Our strategy to invest in technology leadership and grow market share in our core business underpinned a robust financial performance in 2021 and ensured a good Q4 for Ericsson overall. Our commitment to pursue value from growth in wireless enterprise took a significant step forward with the announcement of our ambition to acquire Vonage, which will give us the foundation to develop a Global Network Platform to drive innovation on top of the 5G networks. This adds to already strong progress in 2021 in our organic enterprise portfolio - Dedicated Networks and IoT - and follows the successful integration of Cradlepoint. With a full-year EBIT margin² of 13.9%, we reached our 2022 target one year early, while absorbing significantly increased investments in R&D, Enterprise, cybersecurity and compliance. Fourth quarter organic sales¹ grew by 2%, gross margin² improved to 43.5% (40.6%), the EBIT margin² reached 17.3% (15.8%) and free cash flow before M&A amounted to SEK 13.5 (12.8) b.

Networks sales¹ grew organically by 3% in Q4, despite considerably lower volumes in Mainland China. Gross margin² improved to 46.4% (43.5%). The 2021 financial performance and continued market share gains outside of Mainland China are underpinned by our investments in technology leadership. We have so far been able to mitigate the inflationary pressure by continuously evolving our product portfolio. We strengthened our industry-leading portfolio during the year with ultra-light, energy-efficient Massive MIMO radios for enhanced network performance and our new Cloud RAN portfolio for 5G mid band.

In Q4, Digital Services organic sales¹ were stable YoY. Excluding sales in Mainland China, where we had considerably lower volumes, sales¹ increased by 3% YoY in the fourth quarter. Fourth quarter gross margin² improved to 43.4% (41.0%) with a positive EBIT² of SEK 0.4 b. During 2021 we continued to invest in R&D, particularly for the cloud native offerings and our portfolio is now substantially transformed compared with a few years ago. We will continue to increase investments in our 5G portfolio, including in our orchestration offerings, to further strengthen our long-term competitiveness and position us in an open world for future standards and technologies. We expect profitability to gradually improve and over time exceed our original EBIT margin² target of
10–12%.

Managed Services delivered a gross margin² of 18.9% (17.7%) in Q4. For the full year of 2021 organic sales¹ declined by -6% as new deals did not offset lower customer demand, contract rescoping and planned exits. To grow profits, we will accelerate the ongoing transformation towards a more software-driven offering with higher margin potential.

Emerging Business and Other delivered an improved gross margin² of 35.2% (33.8%) in Q4. For full-year 2021, gross margin² improved to 37.3% (28.0%), where Cradlepoint’s performance is the main contributor. We are seeing increasing momentum for our 5G portfolio in Dedicated Networks and Cradlepoint.

IPR revenues amounted to SEK 2.4 (2.6) b., including a new smaller agreement with retroactive impact. With our strong position in 5G and leading, broad patent portfolio we believe we are well positioned to conclude pending and future patent license renewals. Ericsson’s IPR    

licensing revenues continue to be affected by several expiring patent license agreements pending renewal and 5G license negotiations. This will lead to estimated revenues from IPR licensing of SEK 1.0-1.5 b. in Q1, unless renewals are signed in the first quarter. The actual financial impact will depend on the timing as well as terms and conditions of new agreements.

In October, we received correspondence from the Department of Justice that we had breached our obligations under the Deferred Prosecution Agreement by failing to provide certain documents and factual information. At this point in time, we cannot provide further information or predict the outcome. We continue to invest in improving our Ethics and Compliance program in accordance with our strategy and objectives. We are firmly committed to continuously develop and improve in the years to come to ensure a sustainable compliance program.

Free cash flow before M&A was SEK 32.1 (22.3) b. for full-year 2021, the highest in Ericsson’s history, further strengthening the net cash position to SEK 65.8 (41.9) b. During the last few years, our strategy has been to increase the flexibility of our business and reduce the capital tied up in the business. Consequently, we are now able to operate the Company with less capital than in the past. The Board will propose a dividend of SEK 2.50 (2.00) per share to the AGM, underlining the confidence in Ericsson’s business going forward.

Based on current business momentum, we expect fundamentals to remain strong in our core mobile infrastructure business during 2022. We will continue to increase investments in R&D to sustain our technology leadership and strengthen our competitive position to take advantage of the rollout of 5G networks. At the same time, we will continue our efforts to expand our presence in the enterprise market. Over time, we expect the enterprise segment to provide higher growth and profitability than our mobile infrastructure business. The Group EBIT target² for 2022 of 12-14% remains, excluding the Vonage-related segment. With the different business mix compared to when we set the 2022 target back in 2018, the target becomes less relevant, and our key focus is therefore now to accelerate the pace towards reaching our long-term target of EBITA margin² of 15-18%. After delivering an EBITA margin² of 14.6% in 2021, our ambition is to reach the long-term target no later than in 2-3 years. At that time, we will have a higher growth profile as a company.

2021 was a successful year for Ericsson and I want to take this opportunity to thank all my colleagues who relentlessly delivered on customer commitments while navigating through supply chain challenges and a raging pandemic. I am proud to be part of this team!

Stay healthy and well.

Börje Ekholm

President and CEO

Fourth quarter comments

Group reported sales increased by 3% YoY to SEK 71.3 b. Sales adjusted for comparable units and currency grew by 2%, driven primarily by 5G deployments in market areas North America and Europe and Latin America as well as by growth in Digital Services in Middle East and Africa. Sales in Mainland China in Networks and Digital Services declined by SEK -1.8 b., impacting the growth rate adjusted for comparable units and currency by -3 percentage points.

