uncertain.

Ericsson is, from time to time, involved in lawsuits, legal proceedings and regulatory investigations, and is subject to certain other regulatory requirements, conditions and agreements, including a National Security Agreement entered into with the U.S. Government in connection with the acquisition of Vonage by Ericsson, and approval of the transaction by the Committee on Foreign Investment in the United States. If any of these lawsuits or legal proceedings are determined unfavorably against the Company or it is determined that the Company is not in compliance with any of these regulatory requirements, conditions or agreements, this could result in the Company being required to pay substantial damages, fines and/or penalties or becoming subject to additional enforcement actions, regulatory review and/or adverse decisions.

As mentioned in the Annual Report 2022, including in the risk factor 3.4, in April 2019, Ericsson was informed by China’s State Administration for Market Regulations (SAMR) Anti-monopoly bureau that SAMR has initiated an investigation into Ericsson’s patent licensing practices in China. Ericsson is cooperating with the investigation, which is still in a fact-finding phase. The next steps include continued fact-finding and meetings with SAMR in order to facilitate the authority’s assessment and conclusions. In case of adverse findings, SAMR has the power to impose behavioral and financial remedies, which may have material adverse effects on Ericsson’s business, financial condition and operating results.

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 purchasers of Ericsson ADS in the United States, in the United States District Court for the Eastern District of New York. An amended complaint was filed on September 9, 2022, which added a former Ericsson officer as a defendant. The amended complaint alleged violations of United States securities laws, in connection with allegedly false and misleading statements principally concerning the Company’s adherence with its compliance and anti-corruption policies and obligations and the conduct of its business in Iraq.

On May 24, 2023, the court granted Ericsson’s motion to dismiss and dismissed the case with prejudice, concluding that Ericsson did not violate any disclosure obligation to investors. On June 23, 2023, plaintiff filed a notice of appeal. Ericsson will continue to vigorously defend this matter.

In August 2022, a civil lawsuit was filed in the United States District Court for the District of Columbia against Telefonaktiebolaget LM Ericsson and Ericsson Inc. The lawsuit was brought by US military service members and employees of US government contractors who were killed or injured in terrorist attacks in Iraq, Afghanistan and Syria from 2005 to 2021, as well as by their family members. The lawsuit asserts claims against Ericsson under the US Anti-Terrorism Act alleging that Ericsson made payments that ultimately aided the terrorist organizations that committed, planned or authorized the attacks. In November 2022, the Company filed a motion to dismiss the complaint. On December 20, 2022, plaintiffs filed an amended complaint, which added additional plaintiffs, named Ericsson AB, CEO Börje Ekholm and a former employee as additional defendants and asserted additional allegations and claims. In March 2023, the Ericsson corporate defendants and Mr. Ekholm filed motions to dismiss the amended complaint. On June 2, 2023, plaintiffs filed an opposition to defendants’ motion to dismiss the amended complaint. Defendants’ reply brief in support of their motion to dismiss was filed on July 12, 2023.

This report has not been reviewed by Telefonaktiebolaget LM Ericsson auditors.

Date for next report: 17 October 2023

 

 

   
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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, 2023

Telefonaktiebolaget LM Ericsson (publ)

Org. Nr. 556016-0680

 

Jan Carlson    Jacob Wallenberg    Jon Fredrik Baksaas
Chair    Deputy Chair    Member of the Board
Carolina Dybeck Happe    Börje Ekholm    Eric A. Elzvik
Member of the Board    President, CEO and member of the Board    Member of the Board
Kristin S. Rinne    Helena Stjernholm    Jonas Synnergren
Member of the Board    Member of the Board    Member of the Board
   Christy Wyatt   
   Member of the Board   
Torbjörn Nyman    Ulf Rosberg    Kjell-Åke Soting
Member of the Board    Member of the Board    Member of the Board

 

   
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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, 2023.

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

Alan Ganson, Director,

Investor Relations

Phone: +46 70 267 27 30

E-mail: alan.ganson@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

 

 

   
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Forward-looking statements

 

This report includes forward-looking statements. All statements other than statements of historical fact are forward-looking statements. The words “believe,” “expect,” “anticipate,” “intend,” “likely,” “may,” “could,” “plan,” “estimate,” “forecast,” “will,” “should,” “would,” “predict,” “aim,” “seek,” “potential,” “target,” “might,” “continue” and similar words or expressions are used to identify forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially and adversely from those expressed in, or implied or projected by, the forward-looking statements, including, in particular the following:

 

    Potential material additional costs and liability resulting from our ongoing compliance with the terms of the Plea Agreement with the DOJ and extended monitorship

 

    Potential to become a target for public scrutiny as a result of entering into the Plea Agreement with the DOJ, which could damage our reputation and materially and adversely affect our business and prospects

 

    Risks resulting from entering into the Plea Agreement, including potential debarment from government contracting in the United States and elsewhere, reputational risk, as well as potential counterparty reluctance to continue business relationships

 

