SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM6-K
REPORT OF FOREIGN ISSUER
Pursuant to Rule13a-16 or15d-16
of the Securities Exchange Act of 1934
October 17, 2019
Commission File Number000-12033
LM ERICSSON TELEPHONE COMPANY
(Translation of registrant’s name into English)
Torshamnsgatan 21, Kista
SE-164 83,Stockholm, Sweden
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form20-F or Form40-F. Form20-F ☒Form40-F ☐
Indicate by check mark if the registrant is submitting the Form6-K in paper as permitted by RegulationS-T Rule 101(b)(1): ☐
Indicate by check mark if the registrant is submitting the Form6-K in paper as permitted by RegulationS-T Rule 101(b)(7): ☐
Announcement of LM Ericsson Telephone Company, October 17, 2019 regarding “Third quarter report 2019”.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
TELEFONAKTIEBOLAGET LM ERICSSON (publ) | ||
By: | /s/ XAVIER DEDULLEN | |
Xavier Dedullen | ||
Senior Vice President, Chief Legal Officer | ||
By: | /s/ CARL MELLANDER | |
Carl Mellander | ||
Senior Vice President, Chief Financial Officer |
Date:October 17, 2019
Third quarter report 2019
Stockholm, October 17, 2019
Third quarter highlights |
• Sales were SEK 57.1 (53.8) b. Sales adjusted for comparable units and currency increased by 3% driven by strong growth in North America and North East Asia. Reported sales grew by 6%. |
• Operating income was impacted by cost provisions of USD-1.2 b. (SEK-11.5 b.) related to a resolution of the investigations by SEC and DOJ in the US and a refund of social security costs of SEK 0.9 b., referred to as “items affecting comparability” in the report. |
• Operating income was SEK 6.5 b. (11.4% operating margin) when excluding restructuring charges and items affecting comparability. Reported operating income was SEK-4.2 (3.2) b. |
• Gross margin excluding restructuring charges was 37.8% (36.9%) with improvements in Managed Services, Digital Services and Networks. Reported gross margin was 37.7% (36.5%). |
• Net income was SEK-6.9 (2.7) b., negatively impacted by items affecting comparability. |
• Free cash flow excluding M&A was SEK 5.5 (0.7) b. Net cash increased to SEK 37.4 (32.0) b. |
Investor Update key messages (more details on page 13)
Focused business strategy remains and the Company is tracking towards the new financial targets: |
• Sales ambition of SEK230-240 b. for 2020 (previously SEK210-220 b.), based on a SEK/USD rate of 9.50. |
• Operating margin target for 2020, excluding restructuring charges, remains unchanged at >10% of sales. This incorporates continued dilutive impact from strategic contracts, an initially higher cost level for newly introduced 5G products and a target adjustment for segment Emerging Business and Other to SEK-1.5 to-2.0 b. (previously break-even). |
• Operating margin target of12-14% for 2022 (previously >12%), excluding restructuring charges, based on an ambition to grow faster than the market in combination with leverage from investments in market position and R&D. |
SEK b. | Q3 2019 | Q3 2018 | YoY change | Q2 2019 | QoQ change | Jan-Sep 2019 | Jan-Sep 2018 | |||||||||||||||||||||
Net sales | 57.1 | 53.8 | 6 | % | 54.8 | 4 | % | 160.8 | 147.0 | |||||||||||||||||||
Sales growth adj. for comparable units and currency | — | — | 3 | % | — | — | — | — | ||||||||||||||||||||
Gross margin | 37.7 | % | 36.5 | % | — | 36.6 | % | — | 37.5 | % | 35.2 | % | ||||||||||||||||
Gross margin excluding restructuring charges | 37.8 | % | 36.9 | % | — | 36.7 | % | — | 37.6 | % | 36.5 | % | ||||||||||||||||
Operating income (loss) | -4.2 | 3.2 | — | 3.7 | — | 4.4 | 3.1 | |||||||||||||||||||||
Operating margin | -7.3 | % | 6.0 | % | — | 6.8 | % | — | 2.8 | % | 2.1 | % | ||||||||||||||||
Operating income excl.restr.charges & items affecting comparability ¹) | 6.5 | 3.8 | 71 | % | 3.9 | 68 | % | 14.0 | 6.7 | |||||||||||||||||||
Operating margin excl.restr.charges & items affecting comparability ¹) | 11.4 | % | 7.0 | % | — | 7.0 | % | — | 8.7 | % | 4.6 | % | ||||||||||||||||
Net income (loss) | -6.9 | 2.7 | — | 1.8 | — | -2.6 | 0.2 | |||||||||||||||||||||
EPS diluted, SEK | -1.89 | 0.83 | — | 0.51 | — | -0.67 | 0.01 | |||||||||||||||||||||
Free cash flow excluding M&A | 5.5 | 0.7 | — | 2.2 | 147 | % | 11.8 | 1.3 | ||||||||||||||||||||
Net cash, end of period | 37.4 | 32.0 | 17 | % | 33.8 | 11 | % | 37.4 | 32.0 |
1) | Operating income excluding restructuring charges in all periods. Excluding cost provisions related to resolution of the SEC and DOJ investigations of SEK-11.5 b. and refund of social security costs of SEK 0.9 b. in Q3 2019. Excluding a capital gain related to the divestment of MediaKind of SEK 0.7 b. and a reversal of a provision for impairment of trade receivables of SEK 0.7 b. in Q1 2019. |
Non-IFRS financial measures are reconciled to the most directly reconcilable line items in the financial statements at the end of this report.
1 | Ericsson | Third quarter report 2019 |
CEO comments
We continue to see strong momentum in our business, based on the strategy to increase our investments for technology leadership, including 5G. We saw organic sales growth1 of 3% in the quarter, driven by the early adopters of 5G, in North America and North East Asia. Our operating income was SEK 6.5 b., corresponding to a margin of 11.4% excluding restructuring costs, the SEC and DOJ provision of USD-1.2 b. (SEK-11.5 b.) and the refund of social security costs of SEK 0.9 b. Free cash flow before M&A was SEK 5.5 (0.7) b. adding to our strong financial position.
Our focused strategy, introduced in 2017, is aimed at building a stronger Ericsson longer term. With clear focus on our operator customers the strategy stands on a foundation of increased investments in R&D for technology and cost leadership, and growing market footprint. Increased R&D efforts, which will continue, have resulted in a competitive portfolio driving improved gross margin. In addition, we have been able to record several important wins improving market footprint for future business. We are disciplined in the deals we take and target opportunities where we have a clear competitive advantage through technology leadership, supported by our improved cost structure in hardware and software. While we believe the strategic contracts are attractive long term, the initial margins may be challenging. This is due to high associated costs as operators change vendors.
An important indicator for our execution of the strategy is the improvement in gross margin. The gross margin2 in the quarter ended at 37.8% compared with 36.9% last year and 36.7% last quarter. Within the 0.8 percentage point3 sequential decline in Networks gross margin, we have absorbed the margin impact and inventory provisions related to strategic contracts.
The largest market for 5G infrastructure will be China where deployments are expected to start near term. We have invested to increase our market share, however it is still too early to assess possible volumes and price levels. Based on historic experience we expect to have challenging margins initially but positive margins over the lifespan of a contract.
With an organic sales growth1 of 4%, segment Networks delivered another solid quarter, with strong development in North America. Operating margin improved YoY, with continued good traction for the Ericsson Radio System.
The turnaround of Digital Services is on track for low single digit margins in 2020. Driven by strong improvement in the underlying business, the losses were substantially reduced QoQ, in spite of a negative impact from the remainder of the 45 critical contracts of SEK 0.5 b. (slightly more than in the second quarter). The
negative impact of these contracts will continue to vary between quarters as they are addressed. We continue to focus on developing a full 5G and cloud-native portfolio. It is encouraging to see that the sales growth in our new product portfolio improved from 13% to 19% rolling 12 months.
5G is taking off faster than earlier anticipated and we see initial 5G buildout as a capacity enhancer in metropolitan areas. However, over time, new exciting innovations for 5G will come with industrial and IoT use cases, leveraging the speed, latency and security characteristics of 5G. This provides opportunities for our customers to capture new revenues as they provide additional benefits to consumers and businesses.
Our IoT business is growing almost twice as fast as the estimated market growth of20-25% per year. We have more than 4,500 enterprises on our IoT platform and the number of connected devices on the platform has more than doubled year to date. To fully leverage our position and capture new recurring revenue streams we are increasing our investments in IoT within Emerging Business. With this investment, we do not expect to reach breakeven for the segment next year, and instead incur losses of SEK-1.5 to-2.0 b.
Investor Update
In conjunction with today’s report we are hosting an Investor Update where we will discuss company strategy, including financial targets. Continued technology and market investments will remain key for long-term competitiveness and for reaching our targets for 2020 and 2022. A solid financial position and continued strong cash flow are important for our ability to deliver on our focused strategy. As a consequence of currency movements and a stronger 5G market, our sales ambition for 2020 is to reach SEK230-240 b. compared with the previous estimate of SEK210-220 b. Our 2020 target of reaching an operating margin of more than 10% remains. This includes the changed target for Emerging Business and Other, short-term dilutive impact from strategic contracts and the initially higher cost level for newly introduced 5G products. For 2022 the operating margin target is12-14%2 (previously >12%) based on an ambition to grow faster than the market in combination with leverage from investments in market position and R&D.
Börje Ekholm
President and CEO
1 | Organic sales growth: Sales growth adjusted for comparable units and currency. |
2 | Excluding restructuring charges. |
3 | Excluding restructuring. Networks gross margin adjusted for a license settlement cost in Q2 2019. |
2 | Ericsson | Third quarter report 2019 | CEO comments |
Planning assumptions going forward
Market related
• | The Radio Access Network (RAN) equipment market is estimated to increase by 5% for full-year 2019 with 2% CAGR for 2018-2023. (Source: Dell’Oro) |
Ericsson related
Net sales
• | Two-year average sales seasonality between Q3 and Q4 is 18%. However, uncertainty regarding the announced operator merger in North America is likely to impact operators’ spending negatively short term. |
• | The revenues for current IPR licensing contract portfolio are approximately SEK 9 b. on an annual basis. |
Gross margin
• | Strategic contracts in Networks, with initially low margins, taken to strengthen the market position, are expected to have a somewhat increased negative impact on gross margin short term without jeopardizing the 2020 target. |
• | Large 5G deployments in China are expected to commence in 2020. Ericsson has invested in R&D and supply chain capacity, aiming to increase market share. Based on historic experience margins are initially challenging but turn positive over the lifespan of a contract. |
• | The acquired Kathrein antenna and filter business will initially have a negative impact on Networks margins without jeopardizing the 2020 targets. |
• | The improvements in Digital Services continue, but earnings will vary between quarters depending on business mix, sales seasonality and impact of the remainder of the 45 critical contracts. |
Operating expenses
• | Operating expenses typically increase between Q3 and Q4 due to seasonality. |
Restructuring charges
• | Restructuring charges for full-year 2019 are estimated to be ~1% of sales. |
Currency exposure
• | Rule of thumb: A change by 10% of USD to SEK would have an impact of approximately+/-5% on net sales and approximately+/-1 percentage point on operating margin. |
3 | Ericsson | Third quarter report 2019 | Financial highlights |
Financial highlights
SEK b. | Q3 2019 | Q3 2018 | YoY change | Q2 2019 | QoQ change | Jan-Sep 2019 | Jan-Sep 2018 | |||||||||||||||||||||
Net sales | 57.1 | 53.8 | 6 | % | 54.8 | 4 | % | 160.8 | 147.0 | |||||||||||||||||||
Sales growth adj. for comparable units and currency | — | — | 3 | % | — | — | — | — | ||||||||||||||||||||
Gross income | 21.5 | 19.6 | 10 | % | 20.1 | 7 | % | 60.4 | 51.8 | |||||||||||||||||||
Gross margin | 37.7 | % | 36.5 | % | — | 36.6 | % | — | 37.5 | % | 35.2 | % | ||||||||||||||||
Research and development (R&D) expenses | -9.5 | -9.4 | — | -9.5 | — | -28.2 | -28.2 | |||||||||||||||||||||
Selling and administrative expenses | -4.9 | -6.6 | — | -7.0 | — | -17.9 | -19.8 | |||||||||||||||||||||
Impairment losses on trade receivables | 0.2 | -0.4 | — | 0.2 | 32 | % | 0.9 | -0.8 | ||||||||||||||||||||
Other operating income and expenses | -11.3 | 0.0 | — | 0.1 | — | -10.5 | 0.1 | |||||||||||||||||||||
Operating income (loss) | -4.2 | 3.2 | — | 3.7 | — | 4.4 | 3.1 | |||||||||||||||||||||
Operating margin | -7.3 | % | 6.0 | % | — | 6.8 | % | — | 2.8 | % | 2.1 | % | ||||||||||||||||
Financial income and expenses, net | -0.7 | -0.6 | — | -0.4 | — | -1.7 | -2.0 | |||||||||||||||||||||
Taxes | -2.0 | 0.1 | — | -1.5 | — | -5.4 | -0.9 | |||||||||||||||||||||
Net income (loss) | -6.9 | 2.7 | — | 1.8 | — | -2.6 | 0.2 | |||||||||||||||||||||
Restructuring charges | -0.1 | -0.6 | — | -0.1 | — | -0.5 | -3.6 | |||||||||||||||||||||
Gross income excluding restructuring charges | 21.6 | 19.8 | 9 | % | 20.1 | 7 | % | 60.5 | 53.7 | |||||||||||||||||||
Gross margin excluding restructuring charges | 37.8 | % | 36.9 | % | — | 36.7 | % | — | 37.6 | % | 36.5 | % | ||||||||||||||||
R&D expenses excluding restructuring charges | -9.4 | -9.2 | — | -9.5 | — | -27.9 | -27.2 | |||||||||||||||||||||
SG&A expenses excluding restructuring charges | -4.9 | -6.5 | — | -6.9 | — | -17.8 | -19.2 | |||||||||||||||||||||
Operating income (loss) excl. restructuring charges | -4.0 | 3.8 | — | 3.9 | — | 4.9 | 6.7 | |||||||||||||||||||||
Operating margin excluding restructuring charges | -7.1 | % | 7.0 | % | — | 7.0 | % | — | 3.1 | % | 4.6 | % | ||||||||||||||||
Operating income excl.restr.charges & items affecting comparability ¹) | 6.5 | 3.8 | 71 | % | 3.9 | 68 | % | 14.0 | 6.7 | |||||||||||||||||||
Operating margin excl.restr.charges & items affecting comparability ¹) | 11.4 | % | 7.0 | % | — | 7.0 | % | — | 8.7 | % | 4.6 | % |
1 | Operating income excluding restructuring charges in all periods. Excluding cost provisions related to resolution of the SEC and DOJ investigations of SEK-11.5 b. and refund of social security costs of SEK 0.9 b. in Q3 2019. Excluding a capital gain related to the divestment of MediaKind of SEK 0.7 b. and a reversal of a provision for impairment of trade receivables of SEK 0.7 b. in Q1 2019. |
Items affecting comparability
As previously disclosed, a provision was taken to cover a future settlement with the United States Securities and Exchange Commission (SEC) and the United States Department of Justice (DOJ), in connection with their previously reported investigations. The provision of USD-1.2 b. (SEK-11.5 b.) is reported as Other operating income and expenses in segment Emerging Business and Other. The difference compared with the earlier communicated estimate of SEK-12.0 b. is due to changed currency exchange rate. For more information see page 13.
A refund of earlier paid social security costs in Sweden of SEK 0.9 b. had a positive impact on operating income in the quarter. The refund is reported as Selling and administrative expenses in segment Emerging Business and Other.
The above two items are referred to as “items affecting comparability” in the report.
Net sales
Sales adjusted for comparable units and currency increased by 3% YoY driven by North America and North East Asia. Networks sales adjusted for comparable units and currency increased by 4% YoY, with strong sales growth in North America. Digital Services sales adjusted for comparable units and currency increased by 5% YoY, driven by North America and North East Asia The new portfolio showed growth. Managed Services sales adjusted for comparable units and currency declined by-5%
YoY, negatively impacted by earlier communicated contract exits. Sales adjusted for comparable units and currency in Emerging Business and Other decreased by -7% YoY.
Reported sales for the Group increased by 6% YoY.
Sequentially, sales increased by 4%.
4 | Ericsson | Third quarter report 2019 | Financial highlights |
IPR licensing revenues
IPR licensing revenues increased to SEK 2.4 (2.1) b. YoY and from SEK 2.2 b. QoQ. The YoY increase was mainly due to new contracts signed and currency effects from a stronger USD versus SEK. The QoQ increase was mainly due to better performance in existing contracts.
Gross margin
Gross margin increased to 37.7% (36.5%). Gross margin excluding restructuring charges increased to 37.8% (36.9%) driven by improvements in Managed Services and Digital Services. Networks gross margin excluding restructuring charges remained stable, despite a negative margin impact and inventory provisions, both related to strategic contracts. Higher IPR licensing revenues had a positive impact on gross margin YoY.
Sequentially, gross margin increased to 37.7% from 36.6%. Gross margin excluding restructuring charges increased to 37.8% from 36.7%, driven mainly by improved gross margins in Managed Services and Digital Services. Networks gross margin excluding restructuring charges increased slightly QoQ. A negative margin impact and inventory provisions, both related to strategic contracts, were partly offset by operational leverage. Networks gross margin in Q2 2019 was negatively impacted by a license settlement cost.
Operating expenses
R&D expenses increased to SEK-9.5(-9.4) b., mainly due to currency effects. R&D expenses increased in both Networks and Managed Services while they decreased in Digital Services as well as in Emerging Business and Other. The net impact of capitalized and amortized R&D expenses was SEK 0.1(-0.5) b.
Selling and administrative (SG&A) expenses decreased to SEK-4.9(-6.6) b. YoY, despite a negative impact from currency effects. A refund of earlier paid social security costs in Sweden had a positive impact of SEK 0.9 b. in the quarter. Revaluation of customer financing was SEK-0.1(-0.9) b. Cost reductions and efficiency improvements continued, partly offset by negative currency effects.
Impairment losses on trade receivables were positive at SEK 0.2(-0.4) b.
Sequentially, total operating expenses decreased to SEK-14.2 b. from SEK-16.3 b. SG&A expenses declined QoQ to SEK-4.9 b. from SEK-7.0 b. due to seasonality and the refund of social security costs in Sweden of SEK 0.9 b.
Other operating income and expenses
Other operating income and expenses decreased to SEK-11.3 (0.0) b. YoY and from SEK 0.1 b. QoQ, due to the cost provision related to a resolution of the SEC and DOJ investigations. Share in earnings of JV and associated companies was negative at SEK-0.2 b. (0.0 b), related to the 49% ownership in MediaKind.
Restructuring charges
Restructuring charges decreased to SEK-0.1(-0.6) b. YoY. Restructuring charges for full-year 2019 are estimated to be ~1% of sales compared with previous estimate of SEK2-4 b.
Operating income (loss) and margin
Reported operating income (loss) declined YoY to SEK-4.2 (3.2) b. due to items affecting comparability. The decline was partly offset by higher sales, higher gross margin and lower operating expenses.
Operating income excluding restructuring charges and items affecting comparability was SEK 6.5 b. (11.4% in operating margin).
Sequentially, operating income (loss) declined to SEK-4.2 b. from SEK 3.7 b. due to items affecting comparability. The decline was partly offset by lower operating expenses, higher sales and an improved gross margin.
5 | Ericsson | Third quarter report 2019 | Financial highlights |
Financial income and expenses, net
The financial net decreased to SEK-0.7(-0.6) b. YoY and from SEK-0.4 b. QoQ, mainly due to negative currency hedge effects which derive from the hedge loan balance in USD. The currency hedge effect was SEK-0.3 b. compared with SEK 0.0 b. in Q3 2018 and in Q2 2019. The SEK weakened against the USD between June 30, 2019 (SEK/USD rate 9.27) and Sep 30, 2019 (SEK/USD rate 9.81). Interest expenses on financial leases were SEK-0.1 (0.0) b. in the quarter, as an effect of IFRS 16 implementation.
Taxes
Taxes were SEK-2.0 (0.1) b. The cost provision related to a resolution of the SEC and DOJ investigations is handled asnon-tax deductible. Excluding this cost, the year to date accumulated tax rate was approximately 38%. The Company has implemented IFRIC 23, which requires quarterly assessments of uncertain tax positions.
Net income (loss) and EPS
Net income decreased to SEK-6.9 (2.7) b. and EPS diluted decreased to SEK-1.89 (0.83) YoY due to items affecting comparability.
Employees
The number of employees on September 30, 2019, was 95,887, a net increase of 1,131 employees in the quarter. The increase is mainly in Service Delivery driven by business growth.
6 | Ericsson | Third quarter report 2019 | Financial highlights |
Market area sales
Q3 2019 | Change | |||||||||||||||||||||||||||
SEK b. | Networks | Digital Services | Managed Services | Emerging Business and Other | Total | YoY | QoQ | |||||||||||||||||||||
South East Asia, Oceania and India | 5.5 | 0.9 | 1.0 | 0.0 | 7.4 | -7 | % | 7 | % | |||||||||||||||||||
North East Asia | 4.8 | 1.3 | 0.2 | 0.0 | 6.4 | 10 | % | -2 | % | |||||||||||||||||||
North America | 15.1 | 2.7 | 1.2 | 0.0 | 19.0 | 27 | % | 7 | % | |||||||||||||||||||
Europe and Latin America | 8.2 | 3.0 | 3.0 | 0.1 | 14.3 | -3 | % | 2 | % | |||||||||||||||||||
Middle East and Africa | 3.5 | 1.6 | 0.9 | 0.0 | 6.0 | 4 | % | 7 | % | |||||||||||||||||||
Other¹) | 2.1 | 0.4 | 0.0 | 1.4 | 4.0 | -13 | % | 2 | % | |||||||||||||||||||
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Total | 39.3 | 9.9 | 6.4 | 1.6 | 57.1 | 6 | % | 4 | % | |||||||||||||||||||
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1) | Market Area “Other” includes primarily licensing revenues and the major part of segment Emerging Business and Other. |
South East Asia, Oceania and India
Sales declined YoY. Managed Services sales increased, driven byadd-on sales in India. Networks sales decreased slightly, due to timing of project deliveries and rollout. Digital Services sales decreased, mainly due to lower legacy product sales in India and timing of sales in Australia.
