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Published: 2021-07-16 13:38:53 ET

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6-K 1 d171371d6k.htm 6-K 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN ISSUER

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

the Securities Exchange Act of 1934

July 16, 2021

Commission File Number 000-12033

LM ERICSSON TELEPHONE COMPANY

(Translation of registrant’s name into English)

Torshamnsgatan 21, Kista

SE-164 83, Stockholm, Sweden

(Address of principal executive offices)

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

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

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

Announcement of LM Ericsson Telephone Company, July 16, 2021 regarding “Second quarter report 2021”.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


TELEFONAKTIEBOLAGET LM ERICSSON (publ)

By:		/s/ XAVIER DEDULLEN
		Xavier Dedullen
		Senior Vice President, Chief Legal Officer

By:		/s/ CARL MELLANDER
		Carl Mellander
		Senior Vice President, Chief Financial Officer

Date: July 16, 2021

LOGO

Second quarter report 2021

Stockholm, July 16, 2021

Second quarter highlights

•

Group organic sales grew by 8% YoY, despite a sales decline in Mainland China of SEK -2.5 b. YoY and an IPR revenue decline of SEK -0.5 b. YoY. Reported sales were SEK 54.9 (55.6) b.

•

Gross margin excl. restructuring charges improved to 43.4% (38.2%) driven mainly by operational leverage in Networks. Q2 2020 was negatively impacted by inventory write-down and initial 5G deployments in Mainland China. Reported gross margin was 43.4% (37.6%).

•

EBIT excluding restructuring charges improved to SEK 5.8 b. (10.6%) from SEK 4.5 b. (8.2%) YoY driven by Networks. Reported EBIT was SEK 5.8 (3.9) b.

•

Organic sales in Networks grew by 11% YoY, driven by market share gains. Sales in Mainland China were SEK -2.0 b. lower YoY. Reported EBIT margin was 21.7% (13.2%).

•

Organic sales in Digital Services were stable YoY, despite a sales decline in Mainland China of SEK -0.5 b. YoY. Reported EBIT (loss) was SEK -1.6 (-0.7) b., impacted by a write-down of SEK -0.3 b. for pre-commercial product investments for the Chinese market.

•

Reported net income was SEK 3.9 (2.6) b.

•

Free cash flow before M&A was SEK 4.1 (3.2) b. supported by higher incoming IPR payments. Net cash per June 30, 2021 was SEK 43.7 (37.5) b.

•

The RAN market outlook for 2021 has been updated to 10% growth YoY, compared with previously 3% growth. Source: Dell’Oro.


SEK b.	Q2 2021			Q2 2020			YoY change			Q1 2021			QoQ change			Jan-Jun 2021			Jan-Jun 2020			YoY change
Netsales		54.9			55.6			-1	%		49.8			10	%		104.7			105.3			-1	%
Sales growth adj. for comparable units and currency ¹		—			—			8	%		—			—			—			—			9	%
Gross margin ¹		43.4	%		37.6	%		—			42.8	%		—			43.1	%		38.6	%		—
EBIT		5.8			3.9			51	%		5.3			11	%		11.1			8.2			36	%
EBIT margin ¹		10.6	%		6.9	%		—			10.6	%		—			10.6	%		7.7	%		—
Net income		3.9			2.6			51	%		3.2			23	%		7.1			4.9			45	%
EPS diluted, SEK		1.10			0.74			49	%		0.96			15	%		2.06			1.39			48	%
Measures excl. restructuring charges¹
Gross margin excluding restructuring charges		43.4	%		38.2	%		—			42.9	%		—			43.2	%		39.3	%		—
EBIT excluding restructuring charges		5.8			4.5			29	%		5.3			9	%		11.2			9.1			22	%
EBIT margin excluding restructuring charges		10.6	%		8.2	%		—			10.7	%		—			10.7	%		8.7	%		—
Free cash flow before M &A		4.1			3.2			26	%		1.6			161	%		5.6			5.6			1	%
Net cash, end of period		43.7			37.5			16	%		43.0			2	%		43.7			37.5			16	%

¹	Non-IFRS financial measures are reconciled at the end of this report to the most directly reconcilable line items in the financial statements.



1 Ericsson \| Second quarter report 2021

CEO comments

Our strong business performance continued, with an organic sales¹ growth of 8% in the quarter. This was despite a sales decline of SEK -2.5 b. YoY in Mainland China. Networks continued to grow market shares in the quarter with some significant wins. Group gross margin² increased to 43.4% (38.2%). We are well positioned to take advantage of continued market momentum with our competitive 5G product portfolio and cost structure. However, it is prudent to forecast a materially lower market share in Mainland China for Networks and Digital Services as the earlier decision to exclude Chinese vendors from the Swedish 5G networks might influence market share awards.

Networks sales¹ grew organically by 11%, despite lower volumes from delayed 5G deployment in Mainland China. This growth reflects the continued high activity levels in most markets. The North East Asia market outside Mainland China saw strong growth in 5G volumes. Gross margin² improved to 47.9% (40.5%). Through proactive and continuous measures for supply chain resilience we have accelerated production to meet customer demand, and we are well prepared for any challenges in the future. Our increased R&D investments have accelerated product development. We strengthened our Cloud RAN portfolio further with 5G mid-band and massive MIMO support for increased network performance. Cloud RAN will enable service providers to seamlessly evolve their networks towards cloud-native technologies and open network architectures, meeting demand for more deployment flexibility. We continue on the successful path of 5G wins in North America. We have signed another 5-year contract, this one amounting to USD 8.3 b. (SEK 71 b.), with a leading customer. This is the single largest deal in the history of Ericsson.

In Digital Services the strong momentum in 5G Core continued and we are ramping up R&D investments in the cloud native 5G portfolio. Organic sales were stable in the quarter. However, excluding the reduced sales in Mainland China, sales¹ grew by 5%. Gross margin² decreased to 37.9% (43.6%) YoY, mainly due to a write-down of SEK -0.3 b. related to pre-commercial product investments for the Chinese market. A material loss of market share in Mainland China, which contributed 5.4% of Digital Services sales in 2020, would cause a delay in reaching the EBIT margin target for 2022. A significantly reduced volume would lead to a limited loss in 2022 in Digital Services. Improvements are skewed towards the year end 2022, as we expect to see a gradual increase in Core revenues. Based on our strong portfolio, we expect to exceed our original EBIT margin target of 4-7%, as sales in other markets over time will compensate for the reduction in Mainland China. We see strong demand for our OSS, BSS and 5G core offerings, positioning us well for longer-term profitability.

The new IPR agreement with Samsung reaffirms the significant value of our patent portfolio and with this agreement in place we are well positioned to conclude pending and future

patent license renewals. One additional agreement was signed in July. There is currently high activity in renewal negotiations. As new contracts are concluded, revenues will include retroactive payments for the unlicensed period prior to signing.

Whilst many markets are returning to normal following the COVID-19 pandemic, we continue to see rising numbers of cases in South East Asia, which may result in a slower recovery for impacted countries.

We continue to invest in compliance to fully embed our commitments to ethical business practice, in all areas across the organization. Ensuring all decisions are taken with integrity is a driving force in our culture-change journey.

The opportunity from enterprise for 5G provides an exciting growth path for Ericsson. Building on the strong foundations of our core business we will continue to take a stepwise approach to investing in growth in Dedicated Networks, IoT and the wireless portfolio acquired with Cradlepoint. We foresee 20-30% annual market growth in enterprise, with opportunities in automation, remote operations and safety management across whole industry sectors such as smart manufacturing, ports and airports, energy, mining, health and agriculture. Enterprise use cases in 5G – and the continuing growth in 4G – will drive the digital transformation of business globally combining the high performance, low latency and security benefits of wireless over traditional fixed networks. We are confident that wireless will be the first-choice connection for global business in the 5G era.

Stay healthy and well.