    Potential material additional liability resulting from past conduct, including allegations of past conduct that remains unresolved or unknown in multiple jurisdictions including Iraq, which remains the subject of ongoing investigations by Ericsson and US governmental authorities

 

    Risks related to internal controls and governance, including the potential to incur material liability in connection with internal controls surrounding payments made to third parties in connection with past conduct in multiple jurisdictions including Iraq which remains the subject of ongoing investigations by Ericsson and US governmental authorities

 

    The risk that the ongoing investigations by Ericsson and US governmental authorities result in a conclusion by Ericsson or US governmental authorities that the Company’s past conduct included making or having responsibility for making payments to a terrorist organization or other improper payments, which could lead to material additional liability

 

    Our goals, strategies, planning assumptions and operational or financial performance expectations

 

    Ongoing geopolitical and trade uncertainty, including challenging global economic conditions, market trends and pandemics such as COVID-19

 

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

 

    Our ability to comply with legal and regulatory requirements internationally

 

    Risks related to cybersecurity and privacy

 

    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

 

    Our ability to deliver on future plans and achieve 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

 

    Trends related to our industry, including our regulatory environment, competition and customer structure

 

    Other factors included in our filings with the U.S. Securities and Exchange Commission (the “SEC”), including the factors described throughout this report, included in the section Risk Factors, and in “Risk Factors” in the Annual Report 2022, as updated by subsequent reports filed with the SEC.

These forward-looking statements also represent our estimates, assumptions and expectations only as of the date that they were made, and to the extent they represent third-party data, we have not undertaken to independently verify such third-party data and do not intend to do so. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements and are urged to carefully review and consider the various disclosures made in this report and in other documents we file from time to time with our regulators that disclose risks and uncertainties that may affect our business. 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, except as required by applicable law or stock exchange regulations.

 

 

   
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Financial statements and other information

Contents

 

Financial statements (unaudited)

     19  

Condensed consolidated income statement

     19  

Condensed statement of comprehensive income

     19  

Condensed consolidated balance sheet

     20  

Condensed consolidated statement of cash flows

     21  

Condensed consolidated statement of changes in equity

     22  

Condensed consolidated income statement – isolated quarters

     22  

Condensed consolidated statement of cash flows – isolated quarters

     23  

Condensed Parent Company income statement

     24  

Condensed Parent Company statement of comprehensive income

     24  

Condensed Parent Company balance sheet

     25  

Accounting policies and Explanatory notes (unaudited)

     26  

Note 1 – Accounting policies

     26  

Note 2 – Segment information*)

     27  

Note 3 – Financial income and expenses, net

     31  

Note 4 – Provisions

     32  

Note 5 – Financial risk management

     33  

Note 6 – Cash flow

     34  

Note 7 – Contingent liabilities and Assets pledged as collateral

     34  

Note 8 – Share information

     35  

Note 9 – Employee information

     35  

Note 10 – Business combinations

     35  

Alternative performance measures (unaudited)

     36  

Sales growth adjusted for comparable units and currency

     37  

Items excluding restructuring charges

     38  

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

     39  

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

     39  

Gross cash and net cash, end of period

     40  

Capital employed

     40  

Capital turnover

     40  

Return on capital employed

     41  

Equity ratio

     41  

Return on equity

     41  

Adjusted earnings per share

     42  

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

     42  

Sales growth by segment adjusted for comparable units and currency*)

     43  

Sales growth by market area adjusted for comparable units and currency

     43  

Gross margin by segment by quarter

     44  

EBIT margin by segment by quarter

     44  

Restructuring charges by function

     45  

Restructuring charges by segment

     45  

Gross income and gross margin excluding restructuring charges by segment

     46  

EBIT (loss) and EBIT margin excluding restructuring charges by segment

     47  

Rolling four quarters of net sales by segment

     47  

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

     47  

EBITA (loss) and EBITA margin by segment by quarter

     48  

EBITA (loss) and EBITA margin excluding restructuring charges by segment

     49  

Other ratios

     49  

 

   
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Financial statements (unaudited)

Condensed consolidated income statement

 

            Q2     Jan-Jun  

SEK million

   Note      2023      2022      Change     2023      2022  

Net sales

     2        64,444        62,465        3     126,997        117,526  

Cost of sales

  

 

 

       -40,343        -36,163        12%       -78,728        -67,935  

Gross income

     2        24,101        26,302        -8     48,269        49,591  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Research and development expenses

        -13,777        -11,496        20     -25,749        -22,201  

Selling and administrative expenses

        -10,643        -7,872        35     -19,761        -14,460  

Impairment losses on trade receivables

        -313        3        —         -362        -177  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Operating expenses

        -24,733        -19,365        28     -45,872        -36,838  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Other operating income and expenses

        264        393        -33     291        -672  

Share of earnings of JV and associated companies

 

     56        -22        -355     46        -29  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Earnings before financial items and income tax (EBIT)

     2        -312        7,308        -104     2,734        12,052  

Financial income and expenses, net

     3        -419        -759        -45     -1,336        -1,402  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Income after financial items

