Table of Contents

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN ISSUER

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

the Securities Exchange Act of 1934

April 21, 2021

Commission File Number 000-12033

 

 

LM ERICSSON TELEPHONE COMPANY

(Translation of registrant’s name into English)

 

 

Torshamnsgatan 21, Kista

SE-164 83, Stockholm, Sweden

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. Form 20-F  ☒ Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ☐

Announcement of LM Ericsson Telephone Company, April 21, 2021 regarding “First quarter report 2021”.

 

 

 


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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: April 21, 2021


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LOGO

First quarter report 2021

Stockholm, April 21, 2021

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 excluding restructuring charges and other items affecting comparability¹

          

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.

 

   
1    Ericsson | First Quarter Report 2021                        


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CEO comments

 

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

 

1 

Sales adjusted for comparable units and currency

 

2 

Excluding restructuring charges

 

 

   
2    Ericsson | First Quarter Report 2021    CEO Comments


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Financial highlights

Net sales development

 

SEK b.

   Q1
2021
     Q1
2020
     YoY
change
    YoY
adj.¹
    Q4
2020
     QoQ
change
 

Networks

     36.3        35.1        3     15     49.4        -27

Digital Services

     6.9        7.3        -6     3     12.7        -46

Managed Services

     4.9        5.7        -15     -8     5.8        -16

Emerging Business and Other

     1.7        1.6        11     9     1.7        0

Total

     49.8        49.8        0     10     69.6        -28

 

1 

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

 

Group reported sales were SEK 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%).

 

 

Income and margin development

 

SEK b.

   Q1
2021
    Q1
2020
    YoY
change
    Q4
2020
    QoQ
change
 

Net sales

     49.8       49.8       0     69.6       -28

Gross income

     21.3       19.8       8     28.3       -25

Gross margin

     42.8     39.8     —         40.6     —    

Research and development (R&D) expenses

     -9.6       -9.1       —         -10.4       —    

Selling and administrative expenses

     -6.2       -6.2       —         -7.4       —    

Impairment losses on trade receivables

     -0.2       -0.2       —         0.3       —    

Other operating income and expenses

     0.0       0.1       -85     0.4       -97

EBIT

     5.3       4.3       22     11.0       -52

of which Networks

     7.2       5.8       24     10.6       -32

of which Digital Services

     -1.5       -1.4       —         0.5       —    

of which Managed Services

     0.3       0.4       -23     0.4       -22

of which Emerging Business & Other

     -0.8       -0.5       -       -0.5       -  

EBIT margin

     10.6     8.7     —         15.8     —    

Financial income and expenses, net

     -0.5       -0.9       —         -0.1       —    

Income tax

     -1.6       -1.1       —         -3.7       —    

Net income

     3.2       2.3       39     7.2       -56

Restructuring charges

     -0.1       -0.3       —         0.0       —    

Measures excl. restructuring charges and other items affecting comparability¹

          

Gross margin excluding restructuring charges

     42.9     40.4     —         40.6     —    

EBIT margin excluding restructuring charges

     10.7     9.3     —         15.8     —    

EBITA excluding restructuring charges

     5.6       4.9       14     11.3       -50

EBITA margin excluding restructuring charges

     11.3     9.9     —         16.2    

 

1 

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

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.

 

 

   
3    Ericsson | First Quarter Report 2021    Financial highlights


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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.

 

 

   
4    Ericsson | First Quarter Report 2021    Financial highlights


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Planning assumptions

Market related

 

    The global RAN equipment market is estimated to grow by 3% in 2021, with Mainland China expected to grow by 4%, North America by 2% and Europe by 3%. Source: Dell’Oro Mobile RAN 5-year forecast report, Jan 2021.

Ericsson related

Net sales

 

    Three-year average reported sales seasonality between Q1 and Q2 is +13%, however, with large variations depending on timing of deployments and currency impact.

 

    See IPR comment in section “EBIT”.

Gross margin

 

    Gross margin will vary by quarter depending on business mix and seasonality; thus, a rolling four quarter gross margin gives a more relevant view of the margin development.

 

    Networks margins could be temporarily negatively impacted by a higher share of roll-out projects during the second quarter.

 

    See IPR comment in section “EBIT”.

R&D and SG&A expenses

 

    Operating expenses typically increase between Q1 and Q2 due to seasonality, however, with large variations.

EBIT

 

    IPR: The first quarter revenues reflect the portfolio of contracts, until expired contracts are renewed. Related litigation costs represent a minor share of the overall impact on EBIT. The actual financial impact going forward will depend on timing as well as terms and conditions of new agreements.

 

    Digital Services: 2021 will be an investment year and a similar earnings level in Q2 2021 as in Q1 2021 is expected.

Restructuring charges

 

    Restructuring charges are estimated to be approximately 1% of sales per year on average.

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 EBIT margin.

Cradlepoint

 

    Cradlepoint is fully consolidated into segment Emerging Business and Other.

 

    Group EBIT is expected to be negatively impacted by approximately -1 percentage point until the end of 2022.
 

 

   
5    Ericsson | First Quarter Report 2021    Planning assumptions


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Market area sales

 

SEK b.

   Q1
2021
     Q1
2020
     YoY
change
    YoY
adj.¹
    Q4
2020
     QoQ
change
 

South EastAsia, Oceania and India

     6.7        5.9        13     21     9.7        -32

North EastAsia

     6.5        3.9        66     78     12.8        -49

North America

     17.1        17.9        -5     10     19.1        -11

Europe and Latin America

     12.6        12.2        3     12     17.1        -26

Middle East and Africa

     4.4        5.8        -25     -16     6.5        -33

Other²

     2.5        3.9        -37     -       4.3        -42

Total

     49.8        49.8        0     10     69.6        -28

 

1

Sales growth adjusted for currency.

2

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

Sales

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

    Strong currency adjusted growth in four of the five market areas.
    Networks and Digital Services sales continued to grow in Europe driven by market share gains.
    IPR licensing revenues decreased by SEK -1.6 b.

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.

 

 

   
6    Ericsson | First Quarter Report 2021    Market area sales


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Segment results

Segment Networks

 

SEK b.

   Q1
2021
    Q1
2020
    YoY
change
    Q4
2020
 

Net sales

     36.3       35.1       3     49.4  

Of which IPR licensing revenues

     0.72.0       -67     2.1  

Sales growth adj. for comparable units and FX

     —         —         15     —    

Gross income

     16.7       15.6       7     21.4  

Gross margin

     46.1     44.4     —         43.4

EBIT

     7.2       5.8       24     10.6  

EBIT margin

     20.0     16.6     —         21.5

Restructuring charges

     0.0       -0.1       —         0.0  

Measures excl. restructuring charges

        

Gross margin excl. restructuring charges

     46.0     44.6     —         43.5

EBIT excl. restructuring charges

     7.2       5.9       22     10.6  

EBIT margin excl. restructuring charges

     19.9     16.8     —         21.5

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

 

    Sales adjusted for comparable units and currency grew 15% with double-digit growth in four of the five market areas.

