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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 14, 2022

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 14, 2022 regarding “First quarter report 2022”.

 


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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/ STELLA MEDLICOTT

  Stella Medlicott
  Senior Vice President,
  Chief Marketing and Communications Officer
By:  

/s/ CARL MELLANDER

  Carl Mellander
  Senior Vice President, Chief Financial Officer

Date: April 14, 2022


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LOGO

First quarter report 2022

Stockholm, April 14, 2022

First quarter highlights

 

   

Group organic sales grew by 3% YoY driven by Networks in North America and in Europe and Latin America. Reported sales were SEK 55.1 (49.8) b.

 

   

Reported gross margin was 42.3% (42.8%) impacted by proactive investments in supply chain resilience in Networks. Rolling four quarter gross margin was 43.2%.

 

   

Due to the indefinite suspension of affected business in Russia, a provision for impairment of assets and other extraordinary costs of SEK -0.9 b. was booked in the quarter as other operating expenses in segment Networks. Around one third of this amount will impact cash flow.

 

   

EBIT amounted to SEK 5.9 b. with an EBIT margin of 10.7% when excluding the provision and a revaluation of Ericsson Ventures investments of SEK -0.3 b. Reported EBIT was SEK 4.7 (5.3) b.

 

   

EBITA amounted to SEK 6.1 b. with an EBITA margin of 11.0% when excluding the provision and the revaluation of Ericsson Ventures investments. Reported EBITA was SEK 4.9 (5.5) b.

 

   

Networks EBIT margin was 18.7% when excluding the provision related to Russia. In addition, EBIT was negatively impacted by timing of software sales in a large contract as well as by increased R&D. Reported EBIT margin was 16.6% (20.0%).

 

   

Organic sales in Emerging Business and Other grew by 15% YoY driven by Cradlepoint.

 

   

Reported net income was SEK 2.9 (3.2) b.

 

   

Free cash flow before M&A was SEK -1.7 (1.6) b. impacted primarily by proactive inventory build-up for supply chain resilience. Net cash on March 31, 2022, was SEK 65.2 b. compared with SEK 43.0 b. on March 31, 2021.

 

SEK b.

   Q1
2022
    Q1
2021
    YoY
change
    Q4
2021
    QoQ
change
 

Net sales

     55.1       49.8       11     71.3       -23

Sales growth adj. for comparable units and currency ¹

     —         —         3     —         —    

Gross margin ¹

     42.3     42.8     —         43.2     —    

EBIT

     4.7       5.3       -10     11.9       -60

EBIT margin ¹

     8.6     10.6     —         16.6     —    

Net income

     2.9       3.2       -8     10.1       -71

EPS diluted, SEK

     0.88       0.96       -8     3.02       -71

Measures excl. restructuring charges¹

                              

Gross margin excluding restructuring charges

     42.3     42.9     —         43.5     —    

EBIT excluding restructuring charges

     4.8       5.3       -10     12.3       -61

EBIT margin excluding restructuring charges

     8.7     10.7     —         17.3     —    

Free cash flow before M&A

     -1.7       1.6       —         13.5       —    

Net cash, end of period

     65.2       43.0       52     65.8       -1

 

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 2022  


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CEO comments

 

We continue to execute on our strategy to be a leading mobile infrastructure provider and to establish a focused enterprise business. We see strong business momentum and our investments in technology and a resilient supply chain have allowed us to continue to win market share and deliver on customer commitments in spite of global supply chain challenges. In the quarter, we saw organic sales1 growth of 3%. Gross margin at 42.3% (42.8%) indicates underlying stability while absorbing cost increases in the supply chain. Our EBITA margin was 11.0%, adjusted for revaluation of holdings and provision related to Russia.

Russia’s invasion of Ukraine and the resulting humanitarian disaster is a major setback for the world. While mobile infrastructure is essential for communications in Russia, it has been clear from the start of the invasion that business in Russia would have to be reconsidered. Following current sanctions, we have announced an indefinite suspension of our affected business in Russia and recorded a provision for impairment of assets and other extraordinary costs of SEK -0.9 b. in Q1. We will continue to monitor and respond to the situation day by day, with priority on the safety and well-being of our people.

In our core mobile infrastructure business, we foresee a longer investment cycle compared with previous mobile generations as 5G’s broad application usage will drive a continued need to increase capacity. Technology leadership is driving our competitiveness, and in the quarter, we invested SEK -10.7 (-9.6) b. in R&D.

Networks sales1 grew organically by 4% in Q1 reflecting our continually strengthened market position. Gross margin was 44.7% (46.1%). Software sales vary between quarters, and a certain SEK 1 b. annual software contract that is normally recorded in Q1, is this year delayed into Q2. Gross margin was also negatively impacted by proactive investments in supply chain resilience. Hard work throughout the organization enabled us to deliver on customer commitments despite global supply chain challenges. We also continue to increase our R&D investments to extend our leadership. R&D increased by SEK -1 b. YoY and was primarily related to our Cloud RAN portfolio, which gives customers more flexible deployment options, and to next generation ASICs that provide industry-leading radio performance, energy savings and footprint reduction. We foresee long-term attractive return on our investments similar to the last few years.

Digital Services organic sales1 were down by -2% YoY in the quarter and EBIT was SEK -1.4 b. We are building a strong platform for Digital Services and sales development in the cloud native 5G core portfolio is encouraging with double digit growth, albeit from a low base. However, the overall result in the quarter is not satisfactory. The target of a limited loss for 2022 is challenging especially in light of the increased investments in R&D in service orchestration and 5G portfolio. We now increase focus on accelerating sales growth and addressing efficiency to improve profitability.

To capture opportunities in the rapidly growing enterprise space, we are focusing on two specific areas. The first focus area is wireless networks for enterprise where we already offer easy-to-use pre-packaged solutions, with Cradlepoint showing strong growth in the first quarter as 5G coverage increases on the US C-band. We also see growing momentum for our 5G portfolio in Dedicated Networks. In addition, we are increasing investments in our enterprise go-to-market organization.

The other focus area is a Global Network Platform, which will be built on global unified interfaces, so called APIs. Developers and enterprises will be able to create new use cases and experiences, like high quality video or XR on top of the 5G network, which enable operators and the industry to monetize the network investment in new ways. Ericsson intends to play a major role in building the API platform. With our previously announced intention to acquire Vonage – more than 1 million developers, 120,000 enterprise customers and a proven scaled API infrastructure – we will have a strong position to deliver on this ambition.

Ericsson’s IPR licensing revenues in Q1 were affected by several expiring patent license agreements pending renewal and by 5G license negotiations. We are confident in our strong 5G position and leading patent portfolio, positioning us well to conclude pending and future license renewals. Revenues from current IPR licensing contracts are estimated to SEK 1.0–1.5 b. in Q2. The actual revenue impact will depend on timing as well as terms and conditions of new agreements.

We are currently engaging with the Department of Justice (DOJ) regarding the breach notices it issued relating to the Deferred Prosecution Agreement. The resolution of these matters could result in a range of actions by DOJ, and may likely include additional monetary payments, the magnitude of which cannot at this time be reliably estimated. As this process is ongoing, we remain limited in what we can say about the historical events covered in the Iraq investigation and our ongoing engagement on the matter. We are fully committed to co-operating with the DOJ and our work to further strengthen our Ethics and Compliance program, controls and our culture remains a top priority. It was actually our improved compliance program that allowed us to identify the misconduct in Iraq that started at least back in 2011.

In light of the global supply chain challenges, we decided to create a buffer of vital components in order to secure that we meet customer delivery commitments. In the quarter this had a material impact on inventory levels and therefore Free cash flow before M&A amounted to -1.7 (+1.6) b. We expect elevated inventory levels to remain in the next few quarters.

We are well positioned to continue our strategic journey. The mobile infrastructure business will remain our core and we will not spare any effort to strengthen our position here. Our ambition is to continue to grow and develop this business based on market growth and market share gains. In the growing enterprise space, we are seeing good traction for our established portfolio with Cradlepoint and Dedicated Networks. We continue to work towards closing the Vonage acquisition in the first half of 2022 and to start developing the Global Network Platform.

With our investments in both our core and enterprise businesses, as well as in our culture, we are determined to continue to make Ericsson a stronger, more resilient company while at the same time put it on a higher growth trajectory. Our key focus is to accelerate the pace towards reaching our long-term target of an EBITA margin of 15–18% and our ambition is to reach this target no later than in 2–3 years.

Börje Ekholm

President and CEO

 

1

Sales adjusted for comparable units and currency

 

 

 

 

2   Ericsson | First quarter report 2022   CEO comments


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Financial highlights

Net sales development

 

SEK b.

   Q1
2022
     Q1
2021
     YoY
change
    YoY
adj.¹
    Q4
2021
     QoQ
change
 

Networks

     40.7        36.3        12     4     51.1        -20

Digital Services

     7.2        6.9        5     -2     12.7        -43

Managed Services

     4.9        4.9        2     -5     5.4        -8

Emerging Business and Other

     2.2        1.7        26     15     2.1        2
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Total

     55.1        49.8        11     3     71.3        -23
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

 

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 55.1 (49.8) b. Sales adjusted for comparable units and currency increased by 3% YoY, with growth in North America and in Europe and Latin America.

IPR licensing revenues increased to SEK 1.4 (0.8) b. driven by renewal of patent license agreements expired in 2021, partly offset by agreements expired in 2022.

Networks sales adjusted for comparable units and currency increased by 4% YoY. Sales increased in North America as well as in Europe and Latin America. Networks accounted for 74% (73%) of total sales.

Digital Services sales adjusted for comparable units and currency decreased by -2% YoY. Sales grew in North America. Digital Services share of total sales was 13% (14%).

Managed Services sales adjusted for comparable units and currency decreased by -5% YoY, due to reduced variable sales and contract rescoping. Reported sales increased by 2% YoY. Managed Services share of total sales was 9% (10%).

Emerging Business and Other sales adjusted for comparable units and currency increased by 15%. Reported sales increased by 26% YoY, driven mainly by Cradlepoint. Emerging Business and Other share of total sales was 4% (3%).

 

 

Income and margin development

 

SEK b.