        -731        6,549        -111     1,398        10,650  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Income tax

        134        -1,899        -107     -420        -3,088  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Net income (loss)

        -597        4,650        -113     978        7,562  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Net income (loss) attributable to:

                

Owners of the Parent Company

        -686        4,504          830        7,444  

Non-controlling interests

        89        146          148        118  

Other information

                

Average number of shares, basic (million)

     8        3,330        3,330          3,330        3,330  

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

        -0.21        1.36          0.25        2.24  

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

        -0.21        1.35          0.25        2.23  

 

1)

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

2)

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

Condensed statement of comprehensive income

 

     Q2      Jan-Jun  

SEK million

   2023      2022      2023      2022  

Net income (loss)

     -597        4,650        978        7,562  

Other comprehensive income

           

Items that will not be reclassified to profit or loss

           

Remeasurements of defined benefits pension plans incl. asset ceiling

     4,078        7,543        3,907        14,469  

Revaluation of borrowings due to change in credit risk

     -246        1,064        -471        1,980  

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

     -784        -2,431        -682        -4,192  

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

           

Cash flow hedge reserve

           

Gains/losses arising during the period

     -2,402        -1,295        -2,698        -1,174  

Reclassification adjustments on gains/losses included in profit or loss

     236        43        444        85  

Translation reserves

           

Changes in translation reserves

     5,776        4,167        6,167        5,752  

Reclassification to profit or loss

     -4        -26        -11        -34  

Share of other comprehensive income of JV and associated companies

     36        41        41        40  

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

     446        258        464        224  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total other comprehensive income, net of tax

     7,136        13,257        7,161        21,501  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total comprehensive income

     6,539        17,907        8,139        29,063  
           

Total comprehensive income (loss) attributable to:

           

Owners of the Parent Company

     6,455        17,896        8,020        29,133  

Non-controlling interests

     84        11        119        -70  

 

   
19    Ericsson | Second quarter report 2023    Financial statements


Table of Contents

Condensed consolidated balance sheet

 

            Jun 30      Dec 31  

SEK million

   Note      2023      2022  

Assets

        

Non-current assets

        

Intangible assets

        

Capitalized development expenses

        4,228        3,705  

Goodwill

        89,068        84,570  

Customer relationships, IPR and other intangible assets

        26,453        26,340  

Property, plant and equipment

        13,946        14,236  

Right-of-use assets

        7,238        7,870  

Financial assets

        

Equity in JV and associated companies

        1,193        1,127  

Other investments in shares and participations

     5        2,353        2,074  

Customer finance, non-current

     5        1,574        415  

Interest-bearing securities, non-current

     5        4,878        9,164  

Other financial assets, non-current

     5        7,158        6,839  

Deferred tax assets

        22,443        19,394  
  

 

 

    

 

 

    

 

 

 
        180,532        175,734  
  

 

 

    

 

 

    

 

 

 

Current assets

        

Inventories

        47,382        45,846  

Contract assets

        9,784        9,843  

Trade receivables

     5        49,191        48,413  

Customer finance, current

     5        7,009        4,955  

Current tax assets

        7,036        7,973  

Other current receivables

        11,580        9,688  

Interest-bearing securities, current

     5        8,513        8,736  

Cash and cash equivalents

     5        22,331        38,349  
  

 

 

    

 

 

    

 

 

 
        162,826        173,803  
  

 

 

    

 

 

    

 

 

 

Total assets

        343,358        349,537  
  

 

 

    

 

 

    

 

 

 

Equity and liabilities

        

Equity

        

Stockholders’ equity

        133,869        134,814  

Non-controlling interest in equity of subsidiaries

        -1,514        -1,510  
  

 

 

    

 

 

    

 

 

 
        132,355        133,304  
  

 

 

    

 

 

    

 

 

 

Non-current liabilities

        

Post-employment benefits

        22,785        27,361  

Provisions, non-current

     4        5,263        3,959  

Deferred tax liabilities

        4,887        4,784  

Borrowings, non-current

     5        23,476        26,946  

Lease liabilities, non-current

        6,090        6,818  

Other non-current liabilities

        788        745  
  

 

 

    

 

 

    

 

 

 
        63,289        70,613  
  

 

 

    

 

 

    

 

 

 

Current liabilities

        

Provisions, current

     4        6,742        7,629  

Borrowings, current

     5        10,354        5,984  

Lease liabilities, current

        2,616        2,486  

Contract liabilities

        44,237        42,251  

Trade payables

     5        35,463        38,437  

Current tax liabilities

        2,665        2,640  

Other current liabilities

        45,637        46,193  
  

 

 

    

 

 

    

 

 

 
        147,714        145,620  
  

 

 

    

 

 

    

 

 

 

Total equity and liabilities

        343,358        349,537  
  

 

 

    

 

 

    

 

 

 

 

   
20    Ericsson | Second quarter report 2023    Financial statements


Table of Contents

Condensed consolidated statement of cash flows

 