IPR licensing revenues decreased to SEK 2.4 (2.6) b. Revenues in the quarter were negatively impacted by an expired contract with a licensee exiting the market and by currency, and positively by retroactive revenues for unlicensed periods from a smaller patent license agreement signed in the quarter.

Networks sales adjusted for comparable units and currency increased by 3% driven primarily by sales growth in North America and Europe and Latin America. The loss of market share in Mainland China impacted the growth rate adjusted for comparable units and currency by -3 percentage points. Networks accounted for 72% (71%) of Group sales.

Digital Services sales adjusted for comparable units and currency were stable YoY. Sales growth in Middle East and Africa and in South East Asia, India and Oceania was to a large extent offset by lower sales in North East Asia driven by loss of market share in Mainland China, which impacted the growth rate adjusted for comparable units and currency by -3 percentage points. Digital Services accounted for 18% (18%) of Group sales.

Managed Services sales adjusted for comparable units and currency decreased by -8%, mainly due to lower customer demand and contract rescoping. Managed Services accounted for 7% (8%) of Group sales.

Emerging Business and Other sales adjusted for comparable units and currency increased by 16%, driven by Cradlepoint and iconectiv. Emerging Business and Other accounted for 3% (2%) of Group sales.

Sequentially, Group reported sales increased by 27% with growth across all market areas and segments.

Full-year comments

Reported sales were stable at SEK 232.3 (232.4) b. Sales in Mainland China declined by SEK -7.7 b., impacting Group growth rate adjusted for comparable units and currency by -3 percentage points.

Networks sales increased by SEK 1.9 b. or 1% to SEK 167.8 b., with a negative impact of SEK -6.4 b. from reduced market share in Mainland China. Digital Services sales decreased by SEK -1.2 b. or -3% to SEK 36.2 b., with an impact of SEK -1.3 b. due to the reduced market share in Mainland China. Managed Services sales decreased by SEK -2.2 b. or -10% to SEK 20.4 b. Emerging Business and other sales increased by SEK 1.5 b. or 22%, driven mainly by Cradlepoint. Sales adjusted for comparable units and currency increased by 4%.

IPR licensing revenues declined to SEK 8.1 (10.0) b. mainly due to lower volumes with one licensee.

Networks sales adjusted for comparable units and currency increased by 7%. Sales growth was driven primarily by North America, Europe and Latin America. Networks accounted for 72% (71%) of Group sales.

Digital Services sales adjusted for comparable units and currency increased by 1%. Sales increased in Europe and Latin America and in Middle East and Africa. Digital Services accounted for 16% (16%) of Group sales.

Managed Services sales adjusted for comparable units and currency declined by -6%, mainly due to reduced variable sales in a large contract in North America, post the merger between two operators. Contract rescoping and planned exits also contributed to the sales decline. Managed Services accounted for 9% (10%) of Group sales.

Emerging Business and Other sales adjusted for comparable units and currency grew by 11% with improvements in Emerging Businesses. Emerging Business and Other accounted for 3% (3%) of Group sales.

In the market area dimension, sales growth was driven by North America and Europe and Latin America.

The sales mix by commodity was: hardware 46% (41%), software 20% (22%) and services 34% (37%).

Fourth quarter comments

Gross margin

Reported gross margin was 43.2% (40.6%). Gross margin excluding restructuring charges improved to 43.5% (40.6%) with margin improvements in all segments. The increase in Networks gross margin was a result of continued strong operational leverage and a higher share of product sales. In Digital Services an increased share of software sales, in line with the strategy, supported the higher margin. Managed Services gross margin improved mainly as an effect of efficiency gains.

Sequentially, reported gross margin decreased to 43.2% from 44.0%. Gross margin in Q3 was positively impacted by a high share of licensing revenues in the sales mix.

Research and development (R&D) expenses

R&D expenses amounted to SEK -11.9 (-10.4) b. R&D expenses grew in segment Networks from increased investments in the 5G portfolio, in Digital Services due to increased investments in the cloud native 5G Core portfolio and in Emerging Business and Other as a result of the acquired Cradlepoint business and increased investments to expand the portfolio.

Selling and administrative (SG&A) expenses

SG&A expenses were SEK -7.6 (-7.4) b. Selling expenses increased through investments to expand the sales force in the acquired Cradlepoint business.

Revaluation of customer financing was SEK 0.1 (0.0) b.

Impairment losses on trade receivables

Reversal of impairment losses on trade receivables was SEK 0.1 (0.3) b.

Other operating income and expenses

Other operating income and expenses was SEK 0.4 (0.4) b. The quarter was positively impacted by a data center divestment, while Q4 2020 was impacted by a provision release related to reduced expected costs for the compliance monitor.

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

Restructuring charges

Restructuring charges amounted to SEK -0.5 (0.0) b. in the quarter, related mainly to headcount reductions in Mainland China to adjust for the lower volumes.

EBIT

Reported EBIT improved to SEK 11.9 (11.0) b. EBIT excluding restructuring charges was SEK 12.3 (11.0) b. corresponding to an operating margin of 17.3% (15.8%). The improvement was driven mainly by improved gross income in Networks.

Sequentially, reported EBIT increased to SEK 11.9 b. from SEK 8.8 b. EBIT excluding restructuring charges increased to SEK 12.3 b. from SEK 8.8 b. The increase in EBIT was driven by Networks and Digital Services.