   Q1
2022
    Q1
2021
    YoY
change
    Q4
2021
    QoQ
change
 

Net sales

     55.1       49.8       11     71.3       -23

Gross income

     23.3       21.3       9     30.8       -24

Gross margin

     42.3     42.8     —         43.2     —    

Research and development (R&D) expenses

     -10.7       -9.6       —         -11.9       —    

Selling and administrative expenses

     -6.6       -6.2       —         -7.6       —    

Impairment losses on trade receivables

     -0.2       -0.2       —         0.1       —    

Other operating income and expenses

     -1.1       0.0       —         0.4       —    

Share in earnings of JV and associated companies

     0.0       -0.1       —         0.0       —    

EBIT

     4.7       5.3       -10     11.9       -60

of which Networks

     6.7       7.2       -7     11.8       -43

of which Digital Services

     -1.4       -1.5       —         0.3       —    

of which Managed Services

     0.6       0.3       89     0.4       68

of which Emerging Business & Other

     -1.2       -0.8       —         -0.6       —    

EBIT margin

     8.6     10.6     —         16.6     —    

Financial income and expenses, net

     -0.6       -0.5       —         -0.9       —    

Income tax

     -1.2       -1.6       —         -0.8       —    

Net income

     2.9       3.2       -8     10.1       -71

Restructuring charges

     0.0       -0.1       —         -0.5       —    

Measures excl. restr. Charges and other items affecting com parability ¹

                              

Gross margin excluding restructuring charges

     42.3     42.9     —         43.5     —    

EBIT margin excluding restructuring charges

     8.7     10.7     —         17.3     —    

EBITA excluding restructuring charges

     5.0       5.6       -11     12.8       -61

EBITA margin excluding restructuring charges

     9.1     11.3     —         17.9      

 

1 

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

 

 

3   Ericsson | First quarter report 2022   Financial highlights


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Gross margin

Reported gross margin was 42.3% (42.8%) negatively impacted mainly by proactive investments in supply chain resilience in Networks and higher initial deployment costs for the cloud native 5G Core portfolio. Gross margin in Managed Services and in Emerging Business and Other increased YoY.

Sequentially, reported gross margin decreased to 42.3% from 43.2% mainly due to investments in supply chain resilience and increased costs in Networks. Gross margin was negatively impacted by sequentially lower IPR licensing revenues.

Research and development (R&D) expenses

R&D expenses amounted to SEK -10.7 (-9.6) b. including a negative currency impact of SEK -0.5 b. R&D expenses increased primarily in Networks due to further investments in ASICs and Cloud RAN.

Selling and administrative (SG&A) expenses

SG&A expenses were SEK -6.6 (-6.2) b. including a negative currency impact of SEK -0.5 b.

Other operating income and expenses

Other operating income and expenses was SEK -1.1 (0.0) b. The quarter was negatively impacted by the provision of SEK -0.9 b. for impairment of assets and other extraordinary costs due to the suspension of affected business in Russia, as well as by a negative revaluation of SEK -0.3 b. related to Ericsson Ventures investments.

Restructuring charges

Restructuring charges amounted to SEK 0.0 (-0.1) b.

EBIT

Reported EBIT decreased to SEK 4.7 (5.3) b. impacted by the provision related to Russia and increased R&D investments. EBIT improved in Networks, when excluding the provision, as well as in Managed Services and Digital Services. EBIT was also impacted by revaluation of SEK -0.3 b. related to Ericsson Ventures investments in Emerging Business and Other. EBIT margin was 8.6% (10.6%).

Sequentially, reported EBIT decreased to SEK 4.7 b. from SEK 11.9 b. as a result of seasonally lower sales, the provision related to Russia and the revaluation of Ericsson Ventures investments.

Net sales rolling four quarters were SEK 237.6 b. and reported EBIT margin rolling four quarters was 13.2%.

EBITA

Reported EBITA declined to SEK 4.9 (5.5) b. corresponding to an EBITA margin of 9.0% (11.1%).

Reported EBITA margin rolling four quarters was 13.7%.

Financial income and expenses, net

Reported financial net was SEK -0.6 (-0.5) b. The strengthened USD to SEK resulted in a negative currency hedge effect of SEK -0.2 (-0.4) b.

Sequentially, financial net increased by SEK 0.3 b. to SEK -0.6 b. The currency hedge effect was SEK -0.2 b. in the quarter, versus SEK -0.3 b. in the fourth quarter 2021. The USD strengthened against the SEK between December 31, 2021 (SEK/USD rate 9.05) and March 31, 2022 (SEK/USD rate 9.32).

Income tax

Taxes were SEK -1.2 (-1.6) b. The effective tax rate in Q1 was 29% compared with 33% in Q1 2021, mainly due to market mix.

Net income

Net income declined to SEK 2.9 (3.2) b. and EPS diluted declined to SEK 0.88 (0.96) YoY, impacted by the provision related to Russia.

Employees

The number of employees on March 31, 2022, was 101,067 compared with 101,322 on December 31, 2021.

 

 

 

4   Ericsson | First quarter report 2022   Financial highlights


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Market area sales

 

SEK b.

   Q1
2022
     Q1
2021
     YoY
change
    YoY
adj.¹
    Q4
2021
     QoQ
change
 

South East Asia, Oceania and India

     5.8        6.7        -13     -17     8.6        -32

North East Asia

     5.4        6.5        -16     -20     9.8        -45

North America

     20.7        17.1        21     9     22.3        -7

Europe and Latin America

     15.3        12.6        21     15     19.2        -21

Middle East and Africa

     4.3        4.4        -2     -9     6.9        -38

Other ²

     3.5        2.5        40     —         4.5        -22
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Total

     55.1        49.8        11     3     71.3        -23
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

 

1 

Sales growth adjusted for comparable units and 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.

 

    Continued momentum in North America.

 

    Networks sales in Europe continued to grow as a result of market share gains.

 

    Sales increase in Mainland China due to timing of project milestones.

South East Asia, Oceania and India

Currency adjusted sales decreased by -17% YoY. Networks and Digital Services sales declined due to timing of orders and project milestones. Managed Services sales remained stable. Reported sales decreased by -13%.

North East Asia

Currency adjusted sales declined by -20% YoY. Sales declined in Networks and Digital Services as a result of project timing in Japan. The decline was partly offset by increased sales in Mainland China based on project milestones. Reported sales declined by -16%.

North America

Currency adjusted sales increased by 9% YoY driven by strong demand for 5G solutions across all segments. Reported sales increased by 21%.

Europe and Latin America

Currency adjusted growth was 15% YoY with 18% growth in Europe and 2% in Latin America. Sales in Networks continued to grow as a result of market share gains. Digital Services sales were stable while sales decreased in Managed Services due to rescoping and renegotiations of contracts. Reported sales increased by 21%. As a consequence of the Russian invasion of Ukraine and related sanctions, affected business in Russia has been indefinitely suspended. In 2021, Russia accounted for SEK 4.1 b. in sales.

Middle East and Africa

Currency adjusted sales decreased by -9% YoY. Sales declined in Networks due to timing of 5G investments in the Middle East, partly compensated by growth in African markets. Sales in Digital Services were stable with a drop in the Middle East compensated by strong Core upgrade sales in Africa. Managed Services sales declined, mainly due to contract rescoping. Reported sales decreased by -2%.

Other

IPR licensing revenues increased to SEK 1.4 (0.8) b. driven by renewal of patent license agreements expired in 2021 partly offset by agreements expired in 2022.

Sequentially, IPR licensing revenues decreased to SEK 1.4 b. from SEK 2.4 b.

 

 

 

5   Ericsson | First quarter report 2022   Market area sales


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Segment results

 

Segment Networks

 

SEK b.

   Q1
2022
    Q1
2021
    YoY
change
    Q4
2021
 

Net sales

     40.7       36.3       12     51.1  

Of which IPR licensing revenues

     1.1       0.7       70     1.9  

Sales growth adj. for comparable units and FX

     —           4     —    

Gross income

     18.2       16.7       9     23.6  

Gross margin

     44.7     46.1     —         46.3

EBIT

     6.7       7.2       -7     11.8  

EBIT margin

     16.6     20.0     —         23.0

Restructuring charges

     0.0       0.0       —         -0.3  

Measures excl. restructuring charges

        

Gross margin excl. restructuring charges

     44.8     46.0     —         46.4

EBIT excl. restructuring charges

     6.8       7.2       -6     12.0  

EBIT margin excl. restructuring charges

     16.6     19.9     —         23.6

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

 

    Gross margin was negatively impacted by timing of software sales in a large contract.

 

    Operational leverage, impacted by proactive measures across the supply chain, negatively affected gross margin.

 

    Provision related to Russia impacted EBIT margin by -2.1 percentage points.

Net sales

Sales adjusted for comparable units and currency increased by 4% YoY, driven by sales growth in North America and in Europe and Latin America, while sales in the other markets were negatively affected by timing of orders and project milestones. Reported sales increased by 12% YoY.

Sequentially, reported sales decreased by -20%, due to seasonally lower sales as well as lower IPR licensing revenues.

Gross margin

Reported gross margin decreased to 44.7% (46.1%). Operational leverage was negatively impacted by proactive investments in supply chain resilience. Gross margin was also negatively impacted by a lower share of software in the sales mix, while higher IPR licensing revenues had a positive impact on gross margin.

Reported gross margin declined QoQ as a consequence of the investments in supply chain resilience as well as increased costs. In addition, gross margin was negatively impacted by lower IPR licensing revenues as well as a lower share of software in the sales mix.

EBIT

Reported EBIT decreased to SEK 6.7 (7.2) b. with an EBIT margin of 16.6% (20.0%). The provision related to Russia of SEK -0.9 b. impacted EBIT by -2.1 percentage points. In addition, EBIT was impacted by increased investments in R&D primarily for ASICs and Cloud RAN.

Sequentially, reported EBIT decreased to SEK 6.7 b. from SEK 11.8 b. due to seasonally lower sales.

Net sales rolling four quarters were SEK 172.3 b. and reported EBIT margin rolling four quarters was 21.3%.

Segment Digital Services

 

SEK b.

   Q1
2022
    Q1
2021
    YoY
change
    Q4
2021
 

Net sales

     7.2       6.9       5     12.7  

Of which IPR licensing revenues

     0.3       0.1       70     0.4  

Sales growth adj. for comparable units and FX

     —         —         -2     —    

Gross income

     3.1       3.0       3     5.5  

Gross margin

     42.9     43.5     —         42.8

EBIT (loss)

     -1.4       -1.5       —         0.3  

EBIT margin

     -19.7     -22.0     —         2.4

Restructuring charges

     0.0       0.0       —         -0.1  

Measures excl. restructuring charges

        

Gross margin excl. restructuring charges

     42.9     43.6     —         43.4

EBIT (loss) excl. restructuring charges

     -1.4       -1.5       —         0.4  

EBIT margin excl. restructuring charges

     -19.2     -21.9     —         3.3

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

 

    Double-digit sales growth in BSS and cloud native 5G Core products.

 

    Continuous investment in cloud native 5G portfolio and service orchestration.

Net sales

Sales adjusted for comparable units and currency decreased by -2% YoY. Sales grew in constant currency in North America while sales declined in the other market areas due to timing of orders and project milestones. BSS and 5G Core sales showed double-digit growth. Reported sales increased by 5% YoY.

Sequentially, reported sales decreased by -43%, due to seasonally lower sales and lower IPR licensing revenues.

Gross margin

Reported gross margin decreased to 42.9% (43.5%) primarily due to initial deployment costs for the cloud native 5G Core portfolio. The impact was partly offset by higher IPR licensing revenues.

Reported gross margin was stable at 42.9% QoQ.

EBIT (loss)

Reported EBIT (loss) was SEK -1.4 (-1.5) b. with an EBIT margin of -19.7% (-22.0%). EBIT improved by SEK 0.1 b. driven by increased sales while operating expenses remained stable.

Sequentially, reported EBIT decreased to SEK -1.4 b. from SEK 0.3 b. due to seasonally lower sales.

Net sales rolling four quarters were SEK 36.5 b. and reported EBIT margin rolling four quarters was -9.6%.