 

    Increased market share with notable customer wins in North America and Europe.

 

    EBIT margin at 20%.

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%.

Segment Digital Services

 

SEK b.

   Q1
2021
    Q1
2020
    YoY
change
    Q4
2020
 

Net sales

     6.9       7.3       -6     12.7  

Of which IPR licensing revenues

     0.10.4       -67     0.5  

Sales growth adj. for comparable units and FX

     —         3     —    

Gross income

     3.0       2.9       2     5.2  

Gross margin

     43.5     39.9     —         40.9

EBIT (loss)

     -1.5       -1.4       —         0.5  

EBIT margin

     -22.0     -19.3     —         3.9

Restructuring charges

     0.0       0.0       —         0.0  

Measures excl. restructuring charges

        

Gross margin excl. restructuring charges

     43.6     40.1     —         41.0

EBIT excl. restructuring charges

     -1.5       -1.4       —         0.5  

EBIT margin excl. restructuring charges

     -21.9     -19.6     —         3.8

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

 

    Sales adjusted for comparable units and currency grew 3% driven by packet core.

 

    Currency adjusted growth in four of the five market areas.

 

    Good traction in the new portfolio.

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%.

 

 

   
7    Ericsson | First Quarter Report 2021    Segment results


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Segment Managed Services

 

SEK b.

   Q1
2021
    Q1
2020
    YoY
change
    Q4
2020
 

Net sales

     4.9       5.7       -15     5.8  

Sales growth adj. for comparable units and FX

     —         -8     —    

Gross income

     0.9       0.9       1     1.0  

Gross margin

     19.4     16.3     —         17.7

EBIT

     0.3       0.4       -23     0.4  

EBIT margin

     6.4     7.1     —         6.9

Restructuring charges

     -0.1       -0.2       —         0.0  

Measures excl. restructuring charges

        

Gross margin excl. restructuring charges

     21.0     20.6     —         17.7

EBIT excl. restructuring charges

     0.4       0.7       -40     0.4  

EBIT margin excl. restructuring charges

     8.1     11.4     —        
6.9

 

 

    Sales declined YoY mainly due to lower variable sales in North America.

 

    Further investments in automation, analytics and AI-driven offerings – supporting 5G and efficiency in service delivery.

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%.

Segment Emerging Business and Other

 

SEK b.

   Q1
2021
    Q1
2020
    YoY
change
    Q4
2020
 

Net sales

     1.7       1.6       11     1.7  

Sales growth adj. for comparable units and FX

     —         —         9     —    

Gross income

     0.6       0.3       87     0.6  

Gross margin

     36.6     21.7     —         35.3

EBIT (loss)

     -0.8       -0.5       —         -0.5  

EBIT margin

     -44.4     -32.7     —         -28.5

Restructuring charges

     0.0       0.0       —         0.0  

Measures excl. restructuring charges

        

Gross margin excl. restructuring charges

     36.8     21.9     —         33.8

EBIT (loss) excl. restructuring charges

     -0.8       -0.5       —         -0.5  

EBIT margin excl. restructuring charges

     -43.7     -32.7     —        
-29.3

 

 

    Continued sales and gross margin growth in Emerging Business, driven mainly by Cradlepoint.

 

    Cradlepoint business developing according to plan.

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%.

 

 

   
8    Ericsson | First Quarter Report 2021    Segment results


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Cash flow and financial position

 

Free cash flow bridge, SEK b.

   Q 1
2021
     Q 1
2020
     Q 4
2020
 

EBIT excl. restructuring charges

     5.3        4.6        11.0  
  

 

 

    

 

 

    

 

 

 

Depreciation, amortization and impairment losses

     1.9        2.1        2.3  
  

 

 

    

 

 

    

 

 

 

Restructuring charges

     -0.1        -0.3        0.0  
  

 

 

    

 

 

    

 

 

 

Changes in working capital1)

     -3.9        -0.2        1.3  
  

 

 

    

 

 

    

 

 

 

Interest paid/received, taxes paid, and other

     -0.1        -1.9        -0.7  
  

 

 

    

 

 

    

 

 

 

Cash flow from operating activities

     3.2        4.3        13.9  
  

 

 

    

 

 

    

 

 

 

Capex net and other investing activities

     -1.1        -1.4        -0.5  
  

 

 

    

 

 

    

 

 

 

Repayment of lease liabilities

     -0.5        -0.6        -0.6  
  

 

 

    

 

 

    

 

 

 

Free cash flow before M&A

     1.6        2.3        12.8  
  

 

 

    

 

 

    

 

 

 

M&A

     0.0        -0.2        -9.3  
  

 

 

    

 

 

    

 

 

 

Free cash flow after M&A

     1.6        2.1        3.5  
  

 

 

    

 

 

    

 

 

 

Cash flow from operating activities

     3.2        4.3        13.9  

Cash flow from investing activities

     -0.9        -5.0        -8.6  

Cash flow from financing activities

     -6.2        1.4        -8.5  

 

SEK b.

   Mar 31
2021
    Mar 31
2020
    Dec 31
2020
 

Gross cash

     68.6       79.5       72.0  
  

 

 

   

 

 

   

 

 

 

– Borrowings, current

     2.4       17.8       7.9  

– Borrowings, non-current

     23.3       23.4       22.2  
  

 

 

   

 

 

   

 

 

 

Net cash

     43.0       38.4       41.9  
  

 

 

   

 

 

   

 

 

 

Equity

     88.1       79.1       85.2  

Total assets

     270.3       292.3       271.5  

Capital turnover (times)

     1.3       1.2       1.4  

Return on capital employed (%)

     13.3     10.2     17.0

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

1

Defined as Changes in operating net assets

    Free cash flow before M&A was SEK 1.6 (2.3) b. mainly impacted by lower incoming IPR payments.

 

    Strongest Q1 Free cash flow before M&A, adjusted for IPR incoming payments since 2014.

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.

 

 

   
9    Ericsson | First Quarter Report 2021    Cash flow and financial position


Table of Contents

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.

 

 

   
10    Ericsson | First Quarter Report 2021    Parent Company


Table of Contents

Other information

 

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.

 

 

   
11    Ericsson | First Quarter Report 2021    Other information


Table of Contents

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:

 

    Travel restrictions for non-critical cross-border business travel will remain throughout 2021.

 

    Event restrictions are also extended accordingly for the same time period.

 

    The requirement to wear a face mask in all offices and locations remains until further notice.

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:

 

    Johan Forssell, Investor AB (Chair)

 

    Karl Åberg, AB Industrivärden

 

    Anders Oscarsson, AMF – Försäkring och Fonder

 

    Jonas Synnergren, Cevian Capital Partners Limited

 

    Ronnie Leten, the Chair of the Board of Directors.
 