North East Asia
Sales increased YoY. Network sales increased due to continued 5G deployment in South Korea, while 4G deployment in China is slowing down. Digital Services sales grew, driven by strong sales mainly in Japan.
North America
Sales increased across all segments, driven by continued 4G and 5G investments by all major customers. Managed Services sales grew YoY, driven by strongadd-on sales in large customer contracts.
Europe and Latin America
Sales declined YoY. Growth in Europe in Networks and Digital Services, driven by earlier announced contract wins, was offset by decline in Latin America due to large deployments in 2018. Managed Services sales declined due to earlier communicated customer contract exits.
Middle East and Africa
Sales increased YoY. Networks sales increased, driven by ongoing 4G and 5G deployment in key markets. Digital Services sales were stable. Managed Services sales declined due to earlier communicated customer contract exits.
Other
Sales declined YoY due to the divestment of 51% of MediaKind. IPR licensing revenues amounted to SEK 2.4 (2.1) b., supported by new contracts signed and currency effects from a stronger USD versus SEK.
7 | Ericsson | Third quarter report 2019 | Market area sales |
Segment results
Networks
SEK b. | Q3 2019 | Q3 2018 | YoY change | Q2 2019 | QoQ change | Jan-Sep 2019 | Jan-Sep 2018 | |||||||||||||||||||||
Net sales | 39.3 | 35.9 | 9 | % | 37.8 | 4 | % | 110.6 | 96.9 | |||||||||||||||||||
Of which products | 27.5 | 25.3 | 9 | % | 26.7 | 3 | % | 78.0 | 67.1 | |||||||||||||||||||
Of which IPR licensing revenues | 2.0 | 1.8 | 12 | % | 1.8 | 7 | % | 5.9 | 4.8 | |||||||||||||||||||
Of which services | 11.8 | 10.6 | 11 | % | 11.1 | 6 | % | 32.6 | 29.8 | |||||||||||||||||||
Sales growth adjusted for comparable units and currency | — | — | 4 | % | — | — | — | — | ||||||||||||||||||||
Gross income | 16.3 | 14.8 | 10 | % | 15.7 | 4 | % | 46.5 | 38.5 | |||||||||||||||||||
Gross margin | 41.6 | % | 41.3 | % | — | 41.4 | % | — | 42.0 | % | 39.7 | % | ||||||||||||||||
Operating income | 7.2 | 5.7 | 28 | % | 5.7 | 27 | % | 18.4 | 12.6 | |||||||||||||||||||
Operating margin | 18.4 | % | 15.7 | % | — | 15.0 | % | — | 16.6 | % | 13.0 | % | ||||||||||||||||
Restructuring charges | 0.0 | -0.1 | — | 0.0 | — | 0.0 | -1.4 | |||||||||||||||||||||
Gross income excl.restructuring charges | 16.3 | 14.9 | 10 | % | 15.7 | 4 | % | 46.4 | 39.5 | |||||||||||||||||||
Gross margin excl.restructuring charges | 41.6 | % | 41.5 | % | — | 41.4 | % | — | 42.0 | % | 40.7 | % | ||||||||||||||||
Operating income excl.restructuring charges | 7.2 | 5.8 | 25 | % | 5.7 | 27 | % | 18.4 | 13.9 | |||||||||||||||||||
Operating margin excl.restructuring charges | 18.4 | % | 16.1 | % | — | 15.0 | % | — | 16.6 | % | 14.4 | % |
Net sales
Reported sales increased by 9% YoY, while sales adjusted for comparable units and currency increased by 4% YoY. The increase was mainly driven by continued good traction for the Ericsson Radio System. Sales growth in North America was strong, driven by 4G and 5G investments.
Gross margin
Gross margin increased to 41.6% (41.3%) YoY. Gross margin excluding restructuring charges remained stable, despite a dilutive margin impact and inventory provisions, both related to strategic contracts.
Gross margin excluding restructuring was 41.6% compared with 41.4% in Q2 2019. Gross margin declined QoQ when adjusting Q2 for a license settlement cost. The margin impact and inventory provisions related to strategic contracts were partly offset by operational leverage, resulting in a net impact of-0.8 percentage points QoQ. The strategic contracts are taken to strengthen the market position and their dilutive impact on gross margin may vary between quarters.
Operating income and margin
Operating income increased to SEK 7.2 (5.7) b. YoY and operating margin improved to 18.4% (15.7%). Q3 2018 was negatively impacted by SEK-1.2 b. of revaluation of customer financing and impairment losses on trade receivables.
The improvement in the quarter was supported by higher sales and higher gross margin. In addition, the total impact of amortization and capitalization of development expenses and of recognition and deferral of hardware costs contributed with SEK 0.3(-0.1) b. to operating income.
Strategy execution
The target for Networks is to generate an operating margin of15-17% (excluding restructuring charges) by 2020. Important ongoing strategic activities are to:
• | Invest in R&D to safeguard a leading product portfolio and cost leadership |
• | Increase investments in automation and serviceability driving down costs |
• | Selectively gain market shares based on technology and cost competitiveness. |
At the close of the quarter Ericsson had announced commercial 5G deals with 27 named operators and, across radio and core, supplied equipment to 19 live 5G networks.
The previously announced plan to acquire Kathrein’s antenna and filter business in order to expand the Ericsson Radio System portfolio with new products, competence and capabilities was completed on October 2, 2019.
8 | Ericsson | Third quarter report 2019 | Segment results |
Digital Services
SEK b. | Q3 2019 | Q3 2018 | YoY change | Q2 2019 | QoQ change | Jan-Sep 2019 | Jan-Sep 2018 | |||||||||||||||||||||
Net sales | 9.9 | 9.0 | 10 | % | 9.0 | 10 | % | 26.7 | 25.1 | |||||||||||||||||||
Of which products | 5.6 | 4.6 | 22 | % | 4.6 | 21 | % | 14.1 | 13.0 | |||||||||||||||||||
Of which IPR licensing revenues | 0.4 | 0.4 | 12 | % | 0.4 | 7 | % | 1.3 | 1.0 | |||||||||||||||||||
Of which services | 4.3 | 4.4 | -3 | % | 4.4 | -2 | % | 12.5 | 12.1 | |||||||||||||||||||
Sales growth adjusted for comparable units and currency | — | — | 5 | % | — | — | — | — | ||||||||||||||||||||
Gross income | 3.7 | 3.2 | 17 | % | 3.3 | 13 | % | 9.9 | 9.6 | |||||||||||||||||||
Gross margin | 37.9 | % | 35.7 | % | — | 36.8 | % | — | 37.2 | % | 38.1 | % | ||||||||||||||||
Operating income (loss) | -0.7 | -1.8 | — | -1.4 | — | -3.9 | -6.8 | |||||||||||||||||||||
Operating margin | -6.7 | % | -19.9 | % | — | -15.6 | % | — | -14.5 | % | -27.0 | % | ||||||||||||||||
Restructuring charges | -0.1 | -0.4 | — | -0.1 | — | -0.4 | -1.8 | |||||||||||||||||||||
Gross income excl.restructuring charges | 3.8 | 3.3 | 14 | % | 3.3 | 13 | % | 10.1 | 10.2 | |||||||||||||||||||
Gross margin excl.restructuring charges | 38.3 | % | 36.9 | % | — | 37.1 | % | — | 37.7 | % | 40.7 | % | ||||||||||||||||
Operating income (loss) excl.restructuring charges | -0.5 | -1.4 | — | -1.3 | — | -3.5 | -4.9 | |||||||||||||||||||||
Operating margin excl.restructuring charges | -5.4 | % | -15.9 | % | — | -14.6 | % | — | -12.9 | % | -19.7 | % |
Net sales
Reported sales increased by 10% YoY. Sales adjusted for comparable units and currency increased by 5% YoY, driven by Cloud Core and Cloud Communication sales in North America and North East Asia.
Gross margin
Gross margin increased to 37.9% (35.7%) YoY. Gross margin excluding restructuring charges increased to 38.3% (36.9%) supported by cost reductions and improved business mix, partly through a higher share of software sales.
Gross margin excluding restructuring charges increased to 38.3% from 37.1% QoQ, driven by improved business mix, partly through a higher share of software sales.
Operating income (loss)
Operating income was SEK-0.7(-1.8) b. Operating income excluding restructuring charges was SEK-0.5(-1.4) b., with a positive impact from higher sales and increased gross margin. The net impact of capitalized and amortized development expenses was SEK-0.2(-0.4) b. in the quarter.
Operating income excluding restructuring charges improved QoQ to SEK-0.5 b. from SEK-1.3 b. driven by higher sales, improved gross margin and seasonally lower operating expenses.
Strategy execution
Top priority is to continue to grow the new portfolio while turning Digital Services into a profitable business, targeting low single-digit operating margin by 2020 (excluding restructuring charges).
There is good business momentum in the new portfolio of 5G and cloud-native products. Rolling 12 months sales of the new portfolio increased by 19%, driven by customer investments in 4G and 5G.
At the close of the quarter, across radio and core, Ericsson had supplied equipment to 19 live 5G networks.
A key activity for turnaround of the Digital Services business is to complete, renegotiate or exit 45 identified critical andnon-strategic customer contracts. Two additional contracts were addressed in the quarter, and a total of 29 contracts have been addressed to date. This is in line with the plan to have addressed 35 of the 45 contracts (75%) by the end of 2019.
In order to capture software value and protect the services margin, there is an increased focus on reducing systems integration costs by increasing serviceability and automation.
New ways of working and investments in automation to further improve R&D efficiency as well as investments in the new portfolio of 5G and cloud-native products will continue to strengthen the market position and prepare Digital Services for profitable growth.
The execution of the new BSS strategy is progressing according to plan and the Company won several important new BSS deals in the quarter.
9 | Ericsson | Third quarter report 2019 | Segment results |
Managed Services
SEK b. | Q3 2019 | Q3 2018 | YoY change | Q2 2019 | QoQ change | Jan-Sep 2019 | Jan-Sep 2018 | |||||||||||||||||||||
Net sales | 6.4 | 6.5 | -2 | % | 6.3 | 1 | % | 18.5 | 18.9 | |||||||||||||||||||
Sales growth adjusted for comparable units and currency | — | — | -5 | % | — | — | — | — | ||||||||||||||||||||
Gross income | 1.1 | 0.8 | 41 | % | 0.8 | 46 | % | 3.0 | 2.1 | |||||||||||||||||||
Gross margin | 17.9 | % | 12.5 | % | — | 12.3 | % | — | 15.9 | % | 11.1 | % | ||||||||||||||||
Operating income | 0.6 | 0.4 | 37 | % | 0.2 | 177 | % | 2.0 | 0.8 | |||||||||||||||||||
Operating margin | 8.8 | % | 6.3 | % | — | 3.2 | % | — | 10.9 | % | 4.3 | % | ||||||||||||||||
Restructuring charges | 0.0 | 0.0 | — | 0.0 | — | 0.0 | -0.2 | |||||||||||||||||||||
Gross income excl.restructuring charges | 1.1 | 0.8 | 37 | % | 0.8 | 47 | % | 3.0 | 2.3 | |||||||||||||||||||
Gross margin excl.restructuring charges | 17.9 | % | 12.9 | % | — | 12.3 | % | — | 15.9 | % | 12.1 | % | ||||||||||||||||
Operating income excl.restructuring charges | 0.6 | 0.4 | 28 | % | 0.2 | 179 | % | 2.0 | 1.0 | |||||||||||||||||||
Operating margin excl.restructuring charges | 8.9 | % | 6.8 | % | — | 3.2 | % | — | 10.9 | % | 5.4 | % | ||||||||||||||||
Operating income excl.restr.charges & items affecting comparability ¹) | 0.6 | 0.4 | 28 | % | 0.2 | 179 | % | 1.3 | 1.0 | |||||||||||||||||||
Operating margin excl.restr.charges & items affecting comparability ¹) | 8.9 | % | 6.8 | % | — | 3.2 | % | — | 6.9 | % | 5.4 | % |
1 | Operating income excluding restructuring charges in all periods and excluding a reversal of a provision for impairment of trade receivables of SEK 0.7 b. in Q1 2019. |
Net sales
Sales adjusted for comparable units and currency decreased by-5% YoY, due to earlier communicated customer contract exits. Sales in Network Design & Optimization (project business) showed growth.Add-on sales in certain large Managed Services Networks contracts increased in the quarter.
Reported sales decreased by-2% YoY. Sales increased, adjusted for customer contract exits.
Gross margin
Gross margin increased to 17.9% (12.5%) YoY, mainly as a result of efficiency gains and increasedadd-on sales.
Gross margin increased to 17.9% from 12.3% QoQ, mainly as a result ofnon-recurring costs in Q2 2019 and higheradd-on sales.
Gross margin for the first nine months of 2019 was 15.9% (11.1%).
Operating income and margin
Operating income increased both YoY and QoQ, driven by higher gross margin.
Operating margin for the first nine months of 2019 was 6.9%, excluding restructuring charges and the positive effect from reversal of a provision for impairment of trade receivables, of SEK 0.7 b., in Q1 2019. This in line with the 2020 target.
Strategy execution
The target for Managed Services is5-8% operating margin (excluding restructuring charges) in 2020.
Artificial Intelligence (AI) and automation are essential to managing the increasing complexity of current and future networks. In Q1 Ericsson launched a newAI-based managed services offering for operators – Ericsson Operations Engine. With this offering, network and IT operations will move from reactive to proactive, data-driven operations, making sense of billions of data points and acting before network issues impact customer experience. This will enable operators to address the increasing network complexity, increasing volumes of devices, multiple technologies such as 4G, 5G and IoT and more diverse service requirements.
Further investments will be made in automation, analytics andAI-driven offerings, to support 5G, IoT and cloud as well as to increase service delivery efficiency.
10 | Ericsson | Third quarter report 2019 | Segment results |
Emerging Business and Other (includes Emerging Business, iconectiv, Red Bee Media and Media Solutions)
SEK b. | Q3 2019 | Q3 2018 | YoY change | Q2 2019 | QoQ change | Jan-Sep 2019 | Jan-Sep 2018 | |||||||||||||||||||||
Net sales | 1.6 | 2.4 | -33 | % | 1.7 | -3 | % | 5.1 | 6.1 | |||||||||||||||||||
Of which Emerging Business and iconectiv | 1.1 | 1.0 | 8 | % | 1.0 | 1 | % | 3.1 | 2.3 | |||||||||||||||||||
Of which Red Bee Media | 0.6 | 0.7 | -16 | % | 0.6 | -6 | % | 1.8 | 1.8 | |||||||||||||||||||
Of which Media Solutions | 0.0 | 0.7 | — | 0.0 | — | 0.1 | 2.0 | |||||||||||||||||||||
Sales growth adjusted for comparable units and currency | — | — | -7 | % | — | — | — | — | ||||||||||||||||||||
Gross income | 0.3 | 0.8 | -58 | % | 0.3 | 5 | % | 1.0 | 1.6 | |||||||||||||||||||
Gross margin | 20.2 | % | 32.3 | % | — | 18.5 | % | — | 20.8 | % | 26.6 | % | ||||||||||||||||
Operating income (loss) | -11.3 | -1.0 | — | -0.7 | — | -12.1 | -3.5 | |||||||||||||||||||||
Operating margin | -695.8 | % | -42.9 | % | — | -44.1 | % | — | -239.0 | % | -57.4 | % | ||||||||||||||||
Restructuring charges | 0.0 | 0.0 | — | 0.0 | — | 0.0 | -0.2 | |||||||||||||||||||||
Gross income excl.restructuring charges | 0.3 | 0.8 | -57 | % | 0.3 | 4 | % | 1.1 | 1.7 | |||||||||||||||||||
Gross margin excl.restructuring charges | 20.5 | % | 32.3 | % | — | 19.2 | % | — | 21.1 | % | 28.5 | % | ||||||||||||||||
Operating income excl.restructuring charges | -11.3 | -1.0 | — | -0.7 | — | -12.0 | -3.3 | |||||||||||||||||||||
Of which Emerging Business, iconectiv and common costs | -0.5 | -0.6 | — | -0.5 | — | -1.5 | -1.9 | |||||||||||||||||||||
Of which Red Bee Media | 0.0 | 0.0 | — | 0.0 | — | 0.0 | -0.2 | |||||||||||||||||||||
Of which Media Solutions | -0.3 | -0.4 | — | -0.2 | — | 0.0 | -1.2 | |||||||||||||||||||||
Of which adjustments in Q3 2019 ¹) | -10.5 | — | — | — | — | -10.5 | — | |||||||||||||||||||||
Operating margin excl.restructuring charges | -695.1 | % | -41.5 | % | — | -42.8 | % | — | -238.2 | % | -53.8 | % | ||||||||||||||||
Operating income excl.restr.charges & items affecting comparability ²) | -0.8 | -1.0 | — | -0.7 | — | -2.2 | -3.3 | |||||||||||||||||||||
Operating margin excl.restr.charges & items affecting comparability ²) | -46.6 | % | -41.5 | % | — | -42.8 | % | — | -44.0 | % | -53.8 | % |
1 | Cost provisions related to a resolution of the SEC and DOJ investigations of SEK-11.5 b. and refund of social security costs of SEK 0.9 b. in Q3 2019. |
2 | Operating income excluding restructuring charges in all periods. Excluding cost provisions related to a resolution of the SEC and DOJ investigations of SEK-11.5 b. and refund of social security costs of SEK 0.9 b. in Q3 2019. Excluding a capital gain related to the divestment of MediaKind of SEK 0.7 b. in Q1 2019. |
Net sales
Reported sales decreased by-33% YoY, mainly due to the 51% divestment of MediaKind. Sales adjusted for comparable units and currency decreased by-7% YoY, due to lower sales in Red Bee Media. The decline was partly offset by growth in Emerging Business.
Gross margin
Gross margin declined to 20.2% (32.3%) YoY. Gross margin excluding restructuring charges declined to 20.5% (32.3%). The decline was mainly due to the divestment of 51% of MediaKind.
Gross margin increased QoQ to 20.2% from 18.5%. Gross margin excluding restructuring charges increased to 20.5% from 19.2%.
Q2 2019 was negatively impacted by a provision for a customer claim.
Operating income (loss)
Operating income excluding restructuring charges and items affecting comparability was SEK-0.8 b.
Media Solutions operating income excluding restructuring charges was SEK-0.3(-0.4) b. The operating income includes Ericsson’s 49% share in earnings of the MediaKind business.
Red Bee Media operating income excluding restructuring charges was stable at break-even.
Operating income in Emerging Business, iconectiv and common costs excluding restructuring charges was SEK-0.5(-0.6) b. driven by improved earnings in iconectiv.
11 | Ericsson | Third quarter report 2019 | Segment results |
Strategy execution
Emerging Business and iconectiv A leanstart-up approach with selective investments has been implemented in Emerging Business, to build a position and grow sales in new areas, leveraging on Ericsson’s core business. With the exception of iconectiv (software-based solutions for number portability), the portfolio is still in an early investment phase with focus on generating sales and scaling the business. Within IoT, Ericsson offers global connectivity management for billions of IoT devices and connections. The maingo-to-market model is via mobile operators, leveraging access to licensed spectrum.
In the quarter, iconectiv acquired CSF Corporation’s toll-free number management portfolio and Aerialink’s cloud-based mobile messaging platform for enterprises and for companies managing toll-free number assignments and toll-free number porting in the U.S. The acquisition strengthens the iconectiv portfolio.
Red Bee Media
The target remains to achieve a sustainable profitable business by continuing to develop the business as an independent and focused media services entity within Ericsson.
Media Solutions
51% of the MediaKind business was divested on February 1, 2019. After the transaction, Ericsson carries 49% of the MediaKind results as “share in earnings of JV and associated companies”.
12 | Ericsson | Third quarter report 2019 | Segment results |
Cash flow
SEK b. | Q3 2019 | Q3 2018 | Q2 2019 | Jan-Sep 2019 | Jan-Sep 2018 | |||||||||||||||
Net income reconciled to cash | -4.3 | 2.9 | 5.0 | 6.1 | 1.7 | |||||||||||||||
Changes in operating net assets | 11.3 | -0.9 | -1.3 | 10.3 | 3.4 | |||||||||||||||
Cash flow from operating activities | 7.0 | 2.0 | 3.6 | 16.4 | 5.1 | |||||||||||||||
Cash flow from investing activities | -3.1 | -1.7 | 1.0 | 1.2 | -1.9 | |||||||||||||||
Cash flow from financing activities | 0.2 | 0.3 | -4.6 | -7.0 | -3.5 | |||||||||||||||
Effect of exchange rate changes on cash | 1.6 | -1.6 | 0.0 | 2.2 | 0.6 | |||||||||||||||
Net change in cash and cash equivalents | 5.7 | -1.0 | 0.0 | 12.8 | 0.2 | |||||||||||||||
Free cash flow excluding M&A | 5.5 | 0.7 | 2.2 | 11.8 | 1.3 | |||||||||||||||
Free cash flow | 5.0 | 0.3 | 2.2 | 11.6 | 0.0 |
Operating activities
Cash flow from operating activities was SEK 7.0 (2.0) b. Cash flow was supported by strong income (excluding items affecting comparability) and by decreased trade receivables following strong cash collection. Inventories and Accounts payable decreased. Additions to provisions of SEK 12.8 b. were made in the quarter, of which SEK 11.5 b. were related to a resolution of the SEC and DOJ investigations. SEK 2.2 b. of provisions were utilized in the quarter, of which SEK 0.7 b. were related to restructuring.
The cost provision related to a resolution of the SEC and DOJ investigations had no impact on cash flow in the quarter. SEK 0.4 b. out of the SEK 0.9 b. in social security costs refund had a positive impact on cash flow.
Investing activities
Cash flow from investing activities was SEK-3.1(-1.7) b. impacted by SEK-1.1 b. due to purchases of interest-bearing securities (i.e. government/ mortgage bonds). The acquisition of CSF, aUS-based company related to the iconectiv business, was made in the quarter, impacting cash flow by SEK-0.5 b. Cash flow from investments in property, plant and equipment was SEK-1.2(-1.1) b. Cash flow from capitalized development expenses was SEK-0.3(-0.2) b. due to R&D activities in 5G.
Financing activities
Cash flow from financing activities was SEK 0.2 (0.3) b. Ericsson drew on the credit facility of EUR 250 million, from the European Investment Bank (EIB), which was granted in 2018 to support R&D activities for 5G. The facility is set to mature in 2024.
Free cash flow
Free cash flow excluding M&A was SEK 5.5 (0.7) b. and free cash flow (including M&A) was SEK 5.0 (0.3) b.