EBITA

EBITA improved to SEK 12.3 (11.3) b. EBITA excluding restructuring charges increased to SEK 12.8 (11.3) b., corresponding to an EBITA margin excluding restructuring charges of 17.9% (16.2%).

Financial income and expenses, net

Reported financial net was SEK -0.9 (-0.1) b. The strengthened USD to SEK resulted in a negative currency hedge effect of SEK -0.3 (0.6) b.

Sequentially, financial net decreased by SEK -0.3 b. to SEK -0.9 b. mainly due to negative currency revaluation effects. The currency hedge effect was SEK -0.3 b. in the quarter, the same level as in the third quarter. The USD strengthened against the SEK between September 30, 2021 (SEK/USD rate 8.80) and December 31, 2021 (SEK/USD rate 9.05).

Taxes

Taxes were SEK -0.8 (-3.7) b. Taxes were positively impacted by SEK 1.0 b. as a result of utilization of previously impaired withholding tax assets in Sweden.

Net income

Net income improved to SEK 10.1 (7.2) b. and EPS diluted improved to SEK 3.02 (2.26) driven by lower reported taxes and improved EBIT.

Employees

The number of employees on December 31, 2021, was 101,322 compared with 102,203 on September 30, 2021. The decrease is mainly due to headcount reductions in Mainland China

Full-year comments

Gross margin

Reported gross margin increased to 43.4% (40.3%). Gross margin excluding restructuring charges improved to 43.5% (40.6%) driven primarily by strengthened operational leverage in Networks.

Research and development (R&D) expenses

R&D expenses increased to SEK -42.1 (-39.7) b. R&D expenses increased in Networks and Digital Services due to increased investments in the segments’ 5G portfolios and in Emerging Business and Other as a result of the acquired Cradlepoint business.

Selling and administrative (SG&A) expenses

SG&A expenses increased to SEK -27.0 (-26.7) b. Selling expenses increased through investments in expanding the sales force in the acquired Cradlepoint business.

Revaluation of customer financing was SEK 0.4 (-0.3) b.

Impairment losses on trade receivables

Reversal of impairment losses on trade receivables was SEK 0.0 (0.1) b.

Other operating income and expenses

Other operating income and expenses was SEK 0.4 (0.7) b.

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

Restructuring charges

Restructuring charges decreased to SEK -0.5 (-1.3) b. Restructuring charges in 2021 were mainly related to Mainland China.

EBIT

Reported EBIT improved to SEK 31.8 (27.8) b. EBIT excluding restructuring charges improved to SEK 32.3 (29.1) b. with an EBIT margin excluding restructuring charges of 13.9% (12.5%). The improvement was driven by improved gross income in segment Networks.

EBITA

EBITA improved to SEK 33.3 (29.0) b. EBITA excluding restructuring charges increased to SEK 33.8 (30.3) b. corresponding to an EBITA margin excluding restructuring charges of 14.6% (13.1%).

Financial income and expenses, net

Financial net declined to SEK -2.5 (-0.6) b., mainly due to impact from the currency hedge. The currency hedge effect impacted financial net by SEK -0.8 (1.0) b. The USD strengthened against the SEK between December 31, 2020 (SEK/USD rate 8.19) and December 31, 2021 (SEK/USD rate 9.05).

Taxes

Taxes were SEK -6.3 (-9.6) b. positively impacted by utilization of impaired withholding tax assets in Sweden. The effective tax rate in 2021 was 21%, while the effective 2020 tax rate was approximately 35%. Effective tax rate excluding utilization of impaired withholding tax assets in Sweden would have been 25%.

Net income

Net income improved to SEK 23.0 (17.6) b. driven by improved EBIT and lower reported taxes. EPS diluted was SEK 6.81 (5.26) and Adjusted EPS was SEK 7.26 (5.83).

Employees

The number of employees on December 31, 2021, was 101,322, a total increase of 498 employees compared with December 31, 2020. The increase is mainly to be found in Research and Development, which increased by 1,210 employees.

Fourth quarter comments

South East Asia, Oceania and India

Currency adjusted sales decreased by -13% YoY. Networks sales declined due to an exceptionally strong Q4 2020 and timing of orders in 2021. Sales increased in Digital Services as a result of timing of orders and project milestones, accelerated operator investments and market share gains in Australia and New Zealand. Reported sales decreased by -12%.

North East Asia

Currency adjusted sales declined by -22% YoY. Sales declined in Networks and Digital Services as a result of market share loss in Mainland China. Sales in other parts of the market area declined given the accelerated 5G deployments made in earlier quarters. Reported sales declined by -23%.

North America

Currency adjusted sales increased by 15% YoY driven by strong demand for 5G solutions in Networks. Reported sales increased by 17%.

Europe and Latin America

Currency adjusted growth was 12% YoY with 11% growth in Europe and 17% in Latin America. Sales in both Networks and Digital Services continued to grow as a result of market share gains, while sales decreased in Managed Services YoY due to rescoping of contracts. Reported sales increased by 12%.

Middle East and Africa

Currency adjusted sales increased by 5% YoY. Sales declined in Networks due to timing of 5G investments in the Middle East and was compensated by growth in African markets. Digital Services grew due to strong software upgrades in the African markets. Managed Services sales declined due to contractual renegotiations. Reported sales increased by 7%.

Other

IPR licensing revenues decreased to SEK 2.4 (2.6) b. Revenues in the quarter were negatively impacted by an expired contract with a licensee exiting the market and by currency and positively impacted by revenues for unlicensed periods from a patent license agreement signed in the quarter.