 

   
12    Ericsson | First Quarter Report 2021    Other information


Table of Contents

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

 

 

   
13    Ericsson | First Quarter Report 2021    Risk factors


Table of Contents

Editor’s note

 

Media and analyst briefing

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

 

 

   
14    Ericsson | First Quarter Report 2021    Editor’s note


Table of Contents

Forward-looking statements

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

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

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

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

 

 

   
15    Ericsson | First Quarter Report 2021    Forward-looking statements


Table of Contents

Financial statements and other information

 

Contents

  

Financial statements (unaudited)

     17  

Condensed consolidated income statement

     17  

Condensed statement of comprehensive income (loss)

     17  

Condensed consolidated balance sheet

     18  

Condensed consolidated statement of cash flows

     19  

Condensed consolidated statement of changes in  equity

     20  

Condensed consolidated income statement –  isolated quarters

     20  

Condensed consolidated statement of cash flows  – isolated quarters

     21  

Condensed Parent Company income statement

     22  

Condensed Parent Company statement of  comprehensive income (loss)

     22  

Condensed Parent Company balance sheet

     23  

Accounting policies and Explanatory notes (unaudited)

     24  

Note 1 – Accounting policies

     24  

Note 2 – Critical accounting estimates  and judgements

     24  

Note 3 – Segment information

     25  

Note 4 – Provisions

     29  

Note 5 – Financial risk management

     30  

Note 6 – Cash flow

     31  

Note 7 – Contingent liabilities and  Assets pledged as collateral

     31  

Note 8 – Share information

     32  

Note 9 – Employee information

     32  

Alternative performance measures (unaudited)

     33  

Sales growth adjusted for comparable units  and currency

     33  

Items excluding restructuring charges

     34  

EBITA and EBITA margin / EBITA and  EBITA margin excluding restructuring

     34  

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

     35  

Gross cash and net cash, end of period

     36  

Capital employed

     36  

Capital turnover

     36  

Return on capital employed

     37  

Equity ratio

     37  

Return on equity

     37  

Adjusted earnings per share

     38  

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

     38  

Sales growth by segment adjusted for  comparable units and currency

     39  

Sales growth by market area adjusted for  comparable units and currency

     39  

Gross margin by segment by quarter

     40  

EBIT margin by segment by quarter

     40  

Restructuring charges by function

     41  

Restructuring charges by segment

     41  

Gross income and gross margin excluding  restructuring charges by segment

     42  

EBIT and EBIT margin excluding restructuring  charges by segment

     43  

Rolling four quarters of net sales by  segment

     43  

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

     43  

EBITA and EBITA margin by segment by  quarter

     44  

Other ratios

     44  

 

   
16    Ericsson | First Quarter Report 2021    Financial statements and other Information


Table of Contents

Financial statements (unaudited)

Condensed consolidated income statement

 

     Q1      Jan-M ar     Jan-Dec  

SEK m illion

   Note      2021      2020      Change     2020  

Net sales

     3        49,778        49,750        0     232,390  

Cost of sales

        -28,483        -29,962        -5     -138,666  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Gross income

     3        21,295        19,788        8     93,724  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Research and development expenses

        -9,576        -9,145        5     -39,714  

Selling and administrative expenses

        -6,188        -6,238        -1     -26,684  

Impairment losses on trade receivables

        -212        -160        33     118  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Operating expenses

        -15,976        -15,543        3     -66,280  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Other operating income and expenses

        13        89        -85     662  

Share in earnings of JV and associated companies

        -71        -28        154     -298  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Earnings before financial items and income tax (EBIT)

     3        5,261        4,306        22     27,808  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Financial income and expenses, net

        -533        -902        -41     -596  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Income after financial items

        4,728        3,404        39     27,212  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Income tax

        -1,560        -1,124        39     -9,589  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Net incom e

        3,168        2,280        39     17,623  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Net income (loss) attributable to:

             

Owners of the Parent Company

        3,187        2,156          17,483  

Non-controlling interests

        -19        124          140  

Other information

             

Average number of shares, basic (million)

     8        3,328        3,317          3,323  

Earnings per share, basic (SEK) ¹â¾

        0.96        0.65          5.26  

Earnings per share, diluted (SEK) ²â¾

        0.96        0.65          5.26  

 

1) 

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

2) 

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

Condensed statement of comprehensive income (loss)

 

     Q1      Jan-Dec  

SEK m illion

   2021      2020      2020  

Net income

     3,168        2,280        17,623  

Other comprehensive income (loss)

        

Items that will not be reclassified to profit or loss

        

Remeasurements of defined benefits pension plans incl.asset ceiling

     6,046        -4,683        -4,618  

Revaluation of borrowings due to change in creditrisk

     -55        1,725        99  

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

     -1,233        705        880  

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

        

Cash flow hedge reserve

        

Gains/ losses arising during the period

     -31        -241        136  

Reclassification adjustments on gains/ losses included in profit or loss

     -24        70        281  

Translation reserves

        

Changes in translation reserves

     1,721        2,211        -5,376  

Reclassification to profit and loss

     —          —          124  

Share of other comprehensive income (loss) of JV and associated companies

     35        88        -81  

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

     11        35        -86  
  

 

 

    

 

 

    

 

 

 

Total other comprehensive income, net of tax

     6,470        -90        -8,641  
  

 

 

    

 

 

    

 

 

 

Total comprehensive incom e

     9,638        2,190        8,982  
  

 

 

    

 

 

    

 

 

 

Total comprehensive income attributable to:

        

Owners of the Parent Company

     9,755        2,162        8,787  

Non-controlling interests

     -117        28        195  

 

   
17    Ericsson | First Quarter Report 2021    Financial statements


Table of Contents

Condensed consolidated balance sheet

 

     Mar31      Dec31  

SEK m illion

   Note      2021      2020  

Assets

        

Non-current assets

        

Intangible assets

        

Capitalized development expenses

        3,875        3,857  

Goodwill

        36,659        34,945  

Intellectual property rights, brands and other intangible assets

        4,623        4,805  

Property, plantand equipment

        13,735        13,383  

Right-of-use assets

        8,137        7,980  

Financial assets

        

Equity in JV and associated companies

        1,232        1,274  

Other investments in shares and participations

     51,541        1,519  

Customer finance, non-current

     5        840        1,221  

Interest-bearing securities, non-current

     5        23,477        21,613  

Other financial assets, non-current

     54,816        4,842  

Deferred tax assets

        25,079        26,296  
  

 

 

    

 

 

    

 

 

 
        124,014        121,735  
  

 

 

    

 

 

    

 

 

 

Current assets

        

Inventories

        30,250        28,097  

Contract assets

        11,853        11,273  

Trade receivables

     5        42,068        42,063  

Customer finance, current

     5        2,183        1,916  

Other current receivables

        14,809        16,014  

Interest-bearing securities, current

     5        4,599        6,820  

Cash and cash equivalents

     5        40,543        43,612  
        146,305        149,795  
  

 

 

    

 

 

    

 

 

 

Total assets

        270,319        271,530  
  

 

 

    

 

 

    

 

 

 

Equity and liabilities

        