Effects of implementation of IFRS 16 “Leases”
Cash flow from operating activities and free cash flow were positively impacted by SEK 1.1 b. from the implementation of IFRS 16 “Leases”. This includes aone-time impact of a real estate lease termination. Financing activities were negatively impacted by amortization of the leasing liability of the same amount.
13 | Ericsson | Third quarter report 2019 | Cash flow |
Financial position
Sep 30 | Sep 30 | Jun 30 | ||||||||||
SEK b. | 2019 | 2018 | 2019 | |||||||||
+ Cash and cash equivalents | 51.2 | 36.1 | 45.5 | |||||||||
+ Interest-bearing securities, current | 5.9 | 6.6 | 6.4 | |||||||||
+ Interest-bearing securities,non-current | 19.2 | 23.0 | 17.1 | |||||||||
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Gross cash | 76.2 | 65.7 | 69.0 | |||||||||
- Borrowings, current | 1.6 | 2.5 | 2.2 | |||||||||
- Borrowings,non-current | 37.2 | 31.2 | 33.0 | |||||||||
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Net cash | 37.4 | 32.0 | 33.8 | |||||||||
Equity | 77.5 | 96.0 | 84.5 | |||||||||
Total assets | 288.5 | 264.8 | 280.4 | |||||||||
Capital turnover (times) | 1.4 | 1.3 | 1.3 | |||||||||
Return on capital employed (%) | 3.8 | % | 2.7 | % | 11.0 | % | ||||||
Equity ratio (%) | 26.9 | % | 36.2 | % | 30.1 | % | ||||||
Return on equity (%) | -3.6 | % | 0.0 | % | 9.4 | % |
Gross cash increased by SEK 7.3 b. QoQ as a result of the positive free cash flow. In addition, Ericsson drew on the credit facility of EUR 250 million, from the European Investment Bank (EIB), which was granted in 2018 to support R&D activities for 5G. The facility is set to mature in 2024.
Net cash increased by SEK 3.7 b. QoQ as a result of the positive free cash flow. Net cash does not include lease liabilities.
Liabilities for post-employment benefits increased in the quarter, to SEK 37.3 b. from SEK 33.9 b., due to lower interest rates. The Swedish defined benefit obligation (DBO) was calculated using a discount rate based on the yields of Swedish government bonds. If the
discount rate had been based on Swedish covered mortgage bonds, the liability for post-employment benefits would have been approximately SEK 9.2 b. lower as of September 30, 2019.
The average maturity of long-term borrowings as of September 30, 2019, was 2.8 years, a decrease from 3.6 years 12 months earlier.
In the quarter, Ericsson solicited Fitch for credit rating services. Fitch’s long-term rating for Ericsson isBBB- (“investment grade”) with stable outlook. In the quarter, both Moody’s and Standard & Poor’s changed their rating outlook on Ericsson from stable to positive.
14 | Ericsson | Third quarter report 2019 | Financial position |
Parent Company
Income after financial items was SEK-9.4 (3.3) b.
At the end of the quarter, gross cash (cash, cash equivalents, short-term investments and interest-bearing securitiesnon-current) amounted to SEK 59.4 (55.2) b.
There was a decrease in intercompany lending of SEK 0.6 b. and in intercompany borrowing of SEK 1.7 b. in the quarter.
A provision was made in the quarter of USD 1.2 b. (SEK 11.5 b.), related to a resolution of the investigations by the United States Securities and Exchange Commission (SEC) and with the United States Department of Justice (DOJ), regarding the Company’s compliance with the U.S. Foreign Corrupt Practices Act (FCPA).
In accordance with the conditions of the long-term variable compensation program (LTV) for Ericsson employees, 3,782,621 shares from treasury stock were distributed or sold to employees during the third quarter. The holding of treasury stock on September 30, 2019, was 25,072,497 Class B shares.
15 | Ericsson | Third quarter report 2019 | Parent Company |
Other information
Investor Update on October 17, 2019 at 3:00 – 5:00 pm CET
The Investor Update, an online-only digital event, on Ericsson’s overall strategic direction and business development will be held on October 17 at 3:00 to 5:00 pm CET.
Management presentations by CEO Börje Ekholm and CFO Carl Mellander will be followed by a Q&A session with the online audience. Key messages:
• | Focused business strategy remains and the Company is tracking towards the new financial targets. |
• | Sales ambition for 2020 is SEK230-240 b. (compared with previous 2020 sales ambition of SEK210-220 b.). The increase is driven by Networks, partly supported by currency effects. |
• | Operating margin target for 2020, excluding restructuring charges, remains unchanged at >10% of sales. This incorporates continued dilutive impact from strategic contracts, an initially higher cost level for newly introduced 5G products and a target adjustment for segment Emerging Business and Other to SEK-1.5 to-2.0 b. (previously break-even). |
• | Operating margin target of12-14% for 2022 (previously >12%), excluding restructuring charges, based on an ambition to grow faster than the market in combination with leverage from investments in market position and R&D. 2022 targets by segment remain unchanged. |
2020 target breakdown by segment
(compared with targets communicated at CMD 2018):
Net sales ambition, | Operating margin excl. | |||
Networks | 160-164 (141-145) | 15-17% (unchanged) | ||
Digital Services | 41-43 (unchanged) | Low single digit (unchanged) | ||
Managed Services | 23-25 (unchanged) | 5-8% (unchanged) | ||
Emerging Business | 6-8 (5-7) | SEK-1.5 b. to-2.0 b. (break-even) | ||
Group total | 230-240(210-220) | >10% (unchanged) |
Underlying assumptions:
• | USD to SEK 9.50 |
• | Managed Services addressable market:2-4% |
CAGR 2018-2022
• | Digital Services addressable market:1-4% |
CAGR 2018-2022
• | Network RAN equipment: 2% CAGR 2018-2023. |
Changes to the Executive Team
On August 22, 2019, Ericsson announced that, effective September 1, 2019, Fadi Pharaon is appointed Senior Vice President and Head of Market Area Middle East & Africa at Ericsson, and member of Ericsson’s Executive Team, reporting to the CEO.
Fadi Pharaon previously held the position as Vice President, Networks & Managed Services within Ericsson’s Market Area Europe & Latin America.
16 | Ericsson | Third quarter report 2019 | Other information |
SEC and DOJ inquiries
On September 26, 2019, 01:00 CEST, Ericsson announced a cost provision for the SEC and DOJ inquires. As previously disclosed, Ericsson has beenco-operating voluntarily since 2013 with an investigation by the United States Securities and Exchange Commission (SEC) and, since 2015, with an investigation by the United States Department of Justice (DOJ) into Ericsson’s compliance with the U.S. Foreign Corrupt Practices Act (FCPA) and the process is still ongoing. The investigations cover a period ending Q1 2017 and revealed breaches of the Company’s Code of Business Ethics and the FCPA in six countries: China, Djibouti, Indonesia, Kuwait, Saudi Arabia and Vietnam. The Company previously communicated that the resolution of the investigations will result in material financial and other measures.
The Company announced that it would take a provision, which would impact the third quarter 2019 results by SEK 12 b. The provision constitutes the Company’s current estimate of expenditure related to a resolution of the U.S. investigations, of which the combined monetary sanctions from SEC and DOJ is estimated at USD 1 b., and the remainder pertains to other costs related to a resolution of the investigations. The provision booked in the third quarter amounts to USD 1.2 b (SEK 11.5 b.). It is booked as Other operating expenses in the income statement of segment Emerging Business and Other. The difference compared with the earlier communicated estimate of SEK 12.0 b. is due to changed currency exchange rate.
In the course of the investigations, the Company identified breaches of its Code of Business Ethics and the FCPA. It is the Company’s assessment that the breaches are the result of several deficiencies, including a failure to react to red flags and inadequate internal controls which enabled a limited number of employees to actively circumvent internal controls for illegitimate purposes. Disciplinary measures, including terminations where appropriate, have been taken against identified individuals determined to have breached the Code of Business Ethics. Ericsson has acted to address shortcomings and is significantly enhancing its Ethics & Compliance program, to ensure that the Company is equipped to do business the right way. As the process is still ongoing, Ericsson is not able to make any further comments.
Based on a thorough internal and external assessment of its Ethics and Compliance program, the Company has implemented significant reforms to address identified gaps and further strengthen the program. This work is still ongoing, and Ericsson will remain relentless in striving to improve and safeguard a strong ethical and compliance culture throughout the Company.
POST-CLOSING EVENTS
Ericsson completes acquisition of Kathrein’s antenna and filter business
On October 2, 2019, Ericsson completed its acquisition of the antenna and filter division of Kathrein, a provider of antenna and filter
technologies with headquarters in Rosenheim, Germany. The closing follows the announcement on February 25, 2019 that Ericsson intended to make the acquisition.
17 | Ericsson | Third quarter report 2019 | Other information |
Risk factors
Ericsson is exposed to a number of risks in its activities. To stimulate identification and support cross-functional treatment within the Ericsson Group, risks are grouped in a number of categories, including for example risks relating to technology, IPR, compliance, project execution, operations, products and services, treasury and accounting, the geopolitical environment, M&A, cyber security and occupational health and safety.
Ericsson’s risk management is embedded into strategy development and operational processes and is a part of the Ericsson Group Management System to ensure accountability, effectiveness, efficiency, business continuity and compliance. Risks are defined in both a short-term and long-term perspective and are related to long-term objectives as per the strategic direction as well as to short-term objectives.
Risk factors and uncertainties of relevance to Ericsson are described in the Annual Report 2018. 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:
• | Ericsson has beenco-operating voluntarily since 2013 with an investigation by the United States Securities and Exchange Commission (SEC) and since 2015 with an investigation by the United States Department of Justice (DOJ) into Ericsson’s compliance with the U.S. Foreign Corrupt Practices Act (FCPA) and the process is still ongoing. The investigations cover a period ending Q1 2017 and revealed breaches of the Company’s Code of Business Ethics and the FCPA in six countries: China, Djibouti, Indonesia, Kuwait, Saudi Arabia and Vietnam. While Ericsson cannot comment in detail on the ongoing process with the U.S. authorities, the Company has made a provision for cost related to a resolution of the investigations, which impacted the third quarter 2019 results by SEK 11.5 b. The process to find a resolution is still ongoing. In addition to the estimated costs, Ericsson could experience reputational harm and other negative consequences as a result of these matters. For example, customers or suppliers may reconsider their relationships with the Company, or governmental and regulatory authorities in the relevant jurisdictions or elsewhere could seek to penalize the Company or place restrictions on its operations. Harm to reputation, or any resulting disruption in customer or supplier relationships, could have a material adverse impact on Ericsson’s business. |
• | As with other companies across the world, cyber-attacks are targeting Ericsson’s infrastructure, products, operations, and personnel, which requires the Company to invest in defensive countermeasures throughout the organization and in Ericsson’s supply chain. As attacks continue to increase in frequency and severity, there is no guarantee that existing protections will prevent material adverse effects on Ericsson’s business, operations, financial condition, reputation and brand. |
• | Geopolitical turbulence and trade frictions, e.g. between China and the USA, and continued or increased tension in parts of the world, such as the Middle East, may continue to prevail and to increasingly be a matter to address for Ericsson and its customers. This could result in material negative impact on Ericsson’s global operations, lead to increased, unrecoverable, costs and may have a negative impact on the Company’s profitability. It may also be disruptive to Ericsson’s international supply chain and export/import activities (including component supply, manufacturing, sourcing and deliveries of products and services). |
Stockholm, October 17, 2019
Telefonaktiebolaget LM Ericsson
Börje Ekholm, President and CEO
Org. no. 556016-0680
Date for next report: January 24, 2020
18 | Ericsson | Third quarter report 2019 | Risk factors |
Auditors’ Review Report
Introduction
We have reviewed the condensed interim financial information (interim report) of Telefonaktiebolaget LM Ericsson (publ.) as of September 30, 2019, and the nine months period then ended. The board of directors and the CEO are responsible for the preparation and presentation of the interim financial report in accordance with IAS 34 and the Swedish Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.
Scope of review
We conducted our review in accordance with the International Standard on Review Engagements ISRE 2410, Review of Interim Report Performed by the Independent Auditor of the Entity.
A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing, ISA, and other generally accepted auditing standards in Sweden. The procedures performed in a review do not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the interim report is not prepared, in all material respects, in accordance with IAS 34 and the Swedish Annual Accounts Act, regarding the Group, and with the Swedish Annual Accounts Act, regarding the Parent Company.
Stockholm, October 17, 2019
PricewaterhouseCoopers AB
Bo Hjalmarsson
Authorized Public Accountant
Auditor in Charge
Johan Engstam
Authorized Public Accountant
19 | Ericsson | Third quarter report 2019 | Auditors’ Review Report |
Editor’s note
Press briefing and live webcast
Ericsson invites media, investors and analysts to a conference call on October 17, 2019 starting at 9:00 am CET.
An Investor Update, an online-only digital event, on Ericsson’s overall strategic direction and business development will be held on the same date, October 17 at 3:00 to 5:00 pm CET.
Live audio webcasts of the conference calls as well as supporting slides will be available at:
www.ericsson.com/investors and
www.ericsson.com/press
Replay of the conference calls will be available approximately one hour after each call has ended and will remain available for seven days.
For further information, please contact:
Carl Mellander, Senior Vice President, Chief Financial Officer
Phone: +46 10 713 89 70
E-mail: investor.relations@ericsson.com or
media.relations@ericsson.com
Stella Medlicott, Senior Vice President, Chief Marketing and Communications Officer
Phone: +46 10 713 65 39
E-mail: investor.relations@ericsson.com or
media.relations@ericsson.com
Telefonaktiebolaget LM Ericsson
Org. number: 556016-0680
Torshamnsgatan 21
SE-164 83 Stockholm
Phone: +46 10 719 00 00
www.ericsson.com
Investors
Peter Nyquist, Vice President,
Head of Investor Relations
Phone: +46 10 714 64 99, +46 70 575 29 06
E-mail: peter.nyquist@ericsson.com
Stefan Jelvin, Director,
Investor Relations
Phone: +46 10 714 20 39, +46 70 986 02 27
E-mail: stefan.jelvin@ericsson.com
Rikard Tunedal, Director,
Investor Relations
Phone: +46 10 714 54 00, +46 761 005 400
E-mail: rikard.tunedal@ericsson.com
Media
Ola Rembe, Vice President,
Head of External Communications
Phone: +46 10 719 97 27, +46 73 024 48 73
E-mail: media.relations@ericsson.com
Corporate Communications
Phone: +46 10 719 69 92
E-mail: media.relations@ericsson.com
20 | Ericsson | Third quarter report 2019 | Editor’s note |
Forward-looking statements
This report includes forward-looking statements, including statements reflecting management’s current views relating to the growth of the market, future market conditions, future events, financial condition, and expected operational and financial performance, including, in particular the following:
• | Our goals, targets, strategies, planning assumptions and operational or financial performance expectations, such as for example the investor day key messages and our targets and strategies as described in the introductory bullets, the CEO letter, the Segment descriptions and in Other information |
• | Industry trends, future characteristics and development of the markets in which we operate |
• | Our future liquidity, capital resources, capital expenditures, cost savings and profitability |
• | The expected demand for our existing and new products and services as well as plans to launch new products and services including research and development expenditures |
• | The ability to deliver on future plans and to realize potential for future growth |
• | The expected operational or financial performance of strategic cooperation activities and joint ventures |
• | The time until acquired entities and businesses will be integrated and accretive to income |
• | Technology and industry trends including the regulatory and standardization environment in which we operate, competition and our customer structure. |
The words “believe,” “expect,” “foresee,” “anticipate,” “assume,” “intend,” “likely,” “projects,” “may,” “could,” “plan,” “estimate,” “forecast,” “will,” “should,” “would,” “predict,” “aim,” “ambition,” “seek,” “potential,” “target,” “might,” “continue,” or, in each case, their negative or variations, and similar words or expressions are used to identify forward-looking statements. Any statement that refers to expectations, projections or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements.
We caution investors that these statements are subject to risks and uncertainties many of which are difficult to predict and generally beyond our control that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements.
Important factors that could affect whether and to what extent any of our forward-looking statements materialize include, but are not limited to, the factors described in the section “Risk Factors”, and in “Risk Factors” in the Annual Report 2018.
These forward-looking statements also represent our estimates and assumptions only as of the date that they were made. We expressly disclaim a duty to provide updates to these forward-looking statements, and the estimates and assumptions associated with them, after the date of this report, to reflect events or changes in circumstances or changes in expectations or the occurrence of anticipated events, whether as a result of new information, future events or otherwise, except as required by applicable law or stock exchange regulation.
