With our fourth quarter result we are on track to deliver on our long-term EBITA target of 15-18% by 2024. We remain fully committed to our strategic ambitions and have full confidence in the long term. During the quarter, we made measurable progress towards achieving these ambitions, against a backdrop of broad macroeconomic headwinds. As we said during our Capital Markets Day, there are near-term uncertainties, however, we are still in the early phase of global 5G rollout and widespread enterprise digitalization.

Our strategy remains rooted in driving sustainable growth and maximizing value across all stakeholders. We are confident that we have the right team and strategy in place to extend our leadership in mobile networks; achieve profitability in Cloud Software and Services; execute in our high growth Enterprise segment; shape the industry landscape by becoming a platform company leveraging the 5G innovation platform; and continue our unwavering commitment to a culture of integrity.

This quarter, we signed a multiyear IPR patent license agreement with a major licensee. This positive outcome positions us well to capture further 5G patent license agreements among handset manufacturers and in new areas such as consumer electronics and IoT. We expect significant IPR revenue growth over the coming 18-24 months.

Group Net Sales¹ grew by 1% YoY, of which IPR revenues contributed with 5 percentage points. EBITA² of SEK 9.3 (12.8) b. corresponds to a margin² of 10.8% (17.9%). The positive impact from higher IPR revenues was offset by expected business mix shift and previously announced charges of SEK -4 b. We executed on our ambition to reduce inventory contributing to our free cash flow before M&A of SEK 16.9 (13.5) b.

Our Networks business grew in India on the back of significant market share gains. As anticipated, the growth from share gains in several markets could not fully compensate for reduced operator capex and inventory reductions in other markets, including North America. Gross margin² was 44.6% (46.4%), negatively impacted by this business mix shift including a higher share of services sales from large network rollout projects. The IPR patent license agreement had positive margin impact.

During the quarter, we were able to largely offset the impact of high inflation with commercial activities, including product substitution. We continue to invest in technology to enhance performance and cost leadership, expand our global footprint and improve productivity and capital efficiency across the supply chain.

In Cloud Software and Services, organic sales¹ decreased by -2% excluding IPR revenues. Sales growth in North America – mainly from 5G Core contracts – was offset by a decline in other market areas. We remain committed to improving profitability and are on a clear path to reaching operating profit break-even for full-year 2023 by limiting subscale software development, accelerating automation, and changing focus from market share gains to profitability. In Q4, we decided to exit certain subscale business, with a one-off charge.

Within Enterprise, we continue to leverage our strength in mobile networks to accelerate our business. Organically, sales¹ grew by 15%. Our Enterprise strategy is underpinned by two pillars: First, our Enterprise Wireless Solutions business, focused on capturing the multi-billion-dollar enterprise market opportunity for 5G optimized networking and security solutions. Second, through the Global Communication Platform business, we will enable new ways of monetizing 5G by transforming how network features such as speed and latency are globally exposed, consumed and paid for. Enterprise is a growth engine for the company, and we continue to fine-tune our portfolio to maximize profitability. To this end, we announced the divestment of our loss-making IoT business in Q4. We continue to invest to strengthen our enterprise go-to-market channel and broaden our enterprise product portfolio. In addition, we are increasing our investments in developing the network APIs that will underpin the long-term growth in Global Communication Platform. From 2024 and beyond our enterprise business will be a major driver of Ericsson’s long-term growth and profitability, however, these investments will weigh on profitability during 2023.

We remain positive on the long-term outlook for our business. However, the near-term outlook, as we also described at our Capital Markets Day, remains uncertain. We expect operators to continue to sweat assets in response to macroeconomic headwinds. In addition, we expect operators to adjust inventory levels as supply situation eases. These trends started to impact Networks in Q4 and we expect them to continue at least during the first half of 2023. At the same time, we expect good growth from market share wins, albeit not fully offsetting the near-term headwinds. In the longer-term, capex is driven by traffic growth. Given near-term macroeconomic headwinds, we expect Enterprise to grow somewhat slower than during 2022.

While the quarter saw the easing of supply chain related challenges, the inflationary environment persisted. We remain focused on navigating near-term headwinds through our commercial initiatives but also by making Ericsson more cost-effective. We expect to start seeing the effect of our SEK 9 b. cost savings activities during the second quarter of 2023. We anticipate declining margins in Networks during the first half of 2023 due to changing business mix. In Q1 we expect the EBITA² for the Group to be somewhat lower than EBITA² last year, with improvements during the year.

We remain focused on reaching a resolution with the US authorities regarding the previously announced Deferred Prosecution Agreement (DPA) breach notices received by the company. In this regard, we have this quarter booked a SEK 2.3 b. (approx. USD 220 million) provision as we are now in a position to make a sufficiently reliable estimate of the financial penalty (and additional monitoring costs) associated with a breach resolution.

Separately, and with respect to the past matters described in the company’s 2019 Iraq investigation report, we continue to thoroughly investigate the facts in full cooperation with the DOJ and the SEC to determine if there is any merit to the allegations.

Building a culture of ethics and integrity remains a top priority, and I am convinced that best-in-class compliance will give our company a competitive advantage. Both the company’s resolution with the DOJ and the SEC in 2019 and the ongoing investigation into past conduct in Iraq clearly highlight the importance of intelligent decision-making and effective risk management.

In conclusion, I would like to thank all my colleagues for their diligence and efforts to deliver long-term stakeholder value as they continue to execute on our strategy. The commitment and passion of our team is what inspires me the most as we redefine both our company and our industry. The actions we have taken have positioned us to be a true industry leader.

Börje Ekholm

President and CEO

Fourth quarter comments

Segments

Group reported sales increased by 21% YoY to SEK 86.0 b. Sales adjusted for comparable units and currency grew by 1% YoY, of which IPR revenues contributed with 5 percentage points.