 

 

 

6   Ericsson | First quarter report 2022   Segment results


Table of Contents

Segment Managed Services

 

SEK b.

   Q1
2022
    Q1
2021
    YoY
change
    Q4
2021
 

Net sales

     4.9       4.9       2     5.4  

Sales growth adj. for comparable units and FX

     —         —         -5     —    

Gross income

     1.1       0.9       22     1.0  

Gross margin

     23.2     19.4     —         18.2

EBIT

     0.6       0.3       89     0.4  

EBIT margin

     12.0     6.4     —         6.6

Restructuring charges

     0.0       -0.1       —         0.0  

Measures excl. restructuring charges

        

Gross margin excl. restructuring charges

     23.0     21.0     —         18.9

EBIT excl. restructuring charges

     0.6       0.4       49     0.4  

EBIT margin excl. restructuring charges

     11.8     8.1     —         7.4

 

    Network Optimization grew following 5G buildout.

 

    EBIT margin increased to 12%.

 

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

Net sales

Sales adjusted for comparable units and currency decreased by -5% YoY, due to reduced variable sales and contract rescoping. Sales in Network Optimization showed growth in 4 out of 5 market areas, with an increasing share of software in the sales mix. Reported sales increased by 2% YoY.

Gross margin

Reported gross margin increased to 23.2% (19.4%) due to reduced restructuring charges, higher Network Optimization sales and timing of costs.

Reported gross margin increased to 23.2% from 18.2% QoQ due to seasonally lower costs and lower restructuring charges.

EBIT

Reported EBIT increased to SEK 0.6 (0.3) b. with an EBIT margin of 12.0% (6.4%). The increase was driven by increased gross margin.

Q1 2021 was negatively impacted by costs related to an exit from a non-core field services business in Italy.

Reported EBIT increased to SEK 0.6 b. from SEK 0.4 b. QoQ mainly due to higher gross margin.

Net sales rolling four quarters were SEK 20.5 b. and reported EBIT margin rolling four quarters was 8.5%.

 

Segment Emerging Business and Other

 

SEK b.

   Q1
2022
    Q1
2021
    YoY
change
    Q4
2021
 

Net sales

     2.2       1.7       26     2.1  

Sales growth adj. for comparable units and FX

     —         —         15     —    

Gross income

     0.8       0.6       31     0.7  

Gross margin

     38.1     36.6     —         34.9

EBIT (loss)

     -1.2       -0.8       —         -0.6  

EBIT margin

     -53.8     -44.4     —         -25.8

Restructuring charges

     0.0       0.0       —         0.0  

Measures excl. restructuring charges

        

Gross margin excl. restructuring charges

     38.1     36.8     —         35.2

EBIT (loss) excl. restructuring charges

     -1.2       -0.8       —         -0.5  

EBIT margin excl. restructuring charges

     -53.5     -43.7     —         -24.5

 

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

 

    Negative EBIT impact of SEK -0.3 b. related to revaluation of Ericsson Ventures investments.

Net sales

Sales adjusted for comparable units and currency increased by 15% YoY. Reported sales increased by 26% YoY, driven mainly by Cradlepoint.

Gross margin

Reported gross margin increased to 38.1% (36.6%). The increase was driven primarily by Cradlepoint.

Reported gross margin increased to 38.1% from 34.9% QoQ, as a result of broad-based improvements across most units.

EBIT (loss)

Reported EBIT (loss) was SEK -1.2 (-0.8) b.

Reported EBIT was negatively impacted by SEK -0.3 b. from revaluation of Ericsson Ventures investments.

Reported EBIT (loss) decreased to SEK -1.2 b. from SEK -0.6 b. QoQ.

In Q4 2021, reported EBIT was positively impacted by SEK 0.4 b. related to a gain from divestment of a data center in the Netherlands and revaluation of Ericsson Ventures investments.

Net sales rolling four quarters were SEK 8.4 b. and reported EBIT margin rolling four quarters was -44.7%.

 

 

 

7   Ericsson | First quarter report 2022   Segment results


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Cash flow and financial position

 

Free cash flow bridge, SEK b.

   Q1
2022
     Q1
2021
     Q4
2021
 

EBIT excl. restructuring charges

     4.8        5.3        12.3  

Depreciation, amortization and impairment losses

     2.1        1.9        2.6  

Restructuring charges

     0.0        -0.1        -0.5  

Changes in working capital ¹)

     -5.5        -3.9        2.7  

Interest paid/received, taxes paid, and other

     -1.4        -0.1        -1.9  
  

 

 

    

 

 

    

 

 

 

Cash flow from operating activities

     0.0        3.2        15.2  

Capex net and other investing activities

     -1.1        -1.1        -1.1  

Repayment of lease liabilities

     -0.6        -0.5        -0.6  
  

 

 

    

 

 

    

 

 

 

Free cash flow before M&A

     -1.7        1.6        13.5  

M&A

     0.0        0.0        0.2  
  

 

 

    

 

 

    

 

 

 

Free cash flow after M&A

     -1.6        1.6        13.7  
  

 

 

    

 

 

    

 

 

 

Cash flow from operating activities

     0.0        3.2        15.2  

Cash flow from investing activities

     14.4        -0.9        -2.7  

Cash flow from financing activities

     7.8        -6.2        -4.9  

 

SEK b.

   Mar 31
2022
    Mar 31
2021
    Dec 31
2021
 

Gross cash

     104.2       68.6       97.6  

-Borrowings, current

     10.4       2.4       9.6  

-Borrowings, non-current

     28.6       23.3       22.2  
  

 

 

   

 

 

   

 

 

 

Net cash

     65.2       43.0       65.8  

Equity

     109.9       88.1       107.1  

Total assets

     323.9       270.3       305.6  

Capital turnover (times)

     1.2       1.3       1.3  

Return on capital employed (% )

     10.2     13.3     18.4

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 -1.7 (1.6) b. affected by investments in supply chain resilience.

 

    Net cash position increased to SEK 65.2 (43.0) b.

 

    The average maturity of long-term borrowings was 3.6 years.

Cash flow from operating activities

Reported cash flow from operating activities was SEK 0.0 (3.2) b. The strategy to improve supply chain resilience, and secure the ability to capture market demand, affected cash flow negatively. The decrease in cash flow was partly offset by continued high cash collection. Operating net assets increased in the quarter with a negative impact on cash flow of SEK -5.5 b. Key movements include a negative impact of SEK -5.3 b. related to an increase in inventory, to support the supply chain resilience within Networks. Cash flow was also negatively impacted by SEK -6.8 b. from a change in other operating assets and liabilities, net, which includes pay-outs of accrued employee-related expenses. These negative impacts were partly offset by a positive impact of SEK 6.3 b. as a result of an increase in contract liabilities related to customer contracts and IPR payments. Taxes paid were SEK -1.3 b.

Free cash flow

Free cash flow before M&A was SEK -1.7 (1.6) b. in the quarter. The decrease in the quarter was mainly driven by lower cash flow from operating activities, with build-up of operating net assets. Capex net and other investing activities were SEK -1.1 (-1.1) b. and include investments in 5G production capacity. Repayment of lease liabilities in the quarter was stable at SEK -0.6 b. and was mainly related to property leases.

Free cash flow before M&A rolling four quarters was SEK 28.8 b., or 12.1% in relation to sales.

There were limited M&A activities in the quarter and free cash flow after M&A was SEK -1.6 (1.6) b.

Cash flow from investing and financing activities

Reported cash flow from investing activities was SEK 14.4 (-0.9) b. due to disposal of non-current interest-bearing securities to cash and cash equivalents. Reported cash flow from financing activities including repayment of lease liabilities was SEK 7.8 (-6.2) b., mainly as a result of issuance of a EUR 750 m. (SEK 7.8 b.) bond. In Q1 2021, Ericsson repaid a EUR -500 m. (SEK -5.1 b.) bond.

Financial position

Gross cash increased by SEK 6.6 b. QoQ to SEK 104.2 b. as a result of the issuance of a EUR 750 m. (SEK 7.8 b.) bond. Net cash was stable at SEK 65.2 b. with a slight decrease of SEK -0.6 b. QoQ.

The funding strategy relies on diverse funding sources with bilateral loans and bonds. In the quarter, Ericsson issued a EUR 750 m. (SEK 7.8 b.) bond maturing in February 2027. The bond has a coupon of 1.125% and proceeds will be used for general corporate purposes. The average maturity of long-term borrowings was 3.6 years as of March 31, 2022, an increase from 3.0 years 12 months earlier.

Liabilities for post-employment benefits decreased to SEK 30.6 b. from SEK 36.1 b. in the quarter, due to higher discount rates partly offset by higher inflation rates. The Swedish defined benefit obligation (DBO) was calculated using a discount rate based on the yields of Swedish government bonds. If the discount rate had been based on Swedish covered mortgage bonds, the liability for post-employment benefits would have been approximately SEK 15.3 b. (SEK 15.3 b. lower than current DBO).

Return on capital employed (ROCE) was 10.2% (13.3%).

 

 

 

 

8   Ericsson | First quarter report 2022   Cash flow and financial position


Table of Contents

Key data points

 

Market related

 

    The global RAN equipment market is estimated to grow by 5% (3%) in 2022. North America is expected to grow by 8% (3%), Europe by 5% (4%) and Mainland China by 4% (0%).

Source: Dell’Oro Mobile RAN outlook report February 2022. Numbers in brackets from the Dell’Oro Mobile RAN outlook report January 2022.

Ericsson related

Group long-term financial targets

 

    EBITA margin, excluding restructuring: 15–18%.

 

    Free Cash flow (before M&A): 9–12% of sales.

Net sales

Reported average seasonality last 3 years (2019-2021), %

 

     Q4®Q1     Q1®Q2     Q2®Q3     Q3®Q4  

Ericsson Group

     -26     +11     +3     +21

Networks

     -22     +12     +3     +19

Digital Services

     -43     +15     +7     +42

Net sales may show large variations between quarters.

Sales to Russia amounted to SEK 4.1 b. in 2021.

Operating expenses excluding restructuring

Reported average seasonality last 3 years (2019-2021), SEK b.

 

     Q4®Q1      Q1®Q2      Q2®Q3      Q3®Q4  

Ericsson Group

     +3.2        -1.4        +1.3        -3.1  

Operating expenses may show large variations between quarters.

M&A

Work continues towards closing the Vonage acquisition during H1 2022.

Currency exposure

 

    Rule of thumb: A change by 10% of SEK to USD would have an impact of approximately +/-5% on net sales and approximately +/-1 percentage point on EBIT margin.
 

 

 

9   Ericsson | First quarter report 2022   Key data points


Table of Contents

Parent Company

Income after financial items January–March 2022 was SEK 0.1 (0.8) b.

At the end of the quarter, gross cash (cash, cash equivalents, short-term investments and interest-bearing securities, non-current) amounted to SEK 89.0 (53.1) b.

There was a decrease in intercompany lending of SEK 1.6 b. and in intercompany borrowing of SEK 0.7 b. in the quarter.

In the quarter, a dividend of SEK 8.3 b. was recognized, after decision by the Annual General Meeting on March 29. 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, 2022, was 4,009,306 Class B shares.

