ERIC Ericsson

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 sales¹ growth of 10%, primarily driven by market share gains in Networks. Adjusting for declining IPR revenues, organic sales¹ growth was 14%. Gross margin² improved to 42.9% (40.4%) YoY and margin increases in all segments more than offset lower IPR licensing revenues. Our EBIT margin² 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 sales¹ 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 margin² 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 margin² increase to 43.6% (40.1%). Growing topline for Digital Services is a key driver, and it is encouraging to see sales¹ 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 margin² of 4%-7% in 2022 remains.

Managed Services delivered a gross margin² of 21.0% (20.6%) in the quarter. EBIT margin² 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

Group reported sales were SEK 49.8 b. Sales adjusted for comparable units and currency grew by 10%, with double-digit currency adjusted growth in four of the five market areas. Sales in the Middle East and Africa declined.

IPR licensing revenues decreased to SEK 0.8 (2.5) b. due to expired contracts being under renewal negotiations, lower volumes with one licensee and fluctuations in the timing of revenues in certain contracts. IPR licensing revenues accounted for 2% (5%) of total sales.

Networks sales adjusted for comparable units and currency increased by 15% YoY driven by growth in LTE and deployment of 5G across four of the five market areas. Networks accounted for 73% (71%) of total sales.

Digital Services sales adjusted for comparable units and currency grew by 3% YoY driven by packet core sales in Europe and in North America. Sales adjusted for currency increased in four of the five market areas. Digital Services share of total sales was 14% (15%).

Managed Services sales adjusted for comparable units and currency decreased by -8% YoY, mainly due to lower variable sales in a managed services contract in North America post the merger between two large operators. Managed Services share of total sales was 10% (11%).

Emerging Business and Other sales adjusted for comparable units and currency increased by 9%, driven by growth in Emerging Business. Emerging Business and Other share of total sales was 3% (3%).

Gross margin

Reported gross margin was 42.8% (39.8%). Gross margin excluding restructuring charges increased to 42.9% (40.4%) with margin improvements in all segments. Operational leverage contributed to the higher margins in Networks and in Digital Services. There was

limited impact of critical contracts in Digital Services in Q1 2021 while the impact in Q1 2020 was SEK -0.2 b. Managed Services gross margin improved mainly as an effect of efficiency gains.

Sequentially, reported gross margin increased to 42.8% from 40.6%. Gross margin in Q1 was positively impacted by operational leverage and a favorable business mix in Networks and Digital Services.

Research and development (R&D) expenses

R&D expenses amounted to SEK -9.6 (-9.1) b. R&D expenses increased in Emerging Business and Other as a result of the acquisition of Cradlepoint and in Digital Services due to increased investments in the cloud native 5G portfolio.

Selling and administrative (SG&A) expenses

SG&A expenses remained flat YoY at SEK -6.2 b. Increased SG&A expenses in Emerging Business and Other, due to the acquisition of Cradlepoint, as well as higher expenses for the long-term variable compensation programs, were offset by lower discretionary spending in the other segments.

Revaluation of customer financing was SEK 0.1 (-0.3) b.

Impairment losses on trade receivables

Impairment losses on trade receivables were SEK -0.2 (-0.2) b.

Other operating income and expenses

Other operating income and expenses was SEK 0.0 (0.1) b.

Share in earnings of JVs and associated companies was SEK -0.1 (-0.0) b.

Restructuring charges

Restructuring charges amounted to SEK -0.1 (-0.3) b.

EBIT

Reported EBIT improved to SEK 5.3 (4.3) b. YoY. EBIT excluding restructuring charges was SEK 5.3 (4.6) b. corresponding to an EBIT margin excluding restructuring charges of 10.7% (9.3%). The increase was mainly driven by the improved gross margin. The IPR contribution to EBIT decreased by SEK -1.7 b. due to lower revenues and increased litigation costs.

Sequentially, reported EBIT decreased to SEK 5.3 b. from SEK 11.0 b. due to seasonally lower sales, partly offset by an improved gross margin.