Equity

        

Stockholders’ equity

        89,782        86,674  

Non-controlling interestin equity of subsidiaries

        -1,658        -1,497  
  

 

 

    

 

 

    

 

 

 
        88,124        85,177  
  

 

 

    

 

 

    

 

 

 

Non-current liabilities

        

Post-employment benefits

        31,876        37,353  

Provisions,non-current

     4        2,337        2,886  

Deferred tax liabilities

        1,049        1,089  

Borrowings, non-current

     5        23,299        22,218  

Lease liabilities,non-current

        7,313        7,104  

Other non-current liabilities

        1,326        1,383  
  

 

 

    

 

 

    

 

 

 
        67,200        72,033  
  

 

 

    

 

 

    

 

 

 

Current liabilities

        

Provisions, current

     4        8,708        7,580  

Borrowings, current

     5        2,353        7,942  

Lease liabilities, current

        2,223        2,196  

Contract liabilities

        32,054        26,440  

Trade payables

     5        29,135        31,988  

Other current liabilities

        40,522        38,174  
        114,995        114,320  
  

 

 

    

 

 

    

 

 

 

Total equity and liabilities

        270,319        271,530  
  

 

 

    

 

 

    

 

 

 

 

   
18    Ericsson | First Quarter Report 2021    Financial statements


Table of Contents

Condensed consolidated statement of cash flows

 

     Q1      Jan-Dec  

SEK m illion

   Note      2021      2020      2020  

Operating activities

           

Net income

        3,168        2,280        17,623  

Adjustments for

           

Taxes

        1,584        1,237        10,436  

Earnings/ dividends in JV and associated companies

        76        30        374  

Depreciation, amortization and impairment losses

     61,935        2,120        8,674  

Other

        143        792        447  
  

 

 

    

 

 

    

 

 

    

 

 

 
        6,906        6,459        37,554  
  

 

 

    

 

 

    

 

 

    

 

 

 

Changesin operating netassets

           

Inventories

        -1,235        -538        384  

Custom erfinance, currentand non-current

        219        817        370  

Trade receivables and contract assets

        1,979        5,559        -3,185  

Trade payables

        -4,112        -2,176        4,303  

Provisions and post-employment benefits

        523        218        -2,669  

Contract liabilities

        4,454        3,987        -560  

Other operating assets and liabilities,net

        -5,681        -8,109        -2,280  
  

 

 

    

 

 

    

 

 

    

 

 

 
        -3,853        -242        -3,637  
  

 

 

    

 

 

    

 

 

    

 

 

 

Interest received

        242        132        763  

Interest paid

        -292        -390        -1,434  

Taxes paid/received

        202        -1,657        -4,313  
  

 

 

    

 

 

    

 

 

    

 

 

 

Cash flow from operating activities

        3,205        4,302        28,933  
  

 

 

    

 

 

    

 

 

    

 

 

 

Investing activities

           

Investm entsin property,plantand equipm ent

     6        -915        -1,113        -4,493  

Sales of property, plantand equipm ent

        24        26        254  

Acquisitions/divestments of subsidiaries and other operations, net¹¾

        5        -208        -9,598  

Product developm ent

     6        -204        -262        -817  

Other investing activities

        -5        -42        801  

Interest-bearing securities

        161        -3,432        -1,348  
  

 

 

    

 

 

    

 

 

    

 

 

 

Cash flow from investing activities

        -934        -5,031        -15,201  
  

 

 

    

 

 

    

 

 

    

 

 

 

Financing activities

           

Proceeds from issuance of long-term debt

        77        344        3,219  

Repayment of long-term debt

        -5,242        -291        -9,031  

Dividends paid

        -5        -9        -5,996  

Repayment of lease liabilities

        -548        -596        -2,417  

Other financing activities

        -449        1,983        1,733  
  

 

 

    

 

 

    

 

 

    

 

 

 

Cash flow from financing activities

        -6,167        1,431        -12,492  
  

 

 

    

 

 

    

 

 

    

 

 

 

Effect of exchange rate changes on cash

        827        2,566        -2,707  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net change in cash and cash equivalents

        -3,069        3,268        -1,467  
  

 

 

    

 

 

    

 

 

    

 

 

 

Cash and cash equivalents, beginning of period

        43,612        45,079        45,079  
  

 

 

    

 

 

    

 

 

    

 

 

 

Cash and cash equivalents, end of period

        40,543        48,347        43,612  

 

1) 

Includes acquisition of Cradlepoint of SEK -9.5 b. in 2020.

 

   
19    Ericsson | First Quarter Report 2021    Condensed consolidated statement of cash flows


Table of Contents

Condensed consolidated statement of changes in equity

 

     Jan-M ar      Jan-Dec  

SEK million

     2021        2020        2020  

Opening balance

     85,177        81,878        81,878  

Total comprehensive incom e

     9,638        2,190        8,982  

Sale/repurchase of own shares

     —          43        163  

Long-term variable compensation plans

     21        54        150  

Dividends to shareholders¹¾

     -6,712        -5,053        -5,996  

Transactions ith non-controlling interests

     —          1        —    
  

 

 

    

 

 

    

 

 

 

Closing balance

     88,124        79,113        85,177  
  

 

 

    

 

 

    

 

 

 

 

1) 

Includes accrual of SEK 6,668 (4,978) million in Jan-Mar for the dividend approved by the Annual General Meeting on March 30, 2021 (March 31, 2020).

Condensed consolidated income statement – isolated quarters

 

     2021      2020  

Isolated quarters, SEK million

     Q1        Q4        Q3        Q2        Q1  

Net sales

     49,778        69,590        57,472        55,578        49,750  

Cost of sales

     -28,483        -41,333        -32,710        -34,661        -29,962  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Gross incom e

     21,295        28,257        24,762        20,917        19,788  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Research and development expenses

     -9,576        -10,433        -10,101        -10,035        -9,145  

Selling and administrative expenses

     -6,188        -7,402        -5,992        -7,052        -6,238  

Impairment losses on trade receivables

     -212        264        -28        42        -160  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Operating expenses

     -15,976        -17,571        -16,121        -17,045        -15,543  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Otheroperating income and expenses

     13        381        61        131        89  

Share in earnings of JV and associated companies

     -71        -59        -59        -152        -28  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Earnings before financial items and income tax (EBIT)

     5,261        11,008        8,643        3,851        4,306  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Financial income and expenses, net

     -533        -95        109        292        -902  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Income after financial items

     4,728        10,913        8,752        4,143        3,404  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Income tax

     -1,560        -3,721        -3,186        -1,558        -1,124  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net incom e

     3,168        7,192        5,566        2,585        2,280  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net income (loss) attributable to:

              

Owners of the Parent Company

     3,187        7,522        5,353        2,452        2,156  

Non-controlling interests

     -19        -330        213        133        124  

Otherinform ation

              

Average number of shares, basic (million)

     3,328        3,328        3,326        3,322        3,317  

Earnings per share, basic (SEK) ¹)

