STOCKHOLM, April 21, 2021 /PRNewswire/ -- First quarter
highlights
- Sales adjusted for comparable units and currency grew by 10%
YoY despite SEK -1.6 b. lower IPR
licensing revenues YoY and four of the five market areas showed
double-digit growth. Reported sales were SEK
49.8 (49.8) b.
- Gross margin excluding restructuring charges improved to 42.9%
(40.4%) with margin improvements in all segments despite lower IPR
licensing revenues. Reported gross margin improved to 42.8%
(39.8%).
- EBIT excluding restructuring charges improved to SEK 5.3 b. (10.7%) from SEK 4.6 b. (9.3%) YoY driven by Networks, more
than offsetting the negative impact from lower IPR licensing
revenues. Reported EBIT was SEK 5.3
(4.3) b.
- Networks sales increased by 15% YoY, adjusted for comparable
units and currency, driven by market share gains. Networks EBIT
margin excluding restructuring charges was 19.9%
(16.8%).
- Reported net income was SEK 3.2
(2.3) b.
- Free cash flow before M&A was SEK
1.6 (2.3) b. mainly impacted
by lower incoming IPR payments. Net cash per March 31, 2021 was SEK
43.0 (38.4) b.
SEK b.
|
Q1
2021
|
Q1
2020
|
YoY
change
|
Q4
2020
|
QoQ
change
|
Net sales
|
49.8
|
49.8
|
0%
|
69.6
|
-28%
|
Sales growth adj.
for comparable units and currency[1]
|
-
|
-
|
10%
|
-
|
-
|
Gross
margin[1]
|
42.8%
|
39.8%
|
-
|
40.6%
|
-
|
EBIT
|
5.3
|
4.3
|
22%
|
11.0
|
-52%
|
EBIT
margin[1]
|
10.6%
|
8.7%
|
-
|
15.8%
|
-
|
Net
income
|
3.2
|
2.3
|
39%
|
7.2
|
-56%
|
EPS diluted,
SEK
|
0.96
|
0.65
|
48%
|
2.26
|
-58%
|
Measures excl.
restructuring charges and other items affecting
comparability[1]
|
Gross margin
excluding restructuring charges
|
42.9%
|
40.4%
|
-
|
40.6%
|
-
|
EBIT excluding
restructuring charges
|
5.3
|
4.6
|
16%
|
11.0
|
-51%
|
EBIT margin excluding
restructuring charges
|
10.7%
|
9.3%
|
-
|
15.8%
|
-
|
Free cash flow before
M&A
|
1.6
|
2.3
|
-33%
|
12.8
|
-88%
|
Net cash, end of
period
|
43.0
|
38.4
|
12%
|
41.9
|
3%
|
[1] Non-IFRS financial measures are reconciled at the end of
this report to the most directly reconcilable line items in the
financial statements.
Comments from Börje Ekholm, President and CEO of Ericsson
(NASDAQ:ERIC)
Our strategy, built on increased investments in R&D for
technology and cost leadership, continued to bear fruit in the
first quarter of 2021. We saw organic sales[1] growth of 10%,
primarily driven by market share gains in Networks. Adjusting for
declining IPR revenues, organic sales[1] growth was 14%. Gross
margin[2] improved to 42.9% (40.4%) YoY and margin increases in all
segments more than offset lower IPR licensing revenues. Our EBIT
margin[2] increased to 10.7% despite significant investments in our
business and headwind from currency. We are well positioned to take
advantage of the continued market momentum with a competitive 5G
product portfolio and cost structure.
Networks sales[1] grew organically by 15%, despite a decline in
IPR licensing revenues. This growth is reflecting continued high
activity levels in all market areas, except in the Middle East and Africa. We continued to grow market share in
the quarter with strong order intake. The gross margin[2] for Q1
improved to 46.0% (44.6%). With proactive and continuous measures
for supply chain resilience we have to date been able to manage the
global semiconductors shortage situation without impact on our
customer deliveries. Our increased R&D investments have
accelerated product development, evidenced by our recently launched
lightweight, energy-efficient Massive MIMO radios for 5G mid-band
as well as the Cloud RAN portfolio. These are complementing our
radio portfolio, giving customers more deployment options and are
receiving good customer traction. We expect the overall market to
develop favorably during 2021. We intend to continue to invest for
market share gains as well as supply chain resilience during the
rest of the year.