Börje Ekholm

President and CEO

¹	Sales adjusted for comparable units and currency

²	Excluding restructuring charges



2 Ericsson \| Second quarter report 2021		CEO Comments

Financial highlights

Net sales development


SEK b.	Q2 2021		Q2 2020		YoY change			YoY adj.¹			Q1 2021		Jan-Jun 2021		Jan-Jun 2020		YoY change			YoY adj.¹
Net works		39.9		39.8		0	%		11	%		36.3		76.1		75.0		2	%		13	%
Digital Services		7.9		8.6		-8	%		0	%		6.9		14.8		15.9		-7	%		1	%
M managed Services		5.1		5.6		-8	%		-2	%		4.9		10.0		11.3		-12	%		-5	%
Emerging Business and Other		2.1		1.6		29	%		13	%		1.7		3.8		3.2		20	%		11	%
Total		54.9		55.6		-1	%		8	%		49.8		104.7		105.3		-1	%		9	%

¹	Sales growth adjusted for comparable units and currency. Non-IFRS financial measures are reconciled at the end of this report to the most directly reconcilable line items in the financial statements.

Group reported sales were SEK 54.9 b. Sales adjusted for comparable units and currency grew by 8% YoY, with double-digit currency adjusted growth in three of the five market areas. Sales in North East Asia remained stable despite a sales decline in Mainland China of SEK -2.5 b. YoY in Networks and Digital Services. Sales in the Middle East and Africa declined YoY.

IPR licensing revenues decreased to SEK 2.3 (2.8) b. Revenues from the new contract with Samsung, attributable to both Q1 and Q2, were offset by expired contracts under renewal negotiations, lower volumes with one licensee and a weaker USD.

Networks sales adjusted for comparable units and currency increased by 11% YoY driven primarily by growth in market areas Europe and Latin America, South East Asia, India and Oceania as well as in North East Asia except Mainland China. Sales in Mainland China were SEK -2.0 b. lower YoY. Excluding Mainland China, sales in Networks grew by 17%, adjusted for comparable units and currency. Networks accounted for 73% (72%) of total sales.

Digital Services sales adjusted for comparable units and currency were stable YoY, with double-digit growth in North America and in Europe and Latin America. Excluding Mainland China, where revenues were SEK -0.5 b. lower YoY, sales in Digital Services grew by 5% adjusted for comparable units and currency. Digital Services share of total sales was 14% (15%).

Managed Services sales adjusted for comparable units and currency decreased by -2% YoY, mainly due to reduced variable sales in a large contract in North America, post the merger between two large operators. Managed Services share of total sales was 9% (10%).

Emerging Business and Other sales adjusted for comparable units and currency increased by 13%, driven by growth in Emerging Business. Emerging Business and Other share of total sales was 4% (3%).

Income and margin development


SEK b.	Q2 2021			Q2 2020			YoY change			Q1 2021			QoQ change			Jan-Jun 2021			Jan-Jun 2020			YoY change
Netsales		54.9			55.6			-1	%		49.8			10	%		104.7			105.3			-1	%
Gross income		23.9			20.9			14	%		21.3			12	%		45.2			40.7			11	%
Gross margin		43.4	%		37.6	%		—			42.8	%		—			43.1	%		38.6	%		—
Research and development (R&D) expenses		-10.5			-10.0			—			-9.6			—			-20.1			-19.2			—
Selling and administrative expenses		-7.0			-7.1			—			-6.2			—			-13.2			-13.3			—
Impairment losses on trade receivables		0.1			0.0			138	%		-0.2			—			-0.1			-0.1			—
Other operating income and expenses		-0.6			0.1			—			0.0			—			-0.6			0.2			—
EBIT		5.8			3.9			51	%		5.3			11	%		11.1			8.2			36	%
of which Networks		8.6			5.3			65	%		7.2			19	%		15.9			11.1			43	%
of which Digital Services		-1.6			-0.7			—			-1.5			—			-3.1			-2.1			—
of which Managed Services		0.4			0.3			58	%		0.333	%		—			0.7			0.79	%		—
of which Emerging Business &Other		-1.7			-1.0-			—			-0.8-			—			-2.4			-1.5-			—
EBIT margin		10.6	%		6.9	%		—			10.6	%		—			10.6	%		7.7	%		—
Financial income and expenses, net		-0.5			0.3			—			-0.5			—			-1.0			-0.6			—
Income tax		-1.5			-1.6			—			-1.6			—			-3.0			-2.7			—
Net income		3.9			2.6			51	%		3.2			23	%		7.1			4.9			45	%
Restructuring charges		0.0			-0.7			—			-0.1			—			-0.1			-1.0			—
Measuresc excl. restructuring charges and other items affecting com parability¹
Grossmarg in excluding restructuring charges		43.4	%		38.2	%		—			42.9	%		—			43.2	%		39.3	%		—
EBIT margin excluding restructuring charges		10.6	%		8.2	%		—			10.7	%		—			10.7	%		8.7	%		—
EBITA excluding restructuring charges		6.1			4.8			28	%		5.6			9	%		11.7			9.7			21	%
EBITA margin excluding restructuring charges		11.1	%		8.6	%		—			11.3	%		—			11.2	%		9.2	%		—

¹	Non-IFRS financial measures are reconciled at the end of this report to the most directly reconcilable line items in the financial statements.

Gross margin

Reported gross margin was 43.4% (37.6%). Gross margin excluding restructuring charges increased to 43.4% (38.2%) driven mainly by improvements in Networks. Networks gross margin in the quarter was

supported by strong operational leverage, while in Q2 2020 Networks gross margin was negatively impacted by both a write-down of pre-commercial product inventory and initial 5G deployments in Mainland China. Managed Services gross margin improved mainly as an effect of efficiency gains, while Digital Services margin was negatively impacted by a write-down of SEK -0.3 b. for pre-commercial product investments for the Chinese market.

Ericsson | Second quarter report 2021

Financial highlights

Sequentially, reported gross margin increased to 43.4% from 42.8%, mainly driven by continued strong operational leverage in Networks and a positive impact of two quarters of IPR revenues related to the patent agreement signed in the quarter.

Research and development (R&D) expenses

R&D expenses amounted to SEK -10.5 (-10.0) b. R&D expenses increased in Digital Services due to increased investments in the cloud-native 5G portfolio and in Emerging Business and Other as a result of the acquisition of Cradlepoint.

Selling and administrative (SG&A) expenses

SG&A expenses were SEK -7.0 (-7.1) b. Increased investments in compliance and security and the consolidation of Cradlepoint were offset by lower discretionary spending in other areas.

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

Impairment losses on trade receivables

Impairment losses on trade receivables were SEK 0.1 (0.0) b.

Other operating income and expenses

Other operating income and expenses was SEK -0.6 (0.1) b., negatively impacted by SEK -0.8 b. as a result of the Nokia settlement related to the 2019 resolution with the U.S. Department of Justice (DOJ) and the U.S. Securities and Exchange Commission (SEC).

Share in earnings of JVs and associated companies was SEK -0.1 (-0.2) b.

Restructuring charges

Restructuring charges amounted to SEK 0.0 (-0.7) b.

EBIT

Reported EBIT improved to SEK 5.8 (3.9) b. YoY. EBIT excluding restructuring charges was SEK 5.8 (4.5) b. corresponding to an EBIT margin excluding restructuring charges of 10.6% (8.2%). The increase was driven mainly by improved gross margin in Networks.

Sequentially, reported EBIT increased to SEK 5.8 b. from SEK 5.3 b. driven by increased revenues and gross income primarily in Networks.

EBITA

EBITA improved to SEK 6.1 (4.1) b. YoY. EBITA excluding restructuring charges was SEK 6.1 (4.8) b. corresponding to an EBITA margin excluding restructuring charges of 11.1% (8.6%).

Financial income and expenses, net

Reported financial net was SEK -0.5 (0.3) b. The weakened USD to SEK resulted in a positive currency hedge effect. The currency hedge effect was SEK 0.1 b. in the quarter compared with SEK 0.6 b. in Q2 2020.