 

 

 

10   Ericsson | First quarter report 2022   Parent Company


Table of Contents

Other information

Legal proceedings

On October 4, 2021, Ericsson asked the U.S. District Court for the Eastern District of Texas for a declaration that Ericsson has, in its negotiations with Apple, complied with its FRAND commitment and all other applicable laws and policies that would affect the terms of Ericsson’s and Apple’s prospective license. On December 17, 2021, Apple filed a responsive case against Ericsson in the U.S. District Court for the Eastern District of Texas alleging, among other things, that Ericsson breached obligations associated with the licensing of its standard essential patents under FRAND terms. Ericsson and Apple were not able to renew the now expired patent license agreement between the parties in a timely manner. On January 18, 2022, Ericsson filed three complaints with the U.S. International Trade Commission (ITC) alleging infringement of 12 patents by certain Apple products. In addition, Ericsson filed companion lawsuits in the Western District of Texas alleging infringement of the same 12 patents. Also, in January 2022 Ericsson filed complaints in several jurisdictions in Europe (Germany, Netherlands, Belgium) and South America (Brazil, Colombia) alleging that certain Apple products infringe Ericsson patents. On January 19, 2022, Apple filed a complaint against Ericsson in the ITC alleging infringement of three Apple patents by certain Ericsson products. Apple also filed a complaint in Germany at the District Court of Düsseldorf alleging infringement of a German utility model and another complaint at the District court of Mannheim alleging infringement of an Apple patent by certain Ericsson products. In addition, Apple filed complaints in China at the Beijing Patent Court alleging infringement by Ericsson of one patent and one utility model.

On March 3, 2022, Ericsson learned that Telefonaktiebolaget LM Ericsson and certain officers of Ericsson were named as defendants in a putative class action filed in the United States District Court for the Eastern District of New York. The complaint alleges violations of United States securities laws, in connection with allegedly false and misleading statements principally concerning the Company’s adherence with its compliance and disclosure policies and obligations and the conduct of its business in Iraq.

PRESS RELEASES

March 02, 2022 | Update on Deferred Prosecution Agreement

On December 6, 2019, Ericsson entered into a Deferred Prosecution Agreement (DPA) with the United States Department of Justice (DOJ). On March 1, 2022, the DOJ informed Ericsson that the disclosure made by the company prior to the DPA about its internal investigation into conduct in Iraq in the period 2011 until 2019 was insufficient. Furthermore, it determined that the company breached the DPA by failing to make subsequent disclosure related to the investigation post-DPA. The company is in communication with the DOJ regarding the facts and circumstances of the breach determination and is committed to co-operating with the DOJ to resolve the matter.

At this stage it is premature to predict the outcome of this matter.

Comments about the Iraq investigation Based on our current review, we believe the situation described in the media reports on the conduct of Ericsson employees, vendors and suppliers in Iraq, going back to 2011 is covered by Ericsson’s 2019 internal investigation.

As previously disclosed in our press release on February 15, 2022, Ericsson invested significant time and resources to understand these matters. The investments we have made in our Ethics & Compliance program enabled us to identify and investigate the misconduct in Iraq. The 2019 investigation, which was supported by external legal

counsel, conducted over the course of a year, and involved the collection and review of a large amount of information, found serious breaches of compliance rules and the Code of Business Ethics.

The investigation could not identify that any Ericsson employee was directly involved in financing terrorist organizations. Based on our current assessment of the media reports, we do not believe they change this conclusion. We reiterate our commitment to investigate and take action to address any new information, including further investigation as appropriate.

As a result of the investigation, several employees were exited from the company and multiple other disciplinary and other remedial actions were taken. This included closing gaps in our internal processes in the region and incorporating lessons from the investigation into our ethics and compliance program. Furthermore, Ericsson terminated a number of third-party relationships and prioritized the Iraq country business for enhanced training and awareness activities, policies and procedures, and third-party management processes.

The Company has previously acknowledged publicly that it had failed to implement sufficient internal controls, including internal controls designed to deter and detect corruption. Over the last years, Ericsson has made significant investments in compliance which has enabled the company to uncover and address past misconduct. Since the beginning of 2017 when we started the turnaround of our company, we have invested extensively in enhanced compliance systems and processes. We work hard to build a better Ericsson focused on safeguarding a strong ethical and compliant culture throughout the entire company. We continue to invest significant resources to improve our ethics and compliance program and our speak-up culture to help prevent future misconduct.

Ericsson is under a compliance monitorship and the deferred prosecution agreement with the US Department of Justice remains in effect.

https://www.ericsson.com/en/press-releases/2022/3/update-on-

deferred-prosecution-agreement

March 16, 2022 | Ericsson appoints Scott Dresser as Chief Legal Officer

Ericsson (NASDAQ: ERIC) today announced the appointment of Scott Dresser to the company’s Executive Team as Senior Vice President, Chief Legal Officer and Head of Group Function Legal Affairs & Compliance. Scott will join Ericsson on 21 March 2022 and be based in the US. Scott replaces Xavier Dedullen.

Ericsson President and CEO, Börje Ekholm said: “I warmly welcome Scott to Ericsson. He brings a wealth of global experience spanning our sector and beyond. Scott joins us at a critical time and will play a key role working with me, our Board and the rest of our team as we continue to grow and strengthen the company. We demand that our business be conducted responsibly and with integrity across its value chain. Scott’s experience driving positive change will be invaluable as Ericsson expands its business and continues its cultural transformation, enhancing its governance, compliance, and controls.”

Commenting on his appointment, Scott Dresser said: “Ericsson is a global leader that plays an essential role in advancing the future of communications. I am excited to be joining and look forward to working with Börje and the entire organization to execute the strategy

 

 

 

11   Ericsson | First quarter report 2022   Other information


Table of Contents

while focusing on operating with the highest standards of corporate governance and compliance.”

With a legal career spanning more than three decades, Dresser joins Ericsson from Veon, where he has served for eight years as the company’s General Counsel. Prior to Veon, Scott held senior leadership positions with Virgin Media, White Mountains Capital and Conservation International. He began his career in New York in private practice with law firms Lord Day & Lord and Morgan Lewis where he specialized in corporate law, governance, and mergers and acquisitions. Scott is a US citizen.

Appointed Chief Legal Officer and Secretary to the Board of Directors in April 2018, Xavier Dedullen has played an important role during the turn-around of the company’s business and helped to establish firmer foundations for the legal, compliance, and corporate investigation functions. He will leave the role effective 20 March, 2022 but remain with Ericsson for a transition period.

Börje Ekholm continued: “I want to thank Xavier sincerely for his commitment and support over the past four years. During his tenure, we have taken important strides in several strategic areas including our compliance program. Xavier leaves with our gratitude and I wish him well in all future endeavors.”

https://www.ericsson.com/en/press-releases/2022/3/ericsson-

appoints-scott-dresser-as-chief-legal-officer

March 29, 2022 | Ericsson’s Annual General Meeting 2022

Telefonaktiebolaget LM Ericsson’s (NASDAQ:ERIC) Annual General Meeting (AGM) was held on March 29, 2022. Due to COVID-19, the AGM 2022 was conducted without the physical presence of shareholders, representatives and third parties and the meeting was conducted as a digital meeting with online participation. Shareholders were also able to exercise their voting rights by post before the meeting.

Adoption of the Profit and Loss Statements and the Balance Sheets The AGM resolved to adopt the Profit and Loss Statement and the Balance Sheet for the Parent Company as well as the Consolidated Profit and Loss Statement and the Consolidated Balance Sheet for the Group for 2021.

Dividend

The proposed dividend of SEK 2.50 per share was approved by the AGM. The dividend will be paid in two equal installments; SEK 1.25 per share with the record date Thursday, March 31, 2022, and SEK 1.25 per share with the record date Friday, September 30, 2022. Euroclear Sweden AB is expected to disburse SEK 1.25 per share on Tuesday, April 5, 2022, and SEK 1.25 per share on Wednesday, October 5, 2022.

Remuneration report

The AGM resolved to adopt the Board of Directors’ remuneration report for 2021.

Discharge from liability

It was recorded that shareholders representing at least one tenth of all of the shares in the Company voted against discharge from liability of the Board of Directors and the President for the financial year 2021.

Board of Directors

The AGM elected Board members 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. Carolina Dybeck Happe was elected new Board member. It was also noted that the unions have appointed Torbjörn Nyman, Anders Ripa

and Kjell-Åke Soting employee representatives in the Board with Ulf Rosberg, Loredana Roslund and Annika Salomonsson as deputies.

Board of Directors’ Fees

The AGM resolved on fees to the Board of Directors, in accordance with the Nomination Committee’s proposal. Yearly fee to the Chair of the Board of SEK 4,375,000, and fees to other non-employee members of the Board, elected by the AGM, of SEK 1,100,000 each. Fees for Committee work to non-employee members of the Committees, elected by the AGM, were approved as follows: SEK 475,000 to the Chair of the Audit and Compliance Committee and SEK 275,000 to each of the other members of the Audit and Compliance Committee, SEK 205,000 to each of the Chairs of the Finance Committee, the Remuneration Committee and the Technology and Science Committee, and SEK 180,000 to each of the other members of the Finance Committee, the Remuneration Committee and the Technology and Science Committee.

The AGM approved the Nomination Committee’s proposal to enable payment of part of the fees to the members of the Board for the Board assignment, in the form of synthetic shares.

Auditor

The AGM elected Deloitte AB as auditor for the period up until the end of the AGM 2023.

Long-Term Variable Compensation Program (LTV)

Long-Term Variable compensation program 2022 (LTV 2022)

In accordance with the Board of Directors’ proposals, the AGM resolved on implementation of LTV 2022 for the members of the Executive Team (currently 15 individuals), comprising a maximum of 2 million B-shares in Ericsson. “Performance Share Awards” will be granted free of charge entitling the participant to receive a number of shares, free of charge, following the expiration of a three-year vesting period, provided that certain performance conditions are met and that the participant retains his or her employment. The performance conditions are based on TSR (total shareholder return) development during a three-year period (absolute TSR-development and relative TSR-development), fulfilment of a Group Environmental Social and Governance (ESG) performance criterion comprised of two equally weighted subcomponents covering environmental and social aspects of ESG measured during a three-year period and the 2022 Group EBIT (operating income) performance criterion. All targets have a three-year vesting period. The Company has approximately 3.3 billion shares in issue. The 2 million B-shares covered by LTV 2022 correspond to approximately 0.06 percent of the total number of outstanding shares.

Furthermore, the AGM resolved to approve the Board of Directors’ proposal to hedge the company’s undertakings under LTV 2022 through an equity swap agreement with a third party.

The Board of Directors’ proposals on transfer of treasury stock, directed share issue and acquisition offer under agenda item 16.2 and item 17 were withdrawn.

Transfer of treasury stock for previously resolved LTV programs

The AGM resolved to approve the Board of Directors’ proposal on transfer of not more than 1.4 million B-shares on Nasdaq Stockholm prior to the AGM 2023 to cover certain expenses, mainly social security charges, which may occur in relation to previously resolved and ongoing LTV programs; LTV 2019 and LTV 2020.