            Q2      Jan-Jun  

SEK million

   Note      2023      2022      2023      2022  

Operating activities

              

Net income (loss)

        -597        4,650        978        7,562  

Adjustments for

              

Taxes

        -215        1,751        854        2,772  

Earnings/ dividends in JV and associated companies

        -48        88        -39        96  

Depreciation, amortization and impairment losses

     6        2,813        2,224        5,905        4,370  

Other

        606        345        2,252        1,244  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
        2,559        9,058        9,950        16,044  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Changes in operating net assets

              

Inventories

        382        -4,728        322        -10,074  

Customer finance, current and non-current

        558        134        -2,726        11  

Trade receivables and contract assets

        1,753        3,350        1,953        4,251  

Trade payables

        -597        1,324        -4,704        -47  

Provisions and post-employment benefits

        841        -321        -122        648  

Contract liabilities

        -5,204        -721        349        5,539  

Other operating assets and liabilities, net

        -1,457        -333        -10,562        -7,100  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
        -3,724        -1,295        -15,490        -6,772  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Interest received

        283        -17        678        61  

Interest paid

        -549        -437        -1,138        -648  

Taxes paid

        -1,451        -1,022        -2,707        -2,368  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash flow from operating activities

        -2,882        6,287        -8,707        6,317  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Investing activities

              

Investments in property, plant and equipment

     6        -806        -1,053        -1,760        -1,871  

Sales of property, plant and equipment

        42        61        75        99  

Acquisitions/divestments of subsidiaries and other operations, net

        -911        123        -1,755        169  

Product development

     6        -562        -301        -1,137        -589  

Purchase of interest-bearing securities

        -2,132        -1,037        -2,132        -1,037  

Sale of interest-bearing securities

        4,072        22,747        7,776        38,774  

Other investing activities

        -2,116        1,384        -1,110        805  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash flow from investing activities

        -2,413        21,924        -43        36,350  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Financing activities

              

Proceeds from issuance of borrowings

        1,026        —          2,053        7,788  

Repayment of borrowings

        -2,832        -9,993        -3,912        -9,993  

Dividends paid

        -4,591        -4,164        -4,591        -4,164  

Repayment of lease liabilities

        -690        -577        -1,383        -1,170  

Other financing activities

        18        243        -6        812  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash flow from financing activities

        -7,069        -14,491        -7,839        -6,727  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Effect of exchange rate changes on cash

        562        3,042        571        3,628  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net change in cash and cash equivalents

        -11,802        16,762        -16,018        39,568  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash and cash equivalents, beginning of period

        34,133        76,856        38,349        54,050  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash and cash equivalents, end of period

        22,331        93,618        22,331        93,618  

 

   
21    Ericsson | Second quarter report 2023    Financial statements


Table of Contents

Condensed consolidated statement of changes in equity

 

     Jan-Jun  

SEK million

   2023      2022  

Opening balance

     133,304        107,099  

Total comprehensive income

     8,139        29,063  

Sale/repurchase of own shares

     -50        —    

Share issue, net

     50        —    

Long-term variable compensation plans

     37        46  

Dividends to shareholders¹)

     -9,097        -8,410  

Transactions with non-controlling interests

     —          1  
  

 

 

    

 

 

 

Closing balance

     132,355        127,799  
  

 

 

    

 

 

 

 

1) 

Jan-Jun includes accrual of SEK 4,507 (4,173) million for the dividend approved by the Annual General Meeting on March 29, 2023.

Condensed consolidated income statement – isolated quarters

 

     2023      2022  

Isolated quarters, SEK million

   Q2      Q1      Q4      Q3      Q2      Q1  

Net sales

     64,444        62,553        85,980        68,040        62,465        55,061  

Cost of sales

     -40,343        -38,385        -50,411        -39,905        -36,163        -31,772  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Gross income

     24,101        24,168        35,569        28,135        26,302        23,289  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Research and development expenses

     -13,777        -11,972        -13,217        -11,880        -11,496        -10,705  

Selling and administrative expenses

     -10,643        -9,118        -11,791        -9,441        -7,872        -6,588  

Impairment losses on trade receivables

     -313        -49        99        38        3        -180  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Operating expenses

     -24,733        -21,139        -24,909        -21,283        -19,365        -17,473  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other operating income and expenses1)

     264        27        -2,824        234        393        -1,065  

Share of earnings of JV and associated companies

     56        -10        17        29        -22        -7  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Earnings before financial item s and income tax (EBIT)

     -312        3,046        7,853        7,115        7,308        4,744  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Financial income and expenses, net

     -419        -917        -474        -535        -759        -643  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Income after financial items

     -731        2,129        7,379        6,580        6,549        4,101  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Income tax

     134        -554        -1,189        -1,220        -1,899        -1,189  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net income (loss)

     -597        1,575        6,190        5,360        4,650        2,912  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net income (loss) attributable to:

     -686        1,516        6,066        5,214        4,504        2,940  

Owners of the Parent Company

                 