Sequentially, financial net was stable at SEK -0.5 b. with the currency hedge effect up from SEK -0.4 b. in the first quarter 2021. The USD weakened against the SEK between March 31, 2021 (SEK/USD rate 8.71) and June 30, 2021 (SEK/USD rate 8.51).

Taxes

Taxes were SEK -1.5 (-1.6) b. The effective tax rate in Q2 was 27% compared with 33% in Q1 2021, mainly due to the market mix in the quarter.

Net income

Net income improved to SEK 3.9 (2.6) b. and EPS diluted improved to SEK 1.10 (0.74) YoY driven by stronger EBIT.

Employees

The number of employees on June 30, 2021, was 101,624 compared with 101,113 on March 31, 2021. The increase derives mainly from research and development.

Financial highlights, year to date (Jan-June) development

Reported sales decreased by -1%. Sales adjusted for comparable units and currency increased by 9% driven primarily by sales in market areas North America and Europe and Latin America. Networks sales adjusted for comparable units and currency increased by 13%, Emerging Business and Other and Digital Services grew by 11% and 1% respectively, while Managed Services declined by -5%.

Reported gross margin increased to 43.1% (38.6%) driven by improvements primarily in Networks, which showed strong operational leverage. Q2 2020 was negatively impacted by both a write-down of pre-commercial product inventory and initial 5G deployments in Mainland China.

Reported EBIT increased YoY to SEK 11.1 (8.2) b. as a result of improved gross income.

Reported EBITA increased to SEK 11.7 (8.7) b. YoY. EBITA excluding restructuring charges was SEK 11.7 (9.7) b. corresponding to an EBITA margin excluding restructuring charges of 11.2% (9.2%).

Net income year to date improved to SEK 7.1 (4.9) b. with the improved gross income impacted by a more negative financial net and higher taxes.



4 Ericsson \| Second quarter report 2021		Financial highlights

Planning assumptions

Market related

•

The global RAN equipment market is estimated to grow by 10% (3%) in 2021, with Mainland China expected to grow by 11% (4%), North America by 12% (2%) and Europe by 9% (3%). Source: Dell’Oro Mobile RAN report, May 2021. (Previous forecast within brackets)

Ericsson related

Net sales

•

Three-year average reported sales seasonality between Q2 and Q3 is 5%, however, with large variations depending on timing of deployments and currency impact.

•

In Q2 2021, sales in Mainland China were SEK 1.5 (4.1) b. In Q3 2020, sales in Mainland China were SEK 5.2 b. In Q4 2020, sales in Mainland China were SEK 4.8 b.

•

The annual revenues from the current portfolio of IPR contracts is approximately SEK 7 b.

Gross margin

•

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

R&D and SG&A expenses

•

Operating expenses typically decrease between Q2 and Q3 due to seasonality, however, with large variations.

EBIT

•

Digital Services: Considering the uncertainty in Mainland China and the fact that 2021 is an investment year, a similar earnings level is expected in Q3 2021 as in Q2 2021 and a break-even is expected in Q4 2021 isolated.

Restructuring charges

•

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

Currency exposure

•

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

Cradlepoint

•

Cradlepoint is fully consolidated into segment Emerging Business and Other.

•

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



5 Ericsson \| Second quarter report 2021		Planning assumptions

Market area sales


SEK b.	Q2 2021		Q2 2020		YoY change			YoY adj.¹			Q1 2021		QoQ change			Jan-Jun 2021		YoY change
South East Asia, Oceania and India		7.1		6.6		8	%		14	%		6.7		6	%		13.8		10	%
North EastAsia		7.1		7.8		-9	%		1	%		6.5		10	%		13.6		16	%
North Am erica		18.0		18.4		-2	%		11	%		17.1		5	%		35.0		-4	%
Europe and Latin America		14.0		13.1		7	%		14	%		12.6		11	%		26.7		5	%
Middle East and Africa		4.5		5.4		-18	%		-10	%		4.4		2	%		8.9		-21	%
Other²		4.3		4.3		0	%		—			2.5		73	%		6.8		-18	%
Total		54.9		55.6		-1	%		8	%		49.8		10	%		104.7		-1	%

¹	Sales growth adjusted for currency.

²	Market area “Other” includes primarily IPR licensing revenues and the major part of segment Emerging Business and Other.

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

•

Three market areas showed double-digit organic growth.

•

North East Asia grew organically by 69% excluding sales in Mainland China.

•

After a period of decline, Latin America showed organic growth.

South East Asia, Oceania and India

Currency adjusted sales increased by 14% YoY. Networks sales increased YoY primarily driven by continued investments in LTE, mainly in India, and as a result of timing of project milestones in South East Asia. Sales decreased YoY in Digital Services due to timing of orders and project milestones. Managed Services sales increased YoY, mainly as a result of a new contract signed in the second half of 2020. Reported sales increased by 8%.

North East Asia

Currency adjusted sales increased by 1% YoY. Despite lower 5G volumes in Mainland China, sales in Networks grew, driven by continued 5G momentum in the other parts of the market area. Digital Services sales declined in Mainland China. Reported sales declined by -9%.

North America

Currency adjusted sales increased by 11% YoY. Sales growth was driven by strong demand for 5G solutions in Networks and for 5G Core and cloud-native solutions in Digital Services. Reported sales declined by -2%.

Europe and Latin America

Currency adjusted growth was 14% YoY with 12% growth in Europe and 28% 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 7%.

Middle East and Africa

Currency adjusted sales declined by -10% YoY. Sales declined YoY in Networks and Digital Services primarily due to lower 5G investments in the Middle East and uncertain macroeconomic conditions in Africa, which are likely to prevail for some time. Managed Services sales were stable. Reported sales decreased by -18%.

Other

IPR licensing revenues decreased to SEK 2.3 (2.8) b. Revenues from the new contract with one licensee were offset by expired contracts under renewal negotiations, lower volumes with one licensee and a weaker USD.

Sequentially, IPR licensing revenues increased to SEK 2.3 (0.8) b. mainly due to the new agreement with Samsung.



6 Ericsson \| Second quarter report 2021		Market area sales

Segment results

Segment Networks


SEK b.	Q2 2021			Q2 2020			YoY change			Q1 2021
Net sales		39.9			39.8			0	%		36.3
Of which IPR licensing revenues		1.92.3						-17	%		0.7
Sales growth adj. for comparable units and FX		—			—			11	%		—
Gross income		19.1			16.0			19	%		16.7
Gross margin		47.9	%		40.2	%		—			46.1	%
EBIT		8.6			5.3			65	%		7.2
EBIT margin		21.7	%		13.2	%		—			20.0	%
Restructuring charges		0.0			-0.4			—			0.0
Measures excl. restructuring charges
Gross margin excl. restructuring charges		47.9	%		40.5	%		—			46.0	%
EBIT excl. restructuring charges		8.7			5.6			54	%		7.2
EBIT margin excl.restructuring charges		21.7	%		14.1	%		—			19.9	%

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

•

Sales adjusted for comparable units and currency grew by 11% with growth in four of the five market areas.

•

Strengthened Cloud RAN portfolio with 5G mid-band and massive MIMO support.

•

EBIT margin at 21.7% driven by operational leverage.

Net sales

Sales adjusted for comparable units and currency grew by 11% YoY, with growth in four of the five market areas. Sales in Mainland China declined by SEK -2.0 b. YoY. Sales declined in market area Middle East and Africa primarily due to lower 5G investments in the Middle East and uncertain macroeconomic conditions in Africa. IPR revenues were SEK -0.4 b. lower YoY. Reported sales were stable YoY.

Sequentially, reported sales increased by 10%, driven primarily by growth in Europe and Latin America as well as in North East Asia outside of Mainland China.