Full-year comments

South East Asia, Oceania and India

Currency adjusted sales declined by -1% YoY. Networks sales declined marginally due to timing of orders and project milestones, while Digital Services sales were stable. Sales in Managed Services grew as a result of a new contract signed in 2020 and timing of variable sales. Reported sales decreased by -4%.

North East Asia

Currency adjusted sales declined by -8% YoY. Sales declined in Networks and Digital Services due to market share loss in Mainland China. Markets outside of Mainland China grew by 19% mainly through acceleration of 5G deployments. Reported sales declined by -13%.

North America

Currency adjusted sales increased by 12% driven primarily by Networks 5G deployments, and by growth in 5G Core and cloud native solutions. Managed Services sales decreased after the merger between two operators. Reported sales increased by 5%.

Europe and Latin America

Currency adjusted growth was 12% YoY with 11% growth in Europe and 19% in Latin America. Sales in both Networks and Digital Services continued to grow as a result of market share gains, while sales decreased in Managed Services YoY due to earlier decisions on contract exits and rescoping of contracts. Reported sales increased by 8%.

Middle East and Africa

Currency adjusted sales declined by -7% YoY. Sales decreased in Networks primarily due to timing of 5G investments. Continued growth in Africa and strong software upgrades contributed to growth in Digital Services. Managed Services sales decreased due to contractual renegotiations in certain markets. Reported sales declined by -11%.

Other

IPR licensing revenues declined to SEK 8.1 (10.0) b. mainly due to lower volumes with one licensee.

Fourth quarter comments

Net sales

Sales adjusted for comparable units and currency grew by 3%, with double-digit growth in North America and in Europe and Latin America. Sales declined by SEK -1.5 b. YoY in Mainland China, impacting the growth rate adjusted for comparable units and currency by -3 percentage points. Reported sales increased by 4%. Growth was driven mainly by product sales with a lower share of services in the sales mix.

Sales increased by 26% sequentially, driven by high 5G demand. The global supply situation is challenging but through continued investment to secure supply chain resilience, supply disturbances were limited during the quarter. While all market areas reported growth QoQ, the increase in sales was primarily driven by market areas Europe and Latin America and North East Asia.

Gross margin

Reported gross margin increased to 46.3% (43.4%) mainly as a result of operational leverage.

Sequentially, reported gross margin decreased to 46.3% from 47.8%, impacted by investments to secure supply chain resilience. Q3 was positively impacted by a higher share of licensing revenues in the sales mix.

EBIT

Reported EBIT increased to SEK 11.8 (10.6) b. with an increase in EBIT margin to 23.0% (21.5%). EBIT excluding restructuring charges improved to SEK 12.0 (10.6) b. with an EBIT margin of 23.6% (21.5%). The increase was primarily driven by the improved gross income.

Operating expenses increased by SEK -1.0 b. to SEK -11.9 b. mainly due to investments in the 5G portfolio.

Sequentially, reported EBIT increased by SEK 2.1 b. underpinned by seasonally higher sales.

Full-year comments

Net sales

Reported sales increased by 1% in 2021 to SEK 167.8 (166.0) b. Growth was driven primarily by increased product sales as a result of continued market share gains. Sales adjusted for comparable units and currency increased by 7%. Sales growth was underpinned by increased sales in North America and in Europe and Latin America as well as in some North East Asian markets. Sales declined by SEK -6.4 b. YoY in Mainland China, impacting the growth rate adjusted for comparable units and currency by -4 percentage points.

Gross margin

Reported gross margin increased to 47.0% (43.6%), as a result of continued strengthening of operational leverage and a higher share of product revenues in the sales mix.

EBIT

Reported EBIT increased to SEK 37.3 (30.9) b. with an increase in EBIT margin to 22.2% (18.6%). EBIT excluding restructuring charges improved to SEK 37.5 (31.6) b. with an EBIT margin of 22.4% (19.0%) driven by sales growth and improved gross margin.

Operating expenses remained stable at SEK -41.9 b. R&D investments in the 5G portfolio increased during the year, while selling and administrative expenses decreased.

Fourth quarter comments

Net sales

Sales adjusted for comparable units and currency were stable, with growth primarily in Middle East and Africa and in South East Asia, Oceania and India. Sales in Mainland China decreased by SEK -0.4 b. YoY, impacting the growth rate adjusted for comparable units and currency by -3 percentage points. Reported sales increased by 1%.

Sequentially, reported sales grew by 48%, driven by revenues from 5G core, OSS and BSS. All market areas reported double-digit growth, following normal seasonality. In line with customers going live, the cloud native 5G Core revenues grew in the quarter.

Gross margin

Reported gross margin increased to 42.8% (40.9%), supported by a higher share of software sales.

Sequentially gross margin excluding restructuring charges increased to 43.4% from 42.3% as a result of a seasonally higher share of software sales.

EBIT

Reported EBIT was SEK 0.3 (0.5) b. with an EBIT margin of 2.4% (3.9%). EBIT excluding restructuring charges was SEK 0.4 (0.5) b. with an EBIT margin of 3.3% (3.8%). The BSS business improved its profitability YoY and contributed positively to EBIT.

Operating expenses increased by SEK -0.5 b. to SEK -5.2 b. as a result of increased R&D investments in the cloud native 5G product portfolio.

Sequentially, reported EBIT increased by SEK 1.1 b. supported by seasonally higher sales.