IPR licensing revenues increased to SEK 6.0 (2.4) b. Revenues in the quarter were impacted by retroactive revenues for unlicensed periods, from a new contract with one licensee signed in the quarter.

Networks sales adjusted for comparable units and currency grew by 1%, of which IPR revenues contributed with 6 percentage points. Double-digit growth in market area South East Asia, Oceania and India was offset by decline in the other market areas. Networks reported sales were SEK 58.6 b., accounting for 68% (72%) of Group sales.

Cloud Software and Services sales adjusted for comparable units and currency grew by 2%, of which IPR licensing revenues contributed with 4% percentage points. Sales growth in market area North America was not fully offset by decline in other market areas. Cloud Software and Services reported sales were SEK 20.2 b., accounting for 23% (25%) of Group sales.

Enterprise sales adjusted for comparable units and currency increased by 15%, primarily driven by Enterprise Wireless Solutions. Enterprise reported sales were SEK 6.6 b. accounting for 8% (3%) of Group sales. Vonage sales were SEK 4.1 b.

Market Areas

Sales adjusted for comparable units and currency increased in market area South East Asia, Oceania and India, while sales were stable in Europe and Latin America. Sales declined in the other market areas, mainly due to reduction in operator capex investments in light of macroeconomic pressures. In addition, especially front-runner operators reduced purchases as inventories were optimized due to supply chain constraints easing.

In market area South East Asia, Oceania and India, sales adjusted for comparable units and currency increased by 21% primarily driven by 5G market share gains in India. However, a slowdown of investment in certain countries in South East Asia negatively impacted sales in the quarter.

In market area North East Asia, sales adjusted for comparable units and currency declined, after elevated 5G investment levels during the first three quarters of the year.

Sales adjusted for comparable units and currency declined in market area North America, after accelerated capex investments in prior quarters. Some operators are guiding for reduction in capex investments and are also optimizing inventory in the near-term as supply chain constraints ease.

Market area Other primarily includes IPR licensing revenues and a major part of segment Enterprise. Growth was driven mainly by acquisition of Vonage, impacting the quarter by SEK 4.1 b. and retroactive IPR licensing revenues for unlicensed periods.

Segments

Reported sales increased by 17% to SEK 271.5 (232.3) b. Networks sales increased by SEK 25.6 b. to SEK 193.5 b. Cloud Software and Services sales increased by SEK 4.3 b. to SEK 60.5 b. Enterprise sales increased by SEK 9.1 b. to SEK 15.4 b. Sales in segment Other increased by SEK 0.2 b., to SEK 2.2 b. Sales adjusted for comparable units and currency increased by 3%.

IPR licensing revenues increased to SEK 10.4 (8.1) b. primarily as a result of a new patent license agreement including 5G.

Networks sales adjusted for comparable units and currency increased by 4% YoY. Market areas North America, Europe and Latin America and South East Asia, Oceania and India reported mid-single digit organic growth while sales in North East Asia and Middle East and Africa declined. Reported sales grew by 15%. Networks accounted for 71% (72%) of Group sales.

Cloud Software and Services sales adjusted for comparable units and currency decreased by -1% YoY. Sales growth in North America and in IPR licensing revenues was more than offset by sales decline in other market areas. Reported sales grew by 8%. Cloud Software and Services accounted for 22% (24%) of Group sales.

Enterprise sales adjusted for comparable units and currency grew by 16% YoY driven primarily by business area Enterprise Wireless Solutions. Reported sales grew by 147%. Enterprise accounted for 6% (3%) of Group sales. Vonage sales were SEK 7.0 b.

The share of hardware in the sales mix was 44% (46%), software 20% (20%) and services 36% (34%).

Market Areas

Sales adjusted for comparable units and currency increased in three of the five market areas.

Currency adjusted sales increased by 7% YoY in South East Asia, Oceania and India, driven by increased volumes in India on the back of significant market share gains, which compensated for lower investment levels in certain countries in the market area.

Currency adjusted sales in North East Asia decreased by -11% YoY as operators in several markets have finalized the first build-out phase of 5G.

Currency adjusted sales in North America increased by 5% YoY, driven by 5G network deployments and growth in 5G Core and cloud native solutions. Operator capex investments reached record levels in 2022, and some operators are guiding for reduction in capex investments and inventory optimization as supply chain constraints ease.

Currency adjusted sales in Europe and Latin America increased by 4% YoY with increases in both Europe and in Latin America. Sales in Networks increased as a result of high investment levels during the year and market share gains, partly offset by the decline in Russia.

Market area Other reported sales grew by 71%, driven by the acquisition of Vonage as well as increased IPR licensing revenues of SEK 10.4 (8.1) b. primarily as a result of a new patent license agreement including 5G.

Gross income

Gross income increased by SEK 4.7 b. to SEK 35.6 b. with increases in all segments. Gross margin declined to 41.4% (43.2%). The new patent license agreement including 5G had a positive margin impact in Networks and Cloud Software and Services. Gross margin in Networks decreased to 44.4% (46.3%) primarily as a result of a business mix shift on the back of market share gains in several geographies, resulting in a higher share of services sales in large rollout projects that are contributing to gross profit but are gross margin dilutive. In Cloud Software and Services gross margin declined to 33.0% (35.4%) negatively impacted by the previously announced cost for the exit of subscale agreements and product offerings as well as a less favorable business mix. Enterprise gross margin declined to 43.5% (46.2%) mainly due to the addition of Vonage with a slightly lower gross margin than the rest of the Enterprise segment.

Research and development (R&D) expenses

R&D expenses increased by SEK -1.4 b. and amounted to SEK -13.2 (-11.9) b. including a negative YoY currency effect of SEK -0.7 b. R&D expenses increased primarily in Networks due to further investments in Cloud RAN and in Ericsson Silicon (ASICs). R&D expenses were also impacted by the acquisition of Vonage and increased investments to expand the Enterprise Wireless Solutions portfolio.