EBITA

Reported EBITA improved to SEK 5.5 (4.6) b. YoY. EBITA excluding restructuring charges was SEK 5.6 (4.9) b. corresponding to an EBITA margin excluding restructuring charges of 11.3% (9.9%).

Financial income and expenses, net

Reported financial net was SEK -0.5 (-0.9) b. The strengthened USD to SEK resulted in a negative currency hedge effect. The currency hedge effect was SEK -0.4 b. in the quarter compared with SEK -0.5 b. in Q1 2020.

Sequentially financial net declined to SEK -0.5 b. from SEK -0.1 b. with the currency hedge effect down from SEK 0.6 b. in the fourth quarter 2020. The USD strengthened against the SEK between December 31, 2020 (SEK/USD rate 8.19) and March 31, 2021 (SEK/USD rate 8.71).

Taxes

Taxes were SEK -1.6 (-1.1) b. The effective tax rate in Q1 was 33% compared with 34% in Q4 2020.

Net income

Net income improved to SEK 3.2 (2.3) b. and EPS diluted improved to SEK 0.96 (0.65) YoY driven by the stronger EBIT.

Employees

The number of employees on March 31, 2021, was 101,113 compared with 100,824 on December 31, 2020. The increase derives mainly from research and development.

Planning assumptions

Market related

Ericsson related

Net sales

Gross margin

R&D and SG&A expenses

EBIT

Restructuring charges

Currency exposure

Cradlepoint

South East Asia, Oceania and India

Currency adjusted sales increased by 21% YoY. Sales increased YoY in Networks, driven by continued investments in LTE, primarily in India, and by 5G momentum, predominantly in Australia. Sales increased YoY in Digital Services due to timing of orders and project milestones. Managed Services sales increased YoY, mainly as a result of a new contract signed in second half of 2020. Reported sales increased by 13%.

North East Asia

Currency adjusted sales increased by 78% YoY. Networks and Digital Services sales grew in markets outside of Mainland China. Reported sales increased by 66%.

North America

Currency adjusted sales increased by 10% YoY. Sales growth was driven by strong demand for 5G solutions in Networks and for 5G Core and cloud native solutions in Digital Services. Managed Services sales decreased after the merger between two operators. Reported sales declined by -5%.

Europe and Latin America

Currency adjusted growth was 12% YoY. Sales continued to grow in Networks and in Digital Services in Europe as a result of market share gains, while sales decreased in Managed Services due to earlier decisions on contract exits. Currency adjusted sales growth in Europe was 15%. Currency adjusted sales in Latin America were flat, while reported sales declined by -17% due to macroeconomic conditions following COVID-19. Reported sales increased by 3%.

Middle East and Africa

Currency adjusted sales declined by -16% YoY. Sales declined YoY in Networks and Digital Services primarily due to timing of 5G investments in the Middle East and uncertain macroeconomic conditions in Africa, which are likely to prevail for some time. Managed Services sales were stable. Reported sales decreased by -25%.

Other

IPR licensing revenues decreased to SEK 0.8 (2.5) b. due to expired contracts under renewal negotiation, lower volumes with one licensee and fluctuations in the timing of revenues in certain contracts.

Segment Networks

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

Net sales

Sales adjusted for comparable units and currency grew by 15% with double-digit growth in all market areas except in market area Middle East and Africa, where sales declined as an effect of lower operator capex levels due to the macroeconomic impact. Sales growth adjusted for the IPR impact and currency was 19%. Reported sales increased by 3% YoY.

Reported sales decreased by -27% QoQ, due to seasonally lower sales, lower IPR licensing revenues and a negative currency impact.

Gross margin

Reported gross margin increased to 46.1% (44.4%) YoY, as operational leverage and a lower share of services sales more than offset a lower contribution from IPR.

Reported gross margin increased QoQ to 46.1% from 43.4% with continued strong operational leverage and a favorable business mix.