Digital Services shows good momentum in contract awards
primarily in our cloud native 5G Core portfolio and continues to
execute on the plan, visible in the gross margin[2] increase to
43.6% (40.1%). Growing topline for Digital Services is a key
driver, and it is encouraging to see sales[1] growing 3%
organically in the quarter, despite lower IPR licensing revenues as
well as continued fall in the legacy portfolio. The EBIT loss in
the quarter is a result of seasonally low sales, lower IPR
licensing revenues and ongoing ramp-up in R&D investments. We
will continue to invest in R&D for the new cloud native 5G Core
portfolio and we will see initial deployment costs impacting 2021.
However, we expect revenues from awarded 5G Core contracts to start
late 2021 or early 2022. 2021 will be an investment year and a
similar earnings level in Q2 as in Q1 is expected. We are confident
that we are building a strong platform for Digital Services and the
target to reach an EBIT margin[2] of 4%-7% in 2022 remains.
Managed Services delivered a gross margin[2] of 21.0% (20.6%) in
the quarter. EBIT margin[2] decreased to 8.1% (11.4%), including a
one percentage point one-time negative impact related to an exit
from a non-core business. Going forward, we continue to focus on
further improving the margin profile based on increased R&D
investments in automation and AI.
We are encouraged to see Cradlepoint, reported in segment
Emerging Business and Other, developing according to plan.
IPR licensing revenues amounted to SEK
0.8 (2.5) b. in the quarter.
The decline is mainly related to expired contracts pending renewal
and lower volumes with one licensee. For the largest contract under
renewal, both legal and negotiation processes are continuing.
Free cash flow before M&A amounted to SEK 1.6 (2.3) b. in
the quarter. Normally the majority of the annual IPR licensing fees
are received in Q1. Excluding the IPR impact, the cash flow
improved significantly YoY as a result of improved earnings and
continued working capital discipline. We are well positioned with a
resilient balance sheet and a solid competitive position based on
our 5G portfolio giving us the opportunity to further grow the
company both organically and through acquisitions.
The ongoing global pandemic has fast-forwarded the
digitalization of societies, placing a significant economic and
social premium on high-quality network connectivity. A resilient
global digital infrastructure is critical. We see positive signs of
governments and enterprises increasingly recognizing 5G as a
preferred choice for connectivity with accelerating deployment.
We continue to reinforce our strong commitment to ethics and
compliance. We are further increasing our investments to strengthen
our capabilities, and at the same time deploying new or revised
processes and internal controls. A vital cornerstone is
establishing a durable ethical culture built on individual
accountability for responsible business practices. The ongoing
independent monitorship is providing valuable contributions to
achieving our ambition.
There is strong momentum in the global 5G demand with lead
markets moving forward at high pace, creating opportunities for us
to grow our core business. To that end we continue to invest in
further strengthening our portfolio and growing our global
footprint. The Enterprise opportunity, on the back of 5G and IoT,
offers another attractive growth area. With the investments we are
making in our business in 2021, we are creating a strong platform
for the long term with strengthened competitiveness in the core
business as well as in Enterprise applications.
Our number one priority is the safety, health and well-being of
our colleagues, customers and partners. Thanks to the resilience of
our outstanding employees working under challenging conditions
during the pandemic, we have been able to deliver to customers and
manage our operations without disruption.
Stay healthy and well.
Börje Ekholm
President and CEO
[1]Sales adjusted for comparable units and currency
[2]Excluding restructuring charges
NOTES TO EDITORS
You find the complete report with tables in the attached PDF or
by following this
link https://www.ericsson.com/assets/local/investors/documents/financial-reports-and-filings/interim-reports-archive/2021/3month21-en.pdf
or on www.ericsson.com/investors
Video webcast for analysts, investors and journalists
President and CEO Börje Ekholm and CFO Carl Mellander will comment on the report and
take questions at a video webcast at 9:00 AM
CEST (8:00 AM BST London,
3:00 AM EDT New York).
To join the webcast, please go to www.ericsson.com/investors
To ask a question, please call:
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Please call in at least 15 minutes before the webcast
starts.
The webcast will be available on-demand after the event and can
be viewed at www.ericsson.com/investors.
FOR FURTHER INFORMATION, PLEASE CONTACT
Contact person
Peter Nyquist
Head of Investor Relations
Phone: +46 705 75 29 06
E-mail: peter.nyquist@ericsson.com
Additional contacts
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Senior Vice President
Marketing and Corporate Relations
Phone: +46 730 95 65 39
E-mail: media.relations@ericsson.com
Investors
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Director
Investor Relations
Phone: +46 72 593 27 78
E-mail: lena.haggblom@ericsson.com
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Director
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E-mail: stefan.jelvin@ericsson.com
Media
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Phone: +46 702 67 34 45
E-mail: media.relations@ericsson.com
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|
Ericsson first
quarter report 2021
|