Non-controlling interests

     89        59        124        146        146        -28  

Other information

     3,330        3,330        3,330        3,330        3,330        3,330  

Average number of shares, basic (million)

                 

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

     -0.21        0.46        1.82        1.56        1.36        0.88  

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

     -0.21        0.45        1.82        1.56        1.35        0.88  

 

1) 

Q4 2022 includes a provision of SEK -2.3 billion in relation to a potential resolution with the United States Department of Justice regarding previously announced, non-criminal, alleged breaches under the deferred prosecution agreement (DPA), including estimated expenses for the extended compliance monitorship, noting that the Company, on March 2, 2023, entered into the DOJ Plea Agreement with the DOJ and agreed to pay a fine of approximately SEK 2.2 billion. Q3 2022 includes revaluation of Ericsson Ventures investments of SEK 0.2 billion. 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.

2) 

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

3) 

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

 

   
22    Ericsson | Second quarter report 2023    Financial statements


Table of Contents

Condensed consolidated statement of cash flows – isolated quarters

 

     2023      2022  

Isolated quarters, SEK million

   Q2      Q1      Q4      Q3      Q2      Q1  

Operating activities

                 

Net income (loss)

     -597        1,575        6,190        5,360        4,650        2,912  

Adjustments for

     -215        1,069        1,304        1,307        1,751        1,021  

Taxes

                 

Earnings/ dividends in JV and associated companies

     -48        9        -24        -17        88        8  

Depreciation, amortization and impairment losses

     2,813        3,092        3,535        2,638        2,224        2,146  

Other

     606        1,646        432        -19        345        899  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     2,559        7,391        11,437        9,269        9,058        6,986  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Changes in operating net assets

                 

Inventories

     382        -60        5,898        -3,564        -4,728        -5,346  

Customer finance, current and non-current

     558        -3,284        -871        -872        134        -123  

Trade receivables and contract assets

     1,753        200        -4,080        4,595        3,350        901  

Trade payables

     -597        -4,107        -131        -1,817        1,324        -1,371  

Provisions and post-employment benefits

     841        -963        1,749        -58        -321        969  

Contract liabilities

     -5,204        5,553        2,878        -2,623        -721        6,260  

Other operating assets and liabilities, net

     -1,457        -9,105        5,235        1,052        -333        -6,767  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     -3,724        -11,766        10,678        -3,287        -1,295        -5,477  

Interest received

     283        395        127        156        -17        78  

Interest paid

     -549        -589        -406        -196        -437        -211  

Taxes paid/received

     -1,451        -1,256        -1,941        -1,291        -1,022        -1,346  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash flow from operating activities

     -2,882        -5,825        19,895        4,651        6,287        30  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Investing activities

                 

Investments in property, plant and equipment

     -806        -954        -1,502        -1,104        -1,053        -818  

Sales of property, plant and equipment

     42        33        76        74        61        38  

Acquisitions/divestments of subs. and other operations, net

     -911        -844        -445        -51,412        123        46  

Product development

     -562        -575        -717        -414        -301        -288  

Purchase of interest-bearing securities

     -2,132        —          -12,108        -437        -1,037        —    

Sale of interest-bearing securities

     4,072        3,704        789        978        22,747        16,027  

Other investing activities

     -2,116        1,006        2,012        -6,537        1,384        -579  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash flow from investing activities

     -2,413        2,370        -11,895        -58,852        21,924        14,426  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Financing activities

                 

Proceeds from issuance of borrowings

     1,026        1,027        1,301        1,666        —          7,788  

Re payment of borrowings

     -2,832        -1,080        -121        -5,915        -9,993        —    

Dividends paid

     -4,591        —          -4,172        -79        -4,164        —    

Re payment of lease liabilities

     -690        -693        -765        -658        -577        -593  

Other financing activities

     18        -24        -183        -277        243        569  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash flow from financing activities

     -7,069        -770        -3,940        -5,263        -14,491        7,764  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Effect of exchange rate changes on cash

     562        9        -2,460        2,595        3,042        586  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net change in cash and cash equivalents

     -11,802        -4,216        1,600        -56,869        16,762        22,806  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash and cash equivalents, beginning of period

     34,133        38,349        36,749        93,618        76,856        54,050  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash and cash equivalents, end of period

     22,331        34,133        38,349        36,749        93,618        76,856  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

   
23    Ericsson | Second quarter report 2023    Financial statements


Table of Contents

Condensed Parent Company income statement

 

     Q2      Jan-Jun  

SEK million

   2023      2022      2023      2022  

Net sales

     —          —          —          —    

Cost of sales

     —          —          —          —    

Gross income

     —          —          —          —    

Operating expenses

     -844        -210        -1,199        -565  

Other operating income and expenses

     1,076        644        1,930        1,253  
  

 

 

    

 

 

    

 

 

    

 

 

 

EBIT

     232        434        731        688  
  

 

 

    

 

 

    

 

 

    

 

 

 

Financialnet¹)

     15,890        18,539        15,716        19,286  
  

 

 

    

 

 

    

 

 

    

 

 

 

Income after financial items

     16,122        18,973        16,447        19,974  
  

 

 

    

 

 

    

 

 

    

 

 

 

Transfers to (-) / from untaxed reserves

     —          —          —          —    

Income tax¹)

     29        -432        -15        -708  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income

     16,151        18,541        16,432        19,266  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

1) 

Jan-June 2022 restated in accordance with the change in accounting described in Q4 2022 financial statements.