Selling and administrative (SG&A) expenses

SG&A expenses increased by SEK -4.2 b. to SEK -11.8 (-7.6) b. including a negative YoY currency effect of SEK -0.6 b. The increase is mainly related to acquisition of Vonage, which impacted SG&A by SEK -2.5 b. including amortization of intangible assets of SEK -0.9 b. The increase was also due to higher compliance and legal costs as well as investments in the go-to-market organization in Enterprise Wireless Solutions.

Other operating income and expenses

Other operating income and expenses was SEK -2.8 (0.4) b. The quarter was negatively impacted by a provision of SEK -2.3 b. related to a potential DPA breach resolution with U.S. Department of Justice, including estimated expenses for the previously announced extended monitorship, and by SEK -1.0 b. due to the announced charges related to the divestment of IoT and other portfolio adjustments.

Restructuring charges

Restructuring charges amounted to SEK -0.2 (-0.5) b. in the quarter, mainly due to the announced charges related to the divestment of IoT.

EBITA

EBITA declined to SEK 9.0 (12.3) b. EBITA was impacted by previously announced charges of SEK -4.0 b. (including restructuring charges) as well as by increased operating expenses with higher R&D and increased SG&A expenses in segment Enterprise. EBITA margin declined to 10.5% (17.2%) as a result of higher charges and lower gross margin.

EBIT

EBIT decreased to SEK 7.9 (11.9) b. corresponding to an EBIT margin of 9.1% (16.6%). EBIT was impacted by SEK -1.2 (-0.4) b. of amortization of intangible assets, mainly related to Vonage.

Financial income and expenses, net

Financial net was SEK -0.5 (-0.9) b. The weakened USD to SEK resulted in a positive currency hedge effect of SEK 0.3 (-0.3) b.

Taxes

Taxes were SEK -1.2 (-0.8) b. Taxes were positively impacted by SEK 0.6 b. as a result of the utilization of previously impaired withholding tax assets in Sweden.

Net income

Net income decreased to SEK 6.2 (10.1) b. and EPS diluted declined to SEK 1.82 (3.02).

Employees

The number of employees on December 31, 2022, was 105,529 compared with 104,490 on September 30, 2022. The increase is mainly due to increases in service delivery for large roll-out projects.

Full-year comments

Gross income

Gross income increased to SEK 113.3 (100.7) b. with increases in all segments. Gross margin decreased to 41.7% (43.4%) negatively impacted mainly by increased component cost, inflationary pressure and large-scale projects from market share gains in Networks, as well as an impact from initial 5G Core deployment costs in Cloud Software and Services, partly offset by retroactive IPR licensing revenues.

Research and development (R&D) expenses

R&D expenses increased by SEK -5.2 b. to SEK -47.3 (-42.1) b. including a currency effect of SEK -2.1 b. R&D expenses increased primarily in Networks as a result of further investments in Cloud RAN and in Ericsson Silicon (ASICs) as well as in Enterprise, with acquisition of Vonage and increased investments in Enterprise Wireless Solutions.

Selling and administrative (SG&A) expenses

SG&A expenses increased by SEK -8.7 b. to SEK -35.7 (-27.0) b. including a currency effect of SEK -1.7 b. The increase is mainly related to acquisition of Vonage (SEK -4.3 b.), investments in go-to-market organization for Enterprise Wireless Solutions and increases in compliance and legal expenses.

Other operating income and expenses

Other operating income and expenses was SEK -3.3 (0.4) b. impacted by SEK -2.3 b. due to a provision in relation to a potential DPA breach resolution with U.S. Department of Justice, including estimated expenses for the previously announced extended monitorship, and by SEK -1.0 b. due to the announced charges related to the divestment of IoT and other portfolio adjustments.

Share in earnings of JVs and associated companies was SEK 0.0 (-0.3) b.

Restructuring charges

Restructuring charges decreased to SEK -0.4 (-0.5) b.

EBITA

EBITA declined to SEK 29.1 (33.3) b. with an EBITA margin of 10.7% (14.3%). EBITA was impacted by previously announced charges of SEK -5.5 b. during the year (of which SEK -4.0 b. in Q4) and increased operating expenses with higher R&D as well as increased SG&A expenses in segment Enterprise, mainly from acquisition of Vonage.

EBIT

EBIT decreased to SEK 27.0 (31.8) b. YoY with an EBIT margin of 10.0% (13.7%). EBIT was impacted by SEK -2.1 (-1.4) b. of amortization of intangible assets, mainly related to Vonage.

Financial income and expenses, net

Financial net improved by SEK 0.1 b. to SEK -2.4 (-2.5) b., mainly due to foreign exchange revaluation effects. The currency hedge effect impacted financial net by SEK -0.9 (-0.8) b. The USD strengthened against the SEK between December 31, 2021 (SEK/USD rate 9.05) and December 31, 2022, (SEK/USD rate 10.38).

Taxes

Taxes were SEK -5.5 (-6.3) b. positively impacted by utilization of previously impaired withholding tax assets in Sweden. The effective tax rate in 2022 was 22%, compared with 21% in 2021.

Net income

Net income declined to SEK 19.1 (23.0) b. EPS diluted was SEK 5.62 (6.81) and Adjusted EPS was SEK 6.16 (7.26).

Employees

The number of employees on December 31, 2022, was 105,529, a total increase of 4,207 employees compared with December 31, 2021. The increase is mainly driven by the acquisition of Vonage and increases in service delivery.

Fourth quarter comments

Net sales

Sales adjusted for comparable units and currency grew by 1%, of which IPR revenues contributed with 6 percentage points. Double-digit growth in South East Asia, Oceania and India, on the back of market share gains, was offset by lower operator capex and impact of initial reduction of inventory levels, primarily in front-runner 5G markets. Reported sales increased by 15%.