21 | Ericsson | Third quarter report 2019 | Forward-looking statements |
Financial statements and other information
Contents
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Operating income (loss) and operating margin by segment by quarter | 36 | |||
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Gross income and gross margin excluding restructuring charges by segment | 44 | |||
Operating income (loss) and operating margin excluding restructuring charges by segment | 45 | |||
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22 | Ericsson | Third quarter report 2019 | Financial statements and other information |
Q3 | Jan-Sep | |||||||||||||||||||||||
SEK million | 2019 | 2018 | Change | 2019 | 2018 | Change | ||||||||||||||||||
Net sales | 57,127 | 53,810 | 6 | % | 160,843 | 147,029 | 9 | % | ||||||||||||||||
Cost of sales | -35,587 | -34,180 | 4 | % | -100,453 | -95,208 | 6 | % | ||||||||||||||||
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Gross income | 21,540 | 19,630 | 10 | % | 60,390 | 51,821 | 17 | % | ||||||||||||||||
Gross margin (%) | 37.7 | % | 36.5 | % | 37.5 | % | 35.2 | % | ||||||||||||||||
Research and development expenses | -9,497 | -9,388 | 1 | % | -28,182 | -28,244 | 0 | % | ||||||||||||||||
Selling and administrative expenses | -4,920 | -6,625 | -26 | % | -17,915 | -19,834 | -10 | % | ||||||||||||||||
Impairment losses on trade receivables | 200 | -409 | -149 | % | 910 | -806 | -213 | % | ||||||||||||||||
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Operating expenses | -14,217 | -16,422 | -13 | % | -45,187 | -48,884 | -8 | % | ||||||||||||||||
Other operating income and expenses ¹) | -11,305 | 31 | — | -10,466 | 126 | — | ||||||||||||||||||
Shares in earnings of JV and associated companies | -214 | 2 | — | -298 | 31 | — | ||||||||||||||||||
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Operating income (loss) | -4,196 | 3,241 | -229 | % | 4,439 | 3,094 | 43 | % | ||||||||||||||||
Financial income and expenses, net | -685 | -639 | 7 | % | -1,731 | -1,990 | -13 | % | ||||||||||||||||
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Income after financial items | -4,881 | 2,602 | -288 | % | 2,708 | 1,104 | 145 | % | ||||||||||||||||
Taxes | -2,013 | 146 | — | -5,352 | -883 | — | ||||||||||||||||||
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Net income (loss) | -6,894 | 2,748 | -351 | % | -2,644 | 221 | — | |||||||||||||||||
Net income attributable to: | ||||||||||||||||||||||||
Stockholders of the Parent Company | -6,229 | 2,745 | -2,207 | 23 | ||||||||||||||||||||
Non-controlling interests | -665 | 3 | -437 | 198 | ||||||||||||||||||||
Other information | ||||||||||||||||||||||||
Average number of shares, basic (million) | 3,308 | 3,293 | 3,304 | 3,290 | ||||||||||||||||||||
Earnings (loss) per share, basic (SEK) ²) | -1.89 | 0.84 | -0.67 | 0.01 | ||||||||||||||||||||
Earnings (loss) per share, diluted (SEK) ³) | -1.89 | 0.83 | -0.67 | 0.01 |
1) | Includes a provision of SEK-11.5 billion in Q3 2019 related to the investigation by the SEC and the DOJ. |
2) | Based on net income (loss) attributable to stockholders of the Parent Company. |
3) | Potential ordinary shares are not considered when their conversion to ordinary shares would increase earnings per share. |
Statement of comprehensive income (loss)
Q3 | Jan-Sep | |||||||||||||||
SEK Million | 2019 | 2018 | 2019 | 2018 | ||||||||||||
Net income (loss) | -6,894 | 2,748 | -2,644 | 221 | ||||||||||||
Other comprehensive income (loss) | ||||||||||||||||
Items that will not be reclassified to profit or loss | ||||||||||||||||
Remeasurements of defined benefits pension plans incl. asset ceiling | -2,716 | 1,223 | -8,166 | 497 | ||||||||||||
Revaluation of borrowings due to change in credit risk | 81 | -292 | -454 | -226 | ||||||||||||
Tax on items that will not be reclassified to profit or loss | 629 | -217 | 1,886 | -270 | ||||||||||||
Items that may be reclassified to profit or loss | ||||||||||||||||
Cash flow hedge reserve | ||||||||||||||||
Gains/losses arising during the period | -374 | — | -580 | — | ||||||||||||
Reclassification adjustments for gains/losses included in profit or loss | — | — | — | — | ||||||||||||
Adjustments for amounts transferred to initial carrying amount of hedged items | — | — | — | — | ||||||||||||
Revaluation of other investments in shares and participations | ||||||||||||||||
Fair value remeasurement | — | — | — | — | ||||||||||||
Changes in cumulative translation adjustments | 2,092 | -1,237 | 3,687 | 1,804 | ||||||||||||
Share of other comprehensive income on JV and associated companies | 68 | -5 | 114 | 15 | ||||||||||||
Tax on items that may be reclassified to profit or loss | 77 | — | 119 | — | ||||||||||||
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Total other comprehensive income (loss), net of tax | -143 | -528 | -3,394 | 1,820 | ||||||||||||
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Total comprehensive income | -7,037 | 2,220 | -6,038 | 2,041 | ||||||||||||
Total comprehensive income (loss) attributable to: | ||||||||||||||||
Stockholders of the Parent Company | -6,409 | 2,223 | -5,656 | 1,807 | ||||||||||||
Non-controlling interest | -628 | -3 | -382 | 234 |
23 | Ericsson | Third quarter report 2019 | Financial statements |
Sep 30 | Jun 30 | Dec 31 | ||||||||||
SEK million | 2019 | 2019 | 2018 | |||||||||
Assets | ||||||||||||
Non-current assets | ||||||||||||
Intangible assets | ||||||||||||
Capitalized development expenses | 4,024 | 3,971 | 4,237 | |||||||||
Goodwill | 32,565 | 30,964 | 30,035 | |||||||||
Intellectual property rights, brands and other intangible assets | 2,409 | 2,467 | 3,474 | |||||||||
Property, plant and equipment | 13,399 | 13,192 | 12,849 | |||||||||
Right-of-use assets | 8,617 | 8,227 | — | |||||||||
Financial assets | ||||||||||||
Equity in JV and associated companies | 1,556 | 1,766 | 611 | |||||||||
Other investments in shares and participations | 1,406 | 1,380 | 1,515 | |||||||||
Customer finance,non-current | 2,495 | 2,428 | 1,180 | |||||||||
Interest-bearing securities,non-current | 19,157 | 17,091 | 23,982 | |||||||||
Other financial assets,non-current | 6,452 | 5,986 | 6,559 | |||||||||
Deferred tax assets | 30,818 | 29,169 | 23,152 | |||||||||
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122,898 | 116,641 | 107,594 | ||||||||||
Current assets | ||||||||||||
Inventories | 36,056 | 36,135 | 29,255 | |||||||||
Contract assets | 13,004 | 12,593 | 13,178 | |||||||||
Trade receivables | 41,228 | 44,956 | 51,172 | |||||||||
Customer finance, current | 1,334 | 1,109 | 1,704 | |||||||||
Other current receivables | 16,962 | 17,148 | 20,844 | |||||||||
Interest-bearing securities, current | 5,866 | 6,367 | 6,625 | |||||||||
Cash and cash equivalents | 51,183 | 45,498 | 38,389 | |||||||||
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165,633 | 163,806 | 161,167 | ||||||||||
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Total assets | 288,531 | 280,447 | 268,761 | |||||||||
Equity and liabilities | ||||||||||||
Equity | ||||||||||||
Stockholders’ equity | 78,200 | 84,488 | 86,978 | |||||||||
Non-controlling interest in equity of subsidiaries | -725 | 45 | 792 | |||||||||
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77,475 | 84,533 | 87,770 | ||||||||||
Non-current liabilities | ||||||||||||
Post-employment benefits | 37,345 | 33,919 | 28,720 | |||||||||
Provisions,non-current | 2,308 | 2,646 | 5,471 | |||||||||
Deferred tax liabilities | 857 | 1,178 | 670 | |||||||||
Borrowings,non-current | 37,153 | 33,040 | 30,870 | |||||||||
Lease liabilities,non-current | 7,888 | 7,699 | — | |||||||||
Other non-current liabilities | 2,163 | 2,160 | 4,346 | |||||||||
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| |||||||
87,714 | 80,642 | 70,077 | ||||||||||
Current liabilities | ||||||||||||
Provisions, current | 19,699 | 8,712 | 10,537 | |||||||||
Borrowings, current | 1,622 | 2,160 | 2,255 | |||||||||
Lease liabilities, current | 2,226 | 2,397 | — | |||||||||
Contract liabilities | 34,499 | 37,264 | 29,348 | |||||||||
Trade payables | 30,672 | 31,388 | 29,883 | |||||||||
Other current liabilities | 34,624 | 33,351 | 38,891 | |||||||||
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123,342 | 115,272 | 110,914 | ||||||||||
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Total equity and liabilities | 288,531 | 280,447 | 268,761 | |||||||||
Assets pledged as collateral | 6,049 | 5,824 | 5,681 | |||||||||
Contingent liabilities | 1,640 | 1,511 | 1,638 |
24 | Ericsson | Third quarter report 2019 | Financial statements |
Consolidated statement of cash flows
Q3 | Jan-Sep | Jan-Dec | ||||||||||||||||||
SEK million | 2019 | 2018 | 2019 | 2018 | 2018 | |||||||||||||||
Operating activities | ||||||||||||||||||||
Net income (loss) | -6,894 | 2,748 | -2,644 | 221 | -6,276 | |||||||||||||||
Adjustments to reconcile net income to cash | ||||||||||||||||||||
Taxes | -411 | -2,101 | 703 | -5,487 | -1,897 | |||||||||||||||
Earnings/dividends in JV and associated companies | 278 | 28 | 373 | 13 | -23 | |||||||||||||||
Depreciation, amortization and impairment losses | 2,199 | 1,893 | 6,799 | 5,849 | 8,318 | |||||||||||||||
Other | 508 | 348 | 882 | 1,056 | 1,432 | |||||||||||||||
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Net income reconciled to cash | -4,320 | 2,916 | 6,113 | 1,652 | 1,554 | |||||||||||||||
Changes in operating net assets | ||||||||||||||||||||
Inventories | 1,077 | -1,773 | -4,939 | -6,496 | -4,807 | |||||||||||||||
Customer finance, current andnon-current | -265 | 1,001 | -792 | 1,948 | 1,085 | |||||||||||||||
Trade receivables and contract assets | 6,528 | -3,503 | 14,211 | 5,474 | -2,047 | |||||||||||||||
Trade payables | -2,913 | 953 | -1,060 | 1,607 | 2,436 | |||||||||||||||
Provisions andpost-employment benefits | 10,719 | -265 | 6,780 | -634 | 6,696 | |||||||||||||||
Contract liabilities | -3,988 | -220 | 2,834 | 304 | -808 | |||||||||||||||
Other operating assets and liabilities, net | 151 | 2,931 | -6,770 | 1,200 | 5,233 | |||||||||||||||
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11,309 | -876 | 10,264 | 3,403 | 7,788 | ||||||||||||||||
Cash flow from operating activities | 6,989 | 2,040 | 16,377 | 5,055 | 9,342 | |||||||||||||||
Investing activities | ||||||||||||||||||||
Investments in property, plant and equipment | -1,231 | -1,088 | -3,643 | -2,895 | -3,975 | |||||||||||||||
Sales of property, plant and equipment | 122 | 102 | 538 | 277 | 334 | |||||||||||||||
Acquisitions/divestments of subsidiaries and other operations, net | -466 | -425 | -164 | -1,305 | -1,285 | |||||||||||||||
Product development | -313 | -151 | -1,216 | -730 | -925 | |||||||||||||||
Other investing activities | -56 | -190 | -257 | -427 | -523 | |||||||||||||||
Interest-bearing securities | -1,114 | 30 | 5,973 | 3,152 | 2,242 | |||||||||||||||
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Cash flow from investing activities | -3,058 | -1,722 | 1,231 | -1,928 | -4,132 | |||||||||||||||
Cash flow before financing activities | 3,931 | 318 | 17,608 | 3,127 | 5,210 | |||||||||||||||
Financing activities | ||||||||||||||||||||
Dividends paid | -141 | -2 | -4,435 | -3,291 | -3,425 | |||||||||||||||
Lease liabilities | -1,052 | — | -2,279 | — | — | |||||||||||||||
Other financing activities | 1,396 | 254 | -294 | -223 | -652 | |||||||||||||||
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Cash flow from financing activities | 203 | 252 | -7,008 | -3,514 | -4,077 | |||||||||||||||
Effect of exchange rate changes on cash | 1,550 | -1,562 | 2,194 | 561 | 1,372 | |||||||||||||||
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Net change in cash and cash equivalents | 5,684 | -992 | 12,794 | 174 | 2,505 | |||||||||||||||
| �� |
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Cash and cash equivalents, beginning of period | 45,499 | 37,050 | 38,389 | 35,884 | 35,884 | |||||||||||||||
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Cash and cash equivalents, end of period | 51,183 | 36,058 | 51,183 | 36,058 | 38,389 |
25 | Ericsson | Third quarter report 2019 | Financial statements |
Consolidated statement of changes in equity
Jan-Sep | Jan-Dec | |||||||||||
SEK million | 2019 | 2018 | 2018 | |||||||||
Opening balance ¹) | 87,770 | 97,571 | 97,571 | |||||||||
Adjustment due to new accounting standards ²) | -249 | -983 | -983 | |||||||||
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Adjusted opening balance | 87,521 | 96,588 | 96,588 | |||||||||
Total comprehensive income (loss) | -6,038 | 2,041 | -6,176 | |||||||||
Sale/repurchase of own shares | 125 | 76 | 107 | |||||||||
Stock issue, net | — | — | — | |||||||||
Long-term variable compensation plans | 303 | 540 | 677 | |||||||||
Dividends paid | -4,435 | -3,291 | -3,425 | |||||||||
Transactions withnon-controlling interests | -1 | -1 | -1 | |||||||||
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Closing balance | 77,475 | 95,953 | 87,770 |
1) | Opening balance of 2018 has been restated for IFRS 15. |
2) | Opening balance adjustment in 2019 due to IFRS 16, and in 2018 due to IFRS 9. |
Consolidated income statement – isolated quarters
2019 | 2018 | |||||||||||||||||||||||||||
Isolated quarters, SEK million | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||
Net sales | 57,127 | 54,810 | 48,906 | 63,809 | 53,810 | 49,808 | 43,411 | |||||||||||||||||||||
Cost of sales | -35,587 | -34,739 | -30,127 | -47,430 | -34,180 | -32,475 | -28,553 | |||||||||||||||||||||
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Gross income | 21,540 | 20,071 | 18,779 | 16,379 | 19,630 | 17,333 | 14,858 | |||||||||||||||||||||
Gross margin (%) | 37.7 | % | 36.6 | % | 38.4 | % | 25.7 | % | 36.5 | % | 34.8 | % | 34.2 | % | ||||||||||||||
Research and development expenses | -9,497 | -9,518 | -9,167 | -10,665 | -9,388 | -9,783 | -9,073 | |||||||||||||||||||||
Selling and administrative expenses | -4,920 | -6,964 | -6,031 | -7,685 | -6,625 | -7,053 | -6,156 | |||||||||||||||||||||
Impairment losses on trade receivables | 200 | 151 | 559 | 386 | -409 | -369 | -28 | |||||||||||||||||||||
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Operating expenses | -14,217 | -16,331 | -14,639 | -17,964 | -16,422 | -17,205 | -15,257 | |||||||||||||||||||||
Other operating income and expenses ¹) | -11,305 | 66 | 773 | -294 | 31 | 11 | 84 | |||||||||||||||||||||
Shares in earnings of JV and associated companies | -214 | -67 | -17 | 27 | 2 | 26 | 3 | |||||||||||||||||||||
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| |||||||||||||||
Operating income (loss) | -4,196 | 3,739 | 4,896 | -1,852 | 3,241 | 165 | -312 | |||||||||||||||||||||
Financial income and expenses, net | -685 | -441 | -605 | -715 | -639 | -810 | -541 | |||||||||||||||||||||
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Income after financial items | -4,881 | 3,298 | 4,291 | -2,567 | 2,602 | -645 | -853 | |||||||||||||||||||||
Taxes | -2,013 | -1,451 | -1,888 | -3,930 | 146 | -1,157 | 128 | |||||||||||||||||||||
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Net income (loss) | -6,894 | 1,847 | 2,403 | -6,497 | 2,748 | -1,802 | -725 | |||||||||||||||||||||
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Net income (loss) attributable to: | ||||||||||||||||||||||||||||
Stockholders of the Parent Company | -6,229 | 1,705 | 2,317 | -6,553 | 2,745 | -1,885 | -837 | |||||||||||||||||||||
Non-controlling interests | -665 | 142 | 86 | 56 | 3 | 83 | 112 | |||||||||||||||||||||
Other information | ||||||||||||||||||||||||||||
Average number of shares, basic (million) | 3,308 | 3,304 | 3,300 | 3,296 | 3,293 | 3,290 | 3,286 | |||||||||||||||||||||
Earnings (loss) per share, basic (SEK)²) | -1.89 | 0.52 | 0.70 | -1.99 | 0.84 | -0.58 | -0.25 | |||||||||||||||||||||
Earnings (loss) per share, diluted (SEK) ³) | -1.89 | 0.51 | 0.70 | -1.99 | 0.83 | -0.58 | -0.25 |
1) | Includes a provision of SEK-11.5 billion in Q3 2019 related to the investigation by the SEC and the DOJ. |
2) | Based on net income (loss) attributable to stockholders of the Parent Company. |
3) | Potential ordinary shares are not considered when their conversion to ordinary shares would increase earnings per share. |
26 | Ericsson | Third quarter report 2019 | Financial statements |
Consolidated statement of cash flows – isolated quarters
2019 | 2018 | |||||||||||||||||||||||||||
Isolated quarters, SEK million | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||
Operating activities | ||||||||||||||||||||||||||||
Net income (loss) | -6,894 | 1,847 | 2,403 | -6,497 | 2,748 | -1,802 | -725 | |||||||||||||||||||||
Adjustments to reconcile net income to cash | ||||||||||||||||||||||||||||
Taxes | -411 | 310 | 804 | 3,590 | -2,101 | -1,071 | -2,315 | |||||||||||||||||||||
Earnings/dividends in JV and associated companies | 278 | 71 | 24 | -36 | 28 | -19 | 4 | |||||||||||||||||||||
Depreciation, amortization and impairment losses | 2,199 | 2,274 | 2,326 | 2,469 | 1,893 | 2,065 | 1,891 | |||||||||||||||||||||
Other | 508 | 450 | -76 | 376 | 348 | 568 | 140 | |||||||||||||||||||||
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Net income reconciled to cash | -4,320 | 4,952 | 5,481 | -98 | 2,916 | -259 | -1,005 | |||||||||||||||||||||
Changes in operating net assets | ||||||||||||||||||||||||||||
Inventories | 1,077 | -3,065 | -2,951 | 1,689 | -1,773 | -1,910 | -2,813 | |||||||||||||||||||||
Customer finance, current andnon-current | -265 | 384 | -911 | -863 | 1,001 | 547 | 400 | |||||||||||||||||||||
Trade receivables and contract assets | 6,528 | 3,338 | 4,345 | -7,521 | -3,503 | 1,661 | 7,316 | |||||||||||||||||||||
Trade payables | -2,913 | 1,833 | 20 | 829 | 953 | 1,252 | -598 | |||||||||||||||||||||
Provisions andpost-employment benefits | 10,719 | -480 | -3,459 | 7,330 | -265 | 478 | -847 | |||||||||||||||||||||
Contract liabilities | -3,988 | -1,641 | 8,463 | -1,112 | -220 | -233 | 757 | |||||||||||||||||||||
Other operating assets and liabilities, net | 151 | -1,698 | -5,223 | 4,033 | 2,931 | -94 | -1,637 | |||||||||||||||||||||
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| |||||||||||||||
11,309 | -1,329 | 284 | 4,385 | -876 | 1,701 | 2,578 | ||||||||||||||||||||||
Cash flow from operating activities | 6,989 | 3,623 | 5,765 | 4,287 | 2,040 | 1,442 | 1,573 | |||||||||||||||||||||
Investing activities | ||||||||||||||||||||||||||||
Investments in property, plant and equipment | -1,231 | -1,098 | -1,314 | -1,080 | -1,088 | -951 | -856 | |||||||||||||||||||||
Sales of property, plant and equipment | 122 | 184 | 232 | 57 | 102 | 52 | 123 | |||||||||||||||||||||
Acquisitions/divestments of subsidiaries and other operations, net | -466 | 3 | 299 | 20 | -425 | -431 | -449 | |||||||||||||||||||||
Product development | -313 | -446 | -457 | -195 | -151 | -325 | -254 | |||||||||||||||||||||
Other investing activities | -56 | -36 | -165 | -96 | -190 | -398 | 161 | |||||||||||||||||||||
Interest-bearing securities | -1,114 | 2,414 | 4,673 | -910 | 30 | 3,656 | -534 | |||||||||||||||||||||
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Cash flow from investing activities | -3,058 | 1,021 | 3,268 | -2,204 | -1,722 | 1,603 | -1,809 | |||||||||||||||||||||
Cash flow before financing activities | 3,931 | 4,644 | 9,033 | 2,083 | 318 | 3,045 | -236 | |||||||||||||||||||||
Financing activities | ||||||||||||||||||||||||||||
Dividends paid | -141 | -3,308 | -986 | -134 | -2 | -3,289 | — | |||||||||||||||||||||
Lease liabilities | -1,052 | -623 | -604 | — | — | — | — | |||||||||||||||||||||
Other financing activities | 1,396 | -680 | -1,010 | -429 | 254 | -383 | -94 | |||||||||||||||||||||
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Cash flow from financing activities | 203 | -4,611 | -2,600 | -563 | 252 | -3,672 | -94 | |||||||||||||||||||||
Effect of exchange rate changes on cash | 1,550 | 13 | 631 | 811 | -1,562 | 980 | 1,143 | |||||||||||||||||||||
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Net change in cash and cash equivalents | 5,684 | 46 | 7,064 | 2,331 | -992 | 353 | 813 | |||||||||||||||||||||
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Cash and cash equivalents, beginning of period | 45,499 | 45,453 | 38,389 | 36,058 | 37,050 | 36,697 | 35,884 | |||||||||||||||||||||
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Cash and cash equivalents, end of period | 51,183 | 45,499 | 45,453 | 38,389 | 36,058 | 37,050 | 36,697 |
27 | Ericsson | Third quarter report 2019 | Financial statements |
Parent Company income statement
Q3 | Jan-Sep | Jan-Dec | ||||||||||||||||||
SEK million | 2019 | 2018 | 2019 | 2018 | 2018 | |||||||||||||||
Net sales | — | — | — | — | — | |||||||||||||||
Cost of sales | — | — | — | — | — | |||||||||||||||
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| |||||||||||
Gross income | — | — | — | — | — | |||||||||||||||
Operating expenses | -275 | -879 | -1,032 | -1,385 | -1,686 | |||||||||||||||
Other operating income and expenses ¹) | -10,925 | 399 | -9,957 | 1,153 | 2,111 | |||||||||||||||
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|
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| |||||||||||
Operating income | -11,200 | -480 | -10,989 | -232 | 425 | |||||||||||||||
Financial net | 1,030 | 2,015 | 1,626 | 3,487 | 5,340 | |||||||||||||||
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| |||||||||||
Income after financial items | -10,170 | 1,535 | -9,363 | 3,255 | 5,765 | |||||||||||||||
Transfers to (-) / from untaxed reserves | — | — | — | — | -1,535 | |||||||||||||||
Taxes | -189 | -101 | -264 | -256 | -36 | |||||||||||||||
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| |||||||||||
Net income (loss) | -10,359 | 1,434 | -9,627 | 2,999 | 4,194 |
1) | Includes a provision of SEK-11.5 billion in Q3 2019 related to the investigation by the SEC and the DOJ. |
Parent Company statement of comprehensive income (loss)
Q3 | Jan-Sep | Jan-Dec | ||||||||||||||||||
SEK million | 2019 | 2018 | 2019 | 2018 | 2018 | |||||||||||||||
Net income (loss) | -10,359 | 1,434 | -9,627 | 2,999 | 4,194 | |||||||||||||||
Revaluation of borrowings due to change in credit risk | 81 | 292 | -364 | 342 | 91 | |||||||||||||||
Tax on items that will not be reclassified to profit or loss | -17 | -64 | 75 | -75 | -19 | |||||||||||||||
Available-for-sale financial assets | ||||||||||||||||||||
Gains/losses arising during the period | — | — | — | — | — | |||||||||||||||
Reclassification adjustments on gains/losses included in profit or loss | — | — | — | — | — | |||||||||||||||
Revaluation of other investments in shares and participations | ||||||||||||||||||||
Fair value remeasurement | — | — | — | — | — | |||||||||||||||
Tax on items that may be reclassified to profit or loss | — | — | — | — | — | |||||||||||||||
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Total other comprehensive income, net of tax | 64 | 228 | -289 | 267 | 72 | |||||||||||||||
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|
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|
|
| |||||||||||
Total comprehensive income (loss) | -10,295 | 1,662 | -9,916 | 3,266 | 4,266 |
28 | Ericsson | Third quarter report 2019 | Financial statements |
SEK million | Sep 30 2019 | Dec 31 2018 | ||||||
Assets | ||||||||
Fixed assets | ||||||||
Intangible assets | 66 | 139 | ||||||
Tangible assets | 279 | 259 | ||||||
Financial assets ¹) 2) | 106,712 | 109,177 | ||||||
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| |||||
107,057 | 109,575 | |||||||
Current assets | ||||||||
Inventories | — | — | ||||||
Receivables2) | 27,078 | 38,760 | ||||||
Short-term investments | 5,213 | 6,268 | ||||||
Cash and cash equivalents | 34,990 | 27,850 | ||||||
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| |||||
67,281 | 72,878 | |||||||
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| |||||
Total assets | 174,338 | 182,453 | ||||||
Stockholders’ equity, provisions and liabilities | ||||||||
Equity | ||||||||
Restricted equity | 48,164 | 48,164 | ||||||
Non-restricted equity ²) | 27,612 | 40,752 | ||||||
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|
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| |||||
75,776 | 88,916 | |||||||
Provisions | 11,499 | 86 | ||||||
Non-current liabilities ²) | 37,280 | 62,581 | ||||||
Current liabilities | 49,783 | 30,870 | ||||||
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| |||||
Total stockholders’ equity, provisions and liabilities | 174,338 | 182,453 | ||||||
¹)Of which interest-bearing securities,non-current | 19,157 | 23,982 |
2) | The following 2018 opening balances have been adjusted due to IFRS 9: financial assets increased by SEK 8 million, receivables decreased by SEK –4 million,non-restricted equity decreased by SEK-28 million, andnon-current liabilities increased by SEK 31 million. |
29 | Ericsson | Third quarter report 2019 | Financial statements |
The group
This interim report is prepared in accordance with IAS 34. The term “IFRS” used in this document refers to the application of IAS and IFRS as well as interpretations of these standards as issued by IASB’s Standards Interpretation Committee (SIC) and IFRS Interpretations Committee (IFRIC). The accounting policies adopted are consistent with those of the annual report for the year ended December 31, 2018 and should be read in conjunction with that annual report, with exception for the accounting policies described below.
New standards as from January 1, 2019
One new IFRS standard IFRS 16 “Leases” and one new interpretation IFRIC 23 “Uncertainty over income tax treatments” are effective as from January 1, 2019. IFRIC 23, has not had a material impact on the Company’s financial statements.
IFRS 16 – Leases
Presentation in the financial statements
The Company has implemented this standard using the cumulativecatch-up method, which means that the prior periods financial statements and key ratios presented in this quarterly report have not been restated to reflect adoption of this new standard.
Based on the new requirements under IFRS 16,right-of-use assets and lease liabilities have been added as new lines in the consolidated balance sheet and lease liabilities as a new line in the statement of cash flows. Theright-of-use assets and liabilities were previously reported asoff-balance and repayment to lessors was reported as a part of cash flow from operating activities. Now the amortization of lease liabilities is reported as cash flow from financing activities.