Condensed Parent Company statement of comprehensive income

 

     Q2      Jan-Jun  

SEK million

   2023      2022      2023      2022  

Net income (loss)

     16,151        18,541        16,432        19,266  

Cash flow hedge reserve

           

Gains/losses arising during the period

     —          3,893        —          4,351  

Transfer to investments

     —          —          —          —    

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

     —          -802        —          -891  
  

 

 

    

 

 

    

 

 

    

 

 

 

Other comprehensive income, net of tax

     —          3,091        —          3,460  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total comprehensive income

     16,151        21,632        16,432        22,726  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

   
24    Ericsson | Second quarter report 2023    Financial statements


Table of Contents

Condensed Parent Company balance sheet

 

     Jun 30      Dec 31  

SEK million

   2023      2022  

Assets

     

Fixed assets

     

Intangible assets

     2        4  

Tangible assets

     380        380  

Financial assets ¹)

     162,821        156,720  
  

 

 

    

 

 

 
     163,203        157,104  
  

 

 

    

 

 

 

Current assets

     

Receivables

     24,319        27,664  

Short-term investments

     8,282        8,540  

Cash and cash equivalents

     7,608        23,731  
  

 

 

    

 

 

 
     40,209        59,935  
  

 

 

    

 

 

 

Total assets

     203,412        217,039  
  

 

 

    

 

 

 

Stockholders’ equity, provisions and liabilities

     

Equity

     

Restricted equity

     48,214        48,164  

Non-restricted equity

     45,156        37,753  
  

 

 

    

 

 

 
     93,370        85,917  
  

 

 

    

 

 

 

Provisions

     324        2,435  

Non-current liabilities

     23,352        26,835  

Current liabilities

     86,366        101,852  
  

 

 

    

 

 

 

Total stockholders’ equity, provisions and liabilities

     203,412        217,039  
  

 

 

    

 

 

 

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

     4,873        9,157  

 

   
25    Ericsson | Second quarter report 2023    Financial statements


Table of Contents

Accounting policies and Explanatory notes (unaudited)

 

Note 1 – Accounting policies

The group

This condensed consolidated interim financial report for the reporting period ended June 30, 2023, has been prepared in accordance with 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, 2022 and should be read in conjunction with that annual report. There are no amendments of IFRS during 2023 that are effective for the interim period that are estimated to have a material impact on the result and financial position of the Company.

Changes applied as from Q1 2023

- IoT business reported in segment Other

The IoT business was divested in Q1 2023. As previously announced in Q4 2022 the IoT business has been transferred from segment Enterprise to segment Other in Q1 2023. In order to reflect the change all prior quarters in 2022 have been restated where applicable.

                                         

 

 

   
26    Ericsson | Second quarter report 2023    Accounting policies and Explanatory notes


Table of Contents

Note 2 – Segment information*)

Net sales by segment by quarter

 

     2023     2022  

Isolated quarters, SEK million

   Q2     Q1     Q4     Q3     Q2     Q1  

Networks

     42,440       42,467       58,626       48,147       45,983       40,712  

Of which Products

     32,774       32,175       45,804       35,763       35,299       31,131  

Of which Services

     9,666       10,292       12,822       12,384       10,684       9,581  

Cloud Software and Services

     15,108       13,400       20,210       14,213       14,014       12,087  

Of which Products

     5,161       4,455       8,047       4,752       4,675       3,631  

Of which Services

     9,947       8,945       12,163       9,461       9,339       8,456  

Enterprise

     6,379       5,995       6,314       4,981       1,703       1,599  

Other

     517       691       830       699       765       663  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     64,444       62,553       85,980       68,040       62,465       55,061  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2023     2022  

Sequential change, percent

   Q2     Q1     Q4     Q3     Q2     Q1  

Networks

     0     -28     22     5     13     -20

Of which Products

     2     -30     28     1     13     -22

Of which Services

     -6     -20     4     16     12     -14

Cloud Software and Services

     13     -34     42     1     16     -33

Of which Products

     16     -45     69     2     29     -49

Of which Services

     11     -26     29     1     10     -22

Enterprise

     6     -5     27     192     7     0

Other

     -25     -17     19     -9     15     -3
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     3     -27     26     9     13     -23
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2023     2022  