After fast build-out of 5G in 2022, some of Ericsson’s customers are guiding for lower capex in light of macroeconomic headwinds. In addition, operators are expected to continue to reduce inventories as supply chain constraints are easing. This adjustment started in Q4 and is expected to last a few quarters. Consequently, near-term outlook is uncertain especially for the first half of 2023. In the longer-term, capex is driven by traffic growth, and thus is expected to normalize. The typical seasonality decline in sales between Q4 and Q1 is expected to be more pronounced in 2023, even when adjusting for the retroactive IPR licensing revenues in Q4.

Gross income

Gross income increased by SEK 2.4 b. to SEK 26.1 b. primarily driven by retroactive IPR licensing revenues. Gross margin decreased to 44.4% (46.3%). The decrease in gross margin was caused by a business mix shift, following slowdown in front-runner markets, in combination with market share gains in several geographies. The market share gains contribute to gross profit but are gross margin dilutive in the early stages. Inflationary cost pressure continued but was largely offset by commercial initiatives like product substitution. The new patent license agreement including 5G had a positive margin impact.

It is anticipated that the high inflation impact on cost remains in the coming quarters but will be largely mitigated by commercial initiatives. The change in business mix, resulting from market share gains, will continue during the first half of 2023 and gross margin in the first quarter is expected to be in the range of 40-42%. Market share gains with large-scale projects in early stages tend to have a dilutive impact on gross margins while contributing to increased gross income.

EBIT

EBIT increased to SEK 12.5 (11.8) b. with a decrease in EBIT margin to 21.2% (23.0%).

Operating expenses increased by SEK -1.8 b. to SEK -13.7 b. (including a negative currency impact of SEK -0.7 b.), primarily due to higher investments in R&D in Cloud RAN and in Ericsson Silicon (ASICs).

Full-year comments

Net sales

Reported sales increased by 15% in 2022, to SEK 193.5 (167.8) b. Growth was driven primarily by market share gains in North America, Europe and Latin America, South East Asia, Oceania and India as well as by increased IPR licensing revenues. Sales adjusted for comparable units and currency increased by 4%.

Gross income

Gross income increased by SEK 7.5 b. to SEK 86.4 b. while gross margin decreased to 44.6% (47.0%). Gross margin was impacted by increased component cost, inflationary pressure, and investment in supply chain resilience, partly offset by higher share of IPR licensing revenues in the sales mix and commercial activities. Large scale projects from market share gains had a dilutive impact on the gross margin.

EBIT

EBIT increased to SEK 38.5 (37.3) b., with a decrease in EBIT margin to 19.9% (22.2%), impacted by lower gross margin.

Operating expenses increased by SEK -6.4 b. to SEK -48.3 b. (including a negative currency impact of SEK -2.0 b.), primarily due to higher investments in R&D in Cloud RAN and in Ericsson Silicon (ASICs). Networks EBIT margin exceeded the 2022 target of 16-18%.

Fourth quarter comments

Net sales

Sales adjusted for comparable units and currency grew by 2%, of which IPR licensing revenues contributed with 4% percentage points. Sales grew in market area North America, while sales in the other market areas declined due to timing of project milestones as well as contract descoping and renegotiations in managed services. Reported sales increased by 13%.

Typical seasonality decline in sales between Q4 and Q1 is expected, when adjusting for the retroactive IPR licensing revenues in Q4.

Gross income

Gross income increased by SEK 0.3 b., while gross margin declined to 33.0% (35.4%). Gross margin was negatively impacted by the previously announced charges for the exit of subscale agreements and product offerings in line with the revised strategy for the segment. In addition, there was a negative impact by a less favorable business mix, partly offset by retroactive IPR licensing revenues.

EBIT

EBIT was SEK 0.7 (0.6) b. with a stable EBIT margin of 3.3%. EBIT was impacted by the previously announced charges of SEK -0.8 b. as a result of continued execution of the Cloud Software and Services revised strategy.

Operating expenses increased by SEK -0.2 b. to SEK -6.0 b. including a negative currency impact of SEK -0.3 b.

Full-year comments

Net sales

Reported sales increased by 8% to SEK 60.5 b. in 2022. Sales adjusted for comparable units and currency decreased by -1%. Sales growth in market area North America and higher IPR licensing revenues, were offset by sales decline in managed networks services business as a result of descoping and contract exits.

Gross income

Gross income increased by SEK 1.3 b. to SEK 20.1 b. Gross margin was stable at 33.2% (33.5%). Positive impact from higher share of IPR licensing revenues in the sales mix was offset by initial 5G Core deployment costs.

EBIT (loss)

EBIT was SEK -1.7 (-2.2) b. with an EBIT margin of -2.8% (-4.0%). EBIT was negatively impacted by a previously announced cost of SEK -0.8 b. as a result of continued execution of the Cloud Software and Services revised strategy. The strategy includes limiting subscale software development, accelerating automation to reduce deployment and maintenance efforts, and changing focus from market share gains to profitable business.

Operating expenses increased by SEK -0.7 b. to SEK -21.9 b. (including a negative currency impact of SEK -1.0 b.).

Fourth quarter comments

Net sales

Sales adjusted for comparable units and currency increased by 15% YoY, with growth in all business areas. Reported sales increased by SEK 4.8 b. YoY driven primarily by Vonage contributing SEK 4.1 b., and by organic growth in Enterprise Wireless Solutions.

The Vonage Communications Platform (VCP) grew by 13% in USD YoY. We continue to invest in line with our strategic imperative to build the Global Communication Platform.

Gross income

Gross income increased by SEK 2.0 b. to SEK 2.9 b. driven mainly by the Vonage acquisition. Gross margin decreased to 43.5% (46.2%) mainly due to the addition of Vonage with slightly lower gross margin than the rest of the Enterprise segment.