Full-year comments

Net sales

Reported sales decreased by -3% to SEK 36.2 b. in 2021. Sales adjusted for comparable units and currency increased by 1%, supported by sales growth in North America and in Europe and Latin America. Sales in Mainland China decreased by SEK -1.3 b. YoY, impacting the growth rate adjusted for comparable units and currency by -3 percentage points.

Important 5G Core contracts have been signed with several tier-1 operators in 2021 and are expected to generate increased revenues in 2022 and beyond.

Sales in the 5G Core portfolio gradually increased during 2021 and this portfolio is expected to generate growing sales during 2022 as 5G networks are commissioned and traffic grows.

Gross margin

Reported gross margin was stable at 41.7% (41.9%), while gross margin excluding restructuring charges was stable at 42.0%. The margin was negatively impacted by initial 5G Core deployment costs.

EBIT (loss)

Reported EBIT was SEK -3.6 (-2.2) b. EBIT excluding restructuring charges was SEK -3.5 (-2.2) b.

Operating expenses increased by SEK -0.9 b. to SEK -18.8 b. mainly due to acceleration of R&D investments in the cloud native 5G portfolio. The lower sales volume and consequently lower gross income impacted EBIT by SEK -0.5 b.

Fourth quarter comments

Net sales

Sales adjusted for comparable units and currency decreased by -8% YoY, mainly due to lower demand under certain contracts and contract rescoping. Sales in Network Optimization, which is increasingly transitioning into software offerings, showed growth. Reported sales declined by -8% YoY.

Gross margin

Reported gross margin increased to 18.2% (17.7%). Gross margin excluding restructuring charges increased to 18.9% (17.7%), mainly due to efficiency gains.

Reported gross margin decreased to 18.2% from 18.7% QoQ. Gross margin excluding restructuring charges increased slightly to 18.9% from 18.7% QoQ.

EBIT

Reported EBIT was stable at SEK 0.4 b. YoY. EBIT excluding restructuring charges was SEK 0.4 (0.4) b. with an EBIT margin of 7.4% (6.9%), driven by improved gross margin, partly offset by lower sales.

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

Full-year comments

Net sales

Sales adjusted for comparable units and currency decreased by -6% in 2021, mainly due to reduced variable sales in a large contract in North America, post the merger between two operators. Contract rescoping and planned exits also contributed to the sales decline. Sales in Network Optimization showed growth. Reported sales declined by -10%.

Gross margin

Reported gross margin increased to 18.8% (17.8%). Gross margin excluding restructuring charges increased to 19.4% (18.9%), mainly as a result of efficiency gains, partly offset by lower sales.

EBIT

Reported EBIT was SEK 1.5 (1.6) b. EBIT excluding restructuring charges was SEK 1.6 (1.8) b. with a stable EBIT margin of 7.8% (8.1%), despite the sales decline.

Fourth quarter comments

Net sales

Sales adjusted for comparable units and currency increased by 16% YoY. Reported sales increased by 23% YoY, driven by the acquired Cradlepoint business and iconectiv.

Gross margin

Reported gross margin decreased slightly to 34.9% (35.3%) YoY. Gross margin excluding restructuring charges increased to 35.2% (33.8%) YoY. The increase was driven by Cradlepoint, delivering in line with plan.

Reported gross margin decreased to 34.9% from 39.4% QoQ, mainly due to costs related to Red Bee Media service interruptions as a result of an outage.

EBIT (loss)

Reported EBIT (loss) was SEK -0.6 (-0.5) b. EBIT (loss) excluding restructuring charges was SEK -0.5 (-0.5) b.

EBIT in the quarter 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 11% in 2021, with improvements in Emerging Businesses. Reported sales increased by 22%, driven by the acquired Cradlepoint business.

Cradlepoint saw increasing demand for the 5G portfolio during the year. Reported sales and margins for Cradlepoint were in line with the acquisition plan.

Gross margin

Reported gross margin increased to 37.2% (25.6%), driven by Cradlepoint.

EBIT (loss)

Reported EBIT (loss) was SEK -3.4 (-2.4) b. driven by Cradlepoint, the Nokia settlement related to the 2019 resolution with the U.S authorities and impairment write-off.

In 2021 EBIT was positively impacted by SEK 1.0 b. through a positive revaluation of Ericsson Ventures investments and a data center divestment.

In 2020 EBIT was positively impacted by SEK 0.3 b. from a provision release related to compliance monitor costs.

Sales in Emerging Businesses grew, with improved gross margin.

Fourth quarter comments

Cash flow from operating activities

Reported cash flow from operating activities was SEK 15.2 (13.9) b. The increase YoY was a result of continued earnings growth and decrease in operating net assets. Operating net assets decreased in the quarter with a positive impact on cash flow of SEK 2.7 b. Key movements include a positive impact of SEK 3.0 b. related to trade payables and a negative impact of SEK -6.9 b. from trade receivables and contract assets net of contract liabilities, attributed to normal seasonality in Q4 net of collections and some prepayments from customers. Cash flow was also positively impacted by SEK 4.6 b. from a decrease in other operating assets and liabilities, net, which includes accrued employee-related expenses and current tax liabilities. Taxes paid were SEK -1.2 b.

Free cash flow

Free cash flow before M&A was SEK 13.5 (12.8) b. Capex net and other investing activities was SEK -1.1 (-0.5) b., primarily related to Networks. Repayment of lease liabilities in the quarter was stable at SEK -0.6 b. and was mainly related to property leases.