Gross margin

Reported gross margin increased to 47.9% (40.2%) YoY. Gross margin in the quarter was supported by strong operational leverage, which more than offset the lower IPR revenues YoY. Q2 2020 was negatively impacted by a write-down of pre-commercial product inventory and by initial 5G deployments in Mainland China. Gross margin excluding restructuring charges was 47.9% (40.5%).

Reported gross margin increased QoQ to 47.9% from 46.1% with continued strong operational leverage and a positive impact of two quarters of IPR revenues related to the patent agreement signed in the quarter.

EBIT

Reported EBIT increased to SEK 8.6 (5.3) b. YoY, which increased the EBIT margin to 21.7% (13.2%). The increase was driven by improved gross income. EBIT margin excluding restructuring charges increased to 21.7% (14.1%)

Sequentially, reported EBIT increased by SEK 1.4 b. EBIT margin increased to 21.7% from 20.0%, due to seasonally higher sales and improved gross income.

Net sales rolling four quarters were SEK 167.2 b. and EBIT margin rolling four quarters excluding restructuring charges was 21.5%.

Segment Digital Services


SEK b.	Q2 2021			Q2 2020			YoY change			Q1 2021
Net sales		7.9			8.6			-8	%		6.9
Of which IPR licensing revenues		0.40.5						-17	%		0.1
Sales growth adj. for comparable units and FX		—						0	%		—
Gross income		3.0			3.7			-20	%		3.0
Gross margin		37.9	%		43.6	%		—			43.5	%
EBIT (loss)		-1.6			-0.7			—			-1.5
EBIT margin		-19.9	%		-8.1	%		—			-22.0	%
Restructuring charges		0.0			0.0			—			0.0
Measures excl. restructuring charges
Gross margin excl. restructuring charges		37.9	%		43.6	%		—			43.6	%
EBIT excl. restructuring charges		-1.6			-0.7			—			-1.5
EBIT margin excl. restructuring charges		-19.8	%		-8.5	%		—			-21.9	%

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

•

Sales adjusted for comparable units and currency were stable YoY despite a decrease of SEK -0.5 b. YoY in Mainland China.

•

Double-digit sales growth in North America and in Europe and Latin America.

•

The write-down related pre-commercial product investments for the Chinese market impacted gross margin by -3.6 p.p.

Net sales

Sales adjusted for comparable units and currency were stable YoY, with double-digit growth in North America and in Europe and Latin America, while sales declined in the other three market areas. Sales in Mainland China decreased by SEK -0.5 b. YoY. IPR revenues were SEK -0.1 b. lower YoY. Reported sales decreased by -8% YoY.

Reported sales increased by 14% QoQ, with growth in all market areas except in North East Asia.

Gross margin

Reported gross margin decreased to 37.9% (43.6%) YoY. There is a high risk regarding future market share in Core in Mainland China and the Company has made a write-down of SEK -0.3 b. for pre-commercial product investments for the Chinese market. The impact of the write-down on gross margin was -3.6 percentage points. Gross margin was also negatively impacted by lower IPR revenues YoY.

Reported gross margin decreased to 37.9% from 43.5% QoQ as a result of the write-down related to the Chinese market. The write-down more than offset the positive impact of two quarters of IPR revenues from the patent agreement signed in the quarter.

EBIT (loss)

Reported EBIT (loss) was SEK -1.6 (-0.7) b. with an EBIT margin of -19.9% (-8.1%). Operating expenses increased to SEK -4.6 b. mainly due to acceleration of R&D investments in the cloud native 5G portfolio.

Sequentially, reported EBIT decreased by SEK -0.1 b. to SEK -1.6 b. due to the above-mentioned write-down.

Net sales rolling four quarters were SEK 36.2 b. and EBIT margin rolling four quarters excluding restructuring charges was -8.5%.



7 Ericsson \| Second quarter report 2021		Segment results

Segment Managed Services


SEK b.	Q 2 2021			Q 2 2020			YoY change			Q 1 2021
Net sales		5.1			5.6			-8	%		4.9
Sales growth adj. for comparable units and FX		—						-2	%		—
Gross income		1.0			1.0			2	%		0.9
Gross margin		19.0	%		17.1	%		—			19.4	%
EBIT		0.4			0.3			58	%		0.3
EBIT margin		8.1	%		4.7	%		—			6.4	%
Restructuring charges		0.0			0.0			—			-0.1
Measures excl. restructuring charges
Gross margin excl. restructuring charges		19.0	%		17.2	%		—			21.0	%
EBIT excl. restructuring charges		0.4			0.3			57	%		0.4
EBIT margin excl. restructuring charges		8.1	%		4.8	%		—			8.1	%

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

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

• EBIT margin increased to 8.1% driven by efficiency gains.

Net sales

Sales adjusted for comparable units and currency decreased by -2% YoY, due to reduced variable sales in a large contract in North America, post the merger between two operators, and lower sales mainly in Europe due to earlier decided contract exits. Sales in Network Optimization showed growth mainly in Europe and Latin America. Sales in Managed Services IT&ADM showed growth mainly in North America. Reported sales declined by -8% YoY.

Gross margin

Reported gross margin increased to 19.0% (17.1%) YoY. Gross margin excluding restructuring charges increased to 19.0% (17.2%) YoY, mainly due to efficiency gains and higher variable sales.

Reported gross margin decreased slightly to 19.0% from 19.4% QoQ. Gross margin excluding restructuring charges decreased to 19.0% from 21.0% QoQ, due to seasonally lower costs in Q1.

EBIT

Reported EBIT was SEK 0.4 (0.3) b. EBIT margin excluding restructuring charges increased to 8.1% (4.8%) YoY, driven by efficiency gains and higher variable sales.

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

Net sales rolling four quarters were SEK 21.3 b. and EBIT margin rolling four quarters excluding restructuring charges was 8.0%.

Segment Emerging Business and Other


SEK b.	Q 2 2021			Q 2 2020			YoY change			Q 1 2021
Net sales		2.1			1.6			29	%		1.7
Sales growth adj. for comparable units and FX		—			—			13	%		—
Gross income		0.8			0.2			—			0.6
Gross margin		37.9	%		12.6	%		—			36.6	%
EBIT (loss)		-1.7			-1.0			—			-0.8
EBIT margin		-81.1	%		-60.5	%		—			-44.4	%
Restructuring charges		0.0			-0.3			—			0.0
Measures excl. restructuring charges
Gross margin excl. restructuring charges		38.1	%		25.3	%		—			36.8	%
EBIT (loss) excl. restructuring charges		-1.7			-0.6			—			-0.8
EBIT margin excl. restructuring charges		-81.5	%		-39.6	%		—			-43.7	%

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

• Positive impact of SEK 0.1 b. (Net sales, GM and EBIT) from final PPA for Cradlepoint.

• Negative impact of SEK -0.8 b. (Other op income) from Nokia settlement related to 2019 resolution with the U.S. authorities

Net sales

Sales adjusted for comparable units and currency increased by 13%. Reported sales increased by 29% YoY, driven mainly by the acquired Cradlepoint business.

Gross margin

Reported gross margin increased to 37.9% (12.6%) YoY. Gross margin excluding restructuring charges increased to 38.1% (25.3%). The increase in Emerging Business was driven mainly by Cradlepoint and new businesses.

Reported gross margin increased to 37.9% from 36.6% QoQ. Gross margin excluding restructuring charges increased to 38.1% from 36.8% QoQ. The improvement was driven by Cradlepoint.

EBIT (loss)

Reported EBIT (loss) was SEK -1.7 (-1.0) b.

EBIT was negatively impacted by SEK -0.8 b. in the quarter, as a result of the Nokia settlement related to the 2019 resolution with the U.S. authorities. Adjusted for this settlement, reported EBIT (loss) was SEK -0.9 (-1.0) b.

The positive impact from the changes between the preliminary and final PPA (Purchase Price Allocation) for Cradlepoint was SEK 0.1 b.