EBITA (loss)

EBITA (loss) was SEK -1.9 (-0.6) b. The decline is mainly due to the announced charges related to the divestment of IoT and other portfolio adjustments impacting EBITA by SEK -1.0 b., and growth investments in Enterprise Wireless Solutions.

EBIT (loss)

EBIT (loss) was SEK -2.9 (-0.8) b. impacted by amortization of intangible assets of SEK -1.1 b., from acquired businesses.

Amortization of intangible assets is expected to be around SEK -0.8 b. related to segment Enterprise.

Full-year comments

Net sales

Sales adjusted for comparable units and currency increased by 16% in 2022, driven mainly by Enterprise Wireless Solutions. Reported sales increased by 147% YoY driven by the acquired Vonage business. Reported sales growth exceeded 70% YoY in Enterprise Wireless Solutions.

Gross margin

Gross margin decreased to 45.2% (46.4%) mainly due to the dilutive effect of Vonage.

EBITA (loss)

EBITA (loss) was SEK -4.5 (-2.3) b. The decline is mainly due to announced charges related to the divestment of IoT and other portfolio adjustments as well as increased growth investments in Enterprise Wireless Solutions and Vonage acquisition related costs.

EBIT (loss)

EBIT (loss) was SEK -6.2 (-3.0) b. impacted by amortization of intangible assets from acquired businesses.

Fourth quarter comments

Net sales

Sales adjusted for comparable units and currency increased by 10% YoY. Reported sales increased by 18% YoY to SEK 0.6 b.

Gross income

Gross income remained stable with a slight loss. Gross margin was -2.3% (-3.3%).

EBIT (loss)

Reported EBIT (loss) was SEK -2.3 (0.3) b. impacted by a provision of SEK -2.3 b. in relation to potential DPA breach resolution with U.S. Department of Justice, including estimated expenses for the previously announced extended monitorship.

EBIT in Q4 2021 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.

Full-year comments

Net sales

Sales adjusted for comparable units and currency increased by 3% compared to 2021. Sales in the media business were stable. Reported Sales increased by 8%.

Gross income

Gross income decreased by SEK -0.3 b. primarily due to the previously announced charges related to a market exit (SEK -0.2 b.). For this reason, gross margin decreased to -5.7% compared to 7.9% in 2021.

EBIT (loss)

Reported EBIT (loss) was SEK -3.6 (-0.3) b. impacted by a provision of SEK -2.3 b. in relation to potential DPA breach resolution with U.S. Department of Justice including estimated expenses for the previously announced extended monitorship. Furthermore, there was an impact of SEK -0.9 b for a provision in Q1, related to exit from operations in Russia and a previously announced market exit cost of SEK -0.2 b in Q3.

Fourth quarter comments

Cash flow from operating activities

Cash flow from operating activities was SEK 19.9 (15.2) b. Cash flow was supported by a decrease in working capital, driven by reduction in inventory, high cash collection from customers and a retroactive IPR payment as a result of a new contract with one licensee in Q4. The positive effect was partly offset by lower EBIT and a settlement with the US Federal Trade Commission (FTC) on historic consumer practices in Vonage with a negative cash effect of SEK -1.1 b. Taxes paid were SEK -1.9 (-1.2) b.

Free cash flow

Free cash flow before M&A was SEK 16.9 (13.5) b. Capex net and other investing activities was SEK -2.3 (-1.1) b., mainly related to investment in test equipment and capitalization of development expenses. Repayment of lease liabilities was SEK -0.8 (-0.6) b. M&A activities were SEK -0.4 (0.2) b. and Free cash flow after M&A was SEK 16.4 (13.7) b.

Cash flow from investing activities

Cash flow from investing activities was SEK -11.9 (-2.7) b. mainly as a result of purchases of interest-bearing securities.

Cash flow from financing activities

Cash flow from financing activities was SEK -3.9 (-4.9) b. including repayment of lease liabilities. Dividends paid amounted to SEK -4.2 (-3.4) b. and were related to the second installment (SEK 1.25 per share) of dividend for 2021.

Full-year comments

Cash flow from operating activities

Cash flow from operating activities was SEK 30.9 (39.1) b., following an increase in working capital mainly as a result of a decision to strengthen the supply chain resilience in view of global component shortage. In addition, the lower EBIT and higher taxes paid affected cash flow negatively compared with 2021.

Accounts receivable days of sales outstanding decreased to 61 (71) days while inventory turnover days increased to 93 (88) and payable days decreased to 85 (94). This resulted in an increase in working capital days to 69 (65) days.

Free cash flow

Free cash flow before M&A was SEK 22.2 (32.1) b. or 8.2% (13.8%) in relation to sales, compared with the long-term target of 9-12%. Capex net and other investing activities was SEK -6.1 (-4.6) b. Repayment of lease liabilities was SEK -2.6 (-2.4) b. The increase is related to higher interest rates for property leases.

Free cash flow after M&A was SEK -29.5 (32.1) b. The decrease is primarily a result of the acquisition of Vonage in July 2022.

Cash flow from investing activities

Cash flow from investing activities was SEK -34.4 (-19.9) b. due to the acquisition of Vonage with a purchase price paid of SEK -51.3 b., partly compensated by disposal of interest-bearing securities.

Cash flow from financing activities

Cash flow from financing activities was SEK -15.9 (-9.3) b. including repayment of lease liabilities. During the year, dividends of SEK -8.4 (-6.9) b. were paid to shareholders. The net impact on cash flow from issuance and repayment of long-term debt, including repayment of debt related to Vonage, was SEK -5.3 b.

Fourth quarter comments

On the back of solid operating cash flow generation, net cash increased by SEK 9.9 b. QoQ to SEK 23.3 b., including payment of remaining part of dividends of SEK -4.2 b.

Gross cash increased by SEK 10.4 b. QoQ to SEK 56.2 b.