Year over year change, percent

   Q2     Q1     Q4     Q3     Q2     Q1  

Networks

     -8     4     15     19     15     12

Of which Products

     -7     3     15     15     16     13

Of which Services

     -10     7     15     30     13     9

Cloud Software and Services

     8     11     13     4     8     3

Of which Products

     10     23     13     4     18     2

Of which Services

     7     6     12     5     4     4

Enterprise

     275     275     295     256     20     47

Other

     -32     4     22     5     11     -6
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     3     14     21     21     14     11
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2023     2022  

Year to date, SEK million

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

Networks

     84,907       42,467       193,468       134,842       86,695       40,712  

Of which Products

     64,949       32,175       147,997       102,193       66,430       31,131  

Of which Services

     19,958       10,292       45,471       32,649       20,265       9,581  

Cloud Software and Services

     28,508       13,400       60,524       40,314       26,101       12,087  

Of which Products

     9,616       4,455       21,105       13,058       8,306       3,631  

Of which Services

     18,892       8,945       39,419       27,256       17,795       8,456  

Enterprise

     12,374       5,995       14,597       8,283       3,302       1,599  

Other

     1,208       691       2,957       2,127       1,428       663  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     126,997       62,553       271,546       185,566       117,526       55,061  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2023     2022  

Year over year change, percent

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

Networks

     -2     4     15     16     14     12

Of which Products

     -2     3     15     15     15     13

Of which Services

     -2     7     17     18     11     9

Cloud Software and Services

     9     11     8     5     6     3

Of which Products

     16     23     10     8     10     2

Of which Services

     6     6     7     4     4     4

Enterprise

     275     275     165     112     31     47

Other

     -15     4     8     3     2     -6
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     8     14     17     15     12     11
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

*)

Financial information by segment has been restated for the quarters 2022, where the divested IoT business in Q1 2023 has moved from segment Enterprise to segment Other.

 

   
27    Ericsson | Second quarter report 2023    Accounting policies and Explanatory notes


Table of Contents

Gross income by segment by quarter

 

     2023      2022  

Isolated quarters, SEK million

   Q2      Q1      Q4      Q3      Q2      Q1  

Networks

     16,318        16,869        26,056        21,366        20,735        18,211  

Cloud Software and Services

     4,944        4,476        6,664        4,516        4,692        4,234  

Enterprise

     2,954        2,841        2,885        2,429        900        882  

Other

     -115        -18        -36        -176        -25        -38  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     24,101        24,168        35,569        28,135        26,302        23,289  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     2023      2022  

Year to date, SEK million

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

Networks

     33,187        16,869        86,368        60,312        38,946        18,211  

Cloud Software and Services

     9,420        4,476        20,106        13,442        8,926        4,234  

Enterprise

     5,795        2,841        7,096        4,211        1,782        882  

Other

     -133        -18        -275        -239        -63        -38  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     48,269        24,168        113,295        77,726        49,591        23,289  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

EBIT (loss) by segment by quarter

 

     2023     

 

     2022     

 

    

 

 

Isolated quarters, SEK million

   Q2      Q1      Q4      Q3      Q2      Q1  

Networks

     2,623        6,020        12,453        9,597        8,861        7,601  

Cloud Software and Services

     -1,200        -942        673        -792        -733        -837  

Enterprise

     -1,679        -1,712        -1,893        -1,456        -593        -531  

Other

     -56        -320        -3,380        -234        -227        -1,489  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     -312        3,046        7,853        7,115        7,308        4,744  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     2023     

 

     2022     

 

    

 

 

Year to date, SEK million

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

Networks

     8,643        6,020        38,512        26,059        16,462        7,601  

Cloud Software and Services

     -2,142        -942        -1,689        -2,362        -1,570        -837  

Enterprise

     -3,391        -1,712        -4,473        -2,580        -1,124        -531  

Other

     -376        -320        -5,330        -1,950        -1,716        -1,489  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     2,734        3,046        27,020        19,167        12,052        4,744  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

*)

Financial information by segment has been restated for the quarters 2022, where the divested IoT business in Q1 2023 has moved from segment Enterprise to segment Other.

 

   
28    Ericsson | Second quarter report 2023    Accounting policies and Explanatory notes


Table of Contents

Net sales by market area by quarter

 

     2023     2022  

Isolated quarters, SEK million

   Q2     Q1     Q4     Q3     Q2     Q1  

South East Asia, Oceania and India

     13,839       13,911       11,239       7,914       7,962       5,836  

North East Asia

     5,062       4,363       8,396       5,597       7,319       5,421  

North America

     14,443       16,927       25,301       26,517       22,849       20,727  

Europe and Latin America ¹) 2)

     15,972       14,219       20,877       15,298       15,325       15,290  

Middle East and Africa

     5,348       4,186       7,379       5,668       5,223       4,301  

Other¹) 2)

     9,780       8,947       12,788       7,046       3,787       3,486  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     64,444       62,553       85,980       68,040       62,465       55,061  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

¹) Of which in Sweden

     370       611       778       833       950       678  

²) Of which in EU

     8,054       8,205       10,495       8,242       8,511       8,611  
     2023     2022  