EBIT

Reported EBIT increased to SEK 7.2 (5.8) b. YoY, with an increase in EBIT margin to 20.0% (16.6%). The increase was primarily driven by the improved gross income. Operating expenses decreased by SEK 0.3 b. to SEK -9.5 b. mainly due to a reduced risk provision for accounts receivables.

Reported EBIT decreased by SEK -3.4 b. sequentially, due to seasonally lower sales.

Net sales rolling four quarters were SEK 167.1 b. and EBIT margin rolling four quarters excluding restructuring charges was 19.7%.

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

Net sales

Sales adjusted for comparable units and currency increased by 3% YoY, mainly driven by growth in packet core. Sales adjusted for currency grew in four of the five market areas. Sales growth adjusted for the IPR impact and currency was 7%. Reported sales decreased by -6% YoY.

Reported sales declined by -46% QoQ, due to seasonally lower sales, lower IPR licensing revenues and a negative currency impact.

Gross margin

Reported gross margin increased to 43.5% (39.9%) YoY supported by operational leverage. In addition, Q1 2020 was negatively impacted by SEK -0.2 b. from critical contracts, while such impact was limited in Q1 2021. Lower IPR licensing revenues impacted gross margin negatively.

Reported gross margin increased to 43.5% from 40.9% QoQ as a result of operational leverage and a favorable business mix.

EBIT (loss)

Reported EBIT was SEK -1.5 (-1.4) b. with an EBIT margin of                 -22.0% (-19.3%). Operating expenses increased by SEK -0.2 b. to SEK -4.5 b. mainly due to acceleration of R&D investments in the cloud native 5G portfolio.

Reported EBIT decreased by SEK -2.0 b. QoQ, due to seasonally lower sales.

Net sales rolling four quarters were SEK 36.9 b. and EBIT margin rolling four quarters excluding restructuring charges was -6.1%.

Net sales

Sales adjusted for comparable units and currency decreased by -8% YoY, mainly due to reduced variable sales in a large contract in North America, post the merger between two large operators. Sales in Managed Services IT showed growth mainly in market areas South East Asia, Oceania and India and in North America. Reported sales declined by -15% YoY.

Gross margin

Reported gross margin increased to 19.4% (16.3%) YoY. Gross margin excluding restructuring charges increased to 21.0% (20.6%) YoY, mainly due to efficiency gains and higher variable sales.

Reported gross margin increased to 19.4% from 17.7% QoQ. Gross margin excluding restructuring charges increased to 21.0% from 17.7% QoQ, mainly due to seasonally lower costs.

EBIT

Reported EBIT was SEK 0.3 (0.4) b. EBIT margin excluding restructuring charges declined to 8.1% from 11.4%, mainly due to costs related to an exit from a non-core field services business in Italy, and lower sales. Adjusted for exit costs, EBIT margin excluding restructuring charges was 9.2%.

Reported EBIT excluding restructuring charges was stable at SEK 0.4 b. QoQ.

Restructuring charges in the quarter amounted to SEK -0.1 b.

Net sales rolling four quarters were SEK 21.8 b. and EBIT margin rolling four quarters excluding restructuring charges was 7.2%.

Net sales

Sales in Emerging Business grew, driven mainly by the acquired Cradlepoint business. Sales adjusted for comparable units and currency increased by 9%. Reported sales increased by 11% YoY.

Gross margin

Reported gross margin increased to 36.6% (21.7%) YoY. Gross margin excluding restructuring charges increased to 36.8% (21.9%). The increase was driven by Media Solutions legacy business one-time impact and Cradlepoint.

Reported gross margin increased to 36.6% from 35.3% QoQ. Gross margin excluding restructuring charges increased to 36.8% from 33.8% QoQ. The improvement was mainly driven by a one-time impact in the Media Solutions legacy business.

EBIT (loss)

Reported EBIT (loss) was SEK -0.8 (-0.5) b. Operating expenses increased mainly due to amortization of intangibles and investments in expansion of the Cradlepoint business.

Net sales rolling four quarters were SEK 6.7 b. and EBIT margin rolling four quarters excluding restructuring charges was -35.5%.