Net sales rolling four quarters were SEK 7.1 b. and EBIT margin rolling four quarters excluding restructuring charges was -47.9%.



8 Ericsson \| Second quarter report 2021		Segment results

Cash flow and financial position


Free cash flow bridge, SEK b.	Q 2 2021		Q 2 2020		Q 1 2021		Jan-Jun 2021		Jan-Jun 2020
EBIT excl. restructuring charges		5.8		4.5		5.3		11.2		9.1

Depreciation, am ortization and in pairm entbsses		2.1		2.2		1.9		4.0		4.3

Restructuring charges		0.0		-0.7		-0.1		-0.1		-1.0

Changes in working capital¹â¾		0.2		-0.2		-3.9		-3.6		-0.4

Interestpaid/received,taxespaid,and other		-2.2		-0.4		-0.1		-2.3		-2.2

Cash flow from operating activities		5.9		5.4		3.2		9.1		9.8

Capexnet and other investing activities		-1.3		-1.6		-1.1		-2.4		-3.0

Repaym entoflease liabilities		-0.6		-0.6		-0.5		-1.2		-1.2

Free cash flow before M &A		4.1		3.2		1.6		5.6		5.6

M&A		-0.1		0.0		0.0		-0.1		-0.3

Free cash flow after M &A		4.0		3.2		1.6		5.6		5.3

Cash flow from operating activities		5.9		5.4		3.2		9.1		9.8
Cash flow from investing activities		-7.1		-0.5		-0.9		-8.1		-5.5
Cash flow from financing activities		4.3		-4.6		-6.2		-1.9		-3.1


SEK b.	Jun 30 2021			Jun 30 2020			Mar 31 2021
Grosscash		77.1			75.4			68.6

-Borrow ings, current		11.7			15.3			2.4
-Borrow ings, non-current		21.7			22.6			23.3

Netcash		43.7			37.5			43.0

Equity		91.7			78.5			88.1
Total assets		281.0			276.8			270.3
Capitalturnover(times)		1.3			1.3			1.3
Return on capitalem ployed (% )		13.5	%		9.9	%		13.3	%

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

¹	Defined as Changes in operating net assets

• Free cash flow before M&A was SEK 4.1 (3.2) b. supported by higher incoming IPR payments.

• The average maturity of long-term borrowings increased to 4 years through an 8-year bond and a 7-year loan from EIB.

Cash flow from operating activities

Reported cash flow from operating activities was SEK 5.9 (5.4) b. Continued business momentum with increased profit and higher incoming IPR payments supported cash flow. Cash flow from operating activities in Q2 2020 was impacted by a payment of SEK -1.0 b. into the Swedish Pension Trust. Operating net assets were stable in the quarter and key movements include an increase in contract liabilities with a positive impact of SEK 4.6 b. relating to a combination of customer contracts and incoming IPR payments. This was offset by an increase in trade receivables and contract assets of SEK -4.0 b. as a result of the sales growth in Networks in the quarter. Taxes paid/received were SEK -1.9 b.

Free cash flow

Free cash flow before M&A was SEK 4.1 (3.2) b. Capex net and other investing activities was SEK -1.3 (-1.6) b., primarily related to investment in Networks. Repayment of lease liabilities was stable at SEK -0.6 b. YoY and free cash flow after M&A was SEK 4.0 (3.2) b.

Cash flow from investing and financing activities

Reported cash flow from financing activities was SEK 4.3 (-4.6) b. including repayment of lease liabilities. In the quarter, Ericsson issued a EUR 0.5 b. (SEK 5.0 b.) bond maturing in 2029 and drew on its credit commitment with the European Investment Bank (EIB) of USD 0.3 b. (SEK 2.6 b.) maturing in 2028. Dividends of SEK -3.3 b. were paid out in the quarter, and an additional SEK 1.00 per share (SEK -3.3 b.) will be paid out in October.

Reported cash flow from investing activities was SEK -7.1 (-0.5) b. mainly due to purchases of interest-bearing securities.

Financial position

Net cash improved QoQ to SEK 43.7 b. from SEK 43.0 b. due to the positive cash flow, partly offset by dividends paid. Gross cash increased by SEK 8.5 b. QoQ, driven by the issuing of a EUR 0.5 b. (SEK 5.0 b.) senior unsecured 8-year bond and the utilization of the USD 0.3 b. (SEK 2.6 b.) credit commitment with the EIB. Current borrowings increased due to reclassification of the USD 1.0 b. (SEK 8.5 b.) bond from non-current borrowings as it becomes due in Q2 2022. The average maturity of long-term borrowings was 4.0 years as of June 30, 2021, an increase from 2.2 years 12 months earlier.

Liabilities for post-employment benefits decreased slightly in the quarter, to SEK 31.4 b. from SEK 31.9 b. The Swedish defined benefit obligation (DBO) was calculated using a discount rate based on the Swedish government bond yield-curve. If the discount rate had been based on Swedish covered mortgage bonds, the liability for post-employment benefits would have been approximately SEK 17.7 b. (SEK 13.7 b. lower than current DBO).

Return on capital employed (ROCE) was 13.5% (9.9%).



9 Ericsson \| Second quarter report 2021		Cash flow and financial position

Parent Company

Income after financial items Jan–June 2021 was SEK 5.7 (2.3) b.

At the end of the quarter, gross cash (cash, cash equivalents, short-term investments and interest-bearing securities, non-current) amounted to SEK 62.9 (63.3) b.

There was an increase in intercompany lending of SEK 2.5 b. and in intercompany borrowing of SEK 0.2 b. in the second quarter.

The Parent Company has recognized dividends from subsidiaries of SEK 5.2 (1.0) b. in the quarter. There was a negative impact of SEK -0.8 b. (Other operating income) in the quarter, as a result of the Nokia settlement related to the 2019 resolution with the U.S. Department of Justice (DOJ) and the U.S. Securities and Exchange Commission (SEC).

In accordance with the conditions of the long-term variable compensation program (LTV) for Ericsson employees, 1,629,894 shares from treasury stock were distributed or sold to employees in the second quarter. The holding of treasury stock on June 30, 2021 was 4,414,066 Class B shares.



10 Ericsson \| Second quarter report 2021		Parent Company

Other information

Ericsson and Samsung signed global patent license agreement

On May 7, 2021, Ericsson and Samsung reached a multi-year agreement on global patent licenses between the two companies, including patents relating to all cellular technologies. The cross-license agreement covers sales of network infrastructure and handsets from January 1, 2021.

Furthermore, Ericsson and Samsung agreed on technology cooperation projects to advance the mobile industry in open standardization and create valuable solutions for consumers and enterprises.

This settlement ends complaints filed by both companies before the United States International Trade Commission (USITC) as well as the ongoing lawsuits in several countries and confirms the value of the strong patent portfolios of both companies. The details of the agreement are confidential and will not be disclosed.

Ericsson’s IPR licensing revenues continue to be affected by several factors, mainly expired patent license agreements pending renewal, geopolitical impact on the handset market, technology shift from 4G to 5G, and possible currency effects going forward.

Over several decades, Ericsson has made significant investments in R&D and in developing global mobile standards and is committed to licensing its standard-essential patents on fair, reasonable and non-discriminatory (FRAND) terms for the benefit of consumers and enterprises everywhere. The FRAND system allows access to technology and intellectual property, developed by inventors like Ericsson, and also rewards those inventors for their major up-front investment in R&D in each mobile generation.

The value of Ericsson’s IP portfolio extends to more than 57,000 granted patents and is strengthened by annual investment in R&D of approx. SEK 40 b. With a leading global position in 5G, the company is confident of growing its IPR revenues long term, thereby further maximizing the value of the overall patent portfolio.