     0.96        2.26        1.61        0.74        0.65  

Earnings per share, diluted (SEK) ²)

     0.96        2.26        1.61        0.74        0.65  

 

1) 

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

2) 

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

 

   
20    Ericsson | First Quarter Report 2021    Financial statements


Table of Contents

Condensed consolidated statement of cash flows – isolated quarters

 

     2021      2020  

Isolated quarters,SEK m illion

   Q1      Q4      Q3      Q2      Q1  

Operating activities

              

Netincom e

     3,168        7,192        5,566        2,585        2,280  

Adjustm entsfor

              

Taxes

     1,584        3,846        3,482        1,871        1,237  

Earnings/ dividends in JV and associated companies

     76        115        74        155        30  

Depreciation, amortization and impairment losses

     1,935        2,293        2,105        2,156        2,120  

Other

     143        190        -320        -215        792  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     6,906        13,636        10,907        6,552        6,459  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Changesin operating netassets

              

Inventories

     -1,235        3,753        -1,578        -1,253        -538  

Custom erfinance,currentand non-current

     219        -119        -635        307        817  

Trade receivablesand contractassets

     1,979        -7,231        -1,513        0        5,559  

Trade payables

     -4,112        2,999        -624        4,104        -2,176  

Provisionsand post-em ploym entbenefits

     523        199        -1,897        -1,189        218  

Contractliabilities

     4,454        -2,046        -1,501        -1,000        3,987  

Otheroperating assetsand liabilities,net

     -5,681        3,768        3,228        -1,167        -8,109  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     -3,853        1,323        -4,520        -198        -242  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Interestreceived

     242        188        96        347        132  

Interestpaid

     -292        -344        -187        -513        -390  

Taxespaid/received

     202        -900        -1,017        -739        -1,657  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash flow from operating activities

     3,205        13,903        5,279        5,449        4,302  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Investing activities

              

Investm entsinproperty,plantand equipm ent

     -915        -1,090        -963        -1,327        -1,113  

Salesofproperty,plantand equipm ent

     24        104        55        69        26  

Acquisitions/divestm entsofsubs.and otheroperations,net¹â¾

     5        -9,256        -89        -45        -208  

Productdevelopm ent

     -204        -177        -167        -211        -262  

Otherinvesting activities

     -5        668        301        -126        -42  

Interest-bearing securities

     161        1,189        -246        1,141        -3,432  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash flow from investing activities

     -934        -8,562        -1,109        -499        -5,031  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Financing activities

              

Proceeds from issuance of long-term debt

     77        2,213        83        579        344  

Repaymentoflong-term debt

     -5,242        -8,036        -160        -544        -291  

Dividendspaid

     -5        -3,456        -42        -2,489        -9  

Repaym entoflease liabilities

     -548        -636        -567        -618        -596  

Otherfinancing activities

     -449        1,436        -200        -1,486        1,983  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash flow from financing activities

     -6,167        -8,479        -886        -4,558        1,431  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Effect of exchange rate changeson cash

     827        -2,024        -165        -3,084        2,566  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net change in cash and cash equivalents

     -3,069        -5,162        3,119        -2,692        3,268  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash and cash equivalents,beginning ofperiod

     43,612        48,774        45,655        48,347        45,079  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash and cash equivalents,end ofperiod

     40,543        43,612        48,774        45,655        48,347  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

1) 

Includes acquisition of Cradlepoint of SEK -9.5 b. in Q4 2020.

 

   
21    Ericsson | First Quarter Report 2021    Financial statements


Table of Contents

Condensed Parent Company income statement

 

     Q1      Jan-Dec  

SEK m illion

   2021      2020      2020  

Net sales

     —          —          —    

Cost of sales

     —          —          —    

Gross income

     —          —          —    

Operating expenses

     -173        -251        -1,378  

Other operating income and expenses

     614        580        2,866  
  

 

 

    

 

 

    

 

 

 

EBIT

     441        329        1,488  
  

 

 

    

 

 

    

 

 

 

Financial net

     352        693        6,845  
  

 

 

    

 

 

    

 

 

 

Income after financial item s

     793        1,022        8,333  
  

 

 

    

 

 

    

 

 

 

Transfers to (-)/from untaxed reserves

     —          —          -1,540  

Income tax

     -126        -174        -408  
  

 

 

    

 

 

    

 

 

 

Net incom e

     667        848        6,385  
  

 

 

    

 

 

    

 

 

 

Condensed Parent Company statement of comprehensive income (loss)

 

     Q1      Jan-Dec  

SEK m illion

   2021      2020      2020  

Netincom e

     667        848        6,385  

Revaluation of borrowings due to change in creditrisk

     -55        1,725        99  

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

     11        -355        -20  

Other comprehensive income, net of tax

     -44        1,370        79  
  

 

 

    

 

 

    

 

 

 

Total comprehensive income

     623        2,218        6,464  
  

 

 

    

 

 

    

 

 

 

 

   
22    Ericsson | First Quarter Report 2020    Financial statements


Table of Contents

Condensed Parent Company balance sheet

 

     Mar31      Dec31  

SEK m illion

   2021      2020  

Assets

     

Fixed assets

     

Intangibleassets

     19        26  

Tangibleassets

     461        460  

Financialassets¹â¾

     112,737        104,989  
  

 

 

    

 

 

 
     113,217        105,475  
  

 

 

    

 

 

 

Currentassets

     

Receivables

     24,611        30,230  

Short-term investm ents

     4,337        6,621  

Cash and cash equivalents

     25,262        28,775  
  

 

 

    

 

 

 
     54,210        65,626  
  

 

 

    

 

 

 

Totalassets

     167,427        171,101  
  

 

 

    

 

 

 

Stockholders’equity,provisionsand liabilities

     

Equity

     

Restricted equity

     48,164        48,164  

Non-restricted equity

     27,888        33,915  
     76,052        82,079  

Provisions

     336        343  

Non-currentliabilities

     23,135        22,111  

Currentliabilities

     67,904        66,568  
  

 

 

    

 

 

 

Totalstockholders’equity,provisionsand liabilities

     167,427        171,101  
  

 

 

    

 

 

 

Of which interest-bearing securities, non-current

     23,454        21,597  

 

   
23    Ericsson | First Quarter Report 2021    Financial statements


Table of Contents

Accounting policies and Explanatory notes (unaudited)

 

Note 1 – Accounting policies

The group

This condensed consolidated interim financial report for the quarterly reporting period ended March 31, 2021, has been prepared in accordance with Accounting Standard IAS 34 “Interim Financial Reporting”. The term “IFRS” used in this document refers to the application of IAS and IFRS as well as interpretations of these standards as issued by IASB’s Standards Interpretation Committee (SIC) and IFRS Interpretations Committee (IFRIC). The accounting policies adopted are consistent with those of the annual report for the year ended December 31, 2020 and should be read in conjunction with that annual report. There are no amendments of IFRS during 2021 that are estimated to have a material impact on the result and financial position of the Company.