Transition
The standard is effective for annual periods beginning on or after January 1, 2019. The Company has applied the new standard as from January 1, 2019. At transition, the Company has applied the practical expedient under IFRS 16 to not reassess whether a contract is, or contains, a lease. Therefore, the Company has applied the standard to contracts previously identified as leases, or as containing a lease under IAS 17 and IFRIC 4. The Company has also applied the following practical expedients when applying IFRS 16 at transition date:
• | The IAS 37 onerous lease contract measurement for the operating leases existing as per the transition date. This expedient has been applied as a substitute for the measurement of impairment for the relatedright-of-use assets. Impairment testing will be applied going-forward. |
• | Exclusion of initial direct costs from the measurement of theright-to-use asset at the date of initial recognition. |
The Company has implemented the standard using the cumulativecatch-up method, with the cumulative effect being adjusted to the opening retained earnings balance in equity at transition date. No restated information has been presented for previous years.
The Company has, as a lessee, recognized lease liabilities for leases previously classified as operating leases. The weighted average incremental borrowing rate applied to lease liabilities recognized in the balance sheet at the transition date was 5.4%.Right-of-use assets have for most contracts been recognized based on the amount equal to the related lease liability. For some larger real estate contractsright-of-use assets have been recognized as if IFRS 16 had been applied since the commencement date, however, using the incremental borrowing rate as per the effective date. The asset value for these contracts is SEK 249 million lower than the related liabilities. This difference causes the reduction of equity as per transition date.
Under IAS 17 operating leases were not recognized in the balance sheet of a lessee. Future undiscounted minimum lease payments obligations were however disclosed in a note, see note C3 Leasing in the annual report of 2018, amounting to SEK 13.4 billion. The lease liabilities were as per January 1st, 2019 recognized in the balance sheet with SEK 10.4 billion. The difference is mainly related to the discounting effect of the liability. The liability is calculated as the net present value of the future payments, while the numbers disclosed according to IAS 17 was not discounted – as prescribed in IAS 17. And also, the exclusion of lease payments related tolow-value assets from the balance sheet, they are instead expensed straight-line in the income statement.
Opening balance sheet impact of IFRS 16 | ||||
SEK million | IFRS 16 adjustment | |||
Right-of-use assets | 8,651 | |||
Lease liabilities, current | 2,195 | |||
Lease liabilities, non-current | 8,203 | |||
Equity | 249 |
In the transition the following items have been considered: Onerous contracts with SEK 767 million, straight-lining, periodization of lease costs, with SEK 721 million and other net adjustments with SEK 10 million. The tax effect on the equity posting is deemed to be immaterial. There is no impact on the income statement.
30 | Ericsson | Third quarter report 2019 | Additional information |
The impact ofright-of-use assets increased the total asset value by approximately 3%.
Accounting policy – IFRS 16 Leases
Leasing when the Company is the lessee
The main types of assets leased by the Company are, in the order of materiality, real estate,IT-equipment and vehicles. Vehicles are mainly used under service contracts.
The Company recognizesright-of-use assets and lease liabilities arising from all leases in the balance sheet, with some exceptions. This model reflects that, at the start of a lease, the lessee always obtains the right to use an asset for a period of time and has an obligation to pay for that right.
31 | Ericsson | Third quarter report 2019 | Additional information |
In the assessment of a lease contract the lease components are separated fromnon-lease components and the lease term is defined considering any extension or termination options.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted normally using the Company’s incremental borrowing rate. Lease payments included in the liability are fixed payments, variable payments depending on an index or rate, residual values and penalties for termination of contracts.
Theright-of-use asset is initially measured at cost, which equals the amount of the initial measurement of lease liability adjusted for any lease payments made at or before the commencement date less any lease incentives received plus any initial direct costs, and restoration costs.
The Company applies the recognition exemption for short-term leases and leases for which the underlying asset is oflow-value recognizing the lease payments for those leases as an expense on a straight-line basis over the lease term.
Leasing when the Company is the lessor
Leasing contracts with the Company as lessor are classified as finance leases when the majority of risks and rewards are transferred to the lessee, and otherwise as operating leases. Under a finance lease, a receivable is recognized at an amount equal to the net investment in the lease and revenue is recognized in accordance with the revenue recognition principles. Under operating leases the equipment is recorded as property, plant and equipment and revenue as well as depreciation is recognized on a straight-line basis over the lease term.
APM impact in 2019
Lease interest expense is reported under finance costs according to IFRS 16, which is different from prior to 2019, when it was embedded in the lease expense for operating leases, either as costs of sales or operating expenses. This has had a positive impact on the APM operating margin of approximately 0.3 percentage pointsyear-to-date, because lease interest expense is no longer a part of this measurement. The EBITAyear-to-date has increased with SEK 414 million for the same reason.
The reported amortization of lease liabilities is reported as financing cash flows under IFRS 16 and not as operating cash flows as prior to 2019. The impact of this reclassificationyear-to-date in 2019 is SEK 2,279 million and impacts the APM Free cash flow positively. The APM Cash conversion has also improved for the same reason. The timing of the cash flows is not impacted.
Becauseright-of-use assets under IFRS 16 are included in total assets the APM capital employed has increased by approximately 6%. The APM equity ratio has decreased for the same reason.
32 | Ericsson | Third quarter report 2019 | Additional information |
Cash flow hedge accounting
The company has identified certain customer contracts where a fluctuation in the USD/SEK foreign exchange rate would significantly impact net sales and operating income recorded from the contracts. These contracts are multi-year contracts denominated in USD with highly probable payments at fixed points in time. From Q1 2019, the Company has entered into FX forward contracts that match the terms of the foreign exchange exposure as closely as possible and designated these as hedging instruments.
When applying hedge accounting, the effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in OCI. The gain or loss relating to an ineffective portion is recognized immediately in the Income Statement within Financial income or expenses. Upon recognition of the hedged net sales, the cumulative amount in cash flow hedge reserve is released from OCI as a reclassification adjustment and recognized in net sales.
Market area reporting
As of Q1 2019, sales reported on Morocco is reported on market area Middle East and Africa (earlier Europe and Latin America). Comparative periods have been restated to reflect this change. In Q1 2019, these sales were SEK 151 (103) million. Also “Number of employees” by market area has been updated to reflect this change.
Restatement – change to the presentation of financial income and expenses
Due to the significant variations in SEK rates in recent months, the Company has considered the change in reporting of foreign exchange effect to reflect how foreign exchange transaction risk is managed on a net basis in the Company. Previously foreign exchange effects were reported within both Financial income and Financial expense depending on whether they relate to assets or liabilities. In the Annual Report the foreign exchange effect will be presented as a net amount, reported separately from other financial income and expenses items.
In line with this change the Company also elected to present all financial income and expense, including the foreign exchange effect, on the Income Statement as a single line item ‘Financial income and expenses, net’. Previously, Financial income and Financial expenses were presented as separate line items on the Income Statement. The Income Statement for Q2 2019 and all comparative periods have been restated to reflect the new presentation of ‘Financial income and expenses, net’.
33 | Ericsson | Third quarter report 2019 | Additional information |
Net sales by segment by quarter
2019 | 2018 | |||||||||||||||||||||||||||
Isolated quarters, SEK million | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||
Networks | 39,261 | 37,819 | 33,481 | 41,641 | 35,934 | 32,393 | 28,602 | |||||||||||||||||||||
Of which Products | 27,500 | 26,698 | 23,765 | 29,803 | 25,336 | 22,319 | 19,473 | |||||||||||||||||||||
Of which Services | 11,761 | 11,121 | 9,716 | 11,838 | 10,598 | 10,074 | 9,129 | |||||||||||||||||||||
Digital Services | 9,881 | 8,991 | 7,817 | 13,007 | 8,987 | 8,833 | 7,262 | |||||||||||||||||||||
Of which Products | 5,594 | 4,611 | 3,937 | 7,462 | 4,582 | 4,467 | 3,947 | |||||||||||||||||||||
Of which Services | 4,287 | 4,380 | 3,880 | 5,545 | 4,405 | 4,366 | 3,315 | |||||||||||||||||||||
Managed Services | 6,359 | 6,323 | 5,856 | 6,881 | 6,465 | 6,528 | 5,896 | |||||||||||||||||||||
Emerging Business and Other | 1,626 | 1,677 | 1,752 | 2,280 | 2,424 | 2,054 | 1,651 | |||||||||||||||||||||
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| |||||||||||||||
Total | 57,127 | 54,810 | 48,906 | 63,809 | 53,810 | 49,808 | 43,411 | |||||||||||||||||||||
2019 | 2018 | |||||||||||||||||||||||||||
Sequential change, percent | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||
Networks | 4 | % | 13 | % | -20 | % | 16 | % | 11 | % | 13 | % | -23 | % | ||||||||||||||
Of which Products | 3 | % | 12 | % | -20 | % | 18 | % | 14 | % | 15 | % | -23 | % | ||||||||||||||
Of which Services | 6 | % | 14 | % | -18 | % | 12 | % | 5 | % | 10 | % | -22 | % | ||||||||||||||
Digital Services | 10 | % | 15 | % | -40 | % | 45 | % | 2 | % | 22 | % | -39 | % | ||||||||||||||
Of which Products | 21 | % | 17 | % | -47 | % | 63 | % | 3 | % | 13 | % | -39 | % | ||||||||||||||
Of which Services | -2 | % | 13 | % | -30 | % | 26 | % | 1 | % | 32 | % | -38 | % | ||||||||||||||
Managed Services | 1 | % | 8 | % | -15 | % | 6 | % | -1 | % | 11 | % | -15 | % | ||||||||||||||
Emerging Business and Other | -3 | % | -4 | % | -23 | % | -6 | % | 18 | % | 24 | % | -21 | % | ||||||||||||||
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| |||||||||||||||
Total | 4 | % | 12 | % | -23 | % | 19 | % | 8 | % | 15 | % | -25 | % | ||||||||||||||
2019 | 2018 | |||||||||||||||||||||||||||
Year over year change, percent | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||
Networks | 9 | % | 17 | % | 17 | % | 12 | % | 13 | % | 2 | % | -10 | % | ||||||||||||||
Of which Products | 9 | % | 20 | % | 22 | % | 17 | % | 17 | % | 5 | % | -11 | % | ||||||||||||||
Of which Services | 11 | % | 10 | % | 6 | % | 1 | % | 5 | % | -3 | % | -7 | % | ||||||||||||||
Digital Services | 10 | % | 2 | % | 8 | % | 10 | % | 1 | % | -11 | % | -10 | % | ||||||||||||||
Of which Products | 22 | % | 3 | % | 0 | % | 16 | % | -6 | % | -17 | % | -9 | % | ||||||||||||||
Of which Services | -3 | % | 0 | % | 17 | % | 3 | % | 8 | % | -4 | % | -12 | % | ||||||||||||||
Managed Services | -2 | % | -3 | % | -1 | % | 0 | % | -2 | % | -2 | % | -6 | % | ||||||||||||||
Emerging Business and Other | -33 | % | -18 | % | 6 | % | 9 | % | 22 | % | 2 | % | -7 | % | ||||||||||||||
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|
|
|
|
| |||||||||||||||
Total | 6 | % | 10 | % | 13 | % | 10 | % | 9 | % | -1 | % | -9 | % | ||||||||||||||
2019 | 2018 | |||||||||||||||||||||||||||
Year to date, SEK million | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |||||||||||||||||||||
Networks | 110,561 | 71,300 | 33,481 | 138,570 | 96,929 | 60,995 | 28,602 | |||||||||||||||||||||
Of which Products | 77,963 | 50,463 | 23,765 | 96,931 | 67,128 | 41,792 | 19,473 | |||||||||||||||||||||
Of which Services | 32,598 | 20,837 | 9,716 | 41,639 | 29,801 | 19,203 | 9,129 | |||||||||||||||||||||
Digital Services | 26,689 | 16,808 | 7,817 | 38,089 | 25,082 | 16,095 | 7,262 | |||||||||||||||||||||
Of which Products | 14,142 | 8,548 | 3,937 | 20,458 | 12,996 | 8,414 | 3,947 | |||||||||||||||||||||
Of which Services | 12,547 | 8,260 | 3,880 | 17,631 | 12,086 | 7,681 | 3,315 | |||||||||||||||||||||
Managed Services | 18,538 | 12,179 | 5,856 | 25,770 | 18,889 | 12,424 | 5,896 | |||||||||||||||||||||
Emerging Business and Other | 5,055 | 3,429 | 1,752 | 8,409 | 6,129 | 3,705 | 1,651 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | 160,843 | 103,716 | 48,906 | 210,838 | 147,029 | 93,219 | 43,411 | |||||||||||||||||||||
2019 | 2018 | |||||||||||||||||||||||||||
Year over year change, percent | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |||||||||||||||||||||
Networks | 14 | % | 17 | % | 17 | % | 5 | % | 2 | % | -4 | % | -10 | % | ||||||||||||||
Of which Products | 16 | % | 21 | % | 22 | % | 7 | % | 3 | % | -3 | % | -11 | % | ||||||||||||||
Of which Services | 9 | % | 9 | % | 6 | % | -1 | % | -2 | % | -5 | % | -7 | % | ||||||||||||||
Digital Services | 6 | % | 4 | % | 8 | % | -2 | % | -7 | % | -11 | % | -10 | % | ||||||||||||||
Of which Products | 9 | % | 2 | % | 0 | % | -3 | % | -11 | % | -13 | % | -9 | % | ||||||||||||||
Of which Services | 4 | % | 8 | % | 17 | % | -1 | % | -2 | % | -8 | % | -12 | % | ||||||||||||||
Managed Services | -2 | % | -2 | % | -1 | % | -3 | % | -3 | % | -4 | % | -6 | % | ||||||||||||||
Emerging Business and Other | -18 | % | -7 | % | 6 | % | 7 | % | 6 | % | -2 | % | -7 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | 9 | % | 11 | % | 13 | % | 3 | % | 0 | % | -5 | % | -9 | % |
34 | Ericsson | Third quarter report 2019 | Additional information |
Sales growth adjusted for comparable units and currency
2019 | 2018 | |||||||||||||||||||||||||||
Isolated quarter, year over year change, percent | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||
Networks | 4 | % | 11 | % | 10 | % | 6 | % | 5 | % | 2 | % | -2 | % | ||||||||||||||
Digital Services | 5 | % | -3 | % | 0 | % | 5 | % | -6 | % | -12 | % | -3 | % | ||||||||||||||
Managed Services | -5 | % | -6 | % | -5 | % | -5 | % | -8 | % | -3 | % | -4 | % | ||||||||||||||
Emerging Business and Other1) | -7 | % | 24 | % | 38 | % | 1 | % | 11 | % | 1 | % | -2 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total ¹) | 3 | % | 7 | % | 7 | % | 4 | % | 1 | % | -1 | % | -2 | % | ||||||||||||||
2019 | 2018 | |||||||||||||||||||||||||||
Year to date, year over year change, percent | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |||||||||||||||||||||
Networks | 8 | % | 11 | % | 10 | % | 3 | % | 2 | % | 0 | % | -2 | % | ||||||||||||||
Digital Services | 1 | % | -2 | % | 0 | % | -4 | % | -7 | % | -8 | % | -3 | % | ||||||||||||||
Managed Services | -5 | % | -6 | % | -5 | % | -5 | % | -5 | % | -3 | % | -4 | % | ||||||||||||||
Emerging Business and Other ¹) | 15 | % | 30 | % | 38 | % | 3 | % | 3 | % | -1 | % | -2 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total ¹) | 5 | % | 7 | % | 7 | % | 1 | % | -1 | % | -2 | % | -2 | % |
1) | Adjusted for MediaKind divestment. |
Gross income (loss) and gross margin by segment by quarter
2019 | 2018 | |||||||||||||||||||||||||||
Isolated quarters, SEK million | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||
Networks | 16,327 | 15,670 | 14,455 | 16,626 | 14,835 | 12,565 | 11,127 | |||||||||||||||||||||
Digital Services | 3,749 | 3,311 | 2,878 | -1,240 | 3,208 | 3,458 | 2,892 | |||||||||||||||||||||
Managed Services | 1,136 | 779 | 1,036 | 781 | 805 | 809 | 491 | |||||||||||||||||||||
Emerging Business and Other | 328 | 311 | 410 | 212 | 782 | 501 | 348 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | 21,540 | 20,071 | 18,779 | 16,379 | 19,630 | 17,333 | 14,858 | |||||||||||||||||||||
2019 | 2018 | |||||||||||||||||||||||||||
Isolated quarters, as percentage of net sales | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||
Networks | 41.6 | % | 41.4 | % | 43.2 | % | 39.9 | % | 41.3 | % | 38.8 | % | 38.9 | % | ||||||||||||||
Digital Services | 37.9 | % | 36.8 | % | 36.8 | % | -9.5 | % | 35.7 | % | 39.1 | % | 39.8 | % | ||||||||||||||
Managed Services | 17.9 | % | 12.3 | % | 17.7 | % | 11.4 | % | 12.5 | % | 12.4 | % | 8.3 | % | ||||||||||||||
Emerging Business and Other | 20.2 | % | 18.5 | % | 23.4 | % | 9.3 | % | 32.3 | % | 24.4 | % | 21.1 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | 37.7 | % | 36.6 | % | 38.4 | % | 25.7 | % | 36.5 | % | 34.8 | % | 34.2 | % | ||||||||||||||
2019 | 2018 | |||||||||||||||||||||||||||
Year to date, SEK million | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |||||||||||||||||||||
Networks | 46,452 | 30,125 | 14,455 | 55,153 | 38,527 | 23,692 | 11,127 | |||||||||||||||||||||
Digital Services | 9,938 | 6,189 | 2,878 | 8,318 | 9,558 | 6,350 | 2,892 | |||||||||||||||||||||
Managed Services | 2,951 | 1,815 | 1,036 | 2,886 | 2,105 | 1,300 | 491 | |||||||||||||||||||||
Emerging Business and Other | 1,049 | 721 | 410 | 1,843 | 1,631 | 849 | 348 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | 60,390 | 38,850 | 18,779 | 68,200 | 51,821 | 32,191 | 14,858 | |||||||||||||||||||||
2019 | 2018 | |||||||||||||||||||||||||||
Year to date, as percentage of net sales | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |||||||||||||||||||||
Networks | 42.0 | % | 42.3 | % | 43.2 | % | 39.8 | % | 39.7 | % | 38.8 | % | 38.9 | % | ||||||||||||||
Digital Services | 37.2 | % | 36.8 | % | 36.8 | % | 21.8 | % | 38.1 | % | 39.5 | % | 39.8 | % | ||||||||||||||
Managed Services | 15.9 | % | 14.9 | % | 17.7 | % | 11.2 | % | 11.1 | % | 10.5 | % | 8.3 | % | ||||||||||||||
Emerging Business and Other | 20.8 | % | 21.0 | % | 23.4 | % | 21.9 | % | 26.6 | % | 22.9 | % | 21.1 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | 37.5 | % | 37.5 | % | 38.4 | % | 32.3 | % | 35.2 | % | 34.5 | % | 34.2 | % |
35 | Ericsson | Third quarter report 2019 | Additional information |