Cash flow from operating activities

Reported cash flow from operating activities was SEK 3.2 (4.3) b. in the quarter. Cash flow from operating activities adjusted for IPR incoming payments improved YoY. Cash flow was supported by continued business momentum and increased profit, partly offset by an increase in net operating assets, which resulted in a negative cash flow impact of SEK -3.9 b. Key movements in net operating assets include a decrease in trade payables and an increase in inventory, with a negative cash flow impact of SEK -4.1 b. and SEK -1.2 b. respectively, as a result of the strategy to increase supply chain resilience within Networks. Trade receivables and contract assets decreased and had a combined positive cash flow impact of SEK 2.0 b. attributed to normal seasonality after strong Q4 sales. Contract liabilities, partly related to customer contracts, increased with a positive cash flow impact of SEK 4.5 b. Taxes paid/received was SEK 0.2 b. in the quarter primarily due to tax refund in India.

Free cash flow

Free cash flow before M&A was SEK 1.6 (2.3) b. in the quarter and SEK 21.5 b., or 9.3% in relation to sales, on a rolling 12 months basis. The decrease in the quarter was mainly driven by lower cash flow from operating activities with lower incoming IPR payments. Capex net and other investing activities was SEK -1.1 (-1.4) b. and primarily related to 5G in Networks.

Repayments of lease liabilities were SEK -0.5 (-0.6) b. and are mainly related to property leases. There were limited M&A activities in the quarter. Free cash flow after M&A was SEK 1.6 (2.1) b.

Cash flow from investing and financing activities

Reported cash flow from investing activities was SEK -0.9 (-5.0) b. The YoY change is mainly related to interest-bearing securities.

Reported cash flow from financing activities was SEK -6.2 (1.4) b. including repayments of lease liabilities and of a EUR -500 m. bond (SEK -5.1 b.) that matured in March 2021.

Financial position

Net cash improved QoQ to SEK 43.0 b. from SEK 41.9 b. due to the positive cash flow. Current borrowings decreased from SEK 7.9 b. to SEK 2.4 b., primarily due to repayment of a EUR -500 m (SEK -5.1 b.) bond. Gross cash declined from SEK 72.0 b. to SEK 68.6 b. QoQ. The average maturity of long-term borrowings was 3.0 years as of March 31, 2021, an increase from 2.4 years 12 months earlier.

Liabilities for post-employment benefits decreased in the quarter, to SEK 31.9 b. from SEK 37.4 b., mainly as a result of higher interest rates. The Swedish defined benefit obligation (DBO) was calculated using a discount rate based on the Swedish government bond yield-curve. If the discount rate had been based on Swedish covered mortgage bonds, the liability for post-employment benefits would have been approximately SEK 17.0 b. (SEK 14.9 b. lower than current DBO).

Return on capital employed (ROCE) was 13.3% (10.2%), as a result of improved profitability.

Parent Company

Income after financial items January—March 2021 was SEK 0.8 (1.0) b. At the end of the quarter, gross cash (cash, cash equivalents, short-term investments and interest-bearing securities, non-current) amounted to SEK 53.1 (65.1) b.

There was an increase in intercompany lending of SEK 1.0 b. and in intercompany borrowing of SEK 0.7 b. in the first quarter. In the quarter, a dividend of SEK 6.7 b. was recognized, after decision by the Annual General Meeting on the 30th of March.

The first of two equal dividend payouts was made in the first week of April. The second payout will be in October.

The holding of treasury stock on March 31, 2021 was 6,043,960 Class B shares.

Litigation with Samsung

Ericsson and Samsung were not able to renew the patent license agreement before expiry on December 31, 2020.

On December 11, 2020, Ericsson filed a lawsuit in the US District Court for the Eastern District of Texas, against Samsung, for violating contractual commitments to negotiate in good faith and to license patents on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions. In addition, Ericsson also sought to obtain a ruling by the court that it had complied with its own FRAND commitments. The lawsuit was later amended to include claims of patent infringement against Samsung.