Liabilities for post-employment benefits increased to SEK 27.4 b. from SEK 25.1 b. in the quarter, due to changes in demographic assumptions and experience adjustments. 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 liabilities for post-employment benefits would have been approximately SEK 10.9 b. (SEK 16.5 b. lower than the reported liabilities).

In the quarter, Ericsson established a Green Financing Framework to enable financing of investments in energy-efficient technologies, such as 4G, 5G and future 6G, and renewable energy solutions. See press release in section Other information.

Full-year comments

Gross cash decreased to SEK 56.2 (97.6) b. due to the acquisition of Vonage, repayment of Vonage debt and dividends paid to Ericsson shareholders. The decrease was partly compensated by positive free cash flow. Net cash was SEK 23.3 (65.8) b.

Liabilities for post-employment benefits decreased to SEK 27.4 (36.1) b. primarily due to higher discount 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 liabilities for post-employment benefits would have been approximately SEK 10.9 b. (SEK 16.5 b. lower than the reported liabilities).

The average maturity of long-term borrowings was 3.8 years as of December 31, 2022, an increase from 3.5 years 12 months earlier.

In February 2022, Ericsson issued a EUR 750 m. (SEK 7.8 b.) bond maturing in February 2027. In May 2022, Ericsson repaid its USD -1.0 b. (SEK -10.0 b.) bond.

In July 2022, Ericsson completed the acquisition of Vonage. The cash effect on the day of the acquisition amounted to SEK -51.3 b., adjusted by a positive cash flow hedge release of SEK 3.7 b. Following the acquisition, a Vonage debt of USD -0.6 b. (SEK -5.9 b.) was repaid.

Ericsson has an unutilized revolving credit facility of USD 2.0 b., linked to two of Ericsson’s long-term sustainability goals. The facility is set to expire in 2027 with a one-year extension option.

Ericsson has established a commercial paper program for short-term borrowing. The program is a complement to Ericsson funding and has not yet been utilized.

Standard & Poor’s (S&P) and Fitch both have a long-term BBB- rating on Ericsson with developing outlook from S&P and a stable outlook with Fitch. Moody’s has a Ba1 rating with stable outlook.

The capital turnover increased to 1.4 (1.3) times, while Return on Capital Employed (ROCE) decreased to 14.0% (18.4%) as a result of higher capital employed and lower EBIT.

Market related

The global RAN equipment market is estimated to decline by -1% (0%) in 2023. North America is expected to decline by -7% (-5%), Europe by 0% (4%) and Mainland China by -4% (-2%). Source: Dell’Oro Mobile RAN 5-year forecast, Jan 2023. Numbers in parenthesis are from Dell’Oro Mobile RAN 5-year forecast, July 2022.

Ericsson related

Net sales

Reported average seasonality last 3 years (2020–2022), %

Net sales may show large variations between quarters, including currency changes.

Operating expenses excluding Vonage and restructuring

Reported average seasonality last 3 years (2020–2022), SEK b.

Positive numbers = decrease in operating expenses.

Negative numbers = increase in operating expenses

Operating expenses may show large variations between quarters, including currency changes.

Amortization of intangible assets

Amortization of intangible assets is expected to continue to be around SEK -0.9 b. per quarter, based on currency rates

December 31, 2022, for Ericsson group in 2023, of which around SEK -0.8 b. related to segment Enterprise.

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.

Parent Company

Income after financial items January–December 2022, was SEK 18.4 (9.3) b.

At the end of the year, gross cash (cash and cash equivalents plus interest-bearing securities, current and non-current) amounted to SEK 41.4 (80.5) b.

There was a decrease in intercompany lending of SEK 2.5 b. and an increase in intercompany borrowing of SEK 0.3 b. in the fourth quarter.

A provision was made in the quarter of SEK -2.3 billion (approx. USD 220 million) in relation to a potential resolution with the U.S. Department of Justice (DOJ) regarding previously announced, non-criminal, alleged breaches under its 2019 Deferred Prosecution Agreement (DPA). This provision also includes estimated expenses for the previously announced independent Compliance Monitorship extension.

The holding of treasury stock on December 31, 2022, was 4,009,306 Class B shares.

Dividend, AGM, and Annual Report

Dividend proposal

The Board of Directors proposes to the Annual General Meeting a dividend to the shareholders of SEK 2.70 (2.50) per share for the financial year 2022, representing a total dividend of approximately SEK 9.0 (8.3) b. The dividend is proposed to be paid in two installments, SEK 1.35 per share with the record date March 31, 2023, and SEK 1.35 per share with the record date September 29, 2023. Should the Annual General Meeting decide in favor of the proposal, payment of the dividend is expected to be made on April 5, 2023, and on October 4, 2023. The dividend considers this year’s earnings and balance sheet structure, as well as coming years’ business plans and expected economic development.

Ericsson Annual General Meeting

The Annual General Meeting of shareholders will be held on March 29, 2023. Additional information about the Annual General Meeting of shareholders will be made available on Ericsson’s website.

Annual Report

The annual report will be made public and available on the Ericsson website www.ericsson.com in the first week of March.

Other information

Legal proceedings

On December 9, 2022, Ericsson and Apple reached a multi-year, global patent license agreement between the two companies. The agreement includes a cross-license relating to patented cellular standard-essential technologies and grants certain other patent rights. Furthermore, Ericsson and Apple have mutually agreed to strengthen their technology and business collaboration, including in technology, interoperability and standards development. This settlement ends the lawsuits filed by both companies in several countries, including in the United States District Court of the Eastern District of Texas, as well as the complaints filed before the United States International Trade Commission (USITC).

On March 3, 2022, Telefonaktiebolaget LM Ericsson and certain officers of Ericsson were named as defendants in a putative class action filed on behalf of investors in Ericsson securities in the United States District Court for the Eastern District of New York. An amended complaint was filed on September 9, 2022, which added a former Ericsson officer as defendant. The amended 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 anti-corruption policies and obligations and the conduct of its business in Iraq. In December 2022, Ericsson filed a motion to dismiss the complaint.