Operating income (loss) and operating margin by segment by quarter
2019 | 2018 | |||||||||||||||||||||||||||
Isolated quarters, SEK million | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||
Networks | 7,216 | 5,680 | 5,472 | 6,850 | 5,656 | 3,544 | 3,371 | |||||||||||||||||||||
Digital Services | -660 | -1,405 | -1,798 | -7,087 | -1,784 | -2,374 | -2,607 | |||||||||||||||||||||
Managed Services | 562 | 203 | 1,252 | 285 | 409 | 299 | 100 | |||||||||||||||||||||
Emerging Business and Other | -11,314 | -739 | -30 | -1,900 | -1,040 | -1,304 | -1,176 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | -4,196 | 3,739 | 4,896 | -1,852 | 3,241 | 165 | -312 | |||||||||||||||||||||
2019 | 2018 | |||||||||||||||||||||||||||
Isolated quarters, as percentage of net sales | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||
Networks | 18.4 | % | 15.0 | % | 16.3 | % | 16.5 | % | 15.7 | % | 10.9 | % | 11.8 | % | ||||||||||||||
Digital Services | -6.7 | % | -15.6 | % | -23.0 | % | -54.5 | % | -19.9 | % | -26.9 | % | -35.9 | % | ||||||||||||||
Managed Services | 8.8 | % | 3.2 | % | 21.4 | % | 4.1 | % | 6.3 | % | 4.6 | % | 1.7 | % | ||||||||||||||
Emerging Business and Other | -695.8 | % | -44.1 | % | -1.7 | % | -83.3 | % | -42.9 | % | -63.5 | % | -71.2 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | -7.3 | % | 6.8 | % | 10.0 | % | -2.9 | % | 6.0 | % | 0.3 | % | -0.7 | % | ||||||||||||||
2019 | 2018 | |||||||||||||||||||||||||||
Year to date, SEK million | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |||||||||||||||||||||
Networks | 18,368 | 11,152 | 5,472 | 19,421 | 12,571 | 6,915 | 3,371 | |||||||||||||||||||||
Digital Services | -3,863 | -3,203 | -1,798 | -13,852 | -6,765 | -4,981 | -2,607 | |||||||||||||||||||||
Managed Services | 2,017 | 1,455 | 1,252 | 1,093 | 808 | 399 | 100 | |||||||||||||||||||||
Emerging Business and Other | -12,083 | -769 | -30 | -5,420 | -3,520 | -2,480 | -1,176 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | 4,439 | 8,635 | 4,896 | 1,242 | 3,094 | -147 | -312 | |||||||||||||||||||||
2019 | 2018 | |||||||||||||||||||||||||||
Year to date, as percentage of net sales | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |||||||||||||||||||||
Networks | 16.6 | % | 15.6 | % | 16.3 | % | 14.0 | % | 13.0 | % | 11.3 | % | 11.8 | % | ||||||||||||||
Digital Services | -14.5 | % | -19.1 | % | -23.0 | % | -36.4 | % | -27.0 | % | -30.9 | % | -35.9 | % | ||||||||||||||
Managed Services | 10.9 | % | 11.9 | % | 21.4 | % | 4.2 | % | 4.3 | % | 3.2 | % | 1.7 | % | ||||||||||||||
Emerging Business and Other | -239.0 | % | -22.4 | % | -1.7 | % | -64.5 | % | -57.4 | % | -66.9 | % | -71.2 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | 2.8 | % | 8.3 | % | 10.0 | % | 0.6 | % | 2.1 | % | -0.2 | % | -0.7 | % |
36 | Ericsson | Third quarter report 2019 | Additional information |
EBITA and EBITA margin by segment by quarter
2019 | 2018 | |||||||||||||||||||||||||||
Isolated quarters, SEK million | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||
Networks | 7,253 | 5,716 | 5,552 | 6,916 | 5,722 | 3,618 | 3,461 | |||||||||||||||||||||
Digital Services | -521 | -1,268 | -1,638 | -6,911 | -1,608 | -2,204 | -2,443 | |||||||||||||||||||||
Managed Services | 563 | 205 | 1,253 | 288 | 411 | 303 | 105 | |||||||||||||||||||||
Emerging Business and Other | -11,262 | -688 | 43 | -1,524 | -940 | -1,202 | -1,088 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | -3,967 | 3,965 | 5,210 | -1,231 | 3,585 | 515 | 35 | |||||||||||||||||||||
2019 | 2018 | |||||||||||||||||||||||||||
Isolated quarters, as percentage of net sales | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||
Networks | 18.5 | % | 15.1 | % | 16.6 | % | 16.6 | % | 15.9 | % | 11.2 | % | 12.1 | % | ||||||||||||||
Digital Services | -5.3 | % | -14.1 | % | -21.0 | % | -53.1 | % | -17.9 | % | -25.0 | % | -33.6 | % | ||||||||||||||
Managed Services | 8.9 | % | 3.2 | % | 21.4 | % | 4.2 | % | 6.4 | % | 4.6 | % | 1.8 | % | ||||||||||||||
Emerging Business and Other | -692.6 | % | -41.0 | % | 2.5 | % | -66.8 | % | -38.8 | % | -58.5 | % | -65.9 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | -6.9 | % | 7.2 | % | 10.7 | % | -1.9 | % | 6.7 | % | 1.0 | % | 0.1 | % | ||||||||||||||
2019 | 2018 | |||||||||||||||||||||||||||
Year to date, SEK million | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |||||||||||||||||||||
Networks | 18,521 | 11,268 | 5,552 | 19,717 | 12,801 | 7,079 | 3,461 | |||||||||||||||||||||
Digital Services | -3,427 | -2,906 | -1,638 | -13,166 | -6,255 | -4,647 | -2,443 | |||||||||||||||||||||
Managed Services | 2,021 | 1,458 | 1,253 | 1,107 | 819 | 408 | 105 | |||||||||||||||||||||
Emerging Business and Other | -11,907 | -645 | 43 | -4,754 | -3,230 | -2,290 | -1,088 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | 5,208 | 9,175 | 5,210 | 2,904 | 4,135 | 550 | 35 | |||||||||||||||||||||
2019 | 2018 | |||||||||||||||||||||||||||
Year to date, as percentage of net sales | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |||||||||||||||||||||
Networks | 16.8 | % | 15.8 | % | 16.6 | % | 14.2 | % | 13.2 | % | 11.6 | % | 12.1 | % | ||||||||||||||
Digital Services | -12.8 | % | -17.3 | % | -21.0 | % | -34.6 | % | -24.9 | % | -28.9 | % | -33.6 | % | ||||||||||||||
Managed Services | 10.9 | % | 12.0 | % | 21.4 | % | 4.3 | % | 4.3 | % | 3.3 | % | 1.8 | % | ||||||||||||||
Emerging Business and Other | -235.5 | % | -18.8 | % | 2.5 | % | -56.5 | % | -52.7 | % | -61.8 | % | -65.9 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | 3.2 | % | 8.8 | % | 10.7 | % | 1.4 | % | 2.8 | % | 0.6 | % | 0.1 | % |
37 | Ericsson | Third quarter report 2019 | Additional information |
Net sales by market area by quarter
2019 | 2018 ³) | |||||||||||||||||||||||||||
Isolated quarters, SEK million | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||
South East Asia, Oceania and India | 7,432 | 6,965 | 6,148 | 8,244 | 7,985 | 6,981 | 6,379 | |||||||||||||||||||||
North East Asia | 6,356 | 6,516 | 3,824 | 8,387 | 5,773 | 4,764 | 3,385 | |||||||||||||||||||||
North America | 18,985 | 17,699 | 16,171 | 17,999 | 14,933 | 14,337 | 11,317 | |||||||||||||||||||||
Europe and Latin America1) 2) | 14,308 | 14,085 | 13,124 | 17,909 | 14,697 | 13,999 | 12,958 | |||||||||||||||||||||
Middle East and Africa | 6,046 | 5,641 | 5,412 | 6,828 | 5,841 | 5,801 | 5,868 | |||||||||||||||||||||
Other1) 2) | 4,000 | 3,904 | 4,227 | 4,442 | 4,581 | 3,926 | 3,504 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | 57,127 | 54,810 | 48,906 | 63,809 | 53,810 | 49,808 | 43,411 | |||||||||||||||||||||
1) Of which in Sweden | 13 | 149 | 192 | 375 | 429 | 596 | 915 | |||||||||||||||||||||
2) Of which in EU | 8,815 | 8,385 | 7,957 | 10,319 | 8,481 | 8,619 | 8,522 | |||||||||||||||||||||
2019 | 2018 ³) | |||||||||||||||||||||||||||
Sequential change, percent | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||
South East Asia, Oceania and India | 7 | % | 13 | % | -25 | % | 3 | % | 14 | % | 9 | % | -19 | % | ||||||||||||||
North East Asia | -2 | % | 70 | % | -54 | % | 45 | % | 21 | % | 41 | % | -48 | % | ||||||||||||||
North America | 7 | % | 9 | % | -10 | % | 21 | % | 4 | % | 27 | % | -23 | % | ||||||||||||||
Europe and Latin America1) 2) | 2 | % | 7 | % | -27 | % | 22 | % | 5 | % | 8 | % | -22 | % | ||||||||||||||
Middle East and Africa | 7 | % | 4 | % | -21 | % | 17 | % | 1 | % | -1 | % | -25 | % | ||||||||||||||
Other1) 2) | 2 | % | -8 | % | -5 | % | -3 | % | 17 | % | 12 | % | -20 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | 4 | % | 12 | % | -23 | % | 19 | % | 8 | % | 15 | % | -25 | % | ||||||||||||||
1) Of which in Sweden | -91 | % | -22 | % | -49 | % | -13 | % | -28 | % | -35 | % | 5 | % | ||||||||||||||
2) Of which in EU | 5 | % | 5 | % | -23 | % | 22 | % | -2 | % | 1 | % | -21 | % | ||||||||||||||
2019 | 2018 ³) | |||||||||||||||||||||||||||
Year over year change, percent | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||
South East Asia, Oceania and India | -7 | % | 0 | % | -4 | % | 5 | % | 2 | % | -3 | % | -24 | % | ||||||||||||||
North East Asia | 10 | % | 37 | % | 13 | % | 30 | % | 2 | % | -19 | % | -39 | % | ||||||||||||||
North America | 27 | % | 23 | % | 43 | % | 23 | % | 21 | % | 11 | % | -6 | % | ||||||||||||||
Europe and Latin America1) 2) | -3 | % | 1 | % | 1 | % | 7 | % | 11 | % | 1 | % | 8 | % | ||||||||||||||
Middle East and Africa | 4 | % | -3 | % | -8 | % | -13 | % | -9 | % | -5 | % | 6 | % | ||||||||||||||
Other1) 2) | -13 | % | -1 | % | 21 | % | 2 | % | 19 | % | -7 | % | -17 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | 6 | % | 10 | % | 13 | % | 10 | % | 9 | % | -1 | % | -9 | % | ||||||||||||||
1) Of which in Sweden | -97 | % | -75 | % | -79 | % | -57 | % | -35 | % | -24 | % | -10 | % | ||||||||||||||
2) Of which in EU | 4 | % | -3 | % | -7 | % | -5 | % | -2 | % | -1 | % | 2 | % | ||||||||||||||
2019 | 2018 ³) | |||||||||||||||||||||||||||
Year to date, SEK million | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |||||||||||||||||||||
South East Asia, Oceania and India | 20,545 | 13,113 | 6,148 | 29,589 | 21,345 | 13,360 | 6,379 | |||||||||||||||||||||
North East Asia | 16,696 | 10,340 | 3,824 | 22,309 | 13,922 | 8,149 | 3,385 | |||||||||||||||||||||
North America | 52,855 | 33,870 | 16,171 | 58,586 | 40,587 | 25,654 | 11,317 | |||||||||||||||||||||
Europe and Latin America1) 2) | 41,517 | 27,209 | 13,124 | 59,563 | 41,654 | 26,957 | 12,958 | |||||||||||||||||||||
Middle East and Africa | 17,099 | 11,053 | 5,412 | 24,338 | 17,510 | 11,669 | 5,868 | |||||||||||||||||||||
Other1) 2) | 12,131 | 8,131 | 4,227 | 16,453 | 12,011 | 7,430 | 3,504 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | 160,843 | 103,716 | 48,906 | 210,838 | 147,029 | 93,219 | 43,411 | |||||||||||||||||||||
1) Of which in Sweden | 354 | 341 | 192 | 2,315 | 1,940 | 1,511 | 915 | |||||||||||||||||||||
2) Of which in EU | 25,157 | 16,342 | 7,957 | 35,941 | 25,622 | 17,141 | 8,522 | |||||||||||||||||||||
2019 | 2018 ³) | |||||||||||||||||||||||||||
Year to date, year over year change, percent | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |||||||||||||||||||||
South East Asia, Oceania and India | -4 | % | -2 | % | -4 | % | -6 | % | -9 | % | -15 | % | -24 | % | ||||||||||||||
North East Asia | 20 | % | 27 | % | 13 | % | -5 | % | -19 | % | -29 | % | -39 | % | ||||||||||||||
North America | 30 | % | 32 | % | 43 | % | 13 | % | 9 | % | 3 | % | -6 | % | ||||||||||||||
Europe and Latin America1) 2) | 0 | % | 1 | % | 1 | % | 7 | % | 6 | % | 4 | % | 8 | % | ||||||||||||||
Middle East and Africa | -2 | % | -5 | % | -8 | % | -6 | % | -3 | % | 0 | % | 6 | % | ||||||||||||||
Other1) 2) | 1 | % | 9 | % | 21 | % | -1 | % | -2 | % | -12 | % | -17 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | 9 | % | 11 | % | 13 | % | 3 | % | 0 | % | -5 | % | -9 | % | ||||||||||||||
1) Of which in Sweden | -82 | % | -77 | % | -79 | % | -31 | % | -21 | % | -16 | % | -10 | % | ||||||||||||||
2) Of which in EU | -2 | % | -5 | % | -7 | % | -1 | % | 0 | % | 1 | % | 2 | % |
3) | 2018 has been restated to reflect the move of Morocco from market area Europe and Latin America to Middle East and Africa. Please refer to “Changes applied in Q1 2019”. |
38 | Ericsson | Third quarter report 2019 | Additional information |
Q3 | Jan-Sep | |||||||||||||||
Country, percentage of net sales | 2019 | 2018 | 2019 | 2018 | ||||||||||||
United States | 35 | % | 30 | % | 34 | % | 29 | % | ||||||||
China | 7 | % | 8 | % | 6 | % | 6 | % | ||||||||
India | 4 | % | 5 | % | 4 | % | 5 | % | ||||||||
South Korea | 4 | % | 2 | % | 4 | % | 2 | % | ||||||||
Australia | 3 | % | 4 | % | 3 | % | 4 | % |
Net sales by market area by segment
Q3 2019 | Jan-Sep 2019 | |||||||||||||||||||||||||||||||||||||||
SEK million | Networks | Digital Services | Managed Services | Emerging Business and Other | Total | Networks | Digital Services | Managed Services | Emerging Business and Other | Total | ||||||||||||||||||||||||||||||
South East Asia, Oceania and India | 5,517 | 926 | 976 | 13 | 7,432 | 15,047 | 2,663 | 2,795 | 40 | 20,545 | ||||||||||||||||||||||||||||||
North East Asia | 4,821 | 1,292 | 222 | 21 | 6,356 | 12,997 | 2,917 | 691 | 91 | 16,696 | ||||||||||||||||||||||||||||||
North America | 15,077 | 2,666 | 1,216 | 26 | 18,985 | 42,590 | 6,700 | 3,485 | 80 | 52,855 | ||||||||||||||||||||||||||||||
Europe and Latin America | 8,230 | 2,967 | 3,002 | 109 | 14,308 | 23,921 | 8,500 | 8,803 | 293 | 41,517 | ||||||||||||||||||||||||||||||
Middle East and Africa | 3,497 | 1,596 | 944 | 9 | 6,046 | 9,706 | 4,617 | 2,764 | 12 | 17,099 | ||||||||||||||||||||||||||||||
Other | 2,119 | 434 | -1 | 1,448 | 4,000 | 6,300 | 1,292 | 0 | 4,539 | 12,131 | ||||||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total | 39,261 | 9,881 | 6,359 | 1,626 | 57,127 | 110,561 | 26,689 | 18,538 | 5,055 | 160,843 | ||||||||||||||||||||||||||||||
Share of Total | 69 | % | 17 | % | 11 | % | 3 | % | 100 | % | 69 | % | 17 | % | 11 | % | 3 | % | 100 | % |
Q3 2019 | ||||||||||||||||||||
Sequential change, percent | Networks | Digital Services | Managed Services | Emerging Business and Other | Total | |||||||||||||||
South East Asia, Oceania and India | 10 | % | 1 | % | -6 | % | -13 | % | 7 | % | ||||||||||
North East Asia | -10 | % | 40 | % | 9 | % | -30 | % | -2 | % | ||||||||||
North America | 6 | % | 20 | % | 1 | % | -19 | % | 7 | % | ||||||||||
Europe and Latin America | 1 | % | 1 | % | 3 | % | 20 | % | 2 | % | ||||||||||
Middle East and Africa | 13 | % | 1 | % | -1 | % | 800 | % | 7 | % | ||||||||||
Other | 6 | % | 7 | % | -200 | % | -4 | % | 2 | % | ||||||||||
|
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|
|
|
|
|
|
|
| |||||||||||
Total | 4 | % | 10 | % | 1 | % | -3 | % | 4 | % |
Q3 2019 | Jan-Sep 2019 | |||||||||||||||||||||||||||||||||||||||
Year over year change, percent | Networks | Digital Services | Managed Services | Emerging Business and Other | Total | Networks | Digital Services | Managed Services | Emerging Business and Other | Total | ||||||||||||||||||||||||||||||
South East Asia, Oceania and India | -5 | % | -27 | % | 11 | % | 333 | % | -7 | % | -1 | % | -25 | % | 11 | % | 208 | % | -4 | % | ||||||||||||||||||||
North East Asia | 5 | % | 55 | % | -32 | % | -30 | % | 10 | % | 25 | % | 24 | % | -36 | % | 47 | % | 20 | % | ||||||||||||||||||||
North America | 28 | % | 27 | % | 17 | % | 13 | % | 27 | % | 31 | % | 20 | % | 42 | % | 11 | % | 30 | % | ||||||||||||||||||||
Europe and Latin America | -5 | % | 5 | % | -5 | % | 49 | % | -3 | % | 1 | % | 7 | % | -10 | % | 33 | % | 0 | % | ||||||||||||||||||||
Middle East and Africa | 9 | % | 1 | % | -10 | % | — | 4 | % | -2 | % | 1 | % | -8 | % | — | -2 | % | ||||||||||||||||||||||
Other | 11 | % | 13 | % | — | -37 | % | -13 | % | 21 | % | 23 | % | — | -21 | % | 1 | % | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total | 9 | % | 10 | % | -2 | % | -33 | % | 6 | % | 14 | % | 6 | % | -2 | % | -18 | % | 9 | % |
39 | Ericsson | Third quarter report 2019 | Additional information |
IPR licensing revenues by segment by quarter
2019 | 2018 | |||||||||||||||||||||||||||
Isolated quarters, SEK million | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||
Networks | 1,972 | 1,845 | 2,066 | 1,759 | 1,755 | 1,486 | 1,522 | |||||||||||||||||||||
Digital Services | 433 | 404 | 454 | 387 | 385 | 326 | 334 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | 2,405 | 2,249 | 2,520 | 2,146 | 2,140 | 1,812 | 1,856 | |||||||||||||||||||||
2019 | 2018 | |||||||||||||||||||||||||||
Year to date, SEK million | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |||||||||||||||||||||
Networks | 5,883 | 3,911 | 2,066 | 6,522 | 4,763 | 3,008 | 1,522 | |||||||||||||||||||||
Digital Services | 1,291 | 858 | 454 | 1,432 | 1,045 | 660 | 334 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | 7,174 | 4,769 | 2,520 | 7,954 | 5,808 | 3,668 | 1,856 |
2019 | 2018 | |||||||||||||||||||||||||||
Isolated quarters, SEK million | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||
Opening balance | 11,358 | 12,033 | 16,008 | 8,695 | 9,534 | 9,030 | 9,879 | |||||||||||||||||||||
Additions | 12,774 | 1,423 | 1,401 | 8,930 | 1,491 | 1,974 | 1,315 | |||||||||||||||||||||
Utilization/Cash out | -2,151 | -2,084 | -1,676 | -1,436 | -1,774 | -1,486 | -2,216 | |||||||||||||||||||||
Of which restructuring | -711 | -378 | -557 | -656 | -1,236 | -832 | -1,424 | |||||||||||||||||||||
Reversal of excess amounts | -128 | -88 | -125 | -290 | -127 | -191 | -117 | |||||||||||||||||||||
Reclassification, translation difference and other | 154 | 74 | -3,575 | 109 | -429 | 207 | 169 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Closing balance | 22,007 | 11,358 | 12,033 | 16,008 | 8,695 | 9,534 | 9,030 | |||||||||||||||||||||
Of which restructuring | 1,099 | 1,743 | 2,059 | 6,438 | 2,960 | 4,029 | 3,524 |
2019 | 2018 | |||||||||||||||||||||||||||
Year to date, SEK million | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |||||||||||||||||||||
Opening balance | 16,008 | 16,008 | 16,008 | 9,879 | 9,879 | 9,879 | 9,879 | |||||||||||||||||||||
Additions | 15,598 | 2,824 | 1,401 | 13,710 | 4,780 | 3,289 | 1,315 | |||||||||||||||||||||
Utilization/Cash out | -5,911 | -3,760 | -1,676 | -6,912 | -5,476 | -3,702 | -2,216 | |||||||||||||||||||||
Of which restructuring | -1,646 | -935 | -557 | -4,148 | -3,492 | -2,256 | -1,424 | |||||||||||||||||||||
Reversal of excess amounts | -341 | -213 | -125 | -725 | -435 | -308 | -117 | |||||||||||||||||||||
Reclassification, translation difference and other | -3,347 | -3,501 | -3,575 | 56 | -53 | 376 | 169 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Closing balance | 22,007 | 11,358 | 12,033 | 16,008 | 8,695 | 9,534 | 9,030 | |||||||||||||||||||||
Of which restructuring | 1,099 | 1,743 | 2,059 | 6,438 | 2,960 | 4,029 | 3,524 |
40 | Ericsson | Third quarter report 2019 | Additional information |
Investments in assets subject to depreciation, amortization, impairment and write-downs
2019 | 2018 | |||||||||||||||||||||||||||
Isolated quarters, SEK million | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||
Additions | ||||||||||||||||||||||||||||
Property, plant and equipment | 1,231 | 1,098 | 1,314 | 1,080 | 1,088 | 951 | 856 | |||||||||||||||||||||
Capitalized development expenses | 313 | 446 | 457 | 195 | 151 | 325 | 254 | |||||||||||||||||||||
IPR, brands and other intangible assets | 2 | — | 1 | 27 | — | 1 | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | 1,546 | 1,544 | 1,772 | 1,302 | 1,239 | 1,277 | 1,110 | |||||||||||||||||||||
Depreciation, amortization and impairment losses | ||||||||||||||||||||||||||||
Property, plant and equipment | 1,048 | 919 | 880 | 965 | 870 | 1,080 | 928 | |||||||||||||||||||||
Capitalized development expenses | 330 | 449 | 520 | 884 | 678 | 635 | 616 | |||||||||||||||||||||