The AGM further resolved that the Company shall have the right to, in conjunction with the delivery of vested shares under LTV 2019 and LTV 2020, prior to the AGM in 2023, retain and sell no more than 60% of the vested B-shares on Nasdaq Stockholm in order to cover for the costs for withholding and paying tax and social security liabilities on

 

 

 

12   Ericsson | First quarter report 2022   Other information


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behalf of the participants in relation to the Performance Share Awards. Transfer of these shares shall be made at a price within the, at each time, prevailing price interval for the share.

Shares and votes

There are in total 3,334,151,735 shares in the Company; 261,755,983 shares of series A and 3,072,395,752 shares of series B, corresponding to in total 568,995,558.2 votes. The Company’s holding of treasury stock as of March 29, 2022, amounts to 4,009,306 shares of series B, corresponding to 400,930.6 votes.

https://www.ericsson.com/en/press-releases/2022/3/ericssons-

annual-general-meeting-2022

POST-CLOSING EVENTS

April 07, 2022 | Ericsson announces change to the Executive Team

Ericsson (NASDAQ: ERIC) today announces that Peter Laurin has decided to leave Ericsson to pursue opportunities outside the company. Peter Laurin has been with the company since 2001 and will leave his position as Senior Vice President and Head of Business Area Managed Services on August 15, 2022. He has served on Ericsson’s Executive Team since 2017.

Börje Ekholm, President and CEO, says: “Peter has been instrumental in turning around and transforming our Managed Services business and successfully led Ericsson’s digitalization and IT journey. He is a valued member of the Ericsson leadership team and I wish Peter all the very best in this new role as CEO of Piab.”

Peter’s successor as Head of Business Area Managed Services will be announced later.

Piab (www.piab.com) is a leading company in automation of production processes around the globe.

https://www.ericsson.com/en/press-releases/2022/4/ericsson-

announces-change-to-the-executive-team

April 11, 2022 | Ericsson suspends business in Russia indefinitely and records provision in Q1 2022

In late February, Ericsson (NASDAQ: ERIC) suspended all deliveries to customers in Russia. In the light of recent events and of European Union sanctions, the company will now suspend its affected business with customers in Russia indefinitely. Ericsson is engaging with customers and partners regarding the indefinite suspension of the affected business. The priority is to focus on the safety and well-being of Ericsson employees in Russia and they will be placed on paid leave.

As a consequence, Ericsson records a SEK 0.9 b. provision in first quarter 2022 for impairment of assets and other exceptional costs. No staff redundancy cost is included. The provision will be recorded in Other Operating Expenses in Segment Networks. Around one third of this amount will impact cashflow.

https://www.ericsson.com/en/press-releases/2022/4/ericsson-

suspends-business-in-russia-indefinitely-and-records-provision-in-q1-2022

 

 

 

13   Ericsson | First quarter report 2022   Other information


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Risk factors

 

Ericsson is exposed to a number of risks in its activities. To stimulate identification and support cross-functional treatment within the Ericsson Group, risks are grouped in a number of categories, including for example risks relating to technology, IPR, compliance, project execution, operations, products and services, treasury and accounting, the geopolitical environment, M&A, cyber security and occupational health and safety.

Ericsson’s risk management is embedded into strategy development and operational processes and 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 2021 and in the Annual Report on Form 20-F 2021 (in the following the “Annual Report 2021”). Updates to these risk factors and uncertainties observed by Ericsson that are deemed of short-term relevance include, but are not limited to, the following risks described below:

Deferred Prosecution Agreement with the United States Department of Justice

On December 6, 2019, Ericsson entered into a Deferred Prosecution Agreement (DPA) with the United States Department of Justice (DOJ). In October 2021, Ericsson received correspondence from the DOJ stating its determination that the Company had breached its obligations under its DPA by failing to provide certain documents and factual information. On March 1, 2022, the DOJ informed Ericsson that the disclosure made by the Company prior to the DPA about its internal investigation into conduct in Iraq in the period 2011 until 2019 was insufficient. Furthermore, it determined that the Company breached the DPA by failing to make subsequent disclosure related to the investigation post-DPA. As mentioned in the Annual Report 2021, the Company is in communication with the DOJ regarding the facts and circumstances of the breach determinations and is committed to co-operating with the DOJ to resolve the matters. While the length of the process cannot be determined, the resolution of these matters could result in a range of actions by DOJ, and may likely include additional monetary payments, the magnitude of which cannot at this time be reliably estimated. Accordingly, no provisions have been recorded for such potential exposure.

Business in Russia

As mentioned in the Annual Report 2021, including in the risk factor 1.1 and 3.2, conducting business throughout the world makes Ericsson subject to the effects of general global economic conditions as well as conditions unique to specific countries or regions. In addition to the risk factors described in the Annual Report 2021 and the provision recorded by the Company in Q1 2022, the large uncertainties relating to the Russian market, including the applicable and changed sanctions landscape, lead to large uncertainties relating to other potential costs and consequences that may follow. All of the above could have a material adverse effect on the Company, including its reputation, business, financial condition, results of operations (EBIT), cash flows, or prospects.

Stockholm, April 14, 2022

Telefonaktiebolaget LM Ericsson

Börje Ekholm, President and CEO

Org. No. 556016-0680

This report has not been reviewed by Telefonaktiebolaget LM Ericsson auditors

Date for next report: July 14, 2022

 

 

 

14   Ericsson | First quarter report 2022   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 14, 2022.

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

Kristoffer Edshage, Director of Corporate Media

Phone: +46 72 220 44 46

E-mail: media.relations@ericsson.com

Corporate Communications

Phone: +46 10 719 69 92

E-mail: media.relations@ericsson.com

 

 

 

15   Ericsson | First quarter report 2022   Editor’s note


Table of Contents

Forward-looking statements

 

This 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 2021.

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.

 

 

 

16   Ericsson | First quarter report 2022   Forward-looking statements


Table of Contents

Financial statements and other information

 

 

Contents

  

Financial statements (unaudited)

     18  

Condensed consolidated income statement

     18  

Condensed statement of comprehensive income (loss)

     18  

Condensed consolidated balance sheet

     19  

Condensed consolidated statement of cash flows

     20  

Condensed consolidated statement of changes in equity

     21  

Condensed consolidated income statement – isolated quarters

     21  

Condensed consolidated statement of cash flows – isolated quarters

     22  

Condensed Parent Company income statement

     23  

Condensed Parent Company statement of comprehensive income (loss)

     23  

Condensed Parent Company balance sheet

     24  

Accounting policies and Explanatory notes (unaudited)

     25  

Note 1 – Accounting policies

     25  

Note 2 – Critical accounting estimates and judgements

     25  

Note 3 – Segment information

     26  

Note 4 – Provisions

     30  

Note 5 – Financial risk management

     31  

Note 6 – Cash flow

     32  

Note 7 – Contingent liabilities and Assets pledged as collateral

     32  

Note 8 – Share information

     33  

Note 9 – Employee information

     33  

Alternative performance measures (unaudited)

     34  

Sales growth adjusted for comparable units and currency

     34  

Items excluding restructuring charges

     35  

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

     36  

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

     36  

Gross cash and net cash, end of period

     37  

Capital employed

     37  

Capital turnover

     37  

Return on capital employed

     38  

Equity ratio

     38  

Return on equity

     38  

Adjusted earnings per share

     39  

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

     39  

Sales growth by segment adjusted for comparable units and currency

     40  

Sales growth by market area adjusted for comparable units and currency

     40  

Gross margin by segment by quarter

     41  

EBIT margin by segment by quarter

     41  

Restructuring charges by function

     42  

Restructuring charges by segment

     42  

Gross income and gross margin excluding restructuring charges by segment

     43  

EBIT and EBIT margin excluding restructuring charges by segment

     44  

Rolling four quarters of net sales by segment

     44  

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

     44  

EBITA and EBITA margin by segment by quarter

     45  

Other ratios

     45  

 

 

17   Ericsson | First quarter report 2022   Financial statements and other information


Table of Contents

Financial statements (unaudited)

 

Condensed consolidated income statement

           
            Q1  

SEK million

   Note      2022      2021      Change  

Net sales

     3        55,061        49,778        11

Cost of sales

        -31,772        -28,483        12
     

 

 

    

 

 

    

 

 

 

Gross income

     3        23,289        21,295        9

Research and development expenses

        -10,705        -9,576        12

Selling and administrative expenses

        -6,588        -6,188        6

Impairment losses on trade receivables

        -180        -212        -15
     

 

 

    

 

 

    

 

 

 

Operating expenses

        -17,473        -15,976        9

Other operating income and expenses¹)

        -1,065        13        —    

Share in earnings of JV and associated companies

        -7        -71        -90
     

 

 

    

 

 

    

 

 

 

Earnings before financial item sand income tax (EBIT)

     3        4,744        5,261        -10

Financial income and expenses, net

        -643        -533        21
     

 

 

    

 

 

    

 

 

 

Income after financial items

        4,101        4,728        -13

Income tax

        -1,189        -1,560        -24
     

 

 

    

 

 

    

 

 

 

Net income

        2,912        3,168        -8

Net income (loss) attributable to:

           

Owners of the Parent Company

        2,940        3,187     

Non-controlling interests

        -28        -19     

Other information

           

Average number of shares, basic (million)

     8        3,330        3,328     

Earnings per share, basic (SEK) ²)

        0.88        0.96     

Earnings per share, diluted (SEK) ³)

        0.88        0.96     

 

1) 

Q1 2022 includes a provision of SEK -0.9 b. for impairment of assets and other extraordinary costs due to the suspension of affected business in Russia, and revaluation of Ericsson Venture investments of SEK -0.3 billion.