Free cash flow after M&A was SEK 13.7 (3.5) b. In Q4 2020 Cradlepoint was acquired for SEK -9.5 b.

Cash flow from investing activities

Reported cash flow from investing activities was SEK -2.7 (-8.6) b. mainly as a result of purchases of interest-bearing securities.

Cash flow from financing activities

Reported cash flow from financing activities was SEK -4.9 (-8.5) b. including repayment of lease liabilities. Dividends paid amounted to SEK -3.4 (-3.5) b. and were related to the second installment (SEK 1.00 per share) of dividend for 2020.

Full-year comments

Cash flow from operating activities

Reported cash flow from operating activities was SEK 39.1 (28.9) b. The improvement was attributed to both improved EBIT and decreased operating net assets. Cash flow from operating activities in 2020 was impacted by payments of SEK -3.0 b. into the Swedish Pension Trust. Operating net assets decreased for the full year with a positive impact on cash flow of SEK 4.0 b. Key movements include a negative impact of SEK -5.6 b. related to an increase in inventory, mainly driven by the decision to strengthen the supply chain resilience within Networks. The negative impact was partly offset by a positive impact of SEK 1.4 b. from increase in trade payables. Cash flow was also positively impacted by SEK 4.0 b. from an increase in contract liabilities. Provisions of SEK 4.2 (4.0) b. were utilized, of which SEK 0.8 (0.8) b. related to restructuring charges. Taxes paid were SEK -4.1 b.

Accounts receivable days of sales outstanding increased to 71 (69) days and working capital days was stable at 65 (65) days.

Free cash flow

Free cash flow before M&A was SEK 32.1 (22.3) b. or 13.8% (9.6%) in relation to sales, compared with the long-term target of 9-12%. Capex net and other investing activities was SEK -4.6 (-4.3) b. Repayment of lease liabilities was SEK -2.4 (-2.4) b. There were few M&A transactions settled in 2021 and free cash flow after M&A was SEK 32.1 (12.7) b.

Cash flow from investing activities

Reported cash flow from investing activities was SEK -19.9 (-15.2) b. as a result of purchases of interest-bearing securities.

Cash flow from financing activities

Reported cash flow from financing activities was SEK -9.3 (-12.5) b. including repayment of lease liabilities. During the year, dividends of SEK -6.9 (-6.0) b. were paid to shareholders and the net impact on cash flow from issuance and repayment of long-term debt was SEK 2.1 b.

Fourth quarter comments

Net cash increased by SEK 10.1 b. QoQ to SEK 65.8 b. The positive free cash flow was partly offset by payment of dividends of SEK -3.4 b.

Gross cash increased by SEK 9.4 b. QoQ to SEK 97.6 b.

Liabilities for post-employment benefits increased to SEK 36.1 b. from SEK 34.7 b. in the quarter due to lower interest rates. Details regarding assumptions and the sensitivity analysis of Ericsson’s pension plans can be found in note G1 of the Annual Report.

Full-year comments

Gross cash was SEK 97.6 (72.0) b. as a result of the positive free cash flow and a SEK 2.6 b. loan with the European Investment Bank (EIB), partly offset by SEK -6.9 b. of dividends paid to shareholders. Net cash was SEK 65.8 (41.9) b.

Liabilities for post-employment benefits decreased to SEK 36.1 (37.4) b., primarily due to positive asset returns. 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 17.3 b. (SEK 18.8 b. lower than current DBO).

The average maturity of long-term borrowings was 3.5 years as of December 31, 2021, an increase from 2.7 years 12 months earlier.

In March 2021, Ericsson repaid its EUR -0.5 b. (SEK -5.1 b.) bond and in May 2021, Ericsson issued a EUR 0.5 b. (SEK 5.0 b.) senior unsecured 8-year bond.

In September 2021, Ericsson renewed its existing USD 2.0 b. revolving credit facility, linked to two of Ericsson’s long-term sustainability goals. The facility has a five-year tenure with two one-year extension options and is undrawn.

Standard & Poor’s and Fitch have a long-term BBB- rating on Ericsson with stable outlook. Moody’s has a Ba1 rating with stable outlook.

The capital turnover decreased to 1.3 (1.4) times, while Return on Capital Employed (ROCE) improved to 18.4% (17.0%) driven by improved EBIT.

Market related

Source: Dell’Oro Mobile RAN outlook report January 2022.

Ericsson related

Group long-term financial targets

EBIT

Net sales

Reported average seasonality last 3 years

Net sales may show large variations between quarters.

Operating expenses excluding restructuring

Reported average seasonality last 3 years, SEK b.

Operating expenses may show large variations between quarters.

Currency exposure

Parent Company

Income after financial items January– December 2021, was SEK 9.3 (8.3) b.

At the end of the year, gross cash (cash, cash equivalents, short-term investments and interest-bearing securities, non-current) amounted to SEK 80.5 (57.0) b.

There was a decrease in intercompany lending of SEK 3.9 b. and in intercompany borrowing of SEK 3.3 b. in the fourth quarter.

The holding of treasury stock on December 31, 2021, was 4,009,306 Class B shares.

Dividend proposal

The Board of Directors proposes to the Annual General Meeting a dividend to the shareholders of SEK 2.50 (2.00) per share for the financial year 2021, representing a total dividend of approximately SEK 8.3 (6.7) b. The dividend is proposed to be paid in two installments, SEK 1.25 per share with the record date March 31, 2022, and SEK 1.25 per share with the record date September 30, 2022. Should the Annual General Meeting decide in favor of the proposal, payment of the dividend is expected to be made on April 5, 2022, and on October 5, 2022. The dividend reflects 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, 2022. 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.