Changes applied in Q1 2021

- Change in name from Operating income to EBIT

Operating income has been renamed as EBIT (Earnings before financial items and income tax) and Operating margin as EBIT margin. The definitions of EBIT and EBIT margin remains unchanged.

- Changes in presentation of cash flow statement

From Q1 2021, interests and tax cash flows are presented as a separate section within the “Cash flow from operating activities”. Previously, interests and tax cash flows were subsumed within various lines in the sections “Adjustments to reconcile net income to cash” and “Changes in operating net assets”, and only disclosed in note H3 “Statement of cash flow” of the Annual Report. All prior quarters in 2020 have been restated with this new section and other sections adjusted accordingly. There is no impact on Cash flows from operating activities for all periods in 2020.

From Q1 2021, the condensed consolidated statement of cash flow in the interim report is expanded to show “Proceeds from issuance of borrowings” and “Repayment of borrowings” separately. The Company also decided to present the net movements in collaterals received from CSA agreements and bank borrowings less than 3 months (used for short term liquidity purposes) as “Other financing activities” as these balances fluctuate over a short duration, therefore it is neither practical nor useful to present their gross movements on the cash flow statement.

The prior quarters in 2020 have been restated accordingly. This resulted in a reclassification between the lines “Proceeds from issuance of borrowings”, “Repayment of borrowings” and “Other financing activities” compared to the full year cash flow statement in the 2020 Annual Report. The Cash flow from financing activities remained unchanged for all periods in 2020.

Note 2 – Critical accounting estimates and judgements

COVID-19 impacts on the Financial statements

As noted in the previous interim reports in 2020, the COVID-19 pandemic has impacted certain lines within our financial statements. Fiscal stimulus provided by governments worldwide has reduced government bond yields and resulted in the significant movement in the capital and equity markets throughout 2020.

As the global economy continues to recover in Q1 2021, government bond yields and corporate bond yields increased to almost the pre-pandemic levels. The increase in government bond yields in Sweden, and corporate bond yields in US and UK resulted in a significant decrease in the net pensions liability.

The Company continually assesses the business performance and profitability for changes in expected future cash flows which could impact recoverability of assets such as deferred tax assets and intangible assets. Risk assessment on the business plans is carried out on a regular basis and an impairment review will be performed if conditions suggest that such assets may be impaired. The Company also monitors customer collections trends for changes in current and future conditions that may impact the expected credit losses model for trade receivables. At Q1 2021, the Company concluded there is no evidence of material changes to recoverability risk of business assets, including deferred tax assets and trade receivables.

 

 

   
24    Ericsson | First Quarter Report 2021    Accounting policies and Explanatory notes


Table of Contents

Note 3 – Segment information

Net sales by segment by quarter

 

     2021     2020  

Isolated quarters, SEK million

   Q1     Q4     Q3     Q2     Q1  

Networks

     36,274       49,366       41,659       39,827       35,126  

Of which Products

     27,495       37,523       30,992       28,966       24,748  

Of which Services

     8,779       11,843       10,667       10,861       10,378  

Digital Services

     6,898       12,671       8,733       8,575       7,345  

Of which Products

     3,581       7,430       4,621       4,598       3,798  

Of which Services

     3,317       5,241       4,112       3,977       3,547  

Managed Services

     4,865       5,815       5,498       5,573       5,714  

Emerging Business and Other

     1,741       1,738       1,582       1,603       1,565  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     49,778       69,590       57,472       55,578       49,750  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2021     2020  

Sequential change, percent

   Q1     Q4     Q3     Q2     Q1  

Networks

     -27     19     5     13     -21

Of which Products

     -27     21     7     17     -21

Of which Services

     -26     11     -2     5     -22

Digital Services

     -46     45     2     17     -44

Of which Products

     -52     61     1     21     -48

Of which Services

     -37     27     3     12     -39

Managed Services

     -16     6     -1     -2     -19

Emerging Business and Other

     0     10     -1     2     -10
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -28     21     3     12     -25
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2021     2020  

Year over year change, percent

   Q1     Q4     Q3     Q2     Q1  

Networks

     3     11     6     5     5

Of which Products

     11     20     13     8     4

Of which Services

     -15     -11     -9     -2     7

Digital Services

     -6     -4     -12     -5     -6

Of which Products

     -6     1     -17     0     -4

Of which Services

     -6     -10     -4     -9     -9

Managed Services

     -15     -17     -14     -12     -2

Emerging Business and Other

     11     0     -3     -4     -11
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     0     5     1     1     2
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2021     2020  

Year to date, SEK million

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

Networks

     36,274       165,978       116,612       74,953       35,126  

Of which Products

     27,495       122,229       84,706       53,714       24,748  

Of which Services

     8,779       43,749       31,906       21,239       10,378  

Digital Services

     6,898       37,324       24,653       15,920       7,345  

Of which Products

     3,581       20,447       13,017       8,396       3,798  

Of which Services

     3,317       16,877       11,636       7,524       3,547  

Managed Services

     4,865       22,600       16,785       11,287       5,714  

Emerging Business and Other

     1,741       6,488       4,750       3,168       1,565  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     49,778       232,390       162,800       105,328       49,750  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2021     2020  

Year over year change,, percent

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

Networks

     3     7     5     5     5

Of which Products

     11     12 %9%6%4%       

Of which Services

     -15     -5     -2     2     7

Digital Services

     -6     -6     -8     -5     -6

Of which Products

     -6     -5     -8     -2     -4

Of which Services

     -6     -8     -7     -9     -9

Managed Services

     -15     -12     -9     -7     -2

Emerging Business and Other

     11     -4     -6     -8     -11
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     0     2     1     2     2
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

   
25    Ericsson | First Quarter Report 2021    Alternative performance measures


Table of Contents

Gross income by segment by quarter

 

     2021      2020  

Isolated quarters, SEK million

   Q1      Q4      Q3      Q2      Q1  

Networks

     16,714        21,430        19,375        16,022        15,586  

Digital Services

     3,002        5,183        3,787        3,738        2,929  

Managed Services

     942        1,031        1,093        955        933  

Emerging Business and Other

     637        613        507        202        340  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     21,295        28,257        24,762        20,917        19,788  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     2021      2020  

Year to date, SEK million

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

Networks

     16,714        72,413        50,983        31,608        15,586  

Digital Services

     3,002        15,637        10,454        6,667        2,929  

Managed Services

     942        4,012        2,981        1,888        933  

Emerging Business and Other

     637        1,662        1,049        542        340  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     21,295        93,724        65,467        40,705        19,788  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

EBIT (loss) by segment by quarter

 

     2021      2020  

Isolated quarters, SEK million

   Q1      Q4      Q3      Q2      Q1  

Networks

     7,240        10,604        9,165        5,255        5,827  

Digital Services

     -1,519        499        -591        -697        -1,417  

Managed Services

     313        401        491        263        408  

Emerging Business and Other

     -773        -496        -422        -970        -512  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     5,261        11,008        8,643        3,851        4,306  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     2021      2020  