Goodwill, IPR, brands and other intangible assets | 229 | 226 | 314 | 620 | 345 | 350 | 347 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | 1,607 | 1,594 | 1,714 | 2,469 | 1,893 | 2,065 | 1,891 | |||||||||||||||||||||
2019 | 2018 | |||||||||||||||||||||||||||
Year to date, SEK million | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |||||||||||||||||||||
Additions | ||||||||||||||||||||||||||||
Property, plant and equipment | 3,643 | 2,412 | 1,314 | 3,975 | 2,895 | 1,807 | 856 | |||||||||||||||||||||
Capitalized development expenses | 1,216 | 903 | 457 | 925 | 730 | 579 | 254 | |||||||||||||||||||||
IPR, brands and other intangible assets | 3 | 1 | 1 | 28 | 1 | 1 | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | 4,862 | 3,316 | 1,772 | 4,928 | 3,626 | 2,387 | 1,110 | |||||||||||||||||||||
Depreciation, amortization and impairment losses | ||||||||||||||||||||||||||||
Property, plant and equipment | 2,847 | 1,799 | 880 | 3,843 | 2,878 | 2,008 | 928 | |||||||||||||||||||||
Capitalized development expenses | 1,299 | 969 | 520 | 2,813 | 1,929 | 1,251 | 616 | |||||||||||||||||||||
Goodwill, IPR, brands and other intangible assets | 769 | 540 | 314 | 1,662 | 1,042 | 697 | 347 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | 4,915 | 3,308 | 1,714 | 8,318 | 5,849 | 3,956 | 1,891 |
41 | Ericsson | Third quarter report 2019 | Additional information |
Q3 | Jan-Sep | Jan-Dec | ||||||||||||||||||
SEK million | 2019 | 2018 | 2019 | 2018 | 2018 | |||||||||||||||
Number of shares and earnings per share | ||||||||||||||||||||
Number of shares, end of period (million) | 3,334 | 3,334 | 3,334 | 3,334 | 3,334 | |||||||||||||||
Of which classA-shares (million) | 262 | 262 | 262 | 262 | 262 | |||||||||||||||
Of which classB-shares (million) | 3,072 | 3,072 | 3,072 | 3,072 | 3,072 | |||||||||||||||
Number of treasury shares, end of period (million) | 25 | 40 | 25 | 40 | 37 | |||||||||||||||
Number of shares outstanding, basic, end of period (million) | 3,309 | 3,294 | 3,309 | 3,294 | 3,297 | |||||||||||||||
Numbers of shares outstanding, diluted, end of period (million) | 3,327 | 3,323 | 3,327 | 3,323 | 3,323 | |||||||||||||||
Average number of treasury shares (million) | 26 | 41 | 30 | 44 | 43 | |||||||||||||||
Average number of shares outstanding, basic (million) | 3,308 | 3,293 | 3,304 | 3,290 | 3,291 | |||||||||||||||
Average number of shares outstanding, diluted (million) ¹) | 3,326 | 3,322 | 3,322 | 3,319 | 3,318 | |||||||||||||||
Earnings (loss) per share, basic (SEK) ²) | -1.89 | 0.84 | -0.67 | 0.01 | -1.98 | |||||||||||||||
Earnings (loss) per share, diluted (SEK) ¹) | -1.89 | 0.83 | -0.67 | 0.01 | -1.98 | |||||||||||||||
Earnings (loss) per share(Non-IFRS), diluted (SEK) ³) | -1.80 | 1.03 | -0.40 | 1.04 | 0.27 | |||||||||||||||
Ratios | ||||||||||||||||||||
Days sales outstanding | — | — | 85 | 94 | 91 | |||||||||||||||
Inventory turnover days | 93 | 81 | 89 | 81 | 70 | |||||||||||||||
Payable days | 80 | 77 | 83 | 79 | 72 | |||||||||||||||
Alternative Performance Measures (APMs) | ||||||||||||||||||||
Equity ratio (%) | — | — | 26.9 | % | 36.2 | % | 32.7 | % | ||||||||||||
Return on equity (%) | -30.6 | % | 11.7 | % | -3.6 | % | 0.0 | % | -7.1 | % | ||||||||||
Return on capital employed (%) | -10.3 | % | 8.4 | % | 3.8 | % | 2.7 | % | 0.8 | % | ||||||||||
Capital turnover (times) | 1.4 | 1.4 | 1.4 | 1.3 | 1.4 | |||||||||||||||
Free cash flow | 5,045 | 288 | 11,635 | -25 | 2,968 | |||||||||||||||
Cash conversion (%) | -161.8 | % | 70.0 | % | 267.9 | % | 306.0 | % | 601.2 | % | ||||||||||
Exchange rates used in the consolidation | ||||||||||||||||||||
SEK/EUR - closing rate | — | — | 10.71 | 10.30 | 10.25 | |||||||||||||||
SEK/USD - closing rate | — | — | 9.81 | 8.90 | 8.94 | |||||||||||||||
Other | ||||||||||||||||||||
Market area inventory, end of period | — | — | 21,989 | 19,513 | 16,505 | |||||||||||||||
Export sales from Sweden | 30,790 | 25,338 | 81,632 | 70,995 | 109,969 |
1) | Potential ordinary shares are not considered when their conversion to ordinary shares would increase earnings per share. |
2) | Based on net income (loss) attributable to stockholders of the Parent Company. |
3) | Excluding amortizations and write-downs of acquired intangibles and restructuring charges. |
2019 | 20182) | |||||||||||||||||||||||||||
End of period | Sep 30 | Jun 30 | Mar 31 | Dec 31 | Sep 30 | Jun 30 | Mar 31 | |||||||||||||||||||||
South East Asia, Oceania and India | 24,322 | 23,942 | 24,051 | 23,959 | 23,607 | 23,516 | 23,623 | |||||||||||||||||||||
North East Asia | 13,608 | 13,334 | 13,169 | 12,788 | 12,495 | 12,303 | 12,321 | |||||||||||||||||||||
North America | 9,487 | 9,342 | 9,246 | 9,727 | 9,459 | 9,510 | 9,798 | |||||||||||||||||||||
Europe and Latin America ¹) | 44,150 | 43,846 | 43,833 | 44,522 | 44,594 | 45,643 | 47,437 | |||||||||||||||||||||
Middle East and Africa | 4,320 | 4,292 | 4,281 | 4,363 | 4,344 | 4,288 | 4,402 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | 95,887 | 94,756 | 94,580 | 95,359 | 94,499 | 95,260 | 97,581 | |||||||||||||||||||||
1) Of which Sweden | 12,679 | 12,549 | 12,455 | 12,502 | 12,679 | 13,431 | 13,763 |
2) | 2018 has been restated to reflect the move of Morocco from market area Europe and Latin America to Middle East and Africa. Please refer to “Changes applied in Q1 2019”. |
42 | Ericsson | Third quarter report 2019 | Additional information |
Items excluding restructuring charges
Restructuring charges by function
2019 | 2018 | |||||||||||||||||||||||||||
Isolated quarters, SEK million | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||
Cost of sales | -28 | -26 | -65 | -4,054 | -204 | -937 | -743 | |||||||||||||||||||||
Research and development expenses | -98 | -49 | -118 | -251 | -214 | -502 | -326 | |||||||||||||||||||||
Selling and administrative expenses | -21 | -43 | -23 | -106 | -134 | -441 | -103 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | -147 | -118 | -206 | -4,411 | -552 | -1,880 | -1,172 | |||||||||||||||||||||
2019 | 2018 | |||||||||||||||||||||||||||
Year to date, SEK million | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |||||||||||||||||||||
Cost of sales | -119 | -91 | -65 | -5,938 | -1,884 | -1,680 | -743 | |||||||||||||||||||||
Research and development expenses | -265 | -167 | -118 | -1,293 | -1,042 | -828 | -326 | |||||||||||||||||||||
Selling and administrative expenses | -87 | -66 | -23 | -784 | -678 | -544 | -103 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | -471 | -324 | -206 | -8,015 | -3,604 | -3,052 | -1,172 |
Restructuring charges by segment
2019 | 2018 | |||||||||||||||||||||||||||
Isolated quarters, SEK million | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||
Networks | -5 | -5 | -10 | -425 | -128 | -749 | -479 | |||||||||||||||||||||
of which cost of sales | 12 | 9 | -3 | -439 | -63 | -469 | -415 | |||||||||||||||||||||
of which operating expenses | -17 | -14 | -7 | 14 | -65 | -280 | -64 | |||||||||||||||||||||
Digital Services | -128 | -93 | -187 | -3,545 | -358 | -882 | -581 | |||||||||||||||||||||
of which cost of sales | -32 | -27 | -60 | -3,369 | -111 | -303 | -226 | |||||||||||||||||||||
of which operating expenses | -96 | -66 | -127 | -176 | -247 | -579 | -355 | |||||||||||||||||||||
Managed Services | -2 | 1 | -2 | -70 | -32 | -123 | -51 | |||||||||||||||||||||
of which cost of sales | -2 | 3 | -1 | -69 | -28 | -103 | -48 | |||||||||||||||||||||
of which operating expenses | 0 | -2 | -1 | -1 | -4 | -20 | -3 | |||||||||||||||||||||
Emerging Business and Other | -12 | -21 | -7 | -371 | -34 | -126 | -61 | |||||||||||||||||||||
of which cost of sales | -6 | -11 | -1 | -177 | -2 | -62 | -54 | |||||||||||||||||||||
of which operating expenses | -6 | -10 | -6 | -194 | -32 | -64 | -7 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | -147 | -118 | -206 | -4,411 | -552 | -1,880 | -1,172 | |||||||||||||||||||||
2019 | 2018 | |||||||||||||||||||||||||||
Year to date, SEK million | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |||||||||||||||||||||
Networks | -20 | -15 | -10 | -1,781 | -1,356 | -1,228 | -479 | |||||||||||||||||||||
of which cost of sales | 18 | 6 | -3 | -1,386 | -947 | -884 | -415 | |||||||||||||||||||||
of which operating expenses | -38 | -21 | -7 | -395 | -409 | -344 | -64 | |||||||||||||||||||||
Digital Services | -408 | -280 | -187 | -5,366 | -1,821 | -1,463 | -581 | |||||||||||||||||||||
of which cost of sales | -119 | -87 | -60 | -4,009 | -640 | -529 | -226 | |||||||||||||||||||||
of which operating expenses | -289 | -193 | -127 | -1,357 | -1,181 | -934 | -355 | |||||||||||||||||||||
Managed Services | -3 | -1 | -2 | -276 | -206 | -174 | -51 | |||||||||||||||||||||
of which cost of sales | 0 | 2 | -1 | -248 | -179 | -151 | -48 | |||||||||||||||||||||
of which operating expenses | -3 | -3 | -1 | -28 | -27 | -23 | -3 | |||||||||||||||||||||
Emerging Business and Other | -40 | -28 | -7 | -592 | -221 | -187 | -61 | |||||||||||||||||||||
of which cost of sales | -18 | -12 | -1 | -295 | -118 | -116 | -54 | |||||||||||||||||||||
of which operating expenses | -22 | -16 | -6 | -297 | -103 | -71 | -7 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | -471 | -324 | -206 | -8,015 | -3,604 | -3,052 | -1,172 |
43 | Ericsson | Third quarter report 2019 | Items excluding restructuring charges |
Gross income and gross margin excluding restructuring charges by segment
2019 | 2018 | |||||||||||||||||||||||||||
Isolated quarters, SEK million | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||
Networks | 16,315 | 15,661 | 14,458 | 17,065 | 14,898 | 13,034 | 11,542 | |||||||||||||||||||||
Digital Services | 3,781 | 3,338 | 2,938 | 2,129 | 3,319 | 3,761 | 3,118 | |||||||||||||||||||||
Managed Services | 1,138 | 776 | 1,037 | 850 | 833 | 912 | 539 | |||||||||||||||||||||
Emerging Business and Other | 334 | 322 | 411 | 389 | 784 | 563 | 402 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | 21,568 | 20,097 | 18,844 | 20,433 | 19,834 | 18,270 | 15,601 | |||||||||||||||||||||
2019 | 2018 | |||||||||||||||||||||||||||
Isolated quarters, as percentage of net sales | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||
Networks | 41.6 | % | 41.4 | % | 43.2 | % | 41.0 | % | 41.5 | % | 40.2 | % | 40.4 | % | ||||||||||||||
Digital Services | 38.3 | % | 37.1 | % | 37.6 | % | 16.4 | % | 36.9 | % | 42.6 | % | 42.9 | % | ||||||||||||||
Managed Services | 17.9 | % | 12.3 | % | 17.7 | % | 12.4 | % | 12.9 | % | 14.0 | % | 9.1 | % | ||||||||||||||
Emerging Business and Other | 20.5 | % | 19.2 | % | 23.5 | % | 17.1 | % | 32.3 | % | 27.4 | % | 24.3 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | 37.8 | % | 36.7 | % | 38.5 | % | 32.0 | % | 36.9 | % | 36.7 | % | 35.9 | % | ||||||||||||||
2019 | 2018 | |||||||||||||||||||||||||||
Year to date, SEK million | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |||||||||||||||||||||
Networks | 46,434 | 30,119 | 14,458 | 56,539 | 39,474 | 24,576 | 11,542 | |||||||||||||||||||||
Digital Services | 10,057 | 6,276 | 2,938 | 12,327 | 10,198 | 6,879 | 3,118 | |||||||||||||||||||||
Managed Services | 2,951 | 1,813 | 1,037 | 3,134 | 2,284 | 1,451 | 539 | |||||||||||||||||||||
Emerging Business and Other | 1,067 | 733 | 411 | 2,138 | 1,749 | 965 | 402 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | 60,509 | 38,941 | 18,844 | 74,138 | 53,705 | 33,871 | 15,601 | |||||||||||||||||||||
2019 | 2018 | |||||||||||||||||||||||||||
Year to date, as percentage of net sales | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |||||||||||||||||||||
Networks | 42.0 | % | 42.2 | % | 43.2 | % | 40.8 | % | 40.7 | % | 40.3 | % | 40.4 | % | ||||||||||||||
Digital Services | 37.7 | % | 37.3 | % | 37.6 | % | 32.4 | % | 40.7 | % | 42.7 | % | 42.9 | % | ||||||||||||||
Managed Services | 15.9 | % | 14.9 | % | 17.7 | % | 12.2 | % | 12.1 | % | 11.7 | % | 9.1 | % | ||||||||||||||
Emerging Business and Other | 21.1 | % | 21.4 | % | 23.5 | % | 25.4 | % | 28.5 | % | 26.0 | % | 24.3 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | 37.6 | % | 37.5 | % | 38.5 | % | 35.2 | % | 36.5 | % | 36.3 | % | 35.9 | % |
44 | Ericsson | Third quarter report 2019 | Items excluding restructuring charges |
Operating income (loss) and operating margin excluding restructuring charges by segment
2019 | 2018 | |||||||||||||||||||||||||||
Isolated quarters, SEK million | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||
Networks | 7,221 | 5,685 | 5,482 | 7,275 | 5,784 | 4,293 | 3,850 | |||||||||||||||||||||
Digital Services | -532 | -1,312 | -1,611 | -3,542 | -1,426 | -1,492 | -2,026 | |||||||||||||||||||||
Managed Services | 564 | 202 | 1,254 | 355 | 441 | 422 | 151 | |||||||||||||||||||||
Emerging Business and Other | -11,302 | -718 | -23 | -1,529 | -1,006 | -1,178 | -1,115 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | -4,049 | 3,857 | 5,102 | 2,559 | 3,793 | 2,045 | 860 | |||||||||||||||||||||
2019 | 2018 | |||||||||||||||||||||||||||
Isolated quarters, as percentage of net sales | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||
Networks | 18.4 | % | 15.0 | % | 16.4 | % | 17.5 | % | 16.1 | % | 13.3 | % | 13.5 | % | ||||||||||||||
Digital Services | -5.4 | % | -14.6 | % | -20.6 | % | -27.2 | % | -15.9 | % | -16.9 | % | -27.9 | % | ||||||||||||||
Managed Services | 8.9 | % | 3.2 | % | 21.4 | % | 5.2 | % | 6.8 | % | 6.5 | % | 2.6 | % | ||||||||||||||
Emerging Business and Other | -695.1 | % | -42.8 | % | -1.3 | % | -67.1 | % | -41.5 | % | -57.4 | % | -67.5 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | -7.1 | % | 7.0 | % | 10.4 | % | 4.0 | % | 7.0 | % | 4.1 | % | 2.0 | % | ||||||||||||||
2019 | 2018 | |||||||||||||||||||||||||||
Year to date, SEK million | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |||||||||||||||||||||
Networks | 18,388 | 11,167 | 5,482 | 21,202 | 13,927 | 8,143 | 3,850 | |||||||||||||||||||||
Digital Services | -3,455 | -2,923 | -1,611 | -8,486 | -4,944 | -3,518 | -2,026 | |||||||||||||||||||||
Managed Services | 2,020 | 1,456 | 1,254 | 1,369 | 1,014 | 573 | 151 | |||||||||||||||||||||
Emerging Business and Other | -12,043 | -741 | -23 | -4,828 | -3,299 | -2,293 | -1,115 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | 4,910 | 8,959 | 5,102 | 9,257 | 6,698 | 2,905 | 860 | |||||||||||||||||||||
2019 | 2018 | |||||||||||||||||||||||||||
Year to date, as percentage of net sales | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |||||||||||||||||||||
Networks | 16.6 | % | 15.7 | % | 16.4 | % | 15.3 | % | 14.4 | % | 13.4 | % | 13.5 | % | ||||||||||||||
Digital Services | -12.9 | % | -17.4 | % | -20.6 | % | -22.3 | % | -19.7 | % | -21.9 | % | -27.9 | % | ||||||||||||||
Managed Services | 10.9 | % | 12.0 | % | 21.4 | % | 5.3 | % | 5.4 | % | 4.6 | % | 2.6 | % | ||||||||||||||
Emerging Business and Other | -238.2 | % | -21.6 | % | -1.3 | % | -57.4 | % | -53.8 | % | -61.9 | % | -67.5 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | 3.1 | % | 8.6 | % | 10.4 | % | 4.4 | % | 4.6 | % | 3.1 | % | 2.0 | % |
45 | Ericsson | Third quarter report 2019 | Items excluding restructuring charges |
Alternative performance measures
This section includes a reconciliation of certain Alternative Performance Measures (APMs) to the most directly reconcilable line items in the financial statements. The presentation of APMs has limitations as analytical tools and should not be considered in isolation or as a substitute for related financial measures prepared in accordance with IFRS.
APMs are presented to enhance an investor’s evaluation of ongoing operating results, to aid in forecasting future periods and to facilitate meaningful comparison of results between periods.
Management uses these APMs to, among other things, evaluate ongoing operations in relation to historical results, for internal planning and forecasting purposes and in the calculation of certain performance-based compensation.
The APMs presented in this report may differ from similarly titled measures used by other companies.
The implementation of IFRS 16 “Leasing” as of January 1, 2019, has had an impact on many of the APMs for 2019. For more information, see “Accounting polices” in this report. The APMs for 2018 has not changed. The definition of the APM Net cash has been clarified.
The Company has decided to change the definition of Return on capital employed (ROCE) and no longer include Financial income in the calculation from Q2 2019. The Company believes the updated definition is a better way of reflecting the underlying results of the operation of the Company. The prior periods have been restated to reflect the change.
For additional information, see Alternative Performance Measures in the Ericsson Annual Report 2018.
Sales growth adjusted for comparable units and currency
Sales growth adjusted for the impact of acquisitions and divestments as well as the effects of foreign currency fluctuations.
2019 | 2018 | |||||||||||||||||||||||||||
Isolated quarters, year over year change | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||
Reported net sales | 57,127 | 54,810 | 48,906 | 63,809 | 53,810 | 49,808 | 43,411 | |||||||||||||||||||||
Acquired business | — | — | — | — | — | — | — | |||||||||||||||||||||
Net FX impact | -2,457 | -2,538 | -2,932 | -3,549 | -3,748 | -263 | 3,328 | |||||||||||||||||||||
Comparable net sales, excluding FX impact | 54,670 | 52,272 | 45,974 | 60,260 | 50,062 | 49,545 | 46,739 | |||||||||||||||||||||
Comparable quarter net sales adjusted for divested business ¹) | 53,077 | 49,055 | 42,961 | — | — | — | — | |||||||||||||||||||||
Sales growth adjusted for comparable units and currency (%) | 3 | % | 7 | % | 7 | % | 4 | % | 1 | % | -1 | % | -2 | % | ||||||||||||||
2019 | 2018 | |||||||||||||||||||||||||||
Year to date, year over year change | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |||||||||||||||||||||
Reported net sales | 160,843 | 103,716 | 48,906 | 210,838 | 147,029 | 93,219 | 43,411 | |||||||||||||||||||||
Acquired business | — | — | — | — | — | — | — | |||||||||||||||||||||
Net FX impact | -7,927 | -5,470 | -2,932 | -4,232 | -683 | 3,065 | 3,328 | |||||||||||||||||||||
Comparable net sales, excluding FX impact | 152,916 | 98,246 | 45,974 | 206,606 | 146,346 | 96,284 | 46,739 | |||||||||||||||||||||
Comparable year to date net sales adjusted for divested business ¹) | 145,093 | 92,016 | 42,961 | — | — | — | — | |||||||||||||||||||||
Sales growth adjusted for comparable units and currency (%) | 5 | % | 7 | % | 7 | % | 1 | % | -1 | % | -2 | % | -2 | % |
1) | Adjusted for MediaKind divestment. |
46 | Ericsson | Third quarter report 2019 | Alternative performance measures |
Items excluding restructuring charges
Gross income, operating expenses, and operating income (loss) are presented excluding restructuring charges and, for certain measures, as a percentage of net sales.