On December 17, 2020, Samsung informed Ericsson that it had filed suit in Wuhan, China, on December 7, 2020, seeking rate setting for Ericsson’s 4G & 5G standard essential patents.

On January 1, 2021 Ericsson filed a patent infringement case in the US District Court for the Eastern District of Texas against Samsung.

On January 4, 2021, Ericsson filed a complaint at the US International Trade Commission (ITC) as well as in Düsseldorf, Mannheim, and Munich Regional Courts in Germany, the District Court of the Hague in The Netherlands, and the Enterprise Court of Brussels in Belgium asserting infringement of patents by Samsung.

On January 7, 2021, Samsung asserted patent infringement claims against Ericsson in a complaint at the US ITC as well as in counter claims in the US District Court for the Eastern District of Texas.

On January 15, 2021, Ericsson filed an additional US ITC Action and a case in the US District Court for the Eastern District of Texas against Samsung for patent infringement.

On February 4, 2021, Samsung filed additional complaints at the ITC and in the U.S. District Court for the Eastern District of Texas against Ericsson for patent infringement.

On February 15, 2021, Ericsson filed additional complaints asserting claims of patent infringement against Samsung in the Mannheim and Munich Regional Courts in Germany, the District Court of the Hague in The Netherlands, the Enterprise Court of Brussels in Belgium, and the Patents Court of the United Kingdom.

On February 19, 2021, Samsung asserted patent infringement claims against Ericsson in complaints filed in the Paris First Instance Court in France; Düsseldorf, Mannheim, and Munich Regional Courts in Germany; the District Court of the Hague in The Netherlands; and the Enterprise Court of Brussels in Belgium.

The legal and negotiation processes are continuing. In the context of the various court proceedings, the parties are involved in filing and contesting various pre-trial motions and related court awards, including as to venue. The filing of multiple lawsuits, complaints and other proceedings, when parties take legal action over a patent license agreement renewal, is standard and consequently additional lawsuits, complaints and other proceedings, may follow.

Resolutions at the Annual General Meeting of shareholders 2021 (AGM)

On March 30, 2021, Ericsson held its AGM. Due to the COVID-19 pandemic, the AGM was conducted without the physical presence of shareholders, representatives and third parties and the shareholders were able to exercise their voting rights only by post before the meeting.

The AGM resolved to adopt the profit and loss statements and the balance sheets. The proposed dividend of SEK 2.00 per share was approved by the AGM. The dividend was to be paid in two installments, SEK 1.00 per share with the record date Thursday, April 1, 2021, and SEK 1.00 per share with the record date Friday, October 1, 2021. The Board of Director’s remuneration report for 2020 was approved.

The AGM elected Board members and resolved on fees to the Board of Directors, in accordance with the proposal of the Nomination Committee. Ronnie Leten was re-elected as Chair of the Board and Jon Fredrik Baksaas, Jan Carlson, Nora Denzel, Börje Ekholm, Eric A. Elzvik, Kurt Jofs, Ronnie Leten, Kristin S. Rinne, Helena Stjernholm and Jacob Wallenberg were re-elected as Board members. It was also noted that the unions have appointed Torbjörn Nyman, Anders Ripa and Kjell-Åke Soting as employee representatives on the Board with Per Holmberg, Ulf Rosberg and Loredana Roslund as deputies.

The AGM elected Deloitte AB as auditor for the period up until the end of the AGM 2022.

The AGM resolved to amend the articles of association in accordance with the Board of Directors’ proposal in order to facilitate and increase the flexibility in conducting General Meetings of shareholders, including through introducing a possibility of postal voting.

In accordance with the Board of Directors’ proposals, the AGM resolved on implementation of a Long-Term Variable compensation program (LTV) 2021 for the members of the Executive Team (currently 15 individuals), comprising a maximum of 2.1 million Class B shares in Ericsson.

COVID-19 update

The circumstances continuously evolve with regard to the impact of the COVID-19 pandemic. As always, the well-being of Ericsson’s employees remains the priority and guides decision-making.