2) 

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

3) 

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

Condensed statement of comprehensive income (loss)

 

     Q1  

SEK million

   2022      2021  

Net income

     2,912        3,168  

Other comprehensive income

     

Items that will not be reclassified to profit or loss

     

Re measurements of defined benefits pension plans in class etceiling

     6,926        6,046  

Revaluation of borrowings due to change in credit risk

     916        -55  

Cash flow hedge reserve - gains/losses arising during the year

     458        —    

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

     -1,761        -1,233  

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

     

Cash flow hedge reserve

     

Gains/ losses arising during the period

     121        -31  

Reclassification adjustments on gains/ losses included in profit or loss

     42        -24  

Translation reserves

     

Changes in translation reserves

     1,585        1,721  

Reclassification to profit and loss

     -8        —      

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

     -1        35  

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

     -34        11  
  

 

 

    

 

 

 

Total other com prehensive income, net of tax

     8,244        6,470  
  

 

 

    

 

 

 

Total comprehensive income

     11,156        9,638  

Total comprehensive income attributable to:

     

Owners of the Parent Company

     11,237        9,755  

Non-controlling interests

     -81        -117  

 

 

18

  Ericsson | First quarter report 2022   Financial statements


Table of Contents

Condensed consolidated balance sheet

 

    

 

     Mar 31      Dec 31  

SEK million

   Note      2022      2021  

Assets

        

Non-current assets

        

Intangible assets

        

Capitalized development expenses

        3,428        3,528  

Goodwill

        39,162        38,204  

Intellectual property rights, brands and other intangible assets

        3,729        3,830  

Property, plant and equipment

        13,603        13,580  

Right-of-use assets

        7,937        7,948  

Financial assets

        

Equity in JV and associated companies

        906        941  

Other investments in shares and participations

     5        1,939        2,258  

Customer finance, non-current

     5        628        568  

Interest-bearing securities, non-current

     5        15,022        30,626  

Other financial assets, non-current

     5        6,810        6,217  

Deferred tax assets

        23,641        23,109  
     

 

 

    

 

 

 
        116,805        130,809  

Current assets

        

Inventories

        41,279        35,164  

Contract assets

        9,937        10,506  

Trade receivables

     5        46,845        45,399  

Customer finance, current

     5        2,857        2,719  

Current tax assets

        7,673        6,379  

Other current receivables

        9,391        7,656  

Interest-bearing securities, current

     5        12,292        12,932  

Cash and cash equivalents

     5        76,856        54,050  
     

 

 

    

 

 

 
        207,130        174,805  
     

 

 

    

 

 

 

Total assets

        323,935        305,614  

Equity and liabilities

        

Equity

        

Stockholders’ equity

        111,701        108,775  

Non-controlling interest in equity of subsidiaries

        -1,822        -1,676  
     

 

 

    

 

 

 
        109,879        107,099  

Non-current liabilities

        

Post-employment benefits

        30,643        36,050  

Provisions, non-current

     4        4,498        3,722  

Deferred tax liabilities

        1,012        884  

Borrowings, non-current

     5        28,599        22,241  

Lease liabilities, non-current

        7,037        7,079  

Other non-current liabilities

        1,070        1,587  
     

 

 

    

 

 

 
        72,859        71,563  

Current liabilities

        

Provisions, current

     4        5,699        5,782  

Borrowings, current

     5        10,403        9,590  

Lease liabilities, current

        2,284        2,224  

Contract liabilities

        39,875        32,834  

Trade payables

     5        35,316        35,684  

Current tax liabilities

        5,701        2,917  

Other current liabilities

        41,919        37,921  
     

 

 

    

 

 

 
        141,197        126,952  
     

 

 

    

 

 

 

Total equity and liabilities

        323,935        305,614  

 

 

19   Ericsson | First quarter report 2022   Financial statements


Table of Contents

Condensed consolidated statement of cash flows

 

            Q1      Jan-Dec  

SEK million

   Note      2022      2021      2021  

Operating activities

           

Net income

        2,912        3,168        22,980  

Adjustments for

           

Taxes

        1,021        1,584        6,576  

Earnings/dividends in JV and associated companies

        8        76        360  

Depreciation, amortization and impairment losses

     6        2,146        1,935        8,969  

Other

        899        185        1,238  
     

 

 

    

 

 

    

 

 

 
        6,986        6,948        40,123  

Changes in operating net assets

           

Inventories

        -5,346        -1,235        -5,565  

Customer finance, current and non-current

        -123        219        34  

Trade receivables and contract assets

        901        1,979        1,551  

Trade payables

        -1,371        -4,112        1,385  

Provisions and post-employment benefits

        969        523        -118  

Contract liabilities

        6,260        4,454        4,014  

Other operating assets and liabilities, net

        -6,767        -5,681        2,701  
     

 

 

    

 

 

    

 

 

 
        -5,477        -3,853        4,002  

Interest received

        78        68        8  

Interest paid

        -211        -160        -974  

Taxes paid

        -1,346        202        -4,094  
     

 

 

    

 

 

    

 

 

 

Cash flow from operating activities

        30        3,205        39,065  

Investing activities

           

Investments in property, plant and equipment

     6        -818        -915        -3,663  

Sales of property, plant and equipment

        38        24        115  

Acquisitions/divestments of subsidiaries and other operations, net

        46        5        59  

Product development

     6        -288        -204        -962  

Purchase of interest-bearing securities

        —          -3,680        -35,415  

Sale of interest-bearing securities

        16,027        3,841        20,114  

Other investing activities

        -579        -5        -131  
     

 

 

    

 

 

    

 

 

 

Cash flow from investing activities

        14,426        -934        -19,883  

Financing activities

           

Proceeds from issuance of long-term debt

        7,788        77        7,882  

Repayment of long-term debt

        —          -5,242        -5,791  

Dividends paid

        —          -5        -6,889  

Repayment of lease liabilities

        -593        -548        -2,368  

Other financing activities

        569        -449        -2,141  
     

 

 

    

 

 

    

 

 

 

Cash flow from financing activities

        7,764        -6,167        -9,307  
     

 

 

    

 

 

    

 

 

 

Effect of exchange rate changes on cash

        586        827        563  
     

 

 

    

 

 

    

 

 

 

Net change in cash and cash equivalents

        22,806        -3,069        10,438  
     

 

 

    

 

 

    

 

 

 

Cash and cash equivalents, beginning of period

        54,050        43,612        43,612  
     

 

 

    

 

 

    

 

 

 

Cash and cash equivalents, end of period

        76,856        40,543        54,050  

 

 

20   Ericsson | First quarter report 2022   Financial statements


Table of Contents

Condensed consolidated statement of changes in equity

 

     Jan-Mar      Jan-Dec  

SEK million

   2022      2021      2021  

Opening balance

     107,099        85,177        85,177  

Total comprehensive income

     11,156        9,638        28,770  

Sale/repurchase of own shares

     —          —          42  

Long-term variable compensation plans

     24        21        93  

Dividends to shareholders 1)

     -8,400        -6,712        -6,889  

Transactions with non-controlling interests

     —          —          -94  
  

 

 

    

 

 

    

 

 

 

Closing balance

     109,879        88,124        107,099  

 

1) 

Includes accrual of SEK 8,335 (6,668) million in Jan-Mar for the dividend approved by the Annual General Meeting on March 29, 2022 (March 30, 2021).

Condensed consolidated income statement – isolated quarters

 

     2022      2021  

Isolated quarters, SEK million

   Q1      Q4      Q3      Q2      Q1  

Net sales

     55,061        71,332        56,263        54,941        49,778  

Cost of sales

     -31,772        -40,511        -31,487        -31,084        -28,483  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Gross income

     23,289        30,821        24,776        23,857        21,295  

Research and development expenses

     -10,705        -11,863        -10,155        -10,480        -9,576  

Selling and administrative expenses

     -6,588        -7,620        -6,177        -6,972        -6,188  

Impairment losses on trade receivables

     -180        99        -27        100        -212  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Operating expenses

     -17,473        -19,384        -16,359        -17,352        -15,976  

Other operating income and expenses 1)

     -1,065        428        500        -579        13  

Share in earnings of JV and associated companies

     -7        -4        -82        -103        -71  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Earnings before financial items and income tax (EBIT)

     4,744        11,861        8,835        5,823        5,261  

Financial income and expenses, net

     -643        -945        -598        -454        -533  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Income after financial items

     4,101        10,916        8,237        5,369        4,728  

Income tax

     -1,189        -770        -2,471        -1,469        -1,560  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net income

     2,912        10,146        5,766        3,900        3,168  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net income (loss) attributable to:

              

Owners of the Parent Company

     2,940        10,076        5,752        3,679        3,187  

Non-controlling interests

     -28        70        14        221        -19  

Other information

              

Average number of shares, basic (million)

     3,330        3,330        3,330        3,329        3,328  

Earnings per share, basic (SEK) 2)

     0.88        3.03        1.73        1.10        0.96  

Earnings per share, diluted (SEK) 3)

     0.88        3.02        1.73        1.10        0.96  

 

1) 

Q1 2022 includes a provision of SEK -0.9 b. for impairment of assets and other extraordinary costs due to the suspension of affected business in Russia, and revaluation of Ericsson Venture investments of SEK -0.3 billion. Q4 2021 includes a gain from divestment of a data center and revaluation of Ericsson Ventures investments of SEK 0.4 billion. Q3 2021 includes an Ericsson Ventures investment revaluation of SEK 0.5 billion. Q2 2021 includes cost of SEK -0.8 billion as a result of the Nokia settlement related to the 2019 resolutions with SEC and DOJ.

2) 

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

3) 

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

 

 

21   Ericsson | First quarter report 2022   Financial statements


Table of Contents

Condensed consolidated statement of cash flows – isolated quarters

 

     2022      2021  

Isolated quarters, SEK million

   Q1      Q4      Q3      Q2      Q1  

Operating activities

              

Net income

     2,912        10,146        5,766        3,900        3,168  

Adjustments for

              

Taxes

     1,021        938        2,824        1,230        1,584  

Earnings/dividends in JV and associated companies

     8        13        159        112        76  

Depreciation, amortization and impairment losses

     2,146        2,552        2,385        2,097        1,935  

Other

     899        398        24        631        185  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     6,986        14,047        11,158        7,970        6,948  

Changes in operating net assets

              

Inventories

     -5,346        248        -3,877        -701        -1,235  

Customer finance, current and non-current

     -123        780        -1,419        454        219  

Trade receivables and contract assets

     901        -5,227        8,833        -4,034        1,979  

Trade payables

     -1,371        3,020        1,733        744        -4,112  

Provisions and post-employment benefits

     969        950        -130        -1,461        523  

Contract liabilities

     6,260        -1,655        -3,388        4,603        4,454  

Other operating assets and liabilities, net

     -6,767        4,606        3,168        608        -5,681  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     -5,477        2,722        4,920        213        -3,853  

Interest received

     78        -104        42        2        68  

Interest paid

     -211        -310        -120        -384        -160  

Taxes paid/received

     -1,346        -1,159        -1,276        -1,861        202  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash flow from operating activities

     30        15,196        14,724        5,940        3,205  

Investing activities

              

Investments in property, plant and equipment

     -818        -701        -1,040        -1,007        -915  

Sales of property, plant and equipment

     38        34        40        17        24  

Acquisitions/divestments of subs, and other operations, net

     46        178        -55        -69        5  

Product development

     -288        -302        -190        -266        -204  

Purchase of interest-bearing securities

     —          -8,858        -9,670        -13,207        -3,680  

Sale of interest-bearing securities

     16,027        7,064        1,801        7,408        3,841  

Other investing activities

     -579        -122        -4        —          -5  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash flow from investing activities

     14,426        -2,707        -9,118        -7,124        -934  

Financing activities

              

Proceeds from issuance of long-term debt

     7,788        1        —          7,804        77  

Repayment of long-term debt

     —          -39        —          -510        -5,242  

Dividends paid

     —          -3,395        -161        -3,328        -5  

Repayment of lease liabilities

     -593        -623        -580        -617        -548  

Other financing activities

     569        -825        -1,807        940        -449  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash flow from financing activities

     7,764        -4,881        -2,548        4,289        -6,167  

Effect of exchange rate changes on cash

     586        -34        145        -375        827  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net change in cash and cash equivalents

     22,806        7,574        3,203        2,730        -3,069  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash and cash equivalents, beginning of period

     54,050        46,476        43,273        40,543        43,612  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash and cash equivalents, end of period

     76,856        54,050        46,476        43,273        40,543  

 

 