Legal proceedings

On October 4, 2021, Ericsson asked the United States 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 US 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. The filing of lawsuits, complaints and other proceedings, when parties take legal action over a patent license agreement renewal, is standard and consequently additional lawsuits, complaints and other proceedings, may follow.

Update on Deferred Prosecution Agreement

On October 21, 2021, Ericsson announced that Ericsson has received correspondence from the DOJ stating that it has determined that Ericsson breached its obligations under the Deferred Prosecution Agreement (DPA) entered into by the Company with the United States Department of Justice (DOJ) on December 6, 2019 by failing to provide certain documents and factual information, and that Ericsson will have the opportunity to respond in writing to explain the nature and circumstances of such breach, as well as the actions Ericsson has taken to address and remediate the situation.

At this stage it is premature to predict the outcome of these developments. DOJ has sole discretion under the DPA to determine whether a breach occurred. Ericsson intends to continue cooperating with DOJ consistent with the terms of the DPA, including requirements regarding production of documents.

Ericsson to acquire Vonage for USD 6.2 billion to spearhead the creation of a global network and communication platform for open innovation

On November 22, 2021, Ericsson announced that the Company has entered into an agreement to acquire Vonage Holdings Corp. for USD 21 per share. This represents a total acquisition price of approximately USD 6.2 billion. The merger agreement was approved unanimously by the Board of Vonage. The transaction builds upon Ericsson’s stated intent to expand globally in wireless Enterprise, offering existing customers an increased share of a market valued at USD 700 billion by 2030.

Vonage, a global provider of cloud-based communications, has a strong track record of growth and margin evolution. Robust performance and growth prospects are built on Vonage Communications Platform (VCP), which delivers about 80% of Vonage’s total revenues and, serves more than one million registered developers globally.

For Ericsson, the acquisition builds on the success of the integration of Cradlepoint in September 2020. Cradlepoint has continued to develop strongly under Ericsson’s ownership. The acquisition will be conducted by means of a merger agreement through which Ericsson will acquire all of Vonage’s outstanding shares at an all-cash price of USD 21 per share.

The acquisition will be financed through Ericsson’s existing cash resources, which amounted to SEK 88 billion as of 30 September 2021 on a gross basis, and SEK 56 billion on a net basis as of the same date.

The transaction is expected to be accretive to EPS (excluding non-cash amortization impacts) and free cash flow before M&A from 2024 onwards. On completion, Vonage will become a wholly owned subsidiary of Ericsson and will continue to operate under its existing

name. It will be reported as a separate segment in Ericsson accounts. Vonage is headquartered in Holmdel, New Jersey in the United States with 2,200 employees throughout the United States, EMEA and APAC. The Vonage CEO Rory Read will join the Executive Team of Ericsson, reporting to CEO, Börje Ekholm.

Ericsson remains fully committed to previously communicated financial targets, including long-term EBITA margins of 15-18%; long term FCF before M&A of 9-12% of sales; and a 2022 target EBIT margin of 12-14% for Ericsson Group excluding Vonage.

Completion of the transaction is subject to Vonage shareholder approval, regulatory approvals and other customary conditions and is expected within the first half of 2022.

Covid-19 update

Ericsson continues to monitor the situation of the COVID-19 pandemic closely, as well as guidelines from global health authorities, to ensure the health and well-being of all colleagues.

Due to the rapid transmission of the new Omicron virus variant, as well as the uncertainty around international travel, business travel restrictions remain in place at this time. The Company is also constantly reviewing its participation at in-person events and will update its advice in accordance with local health authorities.

Decisions for returning to office locations continue to rest with local leaders in close consultation with their respective Market Area Crisis Management Task Force (CMTF).

Despite global supply chain challenges, Ericsson continues to operate efficiently and profitably. At the start of the pandemic, Ericsson anticipated this development and took proactive actions by significantly increasing flexibility arrangements, enabling a resilient supply chain. The Company continues to evaluate the situation and adjust accordingly, as needed.

The Omicron variant is a sobering reminder that the pandemic will be a part of our lives during 2022. The Company will continue to follow its guiding principles that are focused on the health, safety and well-being of employees, customers and partners. And through respect, professionalism, perseverance and integrity, Ericsson is confident that the Ericsson team will continue to deliverer to the customers and execute on the business strategy.

Post-closing events

Legal proceedings

Ericsson and Apple were not able to renew the now expired patent license agreement between the parties in a timely manner. On January 17, 2022, Ericsson filed two complaints in the Western District of Texas alleging infringement of a total of 12 US patents by various Apple products, including Apple’s iPhone mobile phones, cellular-equipped iPad tablet computers and cellular-equipped Apple Watch smart watches. Ericsson also filed three complaints with the US International Trade Commission (ITC) alleging infringement of the same 12 patents by certain Apple products.

Also, on January 17, 2022, Ericsson filed complaints in several jurisdictions in Europe and South America 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.

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

Ericsson’s risk management is embedded into strategy development and operational processes and is a part of the Ericsson Group Management System to ensure accountability, effectiveness, efficiency, business continuity and compliance. Risks are defined in both a short-term and long-term perspective and are related to long-term objectives as per the strategic direction as well as to short-term objectives.

Risk factors and uncertainties of relevance to Ericsson are described in the Annual Report 2020. Updates to these risk factors and uncertainties observed by Ericsson that are deemed of short-term relevance include, but are not limited to, the following risks described below. On page 50, an updated set of the Annual Report 2020 risk factors are included to allow these to be referenced in connection with potential upcoming bond issues.