The company is optimistic that 2021 could be the start of the end of the pandemic. However, with an increasing infection rate in some of Ericsson’s markets, there is an increased risk for negative impact and disturbances in the Company’s operations, including in network deployments in those markets, impacting corresponding revenues.

It will take time before the full effects of vaccinations are known. Therefore, Ericsson has decided that working from home will continue for the majority of employees throughout 2021.

The company is continuously monitoring the situation and this decision will be impacted by access to vaccinations, testing and treatment. This means that:

Employees working from home are offered the possibility to buy office furniture for their home office environment, funded by the Company. In preparation for a gradual return to the office, our Workplace of the Future program planning continues to enable future flexibility to work remotely and to increase opportunities to connect and collaborate in the office when deemed safe to do so. Work-life aspects such as culture, ways of working, well-being, digital tools and impact for leaders are also included in the program scope.

The Company decided early on not to apply for any pandemic-related government financial support. We continue to operate efficiently and profitably and believe that tax-payers’ money is better used to target the health and economic effects of COVID-19. The proactive approach to business continuity management in full alignment with customers at the beginning of the pandemic continues to pay off. Quality in Ericsson’s operations and customers´ networks are maintained. The dual mode production strategy and regionalized supply chains make it possible to keep the supply chain operational.

POST-CLOSING EVENTS

Ericsson’s Nomination Committee appointed

On April 19, 2021, Ericsson’s Nomination Committee for the Annual General Meeting 2022 was appointed in accordance with the Instruction for the Nomination Committee resolved by the Annual General Meeting 2012.

The Nomination Committee consists of:

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 2020. Updates to these risk factors and uncertainties observed by Ericsson that are deemed of short-term relevance include, but are not limited to, the following:

Pandemics, such as for example the one caused by the novel Coronavirus, COVID-19, could severely impact our local and global operations

The COVID-19 pandemic has caused challenges and risks relating to travel and lockdowns limiting access to sites, transportation and logistics and impacting the flow of goods, as well as having major parts of the workforce working remotely. With an increasing infection rate in some of Ericsson’s markets, there is an increased risk for negative impact and disturbances in the Company’s operations, including in network deployments in those markets, impacting corresponding revenues. As previously mentioned, disturbances from the pandemic may have material adverse effects on our business and financial position.

Stockholm, April 21, 2021

Telefonaktiebolaget LM Ericsson (publ)

Börje Ekholm, President and CEO

Corporate Reg. No. 556016-0680

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

Date for next report: July 16, 2021

Media and analyst briefing

Ericsson invites media, investors and analysts to a conference call and live video webcast at 9:00 AM CEST on April 21, 2021.

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

www.ericsson.com/investors and

www.ericsson.com/newsroom

For further information, please contact:

Carl Mellander, Senior Vice President, Chief Financial Officer

Phone: +46 72 583 88 70

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

media.relations@ericsson.com

Stella Medlicott, Senior Vice President, Chief Marketing and Communications Officer Phone: +46 73 095 65 39

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

media.relations@ericsson.com

Telefonaktiebolaget LM Ericsson

Org. number: 556016-0680

Torshamnsgatan 21

SE-164 83 Stockholm

Phone: +46 10 719 00 00

www.ericsson.com

Investors

Peter Nyquist, Vice President,

Head of Investor Relations

Phone: +46 70 575 29 06

E-mail: peter.nyquist@ericsson.com

Lena Häggblom, Director,

Investor Relations

Phone: +46 72 593 27 78

E-mail: lena.haggblom@ericsson.com

Stefan Jelvin, Director,

Investor Relations

Phone: +46 70 986 02 27

E-mail: stefan.jelvin@ericsson.com

Media

Peter Olofsson, Head of Corporate Communication

Phone: +46 70 267 34 45

E-mail: media.relations@ericsson.com

Corporate Communications

Phone: +46 10 719 69 92

E-mail: media.relations@ericsson.com

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

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 2020.

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