Ericsson announced settlement with impact in second quarter 2021

On May 12, 2021, Ericsson announced that the Company had reached an agreement with Nokia for settling a damages claim against Ericsson. The settlement relates to events that were the subject of 2019 resolutions with the U.S. Department of Justice (DOJ) and U.S. Securities and Exchange Commission (SEC) of investigations into Ericsson’s violations of the U.S. Foreign Corrupt Practices Act (FCPA).

As communicated in 2019, the resolution with DOJ related to criminal charges of books and records and internal controls violations of the FCPA in five countries including in Djibouti and a guilty plea to one instance of bribery in Djibouti. The resolution with the SEC related to allegations of violations of the books and records and internal controls provision of the FCPA in six countries and of the bribery provision of the FCPA in three of these six countries.

The agreement with Nokia contemplates the payment by Ericsson of a total settlement amount of EUR 80 m (SEK 0.8 b. equivalent). The amount reflects uncertainty, risk, expense, and potential distraction from business focus associated with a potentially lengthy and complex litigation. The settlement will have an impact of EUR 80 m. on EBIT and EUR 26 m. on cash flow in Q2 2021. The remainder of the settlement amount will be made in similar installments in 2022 and 2023 respectively, impacting cash flow. The settlement amount will be recorded as Other operating expenses under Segment Emerging Business and Other. Further details of the terms of the settlement are confidential.

Ericsson has a zero-tolerance policy for corruption and has in recent years worked hard to strengthen its Ethics and Compliance program and to build a culture of compliance.

Ericsson updated risk factors for Euro corporate bond prospectus

On May 24, 2021, Ericsson announced that the Company was in the process of issuing a EUR 500 million unsecured 8-year bond under its EMTN program. In connection with this proposed issue, Ericsson updated the risk factors in its prospectus regarding geopolitical and trade uncertainty.

The reason for the update was as previously disclosed by Ericsson in its Q4 2020 financial report and in its 2020 Annual Report, that there is a risk that the decision by the Post and Telecommunication Authority (PTS) to exclude Chinese vendors’ products from the 5G auction in Sweden may adversely impact the economic interests of Sweden and Swedish industry, including those of Ericsson.

This risk has been included in the risk factors in Ericsson’s EMTN prospectus. The update coincides with Ericsson’s proposed issue under the EMTN program and the change in relation to the risk factor, as shown in the Q4 report, is reflected in the italicized text below.

Extract of text from Q4 report

Ongoing geopolitical and trade uncertainty from a range of factors may have a material adverse impact on our business, operations, business prospects and consequently on operating results, financial conditions and our ability to meet our targets.

[…]

There are uncertainties for the future bilateral trading relationships between China and several countries as a result of restrictions to wards Chinese vendors in national 5G networks.

[…]

In Sweden, the Post and Telecommunication Authority (PTS) has taken a decision to exclude Chinese vendors’ products from the 5G auction. Of special relevance for Ericsson in this context is the trade relationship between Sweden and China, since Ericsson, even though it is a global company with a presence on all global markets, has its headquarters in Sweden and therefore risks collateral damages from a weakened Swedish-Chinese relationship as a result of this decision. There is a risk that the above leads to measures taken by China that are targeted at the economic interests of Sweden and Swedish industry, including those of Ericsson. While Ericsson is invited to various ongoing tender processes in China, the final outcome remains uncertain and it is the company’s current assessment that the risk has increased that Ericsson will in those tenders be allocated a significantly lower market share than its current market share.

[...]

The geopolitical situation can have consequences on the entire industry, with an increased likelihood of further industry split, separation of global value chains and separation of global standards for mobile telecommunications. This overall development has also led to several countries evaluating how to ensure uninterrupted access to telecommunication network infrastructure, for example through promoting disaggregation of the Radio Access Network and support of national communication network infrastructure champions as alternative to the established global vendors such as Ericsson although the timing and extent of this remains unclear.



11 Ericsson \| Second quarter report 2021		Other information

All of the above may have a material and potentially lasting adverse impact on our business, including sales, market share, market access and supply chain and R&D activities, our financial condition and results of operations.

COVID-19 update

Despite the effective deployment of vaccines in many markets we continue to take the utmost care to ensure the health and well-being of our colleagues in respect of the COVID-19 pandemic.

We remain cautiously optimistic as 2021 progresses that control over the spread of the virus is increasing due to vaccination, public education and continued restrictions on movement in areas of heightened infection risk. It will still take time before the full effects of this strategy are seen. Therefore, we continue to advocate working from home for the majority of our employees throughout 2021.

•

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

•

Event restrictions are extended accordingly for the rest of the year

•

The mandate on mask wearing in our office locations continues until further notice.

In preparation for a phased return to the office, our Workplace of the Future program planning continues to enable future work flexibility and increased opportunities to connect and collaborate in the office, once it is deemed safe to do so.

We continue to operate efficiently and profitably and believe that tax-payers’ money is better used to target the health and economic effects of COVID-19, accordingly we have not sought public funding during the pandemic. The proactive approach to business continuity management in full alignment with customers at the beginning of the pandemic continues to pay off. Quality in Ericsson’s operations and customers’ networks are maintained. The dual mode production strategy and regionalized supply chains make it possible to keep performing to high levels across the supply chain.

POST-CLOSING EVENTS

Ericsson and Verizon ink landmark multi-year USD 8.3 b. 5G deal

On July 16, 2021, Ericsson announced a landmark multi-year agreement with Verizon to provide its industry-leading 5G solutions to accelerate the deployment of Verizon’s world-class next-generation 5G network in the U.S.

Under this USD 8.3 billion agreement, Verizon will deploy Ericsson’s 5G MIMO C-band, low-band, and millimeter wave (mmWave) solutions to enhance and expand Verizon’s 5G Ultra Wideband coverage, network performance, and user experience. Ericsson’s technology solutions, including Massive MIMO, Ericsson Spectrum Sharing, and Ericsson Cloud RAN, complement the high-performing Ericsson Radio System portfolio to support 5G services. Ericsson’s industry-leading software functionality provides end-users with the speed and performance they expect from 5G networks.

In 2020, Verizon was the first communications service provider to receive a commercial 5G mmWave Street Macro base station from Ericsson’s award-winning new state-of-the-art U.S. smart factory in Lewisville, Texas. Ericsson is committed to building and accelerating the nationwide build-out of 5G across the country.



12 Ericsson \| Second quarter report 2021		Other information

Risk factors

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

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

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

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

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

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

Date for next report: October 19, 2021



13 Ericsson \| Second quarter report 2021		Risk factors

Board assurance

The Board of Directors and the President and CEO certify that the financial report for the six months gives a fair view of the performance of the business, position and profit or loss of the Company and the Group, and describes the principal risks and uncertainties that the Company and the companies in the Group face.

Stockholm, July 16, 2021

Telefonaktiebolaget LM Ericsson (publ)

Org. Nr. 556016-0680


Helena Stjernholm	Ronnie Leten	Jacob Wallenberg
Deputy Chair	Chair	Deputy Chair

Jon Fredrik Baksaas	Jan Carlson	Nora Denzel
Member of the Board	Member of the Board	Member of the Board

Eric A. Elzvik	Kurt Jofs	Kristin S. Rinne
Member of the Board	Member of the Board	Member of the Board

	Börje Ekholm
	President, CEO and member of the Board

Torbjörn Nyman	Anders Ripa	Kjell-Åke Soting
Member of the Board	Member of the Board	Member of the Board



14 Ericsson \| Second quarter report 2021		Board assurance

Editor’s note

Media and analyst briefing

Ericsson invites media, investors and analysts to a conference call and live video webcast at 9:00 AM CEST on July 16, 2021.