In August 2022, a civil lawsuit was filed in the United States District Court for the District of Columbia against Telefonaktiebolaget LM Ericsson and Ericsson Inc. The lawsuit was brought by US military service members and employees of US government contractors who were killed or injured in terrorist attacks in Iraq, Afghanistan and Syria from 2005 to 2021, as well as by their family members. The lawsuit asserts claims against Ericsson under the US Anti-Terrorism Act alleging that Ericsson made payments that ultimately aided the terrorist organizations that committed, planned or authorized the attacks. In November 2022, Ericsson filed a motion to dismiss the complaint. On December 20 2022, plaintiffs filed an amended complaint, which added additional plaintiffs, named Ericsson AB, CEO Börje Ekholm and a former employee as additional defendants and also asserted additional allegations and claims.

As part of its defense to a now settled patent infringement lawsuit filed by Ericsson in 2013 in the Delhi High Court against Indian handset company Micromax, Micromax filed a complaint against Ericsson with the Competition Commission of India (CCI). The CCI decided to refer the case to the Director General’s Office for an in-depth investigation. The CCI opened similar investigations against Ericsson in January 2014 based on claims made by Intex Technologies (India) Limited and, in 2015, based on a now settled claim from iBall. Ericsson has challenged CCI’s jurisdiction in these cases before the Delhi High Court and is awaiting a decision on the appeal of the first instance court’s decision.

In April 2019, Ericsson was informed by China’s State Administration for Market Regulation (SAMR) Anti-monopoly bureau that SAMR has initiated an investigation into Ericsson’s patent licensing practices in China. Ericsson is cooperating with the investigation, which is still in a fact-finding phase. The next steps include continued fact finding and meetings with SAMR in order to facilitate the authority’s assessments and conclusions.

In addition, the Company continues to negotiate with the DOJ in relation to a potential resolution regarding previously announced, non-criminal, alleged breaches under the DPA, as further described in Note 5 (Provisions) on page 41 of the Report.

In addition to the proceedings discussed above, the Company is, and in the future may be, involved in various other regulatory investigations, lawsuits, claims and proceedings incidental to the ordinary course of business. For information on risks e.g. relating to internal investigations, lawsuits, claims and proceedings, see the chapter Risk factors.

Press releases

Dec 7, 2022, | Aeris to acquire IoT business from Ericsson

Ericsson (NASDAQ: ERIC) and Aeris Communications, a leading provider of Internet of Things (IoT) solutions based in San Jose, California, have signed an agreement for the transfer of Ericsson’s IoT Accelerator and Connected Vehicle Cloud businesses.

Ericsson IoT Accelerator is used by over 9,000 enterprises to manage more than 95 million connected devices with 22 million eSIM connections globally. These enterprises and connections leverage Ericsson’s growing ecosystem of over 35 communications service provider partners for global IoT cellular connectivity. Connected Vehicle Cloud is the most complete connected car platform on the market today, with frontrunners in automotive IoT using it to connect six million vehicles and counting across 180 countries.

Founded in 1996, Aeris is an expert in the IoT field, providing businesses with intelligent IoT cellular connectivity. Its solution stack is being brought to the market through an ecosystem of channel partners, communications service providers and direct sales organizations. Aeris’ Intelligent IoT Network, targeting industry verticals such as transportation, energy, automotive and healthcare, gives communications service providers the opportunity to monetize new services on top of connectivity enabled by the IoT Accelerator. The company has already teamed up with several leading communication service providers including Softbank, AT&T, T-Mobile, and Vodafone, and is also working with leading automotive original equipment manufacturers.

Together, Aeris’ and Ericsson’s IoT platforms will connect over 100 million IoT devices worldwide, covering 190 countries. For customers, this provides the stability, reliability and global scale needed to support the full lifecycle of IoT programs across multiple industries, use cases and geographies. Through the transaction, Aeris will become a market leader in IoT, generate strong market synergies, and further simplify IoT for 9,400 enterprises by providing them with a global, feature rich platform with secure, reliable, and intelligent IoT solutions. To communications service providers, the transaction of Ericsson’s IoT businesses to Aeris will result in a strong partner that continues to provide their customers with a leading IoT connectivity platform, while also offering new value-added services to help grow IoT revenue streams.

Åsa Tamsons, Head of Business Area Technologies & New Businesses at Ericsson, says: “Aeris has been successful in extending its IoT solution offering beyond connectivity and has the right focus, assets, and capabilities to realize the full value creation potential of Ericsson’s IoT business and its strong market presence. Despite significant investments to address the fragmentation of the IoT market, Ericsson has only tapped into a limited part of the value chain, limiting the returns of such investments. The combined business will offer an unparalleled IoT platform for enterprises and new revenue streams for communication service providers, ultimately benefiting Ericsson’s customers. Aeris is a good home for our IoT business.”

With the cellular IoT market being a rather fragmented sector, a consolidation of two industry leading players is expected to accelerate the IoT market overall. IoT will be a fundamental and growing part of the 4G and 5G market.

Marc Jones, President and CEO of Aeris, says: “Building the best technology to support the success of our customers and drive innovation in the IoT space have always been at the forefront for Aeris. Our intelligent, software defined IoT network and Ericsson’s leading connectivity management platform will provide the leading IoT technology stack in the industry. We look forward to bringing these new, transformational IoT solutions and Ericsson’s IoT Accelerator and Connected Vehicle Cloud products to our customers.”

The transaction includes the transfer of Ericsson’s assets and employees in its IoT business to Aeris. In addition, Ericsson intends to support Aeris with transition services and will acquire a small stake in the company. The transaction is expected to close in the first quarter of 2023.