Year to date, SEK million

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

Networks

     7,240        30,851        20,247        11,082        5,827  

Digital Services

     -1,519        -2,206        -2,705        -2,114        -1,417  

M managed Services

     313        1,563        1,162        671        408  

Emerging Business and Other

     -773        -2,400        -1,904        -1,482        -512  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     5,261        27,808        16,800        8,157        4,306  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

   
26    Ericsson | First Quarter Report 2021                        Alternative performance measures


Table of Contents

Net sales by market area by quarter

 

     2021     2020  

Isolated quarters, SEK million

   Q1     Q4     Q3     Q2     Q1  

South East Asia, Oceania and India

     6,676       9,748       7,801       6,582       5,917  

North East Asia

     6,491       12,823       8,814       7,790       3,907  

North America

     17,081       19,101       18,356       18,407       17,911  

Europe and Latin America ¹)

     12,647       17,125       13,318       13,061       12,241  

Middle East and Africa

     4,393       6,518       5,520       5,431       5,829  

Other¹)2)

     2,490       4,275       3,663       4,307       3,945  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     49,778       69,590       57,472       55,578       49,750  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1) Of which in Sweden

     389       363       249       284       227  

2) Of which in EU

     6,801       8,874       7,090       7,278       6,259  
     2021     2020  

Sequential change, percent

   Q1     Q4     Q3     Q2     Q1  

South East Asia, Oceania and India

     -32     25     19     11     -36

North East Asia

     -49     45     13     99     -60

North America

     -11     4     0     3     3

Europe and Latin America ¹)

     -26     29     2     7     -30

Middle East and Africa

     -33     18     2     -7     -31

Other¹

     -42     17     -15     9     -5

Total

     -28     21     3     12     -25

1) Of which in Sweden

     7     46     -12     25     -3

2) Of which in EU

     -23     25     -3     16     -29
     2021     2020  

Year over year change, percent

   Q1     Q4     Q3     Q2     Q1  

South East Asia, Oceania and India

     13     6     5     -5     -4

North East Asia

     66     32     39     20     2

North America

     -5     10     -3     4     11

Europe and Latin America ¹

     3     -2     -7     -7     -7

Middle East and Africa

     -25     -23     -9     -4     8

Other¹

     -37     3     -8     10     -7
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     0     5     1     1     2
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1) Of which in Sweden

     71     54     1815     91     18

2) Of which in EU

     9     1     -4     5     -4
     2021     2020  

Year to date, SEK million

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

South East Asia, Oceania and India

     6,676       30,048       20,300       12,499       5,917  

North East Asia

     6,491       33,334       20,511       11,697       3,907  

North America

     17,081       73,775       54,674       36,318       17,911  

Europe and Latin America ¹

     12,647       55,745       38,620       25,302       12,241  

Middle East and Africa

     4,393       23,298       16,780       11,260       5,829  

Other¹

     2,490       16,190       11,915       8,252       3,945  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     49,778       232,390       162,800       105,328       49,750  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1) Of which in Sweden

     389       1,123       760       511       227  

2) Of which in EU

     6,801       29,501       20,627       13,537       6,259  
     2021     2020  

Yearto date,yearoveryearchange,percent

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

South EastAsia,Oceania and India

     13     1     -1     -5     -4

North EastAsia

     66     26     23     13     2

North Am erica

     -5     5     3     7     11

Europe and Latin Am erica ¹

     3     -6     -7     -7     -7

M iddleEastand Africa

     -25     -9     -2     2     8

Other¹

     -37     -1     -2     1     -7
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     0 %      2 %      1 %      2 %      2 % 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

¹) Of which in Sweden

     71     91     115     50     18

²) Of which in EU

     9     0     -1     1     -4 %  

 

   
27    Ericsson | First Quarter Report 2021                        Alternative performance measures


Table of Contents

Net sales by market area by segment

 

     Q1 2021  

SEK million

   Networks     Digital
Services
    Managed
Services
    Emerging
Business
and Other
    Total  

South East Asia, Oceania and India

     4,843       765       1,061       7       6,676  

North East Asia

     5,391       859       170       71       6,491  

North America

     14,954       1,478       636       13       17,081  

Europe and Latin America

     7,957       2,483       2,109       98       12,647  

Middle East and Africa

     2,348       1,152       889       4       4,393  

Other

     781       161       0       1,548       2,490  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     36,274       6,898       4,865       1,741       49,778  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Share of total

     73     14     10     3     100
     Q1 2021  

Sequential change, percent

   Networks     Digital
Services
    Managed
Services
    Emerging
Business
and Other
    Total  

South East and, Oceania and India

     -33     -45     -5     -13     -32

North East Asia

     -49     -56     -42     48     -49

North America

     -4     -46     -19     -41     -11

Europe and Latin America

     -22     -41     -20     -3     -26

Middle East and Africa

     -35     -40     -10     -33     -33

Other

     -65     -65     —         0     -42
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -27     -46     -16     0     -28
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Q1 2021  

Year over year change, percent

   Networks     Digital
Services
    Managed
Services
    Emerging
Business
and Other
    Total  

South East Asia, Oceania and India

     15     -1     15     -59     13

North East Asia

     94     0     -16     8     66

North America

     -2     -4     -43     8     -5

Europe and Latin America

     10     4     -18     14     3

Middle East and Africa

     -34     -14     -2     -43     -25

Other

     -63     -64     -100     12     -37
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     3     -6     -15     11     0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Top 5 countries in sales

 

     Q1     Jan-Dec  

Country, percentage of net sales

   2021     2020     2020  

United States

     36     38     33

Japan

     8     4     5

Australia

     4     3     4

India

     3     3     3

United Kingdom

     3     3     3

 

1) 

Based on Q1 2021.

 

   
28    Ericsson | First Quarter Report 2021                        Alternative performance measures


Table of Contents

IPR licensing revenues by segment by quarter

Note 4 – Provisions

Provisions

 

     2021      2020  

Isolated quarters, SEK million

   Q1      Q4      Q3      Q2      Q1  

Networks

     671        2,105        1,773        2,282        2,019  

Digital Services

     147        463        389        501        443  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     818        2,568        2,162        2,783        2,462  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     2021      2020  

Year to date, SEK million

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

Networks

     671        8,179        6,074        4,301        2,019  

Digital Services

     147        1,796        1,333        944        443  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     818        9,975        7,407        5,245        2,462  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Note 4 – Provisions

Provisions

 

     2021      2020  

Isolated quarters, SEK million

   Q1      Q4      Q3      Q2      Q1  

Opening balance

     10,466        10,922        10,603        11,060        10,923  

Additions

     1,753        1,245        1,093        2,116        793  

Utilization/Cash out

     -979        -761        -475        -2,066        -673  

Of which restructuring

     -336        -332        -160        -137        -186  

Reversal of excess amounts

     -339        -673        -172        -192        -124  

Reclassification, translation difference and other

     144        -267        -127        -315        141  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Closing balance