2019 | 2018 | |||||||||||||||||||||||||||
Isolated quarters, SEK million | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||
Gross income | 21,540 | 20,071 | 18,779 | 16,379 | 19,630 | 17,333 | 14,858 | |||||||||||||||||||||
Net sales | 57,127 | 54,810 | 48,906 | 63,809 | 53,810 | 49,808 | 43,411 | |||||||||||||||||||||
Gross margin (%) | 37.7 | % | 36.6 | % | 38.4 | % | 25.7 | % | 36.5 | % | 34.8 | % | 34.2 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Gross income | 21,540 | 20,071 | 18,779 | 16,379 | 19,630 | 17,333 | 14,858 | |||||||||||||||||||||
Restructuring charges included in cost of sales | 28 | 26 | 65 | 4,054 | 204 | 937 | 743 | |||||||||||||||||||||
Gross income excluding restructuring charges | 21,568 | 20,097 | 18,844 | 20,433 | 19,834 | 18,270 | 15,601 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net sales | 57,127 | 54,810 | 48,906 | 63,809 | 53,810 | 49,808 | 43,411 | |||||||||||||||||||||
Gross margin excluding restructuring charges (%) | 37.8 | % | 36.7 | % | 38.5 | % | 32.0 | % | 36.9 | % | 36.7 | % | 35.9 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Operating expenses | -14,217 | -16,331 | -14,639 | -17,964 | -16,422 | -17,205 | -15,257 | |||||||||||||||||||||
Restructuring charges included in R&D expenses | 98 | 49 | 118 | 251 | 214 | 502 | 326 | |||||||||||||||||||||
Restructuring charges included in selling and administrative expenses | 21 | 43 | 23 | 106 | 134 | 441 | 103 | |||||||||||||||||||||
Operating expenses excluding restructuring charges | �� | -14,098 | -16,239 | -14,498 | -17,607 | -16,074 | -16,262 | -14,828 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Operating income (loss) | -4,196 | 3,739 | 4,896 | -1,852 | 3,241 | 165 | -312 | |||||||||||||||||||||
Net sales | 57,127 | 54,810 | 48,906 | 63,809 | 53,810 | 49,808 | 43,411 | |||||||||||||||||||||
Operating margin (%) | -7.3 | % | 6.8 | % | 10.0 | % | -2.9 | % | 6.0 | % | 0.3 | % | -0.7 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Operating income (loss) | -4,196 | 3,739 | 4,896 | -1,852 | 3,241 | 165 | -312 | |||||||||||||||||||||
Total restructuring charges | 147 | 118 | 206 | 4,411 | 552 | 1,880 | 1,172 | |||||||||||||||||||||
Operating income (loss) excluding restructuring charges | -4,049 | 3,857 | 5,102 | 2,559 | 3,793 | 2,045 | 860 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net sales | 57,127 | 54,810 | 48,906 | 63,809 | 53,810 | 49,808 | 43,411 | |||||||||||||||||||||
Operating margin excluding restructuring charges (%) | -7.1 | % | 7.0 | % | 10.4 | % | 4.0 | % | 7.0 | % | 4.1 | % | 2.0 | % | ||||||||||||||
2019 | 2018 | |||||||||||||||||||||||||||
Year to date, SEK million | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |||||||||||||||||||||
Gross income | 60,390 | 38,850 | 18,779 | 68,200 | 51,821 | 32,191 | 14,858 | |||||||||||||||||||||
Net sales | 160,843 | 103,716 | 48,906 | 210,838 | 147,029 | 93,219 | 43,411 | |||||||||||||||||||||
Gross margin (%) | 37.5 | % | 37.5 | % | 38.4 | % | 32.3 | % | 35.2 | % | 34.5 | % | 34.2 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Gross income | 60,390 | 38,850 | 18,779 | 68,200 | 51,821 | 32,191 | 14,858 | |||||||||||||||||||||
Restructuring charges included in cost of sales | 119 | 91 | 65 | 5,938 | 1,884 | 1,680 | 743 | |||||||||||||||||||||
Gross income excluding restructuring charges | 60,509 | 38,941 | 18,844 | 74,138 | 53,705 | 33,871 | 15,601 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net sales | 160,843 | 103,716 | 48,906 | 210,838 | 147,029 | 93,219 | 43,411 | |||||||||||||||||||||
Gross margin excluding restructuring charges (%) | 37.6 | % | 37.5 | % | 38.5 | % | 35.2 | % | 36.5 | % | 36.3 | % | 35.9 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Operating expenses | -45,187 | -30,970 | -14,639 | -66,848 | -48,884 | -32,462 | -15,257 | |||||||||||||||||||||
Restructuring charges included in R&D expenses | 265 | 167 | 118 | 1,293 | 1,042 | 828 | 326 | |||||||||||||||||||||
Restructuring charges included in selling and administrative expenses | 87 | 66 | 23 | 784 | 678 | 544 | 103 | |||||||||||||||||||||
Operating expenses excluding restructuring charges | -44,835 | -30,737 | -14,498 | -64,771 | -47,164 | -31,090 | -14,828 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Operating income (loss) | 4,439 | 8,635 | 4,896 | 1,242 | 3,094 | -147 | -312 | |||||||||||||||||||||
Net sales | 160,843 | 103,716 | 48,906 | 210,838 | 147,029 | 93,219 | 43,411 | |||||||||||||||||||||
Operating margin (%) | 2.8 | % | 8.3 | % | 10.0 | % | 0.6 | % | 2.1 | % | -0.2 | % | -0.7 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Operating income (loss) | 4,439 | 8,635 | 4,896 | 1,242 | 3,094 | -147 | -312 | |||||||||||||||||||||
Total restructuring charges | 471 | 324 | 206 | 8,015 | 3,604 | 3,052 | 1,172 | |||||||||||||||||||||
Operating income (loss) excluding restructuring charges | 4,910 | 8,959 | 5,102 | 9,257 | 6,698 | 2,905 | 860 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net sales | 160,843 | 103,716 | 48,906 | 210,838 | 147,029 | 93,219 | 43,411 | |||||||||||||||||||||
Operating margin excluding restructuring charges (%) | 3.1 | % | 8.6 | % | 10.4 | % | 4.4 | % | 4.6 | % | 3.1 | % | 2.0 | % |
47 | Ericsson | Third quarter report 2019 | Alternative performance measures |
Earnings (loss) before interest, taxes, amortization and write-downs of acquired intangibles, also expressed as a percentage of net sales.
2019 | 2018 | |||||||||||||||||||||||||||
Isolated quarters, SEK million | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||
Net income (loss) | -6,894 | 1,847 | 2,403 | -6,497 | 2,748 | -1,802 | -725 | |||||||||||||||||||||
Taxes | 2,013 | 1,451 | 1,888 | 3,930 | -146 | 1,157 | -128 | |||||||||||||||||||||
Financial income and expenses, net | 685 | 441 | 605 | 715 | 639 | 810 | 541 | |||||||||||||||||||||
Amortization andwrite-downs of acquired intangibles | 229 | 226 | 314 | 621 | 344 | 350 | 347 | |||||||||||||||||||||
EBITA | -3,967 | 3,965 | 5,210 | -1,231 | 3,585 | 515 | 35 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net sales | 57,127 | 54,810 | 48,906 | 63,809 | 53,810 | 49,808 | 43,411 | |||||||||||||||||||||
EBITA margin (%) | -6.9 | % | 7.2 | % | 10.7 | % | -1.9 | % | 6.7 | % | 1.0 | % | 0.1 | % | ||||||||||||||
2019 | 2018 | |||||||||||||||||||||||||||
Year to date, SEK million | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |||||||||||||||||||||
Net income (loss) | -2,644 | 4,250 | 2,403 | -6,276 | 221 | -2,527 | -725 | |||||||||||||||||||||
Taxes | 5,352 | 3,339 | 1,888 | 4,813 | 883 | 1,029 | -128 | |||||||||||||||||||||
Financial income and expenses, net | 1,731 | 1,046 | 605 | 2,705 | 1,990 | 1,351 | 541 | |||||||||||||||||||||
Amortization andwrite-downs of acquired intangibles | 769 | 540 | 314 | 1,662 | 1,041 | 697 | 347 | |||||||||||||||||||||
EBITA | 5,208 | 9,175 | 5,210 | 2,904 | 4,135 | 550 | 35 | |||||||||||||||||||||
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|
| |||||||||||||||
Net sales | 160,843 | 103,716 | 48,906 | 210,838 | 147,029 | 93,219 | 43,411 | |||||||||||||||||||||
EBITA margin (%) | 3.2 | % | 8.8 | % | 10.7 | % | 1.4 | % | 2.8 | % | 0.6 | % | 0.1 | % |
Cash flow from operating activities divided by the sum of net income (loss) and adjustments to reconcile net income to cash, expressed as a percentage.
2019 | 2018 | |||||||||||||||||||||||||||
Isolated quarters, SEK million | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||
Net income (loss) | -6,894 | 1,847 | 2,403 | -6,497 | 2,748 | -1,802 | -725 | |||||||||||||||||||||
Net income reconciled to cash | -4,320 | 4,952 | 5,481 | -98 | 2,916 | -259 | -1,005 | |||||||||||||||||||||
Cash flow from operating activities | 6,989 | 3,623 | 5,765 | 4,287 | 2,040 | 1,442 | 1,573 | |||||||||||||||||||||
Cash conversion (%) | -161.8 | % | 73.2 | % | 105.2 | % | -4374.5 | % | 70.0 | % | -556.8 | % | -156.5 | % | ||||||||||||||
2019 | 2018 | |||||||||||||||||||||||||||
Year to date, SEK million | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |||||||||||||||||||||
Net income (loss) | -2,644 | 4,250 | 2,403 | -6,276 | 221 | -2,527 | -725 | |||||||||||||||||||||
Net income reconciled to cash | 6,113 | 10,433 | 5,481 | 1,554 | 1,652 | -1,264 | -1,005 | |||||||||||||||||||||
Cash flow from operating activities | 16,377 | 9,388 | 5,765 | 9,342 | 5,055 | 3,015 | 1,573 | |||||||||||||||||||||
Cash conversion (%) | 267.9 | % | 90.0 | % | 105.2 | % | 601.2 | % | 306.0 | % | -238.5 | % | -156.5 | % |
48 | Ericsson | Third quarter report 2019 | Alternative performance measures |
Gross cash and net cash, end of period
Gross cash: Cash and cash equivalents plus interest-bearing securities (current andnon-current). Net cash: Cash and cash equivalents plus interest-bearing securities (current andnon-current) less borrowings (current andnon-current).
2019 | 2018 | |||||||||||||||||||||||||||
SEK million | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||
Cash and cash equivalents | 51,183 | 45,498 | 45,453 | 38,389 | 36,058 | 37,049 | 36,697 | |||||||||||||||||||||
+ Interest-bearing securities, current | 5,866 | 6,367 | 3,183 | 6,625 | 6,591 | 8,304 | 5,453 | |||||||||||||||||||||
+ Interest-bearing securities,non-current | 19,157 | 17,091 | 23,022 | 23,982 | 23,014 | 21,501 | 27,104 | |||||||||||||||||||||
Gross cash, end of period | 76,206 | 68,956 | 71,658 | 68,996 | 65,663 | 66,854 | 69,254 | |||||||||||||||||||||
- Borrowings, current | 1,622 | 2,160 | 3,015 | 2,255 | 2,463 | 2,642 | 2,554 | |||||||||||||||||||||
- Borrowings,non-current | 37,153 | 33,040 | 32,533 | 30,870 | 31,187 | 31,131 | 31,134 | |||||||||||||||||||||
Net cash, end of period | 37,431 | 33,756 | 36,110 | 35,871 | 32,013 | 33,081 | 35,566 |
Total assets lessnon-interest-bearing provisions and liabilities.
2019 | 2018 | |||||||||||||||||||||||||||
SEK million | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||
Total assets | 288,531 | 280,447 | 283,958 | 268,761 | 264,848 | 265,322 | 260,681 | |||||||||||||||||||||
Non-interest-bearing provisions and liabilities | ||||||||||||||||||||||||||||
Provisions,non-current | 2,308 | 2,646 | 2,670 | 5,471 | 3,420 | 2,819 | 2,597 | |||||||||||||||||||||
Deferred tax liabilities | 857 | 1,178 | 792 | 670 | 1,274 | 1,332 | 1,325 | |||||||||||||||||||||
Othernon-current liabilities | 2,163 | 2,160 | 2,118 | 4,346 | 4,456 | 4,549 | 2,792 | |||||||||||||||||||||
Provisions, current | 19,699 | 8,712 | 9,363 | 10,537 | 5,275 | 6,715 | 6,435 | |||||||||||||||||||||
Contract liabilities | 34,499 | 37,264 | 38,605 | 29,348 | 30,108 | 30,959 | 30,391 | |||||||||||||||||||||
Trade payables | 30,672 | 31,388 | 30,842 | 29,883 | 28,914 | 28,563 | 26,453 | |||||||||||||||||||||
Other current liabilities | 34,624 | 33,351 | 38,528 | 38,891 | 36,323 | 35,746 | 37,888 | |||||||||||||||||||||
Capital employed | 163,709 | 163,748 | 161,040 | 149,615 | 155,078 | 154,639 | 152,800 |
Annualized net sales divided by average capital employed.
2019 | 2018 | |||||||||||||||||||||||||||
Isolated quarters, SEK million | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||
Net sales | 57,127 | 54,810 | 48,906 | 63,809 | 53,810 | 49,808 | 43,411 | |||||||||||||||||||||
Annualized net sales | 228,508 | 219,240 | 195,624 | 255,236 | 215,240 | 199,232 | 173,644 | |||||||||||||||||||||
Average capital employed | ||||||||||||||||||||||||||||
Capital employed at beginning of period | 163,748 | 161,040 | 149,615 | 155,078 | 154,639 | 152,800 | 155,625 | |||||||||||||||||||||
Capital employed at end of period | 163,709 | 163,748 | 161,040 | 149,615 | 155,078 | 154,639 | 152,800 | |||||||||||||||||||||
Average capital employed | 163,729 | 162,394 | 155,328 | 152,347 | 154,859 | 153,720 | 154,213 | |||||||||||||||||||||
Capital turnover (times) | 1.4 | 1.4 | 1.3 | 1.7 | 1.4 | 1.3 | 1.1 | |||||||||||||||||||||
2019 | 2018 | |||||||||||||||||||||||||||
Year to date, SEK million | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |||||||||||||||||||||
Net sales | 160,843 | 103,716 | 48,906 | 210,838 | 147,029 | 93,219 | 43,411 | |||||||||||||||||||||
Annualized net sales | 214,457 | 207,432 | 195,624 | 210,838 | 196,039 | 186,438 | 173,644 | |||||||||||||||||||||
Average capital employed | ||||||||||||||||||||||||||||
Capital employed at beginning of period | 149,615 | 149,615 | 149,615 | 155,625 | 155,625 | 155,625 | 155,625 | |||||||||||||||||||||
Capital employed at end of period | 163,709 | 163,748 | 161,040 | 149,615 | 155,078 | 154,639 | 152,800 | |||||||||||||||||||||
Average capital employed | 156,662 | 156,682 | 155,328 | 152,620 | 155,352 | 155,132 | 154,213 | |||||||||||||||||||||
Capital turnover (times) | 1.4 | 1.3 | 1.3 | 1.4 | 1.3 | 1.2 | 1.1 |
49 | Ericsson | Third quarter report 2019 | Alternative performance measures |
The annualized total of operating income (loss) as a percentage of average capital employed.
The definition is updated. Refer to the clarification provided at the beginning of the APM section.
2019 | 2018 | |||||||||||||||||||||||||||
Isolated quarters, SEK million | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||
Operating income (loss) | -4,196 | 3,739 | 4,896 | -1,852 | 3,241 | 165 | -312 | |||||||||||||||||||||
Annualized operating income (loss) | -16,784 | 14,956 | 19,584 | -7,408 | 12,964 | 660 | -1,248 | |||||||||||||||||||||
Average capital employed | ||||||||||||||||||||||||||||
Capital employed at beginning of period | 163,748 | 161,040 | 149,615 | 155,078 | 154,639 | 152,800 | 155,625 | |||||||||||||||||||||
Capital employed at end of period | 163,709 | 163,748 | 161,040 | 149,615 | 155,078 | 154,639 | 152,800 | |||||||||||||||||||||
Average capital employed | 163,729 | 162,394 | 155,328 | 152,347 | 154,859 | 153,720 | 154,213 | |||||||||||||||||||||
Return on capital employed (%) | -10.3 | % | 9.2 | % | 12.6 | % | -4.9 | % | 8.4 | % | 0.4 | % | -0.8 | % | ||||||||||||||
2019 | 2018 | |||||||||||||||||||||||||||
Year to date, SEK million | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |||||||||||||||||||||
Operating income (loss) | 4,439 | 8,635 | 4,896 | 1,242 | 3,094 | -147 | -312 | |||||||||||||||||||||
Annualized operating income (loss) | 5,919 | 17,270 | 19,584 | 1,242 | 4,125 | -294 | -1,248 | |||||||||||||||||||||
Average capital employed | ||||||||||||||||||||||||||||
Capital employed at beginning of period | 149,615 | 149,615 | 149,615 | 155,625 | 155,625 | 155,625 | 155,625 | |||||||||||||||||||||
Capital employed at end of period | 163,709 | 163,748 | 161,040 | 149,615 | 155,078 | 154,639 | 152,800 | |||||||||||||||||||||
Average capital employed | 156,662 | 156,682 | 155,328 | 152,620 | 155,352 | 155,132 | 154,213 | |||||||||||||||||||||
Return on capital employed (%) | 3.8 | % | 11.0 | % | 12.6 | % | 0.8 | % | 2.7 | % | -0.2 | % | -0.8 | % |
Equity expressed as a percentage of total assets.
2019 | 2018 | |||||||||||||||||||||||||||
SEK million | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||
Total equity | 77,475 | 84,533 | 84,532 | 87,770 | 95,953 | 93,560 | 93,466 | |||||||||||||||||||||
Total assets | 288,531 | 280,447 | 283,958 | 268,761 | 264,848 | 265,322 | 260,681 | |||||||||||||||||||||
Equity ratio (% ) | 26.9 | % | 30.1 | % | 29.8 | % | 32.7 | % | 36.2 | % | 35.3 | % | 35.9 | % |
Annualized net income (loss) attributable to stockholders of the Parent Company as a percentage of average stockholders’ equity.
2019 | 2018 | |||||||||||||||||||||||||||
Isolated quarters, SEK million | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||
Net income (loss) attributable to stockholders of the Parent Company | -6,229 | 1,705 | 2,317 | -6,553 | 2,745 | -1,885 | -837 | |||||||||||||||||||||
Annualized | -24,916 | 6,820 | 9,268 | -26,212 | 10,980 | -7,540 | -3,348 | |||||||||||||||||||||
Average stockholders’ equity | ||||||||||||||||||||||||||||
Stockholders’ equity, beginning of period | 84,488 | 84,619 | 86,978 | 95,087 | 92,689 | 92,703 | 95,952 | |||||||||||||||||||||
Stockholders’ equity, end of period | 78,200 | 84,488 | 84,619 | 86,978 | 95,087 | 92,689 | 92,703 | |||||||||||||||||||||
Average stockholders’ equity | 81,344 | 84,554 | 85,799 | 91,033 | 93,888 | 92,696 | 94,328 | |||||||||||||||||||||
Return on equity (%) | -30.6 | % | 8.1 | % | 10.8 | % | -28.8 | % | 11.7 | % | -8.1 | % | -3.5 | % | ||||||||||||||
2019 | 2018 | |||||||||||||||||||||||||||
Year to date, SEK million | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |||||||||||||||||||||
Net income (loss) attributable to stockholders of the Parent Company | -2,207 | 4,022 | 2,317 | -6,530 | 23 | -2,722 | -837 | |||||||||||||||||||||
Annualized | -2,943 | 8,044 | 9,268 | -6,530 | 31 | -5,444 | -3,348 | |||||||||||||||||||||
Average stockholders’ equity | ||||||||||||||||||||||||||||
Stockholders’ equity, beginning of period | 86,978 | 86,978 | 86,978 | 95,952 | 95,952 | 95,952 | 95,952 | |||||||||||||||||||||
Stockholders’ equity, end of period | 78,200 | 84,488 | 84,619 | 86,978 | 95,087 | 92,689 | 92,703 | |||||||||||||||||||||
Average stockholders’ equity | 82,589 | 85,733 | 85,799 | 91,465 | 95,520 | 94,321 | 94,328 | |||||||||||||||||||||
Return on equity (%) | -3.6 | % | 9.4 | % | 10.8 | % | -7.1 | % | 0.0 | % | -5.8 | % | -3.5 | % |
50 | Ericsson | Third quarter report 2019 | Alternative performance measures |
Earnings (loss) per share(non-IFRS)
Earnings (loss) per share, diluted, excluding amortizations and write-down of acquired intangible assets and excluding restructuring charges.
2019 | 2018 | |||||||||||||||||||||||||||
Isolated quarters, SEK | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||
Earnings (loss) per share, diluted | -1.89 | 0.51 | 0.70 | -1.99 | 0.83 | -0.58 | -0.25 | |||||||||||||||||||||
Restructuring charges | 0.04 | 0.02 | 0.05 | 1.06 | 0.12 | 0.41 | 0.30 | |||||||||||||||||||||
Amortization andwrite-downs of acquired intangibles | 0.05 | 0.06 | 0.05 | 0.16 | 0.08 | 0.08 | 0.06 | |||||||||||||||||||||
Earnings (loss) per share(non-IRFS) | -1.80 | 0.59 | 0.80 | -0.77 | 1.03 | -0.09 | 0.11 | |||||||||||||||||||||
2019 | 2018 | |||||||||||||||||||||||||||
Year to date, SEK | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |||||||||||||||||||||
Earnings (loss) per share, diluted | -0.67 | 1.21 | 0.70 | -1.98 | 0.01 | -0.83 | -0.25 | |||||||||||||||||||||
Restructuring charges | 0.11 | 0.07 | 0.05 | 1.88 | 0.82 | 0.71 | 0.30 | |||||||||||||||||||||
Amortization andwrite-downs of acquired intangibles | 0.16 | 0.11 | 0.05 | 0.37 | 0.21 | 0.14 | 0.06 | |||||||||||||||||||||
Earnings (loss) per share(non-IRFS) | -0.40 | 1.39 | 0.80 | 0.27 | 1.04 | 0.02 | 0.11 |
Free cash flow and free cash flow excluding M&A
Free cash flow: Cash flow from operating activities less net capital expenditures and other investments.
Free cash flow excluding M&A: Cash flow from operating activities less net capital expenditures and other investments (excluding M&A).
2019 | 2018 | |||||||||||||||||||||||||||
Isolated quarters, SEK million | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||
Cash flow from operating activities | 6,989 | 3,623 | 5,765 | 4,287 | 2,040 | 1,442 | 1,573 | |||||||||||||||||||||
Net capital expenditures and other investments (excluding M&A) | ||||||||||||||||||||||||||||
Investments in property, plant and equipment | -1,231 | -1,098 | -1,314 | -1,080 | -1,088 | -951 | -856 | |||||||||||||||||||||
Sales of property, plant and equipment | 122 | 184 | 232 | 57 | 102 | 52 | 123 | |||||||||||||||||||||
Product development | -313 | -446 | -457 | -195 | -151 | -325 | -254 | |||||||||||||||||||||
Other investing activities | -56 | -36 | -165 | -96 | -190 | -398 | 161 | |||||||||||||||||||||
Free cash flow excluding M&A | 5,511 | 2,227 | 4,061 | 2,973 | 713 | -180 | 747 | |||||||||||||||||||||
Acquisitions/divestments of subsidiaries and other operations, net | -466 | 3 | 299 | 20 | -425 | -431 | -449 | |||||||||||||||||||||
Free cash flow | 5,045 | 2,230 | 4,360 | 2,993 | 288 | -611 | 298 | |||||||||||||||||||||
2019 | 2018 | |||||||||||||||||||||||||||
Year to date, SEK million | Jan-Sep | Jan-Jun | Jan-Mar | Jan-Dec | Jan-Sep | Jan-Jun | Jan-Mar | |||||||||||||||||||||
Cash flow from operating activities | 16,377 | 9,388 | 5,765 | 9,342 | 5,055 | 3,015 | 1,573 | |||||||||||||||||||||
Net capital expenditures and other investments (excluding M&A) | ||||||||||||||||||||||||||||
Investments in property, plant and equipment | -3,643 | -2,412 | -1,314 | -3,975 | -2,895 | -1,807 | -856 | |||||||||||||||||||||
Sales of property, plant and equipment | 538 | 416 | 232 | 334 | 277 | 175 | 123 | |||||||||||||||||||||
Product development | -1,216 | -903 | -457 | -925 | -730 | -579 | -254 | |||||||||||||||||||||
Other investing activities | -257 | -201 | -165 | -523 | -427 | -237 | 161 | |||||||||||||||||||||
Free cash flow excluding M&A | 11,799 | 6,288 | 4,061 | 4,253 | 1,280 | 567 | 747 | |||||||||||||||||||||
Acquisitions/divestments of subsidiaries and other operations, net | -164 | 302 | 299 | -1,285 | -1,305 | -880 | -449 | |||||||||||||||||||||
Free cash flow | 11,635 | 6,590 | 4,360 | 2,968 | -25 | -313 | 298 |
51 | Ericsson | Third quarter report 2019 | Alternative performance measures |