The IoT business, with 2022 full year forecasted net sales of SEK 0.8 billion, has been the key driver of the losses in Business Area Technologies and New Businesses in the Enterprise segment. The transaction will eliminate quarterly losses of SEK 0.25 billion. The divestment, related cost and other portfolio optimizations will lead to a negative one-time EBIT impact of SEK 1.1 billion in Q4 2022, of which 80 percent being cash and the majority occurring in Q1 2023. The IoT business will be transferred to Segment Other in Q1 2023 in anticipation of closing of the transaction, with an expected EBIT loss of SEK 0.25 billion during the first quarter.

More information about Aeris Communications

Aeris to acquire IoT business from Ericsson

Dec 9, 2022 | Changes to Ericsson’s Nomination Committee

Effective December 9, 2022, Niko Pakalén will replace Jonas Synnergren as representative for Cevian Capital Partners Limited in Ericsson’s (NASDAQ:ERIC) Nomination Committee.

The Nomination Committee now consists of:

Johan Forssell, Investor AB;

Karl Åberg, AB Industrivärden;

Anders Oscarsson, AMF – Tjänstepension och Fonder;

Niko Pakalén, Cevian Capital Partners Limited; and

Ronnie Leten, the Chair of the Board of Directors

Johan Forssell is the Chair of the Nomination Committee.

Changes to Ericsson’s Nomination Committee

Dec 9, 2022 | Ericsson and Apple sign global patent license agreement

Ericsson (NASDAQ: ERIC) and Apple have reached a multi-year, global patent license agreement between the two companies. The agreement includes a cross-license relating to patented cellular standard-essential technologies and grants certain other patent rights.

Furthermore, Ericsson and Apple have mutually agreed to strengthen their technology and business collaboration, including in technology, interoperability and standards development.

This settlement ends the lawsuits filed by both companies in several countries, including in the United States District Court of the Eastern District of Texas, as well as the complaints filed before the United States International Trade Commission (USITC).

Ericsson’s IPR licensing revenues continue to be affected by several factors, including expired patent license agreements pending renewal, the technology shift from 4G to 5G, and possible currency effects and geopolitical impact going forward. Including effects of the agreement with Apple covering sales from January 15, 2022, and including ongoing IPR business with all other licensees, Ericsson estimates the fourth quarter 2022 IPR licensing revenues will be SEK 5.5-6.0 b.

Christina Petersson, Chief Intellectual Property Officer at Ericsson says: “We are pleased to settle the litigations with Apple with this agreement, which is of strategic importance to our 5G licensing program. This will allow both companies to continue to focus on bringing the best technology to the global market.”

Over several decades, Ericsson has been a leading contributor to 3GPP and to the development of global mobile standards for the benefit of consumers and enterprises everywhere. The value of Ericsson’s patent portfolio of more than 60,000 granted patents is strengthened by our

leading position as 5G vendor, and annual investments of more than USD 4 b in R&D. The company is confident of growing its IPR revenues with new 5G agreements and by expanding into other licensing areas long term.

Ericsson and Apple sign global patent license agreement

Dec 14, 2022 | Ericsson Announces Extension of Compliance Monitorship

Ericsson (NASDAQ: ERIC) announces that it has agreed with the U.S. Department of Justice (DOJ) and Securities and Exchange Commission (SEC) to extend the term of the Company’s Independent Compliance Monitor for one year, to June 2024.

In 2019 Ericsson entered into a Deferred Prosecution Agreement (DPA) with the DOJ and a Consent Judgment with the SEC to resolve violations of the FCPA. As part of the resolution, Ericsson agreed to engage an independent compliance monitor for a period of three years while the Company strengthened its culture and established a rigorous anti-corruption, compliance and controls program.

This extension will allow the company, under the monitorship, to further embed best in class governance, risk management and compliance frameworks across the organization.

The Company remains committed to cooperating with the DOJ in connection with the resolution of the breach notification.

Börje Ekholm, President and CEO, says: “This extension is consistent with our commitment to continuous improvement of Ericsson’s Ethics and Compliance program. We have made significant progress in changing our culture and implementing an enhanced compliance framework and system of internal controls, and we will use this additional time to ensure these improvements are ingrained in our organization, our daily interactions and the way we do business. We want to get this right and, to be a true industry leader, we have to conduct our business in the right way.”

Ronnie Leten, Chair of the Board of Directors, says: “We are dedicated to acting with integrity in everything we do and continuing to align business operations with strengthened internal controls, governance and risk management processes. Our work with the monitor has meaningfully advanced our Ethics and Compliance program, and we welcome this extension of our engagement with the monitor.”

Ericsson Announces Extension of Compliance Monitorship

Dec 15, 2022 | Ericsson Capital Markets Day 2022

Ericsson (NASDAQ: ERIC) hosts a Capital Markets Day on December 15, 2022. Executives from across the company join President and Chief Executive Officer, Börje Ekholm, to share insights on the company’s strategic priorities for extending its leadership in mobile infrastructure, executing on its ambitions in the high-growth enterprise segment, and driving continued cultural change.

Ericsson’s strategy is to leverage leadership in mobile networks, drive focused expansion in enterprise, lead the industry with critical innovations, and capture strategic business opportunities

Ericsson continues to execute on its Enterprise strategy organized around two pillars, each leveraging the Company’s strength in mobile networks: First, Enterprise Wireless Solutions, where Ericsson is driving business transformation through seamless secure network solutions addressing the multi-billion dollar opportunity of enterprise 5G. Second, the Global Network Platform, where Ericsson will be able to monetize 5G in new ways by transforming how network features such as speed and latency are globally exposed, consumed and paid for. With the completion of the Vonage acquisition, the cloud communication portfolio, including the communication platforms as a service (CPaaS) with its developer community, provides the business foundation to realize this ambition. Transforming Ericsson into a platform company creates a virtuous circle with new revenue streams for operators to monetize their network investments.