22   Ericsson | First quarter report 2022   Financial statements


Table of Contents

Condensed Parent Company income statement

 

     Q1      Jan-Dec  

SEK million

   2022      2021      2021  

Net sales

     —          —          —    

Cost of sales

     —          —          —    
  

 

 

    

 

 

    

 

 

 

Gross income

     —          —          —    

Operating expenses

     -355        -173        -820  

Other operating income and expenses

     609        614        1,770  
  

 

 

    

 

 

    

 

 

 

EBIT

     254        441        950  

Financial net

     -169        352        8,368  
  

 

 

    

 

 

    

 

 

 

Income after financial items

     85        793        9,318  

Transfers to (-) / from untaxed reserves

     —          —          -1,526  

Income tax

     -87        -126        -161  
  

 

 

    

 

 

    

 

 

 

Net income

     -2        667        7,631  

Condensed Parent Company statement of comprehensive income (loss)

 

     Q1      Jan-Dec  

SEK million

   2022      2021      2021  

Net income

     -2        667        7,631  

Revaluation of borrowings due to change in credit risk

     916        -55        31  

Cash flow hedge reserve - gains/losses arising during the period

     458        —          -26  

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

     -278        11        -6  
  

 

 

    

 

 

    

 

 

 

Other comprehensive income, net of tax

     1,096        -44        -1  
  

 

 

    

 

 

    

 

 

 

Total comprehensive income

     1,094        623        7,630  

 

 

23   Ericsson | First quarter report 2022   Financial statements


Table of Contents

 

Condensed Parent Company balance sheet

 

SEK million

   Mar 31
2022
     Dec 31
2021
 

Assets

     

Fixed assets

     

Intangible assets

     7        8  

Tangible assets

     403        413  

Financial assets¹)

     105,602        120,605  
  

 

 

    

 

 

 
     106,012        121,026  

Current assets

     

Receivables

     27,533        27,364  

Short-term investments

     11,955        12,722  

Cash and cash equivalents

     62,001        37,128  
  

 

 

    

 

 

 
     101,489        77,214  
  

 

 

    

 

 

 

Total assets

     207,501        198,240  

Stockholders’ equity, provisions and liabilities

     

Equity

     

Restricted equity

     48,164        48,164  

Non-restricted equity

     27,762        34,984  
  

 

 

    

 

 

 
     75,926        83,148  

Provisions

     261        293  

Non-current liabilities

     28,774        22,406  

Current liabilities

     102,540        92,393  
  

 

 

    

 

 

 

Total stockholders’ equity, provisions and liabilities

     207,501        198,240  

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

     14,994        30,615  

 

 

24   Ericsson | First quarter report 2022   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, 2022, has been prepared in accordance with International 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, 2021 and should be read in conjunction with that annual report. There are no amendments of IFRS during 2022 that are estimated to have a material impact on the result and financial position of the Company.

Note 2 – Critical accounting estimates and judgements

Russia

In late February, Ericsson suspended all deliveries to customers in Russia. In the light of recent events and of European Union sanctions, the company will now suspend its affected business with customers in Russia indefinitely. Ericsson is engaging with customers and partners regarding the indefinite suspension of the affected business. The priority is to focus on the safety and well-being of Ericsson employees in Russia and they will be placed on paid leave.

As a consequence, Ericsson records a SEK 0.9 b. provision in the first quarter 2022 for impairment of assets and other exceptional costs. No staff redundancy cost is included. The provision will be recorded in Other operating expenses in Segment Networks. Around one third of this amount will impact cash flow.

 

 

25   Ericsson | First quarter report 2022   Accounting policies and Explanatory notes


Table of Contents

Note 3 – Segment information

Net sales by segment by quarter

 

     2022     2021  

Isolated quarters, SEK million

   Q1     Q4     Q3     Q2     Q1  

Networks

     40,712       51,097       40,592       39,875       36,274  

Of which Products

     31,131       39,963       31,079       30,414       27,495  

Of which Services

     9,581       11,134       9,513       9,461       8,779  

Digital Services

     7,214       12,736       8,630       7,887       6,898  

Of which Products

     3,634       7,157       4,601       3,989       3,581  

Of which Services

     3,580       5,579       4,029       3,898       3,317  

Managed Services

     4,946       5,354       5,041       5,119       4,865  

Emerging Business and Other

     2,189       2,145       2,000       2,060       1,741  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     55,061       71,332       56,263       54,941       49,778  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2022     2021  

Sequential change, percent

   Q1     Q4     Q3     Q2     Q1  

Networks

     -20     26     2     10     -27

Of which Products

     -22     29     2     11     -27

Of which Services

     -14     17     1     8     -26

Digital Services

     -43     48     9     14     -46

Of which Products

     -49     56     15     11     -52

Of which Services

     -36     38     3     18     -37

Managed Services

     -8     6     -2     5     -16

Emerging Business and Other

     2     7     -3     18     0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -23     27     2     10     -28
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2022     2021  

Year over year change, percent

   Q1     Q4     Q3     Q2     Q1  

Networks

     12     4     -3     0     3

Of which Products

     13     7     0     5     11

Of which Services

     9     -6     -11     -13     -15

Digital Services

     5     1     -1     -8     -6

Of which Products

     1     -4     0     -13     -6

Of which Services

     8     6     -2     -2     -6

Managed Services

     2     -8     -8     -8     -15

Emerging Business and Other

     26     23     26     29     11
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     11     3     -2     -1     0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2022     2021  

Year to date, SEK million

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

Networks

     40,712       167,838       116,741       76,149       36,274  

Of which Products

     31,131       128,951       88,988       57,909       27,495  

Of which Services

     9,581       38,887       27,753       18,240       8,779  

Digital Services

     7,214       36,151       23,415       14,785       6,898  

Of which Products

     3,634       19,328       12,171       7,570       3,581  

Of which Services

     3,580       16,823       11,244       7,215       3,317  

Managed Services

     4,946       20,379       15,025       9,984       4,865  

Emerging Business and Other

     2,189       7,946       5,801       3,801       1,741  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     55,061       232,314       160,982       104,719       49,778  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2022     2021  

Year over year change, percent

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

Networks

     12     1     0     2     3

Of which Products

     13     5     5     8     11

Of which Services

     9     -11     -13     -14     -15

Digital Services

     5     -3     -5     -7     -6

Of which Products

     1     -5     -6     -10     -6

Of which Services

     8     0     -3     -4     -6

Managed Services

     2     -10     -10     -12     -15

Emerging Business and Other

     26     22     22     20     11
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     11     0     -1     -1     0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

 

26   Ericsson | First quarter report 2022   Accounting policies and Explanatory notes


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Gross income by segment by quarter

 

     2022      2021  

Isolated quarters, SEK million

   Q1      Q4      Q3      Q2      Q1  

Networks

     18,211        23,643        19,401        19,111        16,714  

Digital Services

     3,097        5,456        3,644        2,990        3,002  

Managed Services

     1,148        974        944        975        942  

Emerging Business and Other

     833        748        787        781        637  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     23,289        30,821        24,776        23,857        21,295  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     2022      2021  

Year to date, SEK million

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

Networks

     18,211        78,869        55,226        35,825        16,714  

Digital Services

     3,097        15,092        9,636        5,992        3,002  

Managed Services

     1,148        3,835        2,861        1,917        942  

Emerging Business and Other

     833        2,953        2,205        1,418        637  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     23,289        100,749        69,928        45,152        21,295  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

EBIT (loss) by segment by quarter

 

     2022      2021  

Isolated quarters, SEK million

   Q1      Q4      Q3      Q2      Q1  

Networks

     6,747        11,757        9,624        8,645        7,240  

Digital Services

     -1,418        304        -822        -1,567        -1,519  

Managed Services

     592        353        386        416        313  

Emerging Business and Other

     -1,177        -553        -353        -1,671        -773  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     4,744        11,861        8,835        5,823        5,261  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     2022      2021  

Year to date, SEK million

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

Networks

     6,747        37,266        25,509        15,885        7,240  

Digital Services

     -1,418        -3,604        -3,908        -3,086        -1,519  

Managed Services

     592        1,468        1,115        729        313  

Emerging Business and Other

     -1,177        -3,350        -2,797        -2,444        -773  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     4,744        31,780        19,919        11,084        5,261  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

 

 

27   Ericsson | First quarter report 2022   Accounting policies and Explanatory notes


Table of Contents

Net sales by market area by quarter

 

     2022     2021  

Isolated quarters, SEK million

   Q1     Q4     Q3     Q2     Q1  

South East Asia, Oceania and India

     5,836       8,604       6,450       7,099       6,676  

North East Asia

     5,421       9,816       5,691       7,123       6,491  

North America

     20,727       22,264       20,161       17,950       17,081  

Europe and Latin America 1) 2)

     15,290       19,236       14,378       14,011       12,647  

Middle East and Africa

     4,301       6,948       4,985       4,459       4,393  

Other 1) 2)

     3,486       4,464       4,598       4,299       2,490  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     55,061       71,332       56,263       54,941       49,778  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1) Of which in Sweden

     678       1,078       478       404       389  

2) Of which in EU

     8,611       10,181       7,069       7,256       6,801  
     2022     2021  

Sequential change, percent

   Q1     Q4     Q3     Q2     Q1  

South East Asia, Oceania and India

     -32     33     -9     6     -32

North East Asia

     -45     72     -20     10     -49

North America

     -7     10     12     5     -11

Europe and Latin America 1) 2)

     -21     34     3     11     -26

Middle East and Africa

     -38     39     12     2     -33

Other 1) 2)

     -22     -3     7     73     -42
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -23     27     2     10     -28
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1) Of which in Sweden

     -37     126     18     4     7

2) Of which in EU

     -15     44     -3     7     -23
     2022     2021  

Year over year change, percent

   Q1     Q4     Q3     Q2     Q1  

South East Asia, Oceania and India

     -13     -12     -17     8     13

North East Asia

     -16     -23     -35     -9     66

North America

     21     17     10     -2     -5

Europe and Latin America 1) 2)

     21     12     8     7     3

Middle East and Africa

     -2     7     -10     -18     -25

Other 1) 2)

     40     4     26     0     -37
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     11     3     -2     -1     0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1) Of which in Sweden

     74     197     92     42     71

2) Of which in EU

     27     15     0     0     9
     2022     2021  

Year to date, SEK million

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

South East Asia, Oceania and India

     5,836       28,829       20,225       13,775       6,676  

North East Asia

     5,421       29,121       19,305       13,614       6,491  

North America

     20,727       77,456       55,192       35,031       17,081  

Europe and Latin America 1) 2)

     15,290       60,272       41,036       26,658       12,647  

Middle East and Africa

     4,301       20,785       13,837       8,852       4,393  

Other 1) 2)

     3,486       15,851       11,387       6,789       2,490  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     55,061       232,314       160,982       104,719       49,778  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1) Of which in Sweden

     678       2,349       1,271       793       389  

2) Of which in EU

     8,611       31,307       21,126       14,057       6,801  
     2022     2021  

Year to date, year over year change, percent

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

South East Asia, Oceania and India

     -13     -4     0     10     13

North East Asia

     -16     -13     -6     16     66

North America

     21     5     1     -4     -5

Europe and Latin America 1) 2)

     21     8     6     5     3

Middle East and Africa

     -2     -11     -18     -21     -25

Other 1) 2)

     40     -2     -4     -18     -37
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     11     0     -1     -1     0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1) Of which in Sweden

     74     109     67     55     71

2) Of which in EU

     27     6     2     4     9

 

 

28   Ericsson | First quarter report 2022   Accounting policies and Explanatory notes


Table of Contents

Net sales by market area by segment

 

     Q1 2022  

SEK million

   Networks     Digital
Services
    Managed
Services
    Emerging
Business
and Other
    Total  

South East Asia, Oceania and India

     3,910       796       1,124       6       5,836  

North East Asia

     4,541       682       142       56       5,421  

North America

     18,209       1,689       806       23       20,727  

Europe and Latin America

     10,625       2,562       1,996       107       15,290  

Middle East and Africa

     2,186       1,233       878       4       4,301  

Other ¹)

     1,241       252       0       1,993       3,486  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     40,712       7,214       4,946       2,189       55,061  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Share of total

     74     13     9     4     100

1) Includes IPR licensing revenues.