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

www.ericsson.com/investors and

www.ericsson.com/newsroom

For further information, please contact:

Carl Mellander, Senior Vice President, Chief Financial Officer

Phone: +46 72 583 88 70

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

media.relations@ericsson.com

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

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

media.relations@ericsson.com

Telefonaktiebolaget LM Ericsson

Org. number: 556016-0680

Torshamnsgatan 21

SE-164 83 Stockholm

Phone: +46 10 719 00 00

www.ericsson.com

Investors

Peter Nyquist, Vice President,

Head of Investor Relations

Phone: +46 70 575 29 06

E-mail: peter.nyquist@ericsson.com

Lena Häggblom, Director,

Investor Relations

Phone: +46 72 593 27 78

E-mail: lena.haggblom@ericsson.com

Stefan Jelvin, Director,

Investor Relations

Phone: +46 70 986 02 27

E-mail: stefan.jelvin@ericsson.com

Media

Kristoffer Edshage, , Director of Corporate Media

Phone: +46 72 220 44 46

E-mail: media.relations@ericsson.com

Corporate Communications

Phone: +46 10 719 69 92

E-mail: media.relations@ericsson.com



15 Ericsson \| Second quarter report 2021		Editor’s note

Forward-looking statements

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

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

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

Important factors that could affect whether and to what extent any of our forward-looking statements materialize include, but are not limited to, the factors described in the section “Risk Factors”, and in “Risk Factors” in the Annual Report 2020.

These forward-looking statements also represent our estimates and assumptions only as of the date that they were made. We expressly disclaim a duty to provide updates to these forward-looking statements, and the estimates and assumptions associated with them, after the date of this report, to reflect events or changes in circumstances or changes in expectations or the occurrence of anticipated events, whether as a result of new information, future events or otherwise, except as required by applicable law or stock exchange regulation.



16 Ericsson \| Second quarter report 2021		Forward-looking statements

Financial statements and other information

Contents



Financial statements (unaudited)			18
Condensed consolidated income statement			18
Condensed statement of comprehensive income (loss)			18
Condensed consolidated balance sheet			19
Condensed consolidated statement of cash flows			20
Condensed consolidated statement of changes in equity			21
Condensed consolidated income statement – isolated quarters			21
Condensed consolidated statement of cash flows – isolated quarters			22
Condensed Parent Company income statement			23
Condensed Parent Company statement of comprehensive income (loss)			23
Condensed Parent Company balance sheet			24

Accounting policies and Explanatory notes (unaudited)			25
Note 1 – Accounting policies			25
Note 2 – Critical accounting estimates and judgements			25
Note 3 – Segment information			26
Note 4 – Provisions			30
Note 5 – Financial risk management			31
Note 6 – Cash flow			32
Note 7 – Contingent liabilities and Assets pledged as collateral			32
Note 8 – Share information			33
Note 9 – Employee information			33

Note 10 – Business combinations			33
Alternative performance measures (unaudited)			34
Sales growth adjusted for comparable units and currency			34
Items excluding restructuring charges			35
EBITA and EBITA margin / EBITA and EBITA margin excluding restructuring charges			36
Rolling four quarters of net sales and EBIT margin excluding restructuring charges (%)			36
Gross cash and net cash, end of period			37
Capital employed			37
Capital turnover			37
Return on capital employed			38
Equity ratio			38
Return on equity			38
Adjusted earnings per share			39
Free cash flow before M&A / Free cash flow after M&A			39
Sales growth by segment adjusted for comparable units and currency			40
Sales growth by market area adjusted for comparable units and currency			40
Gross margin by segment by quarter			41
EBIT margin by segment by quarter			41
Restructuring charges by function			42
Restructuring charges by segment			42
Gross income and gross margin excluding restructuring charges by segment			43
EBIT and EBIT margin excluding restructuring charges by segment			44
Rolling four quarters of net sales by segment			44
Rolling four quarters of EBIT margin excluding restructuring charges by segment (%)			44
EBITA and EBITA margin by segment by quarter			45
Other ratios			45



17 Ericsson \| Second quarter report 2021		Financial statements and other information

Financial statements (unaudited)

Condensed consolidated income statement


			Q2							Jan-Jun
SEK million	Note		2021		2020		Change			2021		2020
Net sales		3		54,941		55,578		-1	%		104,719		105,328
Cost of sales				-31,084		-34,661		-10	%		-59,567		-64,623

Gross income		3		23,857		20,917		14	%		45,152		40,705

Research and development expenses				-10,480		-10,035		4	%		-20,056		-19,180
Selling and administrative expenses				-6,972		-7,052		-1	%		-13,160		-13,290
Impairment losses on trade receivables				100		42		138	%		-112		-118

Operating expenses				-17,352		-17,045		2	%		-33,328		-32,588

Other operating income and expenses¹⁾				-579		131		-542	%		-566		220
Share in earnings of JV and associated companies				-103		-152		-32	%		-174		-180

Earnings before financial items and income tax (EBIT)		3		5,823		3,851		51	%		11,084		8,157

Financial income and expenses, net				-454		292		-255	%		-987		-610

Income after financial items				5,369		4,143		30	%		10,097		7,547

Income tax				-1,469		-1,558		-6	%		-3,029		-2,682

Net income				3,900		2,585		51	%		7,068		4,865

Net income (loss) attributable to:
Owners of the Parent Company				3,679		2,452					6,866		4,608
Non-controlling interests				221		133					202		257
Other information
Average number of shares, basic (million)		8		3,329		3,322					3,329		3,320
Earnings per share, basic (SEK) ²⁾				1.10		0.74					2.06		1.39
Earnings per share, diluted (SEK) ³⁾				1.10		0.74					2.06		1.39

¹⁾	Includes cost of SEK -0.8 b. in Q2 2021 as a result of the Nokia settlement related to the 2019 resolutions with SEC and DOJ.

²⁾	Based on net income attributable to owners of the Parent Company.

³⁾	Potential ordinary shares are not considered when their conversion to ordinary shares would increase earnings per share.

Condensed statement of comprehensive income (loss)


	Q2				Jan-Jun
SEK million	2021		2020		2021		2020
Net income		3,900		2,585		7,068		4,865
Other comprehensive income (loss)
Items that will not be reclassified to profit or loss
Remeasurements of defined benefits pension plans incl. asset ceiling		595		1,482		6,641		-3,201
Revaluation of borrowings due to change in creditrisk		39		-1,032		-16		693
Tax on items that will not be reclassified to profit or loss		-93		-146		-1,326		559
Items that have been or may be reclassified to profit or loss
Cash flow hedge reserve
Gains/ losses arising during the period		-123		146		-154		-95
Reclassification adjustments on gains/ losses included in profit or loss		-24		71		-48		141
Translation reserves								—
Changes in translation reserves		-476		-3,591		1,245		-1,380
Reclassification to profit and loss		-9		-99		-9		-99
Share of other comprehensive income (loss) of JV and associated companies		-4		-90		31		-2
Tax on items that have been or may be reclassified to profit or loss		31		-44		42		-9

Total other comprehensive income, net of tax		-64		-3,303		6,406		-3,393

Total comprehensive income		3,836		-718		13,474		1,472

Total comprehensive income attributable to:
Owners of the Parent Company		3,597		-916		13,352		1,246
Non-controlling interests		239		198		122		226



18 Ericsson \| Second quarter report 2021		Financial statements

Condensed consolidated balance sheet


	Jun 30				Dec 31
SEK million	Note		2021		2020
Assets
Non-current assets
Intangible assets
Capitalized development expenses				3,798		3,857
Goodwill		10		36,436		34,945
Intellectual property rights, brands and other intangible assets				4,272		4,805
Property, plant and equipment				13,739		13,383
Right-of-use assets				7,985		7,980
Financial assets
Equity in JV and associated companies				1,116		1,274
Other investments in shares and participations		5		1,499		1,519
Customer finance, non-current		5		545		1,221
Interest-bearing securities, non-current		5		20,998		21,613
Other financial assets, non-current		5		5,329		4,842
Deferred tax assets				25,175		26,296

				120,892		121,735

Current assets
Inventories				30,515		28,097
Contract assets				11,811		11,273
Trade receivables		5		45,192		42,063
Customer finance, current		5		1,973		1,916
Other current receivables				14,534		16,014
Interest-bearing securities, current		5		12,855		6,820
Cash and cash equivalents		5		43,273		43,612
				160,153		149,795