     11,045        10,466        10,922        10,603        11,060  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Of which restructuring

     950        1,200        1,659        1,594        1,202  
     2021      2020  

Year to date, SEK million

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

Opening balance

     10,466        10,923        10,923        10,923        10,923  

Additions

     1,753        5,247        4,002        2,909        793  

Utilization/Cash out

     -979        -3,975        -3,214        -2,739        -673  

of which restructuring

     -336        -815        -483        -323        -186  

Reversal of excess amounts

     -339        -1,161        -488        -316        -124  

Reclassification, translation difference and other

     144        -568        -301        -174        141  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Closing balance

     11,045        10,466        10,922        10,603        11,060  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Of which restructuring

     950        1,200        1,659        1,594        1,202  

 

   
29    Ericsson | First Quarter Report 2021                        Alternative performance measures


Table of Contents

Note 5 – Financial risk management

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

Financial instruments

 

SEK billion

   Mar31 2021      Dec 31 2020  
     Fair value hierarchy level      Fair value hierarchy level  
     Carrying
value
     Level 1      Level2      Level 3      Carrying
value
     Level 4      Level2      Level 3  

Assets at fair value through profit loss

                       

Customer finance ¹)

     3.0        —          —          3.0        3.1        —          —          3.1  

Interest bearing securities

     27.6        27.6        —          —          28.1        28.1        —          —    

Cash equivalents 2)

     18.2        —          18.2        —          23.6        —          23.6        —    

Other financial assets

     1.5        —          —          1.5        1.5        —          —          1.5  

Other current assets

     0.6        —          0.6        —          1.5        —          1.5        —    

Assets at fair value through OCI

     —          —          —          —          —          —          —          —    

Trade receivables

     42.1        —          —          42.1        42.1        —          —          42.1  

Assets at mortized costs

     —          —          —          —          —          —          —          —    

Interest bearing securities

     0.5        —          —          —          0.4        —          —          —    

Cash equivalents 2)

     2.4        —          —          —          3.6        —          —          —    

Other financial assets

     0.5        —          —          —          0.5        —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total financial assets

     96.4                 104.4           
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities at resignated FVTPL

                       

Parent company borrowings

     -23.2        -14.4        -8.8        —          -27.2        -18.9        -8.3        —    
     —          —          —          —          —          —          —          —    

Financial liabilities at FVTPL

     —          —          —          —          —          —          —          —    

Other current liabilities

     -0.5        —          -0.5        —          -0.2        —          -0.2        —    

Liabilities at mortized cost

     —          —          —          —          —          —          —          —    

Trade payables

     -29.1        —          —          —          -32.0        —          —          —    

Borrowings

     -2.5        —          —          —          -2.9        —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Financialliabilities

     -55.3                 -62.3           
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

1) 

Year to date movements of customer finance receivables are as follows: additions of SEK 5.9 billion, disposals and repayments of SEK 6.0 billion and revaluation gain of SEK 0 billion.

2) 

Total Cash and cash equivalent is SEK 40.5 (43.6) billion, of which SEK 20.6 (27.2) billion relating to Cash equivalents are presented in the table above.

Exchange rates used in the consolidation

 

     Q1      Jan-Dec  
     2021      2020      2020  

SEK/EUR -closing rate

     10.22        11.09        10.06  

SEK/USD -closing rate

     8.71        10.13        8.19  

 

   
30    Ericsson | First Quarter Report 2021                        Alternative performance measures


Table of Contents

Note 6 – Cash flow

Information on investments

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

 

     2021      2020  

Isolated quarters,SEKmillion

   Q1      Q4      Q3      Q2      Q1  

Additions

              

Property, plant and equipment

     915        1,090        963        1,327        1,113  

Capitalized development expenses

     204        177        167        211        262  

IPR, brands and other intangible assets

     4        124        —          97        1  

Total

     1,123        1,391        1,130        1,635        1,376  

Depreciation,amortization and im pairment losses

              

Property, plant and equipment

     874        1,186        916        1,003        1,009  

Capitalized development expenses

     224        230        230        272        174  

Goodwill, IPR, brands and other intangible assets

     283        276        365        258        321  

Right-of-use assets

     554        601        594        623        616  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     1,935        2,293        2,105        2,156        2,120  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     2021     

 

     2020     

 

    

 

 

Yearto date,SEKmillion

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

Additions

              

Property, plant and equipment

     915        4,493        3,403        2,440        1,113  

Capitalized development expenses

     204        817        640        473        262  

IPR, brands and other intangible assets

     4        222        98        98        1  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     1,123        5,532        4,141        3,011        1,376  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Depreciation, amortization and impairment losses

              

Property, plant and equipment

     874        4,114        2,928        2,012        1,009  

Capitalized development expenses

     224        906        676        446        174  

Goodwill, IPR, brands and other intangible assets

     283        1,220        944        579        321  

Right-of-use assets

     554        2,434        1,833        1,239        616  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     1,935        8,674        6,381        4,276        2,120  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Note 7 – Contingent liabilities and Assets pledged as collateral

Contingent liabilities and Assets pledged as collateral

 

     Mar31
2021
     Dec31
2020
 

SEKmillion

Contingent liabilities

     1,322        1,198  

Assets pledged as collateral

     6,801        6,808  

 

   
31    Ericsson | First Quarter Report 2021                        Alternative performance measures


Table of Contents

Note 8 – Share information

Number of shares and earnings per share

 

     Q1      Jan-Dec  
     2021      2020      2020  

Num berofshares,end ofperiod (m illion)

     3,334        3,334        3,334  

Of which class A-shares (million)

     262        262        262  

Of which class B-shares (million)

     3,072        3,072        3,072  

Num ber of treasury shares,end ofperiod (m illion)

     6        15        6  

Num ber of shares outstanding,basic,end of period ( million)

     3,328        3,319        3,328  

Num bersofsharesoutstanding,diluted,end ofperiod (million)

     3,328        3,329        3,331  

Average num beroftreasuryshares(m illion)

     6        17        11  

Average num berofsharesoutstanding,basic(million)

     3,328        3,317        3,323  

Average num berofsharesoutstanding,diluted (m illion)1)

     3,328        3,328        3,326  

Earningspershare,basic(SEK)²)

     0.96        0.65        5.26  

Earningspershare,diluted (SEK)1)

     0.96        0.65        5.26  

 

1) 

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

2) 

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

Note 9 – Employee information

Number of employees

 

     2021      2020  

End ofperiod

   M ar31      Dec31      Sep 30      Jun 30      M ar31  

South EastAsia,Oceania and India

     26,123        25,869        25,633        25,265        24,942  

North EastAsia

     14,033        13,944        13,955        13,965        13,786  

North Am erica

     10,161        10,175        9,537        9,785        9,718  

Europe and Latin Am erica1)

     46,482        46,580        46,495        46,521        46,402  

M iddleEastand Africa

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