 

     Q1 2022  

Sequential change, percent

   Networks     Digital
Services
    Managed
Services
    Emerging
Business
and Other
    Total  

South East Asia, Oceania and India

     -34     -50     4     -40     -32

North East Asia

     -44     -50     -48     -31     -45

North America

     -3     -36     -2     28     -7

Europe and Latin America

     -16     -40     -11     -9     -21

Middle East and Africa

     -38     -50     -5     -20     -38

Other

     -42     -41     —         4     -22
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -20     -43     -8     2     -23
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Q1 2022  

Year over year change, percent

   Networks     Digital
Services
    Managed
Services
    Emerging
Business
and Other
    Total  

South East Asia, Oceania and India

     -19     4     6     -14     -13

North East Asia

     -16     -21     -16     -21     -16

North America

     22     14     27     77     21

Europe and Latin America

     34     3     -5     9     21

Middle East and Africa

     -7     7     -1     0     -2

Other

     59     57     —         29     40
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     12     5     2     26     11
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

 

29   Ericsson | First quarter report 2022   Accounting policies and Explanatory notes


Table of Contents

Top 5 countries in sales

 

     Q1     Jan-Dec  

Country, percentage of net sales1)

   2022     2021     2021  

United States

     39     36     34

China

     4     3     4

United Kingdom

     4     3     3

Japan

     3     8     6

France

     3     3     2

 

1) 

Based on Jan-Mar 2022. Includes IPR licensing revenues.

IPR licensing revenues by segment by quarter

 

     2022      2021  

Isolated quarters, SEK million

   Q1      Q4      Q3      Q2      Q1  

Networks

     1,142        1,949        2,146        1,904        671  

Digital Services

     250        428        471        418        147  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     1,392        2,377        2,617        2,322        818  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     2022      2021  

Year to date, SEK million

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

Networks

     1,142        6,670        4,721        2,575        671  

Digital Services

     250        1,464        1,036        565        147  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     1,392        8,134        5,757        3,140        818  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Note 4 – Provisions

Provisions

 

     2022      2021  

Isolated quarters, SEK million

   Q1      Q4      Q3      Q2      Q1  

Opening balance

     9,504        8,813        9,232        11,045        10,466  

Additions

     1,583        1,738        316        616        1,753  

Utilization

     -1,173        -643        -408        -2,179        -979  

Of which restructuring

     -67        -193        -95        -161        -336  

Reversal of excess amounts

     -452        -603        -66        -170        -339  

Reclassification, translation difference and other

     735        199        -261        -80        144  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Closing balance

     10,197        9,504        8,813        9,232        11,045  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Of which restructuring

     604        637        732        807        950  
     2022      2021  

Year to date, SEK million

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

Opening balance

     9,504        10,466        10,466        10,466        10,466  

Additions

     1,583        4,423        2,685        2,369        1,753  

Utilization/Cash out

     -1,173        -4,209        -3,566        -3,158        -979  

Of which restructuring

     -67        -785        -592        -497        -336  

Reversal of excess amounts

     -452        -1,178        -575        -509        -339  

Reclassification, translation difference and other

     735        2        -197        64        144  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Closing balance

     10,197        9,504        8,813        9,232        11,045  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Of which restructuring

     604        637        732        807        950  

 

 

30   Ericsson | First quarter report 2022  

Accounting policies and Explanatory notes


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

   Mar 31
2022
     Dec 31
2021
 
            Fair value hierarchy level             Fair value hierarchy level  

Assets at fair value through profit or loss

   Carrying
value
     Level 1      Level 2      Level 3      Carrying
value
     Level 1      Level 2      Level 3  

Customer finance ¹)

     3.5        —          —          3.5        3.3        —          —          3.3  

Interest-bearing securities

     26.8        26.8        —          —          43.3        43.3        —          —    

Cash equivalents²)

     51.5        —          51.5        —          26.0        —          26.0        —    

Other financial assets

     1.9        0.2        —          1.7        2.3        0.6        —          1.7  

Other current assets

     1.1        —          1.1        —          0.3        —          0.3        —    

Assets at fair value through OCI

                       

Trade receivables

     46.8        —          —          46.8        45.4        —          —          45.4  

Assets at amortized costs

                       

Interest-bearing securities

     0.5        —          —          —          0.3        —          —          —    

Cash equivalents²)

     3.2        —          —          —          4.0        —          —          —    

Other financial assets

     0.6        —          —          —          0.5        —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total financial assets

     135.9                 125.4           
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities at designated FVTPL

                       

Parent company borrowings

     -38.0        -26.1        -11.9        —          -31.4        -19.5        -11.9        —    

Financial liabilities at FVTPL

                       

Other current liabilities

     -1.4        —          -1.4        —          -0.8        —          -0.8        —    

Liabilities at amortized cost

                       

Trade payables

     -35.3        —          —          —          -35.7        —          —          —    

Borrowings

     -1.0        —          —          —          -0.4        —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total financial liabilities

     -75.7                 -68.3           
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

1) 

Year to date movements of customer finance receivables are as follows: additions of SEK 5.2 billion, disposals and repayments of SEK 5.2 billion and revaluation gain of SEK 0.1 billion.

2) 

Total Cash and cash equivalent is SEK 76.9 (54.1) billion, of which SEK 54.7 (30.0) billion relating to Cash equivalents are presented in the table above.

Exchange rates used in the consolidation

 

     Jan-Mar      Jan-Dec  
     2022      2021      2021  

SEK/EUR -closing rate

     10.34        10.22        10.24  

SEK/USD -closing rate

     9.32        8.71        9.05  

 

 

31   Ericsson | First quarter report 2022   Accounting policies and Explanatory notes


Table of Contents

Note 6 – Cash flow

Information on investments

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

 

     2022      2021  

Isolated quarters, SEK million

   Q1      Q4      Q3      Q2      Q1  

Additions

              

Property, plant and equipment

     818        701        1,040        1,007        915  

Capitalized development expenses

     288        302        190        266        204  

IPR, brands and other intangible assets

     2        123        3        1        4  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     1,108        1,126        1,233        1,274        1,123  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Depreciation, amortization and impairment losses

              

Property, plant and equipment

     964        1,134        954        910        874  

Capitalized development expenses

     401        396        394        329        224  

Goodwill, IPR, brands and other intangible assets

     198        435        464        294        283  

Right-of-use assets

     583        587        572        564        554  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     2,146        2,552        2,384        2,097        1,935  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     2022      2021  

Year to date, SEK million

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

Additions

              

Property, plant and equipment

     818        3,663        2,962        1,922        915  

Capitalized development expenses

     288        962        660        470        204  

IPR, brands and other intangible assets

     2        131        8        5        4  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     1,108        4,756        3,630        2,397        1,123  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Depreciation, amortization and impairment losses

              

Property, plant and equipment

     964        3,872        2,738        1,784        874  

Capitalized development expenses

     401        1,343        947        553        224  

Goodwill, IPR, brands and other intangible assets

     198        1,477        1,041        577        283  

Right-of-use assets

     583        2,277        1,690        1,118        554  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     2,146        8,969        6,416        4,032        1,935  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Note 7 – Contingent liabilities and Assets pledged as collateral

Contingent liabilities and Assets pledged as collateral

 

SEK million

   Mar 31
2022
     Dec 31
2021
 

Contingent liabilities

     1,805        1,614  

Assets pledged as collateral

     7,080        6,873  

On December 6, 2019, Ericsson entered into a Deferred Prosecution Agreement (DPA) with the United States Department of Justice (DOJ). In October 2021, Ericsson received correspondence from the DOJ stating its determination that the Company had breached its obligations under its DPA by failing to provide certain documents and factual information. On March 1, 2022, the DOJ informed Ericsson that the disclosure made by the Company prior to the DPA about its internal investigation into conduct in Iraq in the period 2011 until 2019 was insufficient. Furthermore, it determined that the Company breached the DPA by failing to make subsequent disclosure related to the investigation post-DPA. As mentioned in the Annual Report 2021, the Company is in communication with the DOJ regarding the facts and circumstances of the breach determinations and is committed to co-operating with the DOJ to resolve the matters. While the length of the process cannot be determined, the resolution of these matters could result in a range of actions by DOJ, and may likely include additional monetary payments, the magnitude of which cannot at this time be reliably estimated. Accordingly, no provisions have been recorded for such potential exposure.

On March 3, 2022, Ericsson learned that Telefonaktiebolaget LM Ericsson and certain officers of Ericsson were named as defendants in a putative class action filed in the United States District Court for the Eastern District of New York. The complaint alleges violations of United States securities laws, in connection with allegedly false and misleading statements principally concerning the Company’s adherence with its compliance and disclosure policies and obligations and the conduct of its business in Iraq. At this stage it is premature to predict the outcome of this matter. Hence it is not possible to reliably estimate potential future cash outflows in resolving the matter.

 

 

32   Ericsson | First quarter report 2022   Accounting policies and Explanatory notes


Table of Contents

Note 8 – Share information

Number of shares and earnings per share

 

     Q1      Jan-Dec  
     2022      2021      2021  

Number of shares issued, end of period (million)

     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  

Number of treasury shares, end of period (million)

     4        6        4  

Number of shares outstanding, basic, end of period (million)

     3,330        3,328        3,330  

Numbers of shares outstanding, diluted, end of period (million)

     3,333        3,328        3,333  

Average number of treasury shares (million)

     4        6        5  

Average number of shares outstanding, basic (million)

     3,330        3,328        3,329  

Average number of shares outstanding, diluted (million)1)

     3,333        3,328        3,332  

Earnings per share, basic (SEK)2)

     0.88        0.96        6.82  

Earnings per share, diluted (SEK)1)

     0.88        0.96        6.81  

 

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.

The proposed dividend of SEK 2.50 per share was approved by the AGM. The dividend will be paid in two equal installments; SEK 1.25 per share with the record date Thursday, March 31, 2022, and SEK 1.25 per share with the record date Friday, September 30, 2022.

Note 9 – Employee information

Number of employees