Sequential change, percent

   Q2     Q1     Q4     Q3     Q2     Q1  

South East Asia, Oceania and India

     -1     24     42     -1     36     -32

North East Asia

     16     -48     50     -24     35     -45

North America

     -15     -33     -5     16     10     -7

Europe and Latin America ¹) 2)

     12     -32     36     0     0     -21

Middle East and Africa

     28     -43     30     9     21     -38

Other¹) 2)

     9     -30     81     86     9     -22
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     3     -27     26     9     13     -23
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

¹) Of which in Sweden

     -39     -21     -7     -12     40     -37

²) Of which in EU

     -2     -22     27     -3     -1     -15
     2023     2022  

Year over year change, percent

   Q2     Q1     Q4     Q3     Q2     Q1  

South East Asia, Oceania and India

     74     138     31     23     12     -13

North East Asia

     -31     -20     -14     -2     3     -16

North America

     -37     -18     14     32     27     21

Europe and Latin America ¹) 2)

     4     -7     9     6     9     21

Middle East and Africa

     2     -3     6     14     17     -2

Other¹) 2)

     158     157     186     53     -12     40
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     3     14     21     21     14     11
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

¹) Of which in Sweden

     -61     -10     -28     74     135     74

²) Of which in EU

     -5     -5     3     17     17     27
     2023     2022  

Year to date, SEK million

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

South East Asia, Oceania and India

     27,750       13,911       32,951       21,712       13,798       5,836  

North East Asia

     9,425       4,363       26,733       18,337       12,740       5,421  

North America

     31,370       16,927       95,394       70,093       43,576       20,727  

Europe and Latin America ¹) 2)

     30,191       14,219       66,790       45,913       30,615       15,290  

Middle East and Africa

     9,534       4,186       22,571       15,192       9,524       4,301  

Other¹) 2)

     18,727       8,947       27,107       14,319       7,273       3,486  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     126,997       62,553       271,546       185,566       117,526       55,061  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

¹) Of which in Sweden

     981       611       3,239       2,461       1,628       678  

²) Of which in EU

     16,259       8,205       35,859       25,364       17,122       8,611  
     2023     2022  

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

     101     138     14     7     0     -13

North East Asia

     -26     -20     -8     -5     -6     -16

North America

     -28     -18     23     27     24     21

Europe and Latin America ¹) 2)

     -1     -7     11     12     15     21

Middle East and Africa

     0     -3     9     10     8     -2

Other¹) 2)

     157     157     71     26     7     40
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     8     14     17     15     12     11
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

¹) Of which in Sweden

     -40     -10     38     94     105     74

²) Of which in EU

     -5     -5     15     20     22     27

 

   
29    Ericsson | Second quarter report 2023    Accounting policies and Explanatory notes


Table of Contents

Net sales by market area by segment

 

     Q2 2023     Jan-Jun 2023  

SEK million

   Networks     Cloud Software
and Services
    Enterprise     Other     Total     Networks     Cloud Software
and Services
    Enterprise     Other     Total  

South East Asia, Oceania and India

     11,675       2,154       9       1       13,839       23,212       4,512       17       9       27,750  

North East Asia

     3,980       1,072       5       5       5,062       7,253       2,103       13       56       9,425  

North America

     10,820       3,575       47       1       14,443       24,850       6,425       85       10       31,370  

Europe and Latin America

     10,445       5,454       73       0       15,972       19,827       10,200       94       70       30,191  

Middle East and Africa

     2,843       2,427       84       -6       5,348       4,948       4,396       188       2       9,534  

Other¹)

     2,677       426       6,161       516       9,780       4,817       872       11,977       1,061       18,727  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     42,440       15,108       6,379       517       64,444       84,907       28,508       12,374       1,208       126,997  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Share of total

     66     23     10     1     100     67     22     10     1     100

 

1) 

Includes primarily IPR licensing revenues and a major part of segment Enterprise.

 

     Q2 2023  

Sequential change, percent

   Networks     Cloud Software
and Services
    Enterprise     Other     Total  

South East Asia, Oceania and India

     1     -9     13     -88     -1

North East Asia

     22     4     -38     -90     16

North America

     -23     25     24     -89     -15

Europe and Latin America

     11     15     248     -100     12

Middle East and Africa

     35     23     -19     -175     28

Other

     25     -4     6     -5     9
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     0     13     6     -25     3
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     Q2 2023     Jan-Jun 2023  

Year over year change, percent

   Networks     Cloud Software
and Services
    Enterprise     Other     Total     Networks     Cloud Software
and Services
    Enterprise     Other     Total  

South East Asia, Oceania and India

     104     -3     200     -88     74     141     9     240     -25     101

North East Asia

     -36     2     150     -90     -31     -33     12     225     -47     -26

North America

     -46     21     840     -92     -37     -35     18     400     -57     -28

Europe and Latin America

     3     8     329     -100     4     -5     6     176     -62     -1

Middle East and Africa

     5     0     27     -186     2     1     -2     36     -80     0

Other

     103     59     283