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

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

Ericsson relies on a limited number of suppliers of components, production capacity and R&D and IT services, which exposes the Company to supply disruptions and cost increases.

As stated in the Risk Factors in the 2020 Annual Report, section 1.13, Ericsson relies on a limited number of suppliers of components, which exposes the Company to supply disruptions and cost increases. The combination of this with the effects from the COVID-19 pandemic on the component industry, especially on semi-conductors, is causing challenges to the capabilities to fully deliver according to customer demands, which may cause delays in deliveries and reduced sales. Such disruptions and cost increases may negatively affect the Ericsson business, operating results and financial condition.

We engage in acquisitions and divestments, which may be disruptive and require us to incur significant expenses, and we may not be successful in consummating such transactions or protecting the value of acquisitions during integration following consummation.

We cannot assure that we will be successful in consummating acquisitions or divestments on favorable terms or at all. For example, although we expect our agreement, dated November 22, 2021, to acquire Vonage Holdings Corp. to be consummated during the first half of 2022, it may take up to a year to satisfy the conditions to closing this acquisition. Moreover, it is possible that certain of the conditions to the closing of this acquisition may not be satisfied or waived and, if that were to happen, the agreement would terminate

without a closing. The closing conditions include the receipt of regulatory clearances and the approval of the agreement by a special meeting of the shareholders of Vonage. If the agreement were to terminate under specified circumstances where we have failed to obtain certain clearances from the Committee on Foreign Investment in the United States, we may have to pay a $200,000,000 termination fee to Vonage. The delay or inability to consummate an acquisition or divestiture may impede our ability to execute our strategic plan and achieve the benefits that we anticipated from these transactions. Acquisitions could also result in the incurrence of contingent liabilities and an increase in amortization expenses related to intangible assets or impairment of goodwill, which could have a material adverse effect upon our business, operating results, financial condition and liquidity.

We may be subject to further adverse consequences following the 2019 resolutions with the United States Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) of the previously disclosed investigations under the FCPA and the correspondence received from the DOJ in October 2021, stating that the DOJ has determined that Ericsson breached its obligations under the DPA.

In October 2021, Ericsson received correspondence from the DOJ stating that it has determined that Ericsson breached its obligations under the DPA by failing to provide certain documents and factual information, and that Ericsson will have the opportunity to respond in writing to explain the nature and circumstances of such breach, as well as the actions Ericsson has taken to address and remediate the situation. Ericsson is in discussions with the DOJ regarding the correspondence. If the DOJ determines that we have violated the terms of the DPA, the DOJ may in its sole discretion commence prosecution, including for the charged conspiracy to violate the anti-bribery and books and records and internal controls provisions of the FCPA that were included in the information filed in conjunction with the DPA, or extend the term of the DPA for up to one year. In such circumstances, the DOJ would be permitted to rely upon the admissions we made in the DPA and would benefit from our waiver of certain procedural and evidentiary defenses. In addition, the DOJ may at its sole discretion decide to extend the term of the DPA. Any criminal prosecution or civil or criminal penalties or consequences imposed as a result of noncompliance with the DPA could have a material adverse effect on our reputation, business, financial condition, result of operations, cash flows, or prospects.

The globally increasing inflation rate may impact Ericsson’s costs of labor and supply of material, products and services. Although inflation is a normal part of business and the Company have measures in place to manage this, it may not be possible to fully compensate such increased costs through increased sales prices to the Company’s customers, leading to lowered margins and decreased financial performance.

Stockholm, January 25, 2022

Telefonaktiebolaget LM Ericsson (publ)

The Board of Directors

Corporate Reg. No. 556016-0680

Date for next report: April 14, 2022.

Press briefing and live webcast

Ericsson invites media, investors and analysts to a conference call on January 25, 2022, starting at 9:00 am CET.

Live audio webcast of the conference call as well as supporting slides will be available at:

www.ericsson.com/investors and

www.ericsson.com/press

Replay of the conference call will be available approximately one hour after the call has ended and will remain available for seven days.

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

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

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

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

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

Important factors that could affect whether and to what extent any of our forward-looking statements materialize include, but are not limited to, the factors described in the section “Risk Factors”, and in “Risk Factors” in the Annual Report 2019.

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

Introduction

We have reviewed the condensed interim financial information (year-end report) of Telefonaktiebolaget LM Ericsson (publ.) as of December 31, 2021, and the twelve months period then ended. The board of directors and the CEO are responsible for the preparation and presentation of the year-end report in accordance with IAS 34 and the Swedish Annual Accounts Act. Our responsibility is to express a conclusion on this year-end report based on our review.

Scope of review

We conducted our review in accordance with the International Standard on Review Engagements ISRE 2410, Review of Interim Report Performed by the Independent Auditor of the Entity.

A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing, ISA, and other generally accepted auditing standards in Sweden. The procedures performed in a review do not enable us to obtain assurance that would make us aware of all significant matters that might be identified in an audit. Therefore, the conclusion expressed based on a review does not give the same level of assurance as a conclusion expressed based on an audit.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the year-end report is not prepared, in all material respects, in accordance with IAS 34 and the Swedish Annual Accounts Act, regarding the Group, and with the Swedish Annual Accounts Act, regarding the Parent Company.

Stockholm, January 25, 2022

Deloitte AB

Thomas Strömberg

Authorized Public Accountant