Total assets				281,045		271,530

Equity and liabilities
Equity
Stockholders’ equity				93,331		86,674
Non-controlling interest in equity of subsidiaries				-1,636		-1,497

				91,695		85,177

Non-current liabilities
Post-employment benefits				31,411		37,353
Provisions, non-current		4		1,922		2,886
Deferred tax liabilities				975		1,089
Borrowings, non-current		5		21,673		22,218
Lease liabilities, non-current				7,111		7,104
Other non-current liabilities				1,596		1,383

				64,688		72,033

Current liabilities
Provisions, current		4		7,310		7,580
Borrowings, current		5		11,737		7,942
Lease liabilities, current				2,203		2,196
Contract liabilities				36,621		26,440
Trade payables		5		29,638		31,988
Other current liabilities				37,153		38,174
				124,662		114,320

Total equity and liabilities				281,045		271,530



19 Ericsson \| Second quarter report 2021		Financial statements

Condensed consolidated statement of cash flows


			Q2				Jan-Jun
SEK million	Note		2021		2020		2021		2020
Operating activities
Net income				3,900		2,585		7,068		4,865
Adjustments for
Taxes				1,230		1,871		2,814		3,108
Earnings/ dividends in JV and associated companies				112		155		188		185
Depreciation, amortization and impairment losses		62,097				2,156		4,032		4,276
Other non-cash items				495		-215		638		577

				7,834		6,552		14,740		13,011

Changes in operating net assets
Inventories				-701		-1,253		-1,936		-1,791
Customer finance, current and non-current				454		307		673		1,124
Trade receivables and contract assets				-4,034		0		-2,055		5,559
Trade payables				744		4,104		-3,368		1,928
Provisions and post-employment benefits				-1,461		-1,189		-938		-971
Contract liabilities				4,603		-1,000		9,057		2,987
Other operating assets and liabilities, net				608		-1,167		-5,073		-9,276

				213		-198		-3,640		-440

Interest received				15		347		257		479
Interest paid				-261		-513		-553		-903
Taxes paid/received				-1,861		-739		-1,659		-2,396

Cash flow from operating activities				5,940		5,449		9,145		9,751

Investing activities
Investments in property, plant and equipment		6		-1,007		-1,327		-1,922		-2,440
Sales of property, plant and equipment				17		69		41		95
Acquisitions/divestments of subsidiaries and other operations, net				-69		-45		-64		-253
Product development		6		-266		-211		-470		-473
Other investing activities				—		-126		-5		-168
Interest-bearing securities				-5,799		1,141		-5,638		-2,291

Cash flow from investing activities				-7,124		-499		-8,058		-5,530

Financing activities
Proceeds from issuance of long-term debt				7,804		579		7,881		923
Repayment of long-term debt				-510		-544		-5,752		-835
Dividends paid				-3,328		-2,489		-3,333		-2,498
Repayment of lease liabilities				-617		-618		-1,165		-1,214
Other financing activities				940		-1,486		491		497

Cash flow from financing activities				4,289		-4,558		-1,878		-3,127

Effect of exchange rate changes on cash				-375		-3,084		452		-518

Net change in cash and cash equivalents				2,730		-2,692		-339		576

Cash and cash equivalents, beginning of period				40,543		48,347		43,612		45,079

Cash and cash equivalents, end of period				43,273		45,655		43,273		45,655



20 Ericsson \| Second quarter report 2021		Financial statements

Condensed consolidated statement of changes in equity


	Jan-Jun
SEK million	2021		2020
Opening balance		85,177		81,878
Total comprehensive income		13,474		1,472
Sale/repurchase of own shares		—		81
Long-term variable compensation plans		43		97
Dividends to shareholders¹⁾		-6,873		-5,056
Transactions with non-controlling interests		-126		—

Closing balance		91,695		78,472

¹⁾	SEK 1.00 per share of the total SEK 2.00 per share of the dividend approved by the AGM in March 2021 will be paid out in Q4 2021.

Condensed consolidated income statement – isolated quarters


	2021				2020
Isolated quarters, SEK million	Q2		Q1		Q4		Q3		Q2		Q1
Net sales		54,941		49,778		69,590		57,472		55,578		49,750
Cost of sales		-31,084		-28,483		-41,333		-32,710		-34,661		-29,962

Gross income		23,857		21,295		28,257		24,762		20,917		19,788

Research and development expenses		-10,480		-9,576		-10,433		-10,101		-10,035		-9,145
Selling and administrative expenses		-6,972		-6,188		-7,402		-5,992		-7,052		-6,238
Impairment losses on trade receivables		100		-212		264		-28		42		-160

Operating expenses		-17,352		-15,976		-17,571		-16,121		-17,045		-15,543

Other operating income and expenses¹⁾		-579		13		381		61		131		89
Share in earnings of JV and associated companies		-103		-71		-59		-59		-152		-28

Earnings before financial items and income tax (EBIT)		5,823		5,261		11,008		8,643		3,851		4,306

Financial income and expenses, net		-454		-533		-95		109		292		-902

Income after financial items		5,369		4,728		10,913		8,752		4,143		3,404

Income tax		-1,469		-1,560		-3,721		-3,186		-1,558		-1,124

Net income		3,900		3,168		7,192		5,566		2,585		2,280

Net income (loss) attributable to:
Owners of the Parent Company		3,679		3,187		7,522		5,353		2,452		2,156
Non-controlling interests		221		-19		-330		213		133		124
Other information
Average number of shares, basic (million)		3,329		3,328		3,328		3,326		3,322		3,317
Earnings per share, basic (SEK) ²⁾		1.10		0.96		2.26		1.61		0.74		0.65
Earnings per share, diluted (SEK) ³⁾		1.10		0.96		2.26		1.61		0.74		0.65

¹⁾	Includes cost of SEK -0.8 b. in Q2 2021 as a result of the Nokia settlement related to the 2019 resolutions with SEC and DOJ.

²⁾	Based on net income attributable to owners of the Parent Company.

³⁾	Potential ordinary shares are not considered when their conversion to ordinary shares would increase earnings per share.



21 Ericsson \| Second quarter report 2021		Financial statements

Condensed consolidated statement of cash flows – isolated quarters


	2021				2020
Isolated quarters, SEK million	Q2		Q1		Q4		Q3		Q2		Q1
Operating activities
Net income		3,900		3,168		7,192		5,566		2,585		2,280
Adjustments for
Taxes		1,230		1,584		3,846		3,482		1,871		1,237
Earnings/ dividends in JV and associated companies		112		76		115		74		155		30
Depreciation, amortization and impairment losses		2,097		1,935		2,293		2,105		2,156		2,120
Other		495		143		190		-320		-215		792

		7,834		6,906		13,636		10,907		6,552		6,459

Changes in operating net assets
Inventories		-701		-1,235		3,753		-1,578		-1,253		-538
Customer finance, current and non-current		454		219		-119		-635		307		817
Trade receivables and contract assets		-4,034		1,979		-7,231		-1,513		0		5,559
Trade payables		744		-4,112		2,999		-624		4,104		-2,176
Provisions and post-employment benefits		-1,461		523		199		-1,897		-1,189		218
Contract liabilities		4,603		4,454		-2,046		-1,501		-1,000		3,987
Other operating assets and liabilities, net		608		-5,681		3,768		3,228		-1,167		-8,109
	213		-3,853		1,323		-4,520		-198		-242
Interest received		15		242		188		96		347		132
Interest paid		-261		-292		-344		-187		-513		-390
Taxes paid/received		-1,861		202		-900		-1,017		-739		-1,657

Cash flow from operating activities		5,940		3,205		13,903		5,279		5,449		4,302

Investing activities
Investments in property, plant and equipment		-1,007		-915		-1,090		-963		-1,327		-1,113
Sales of property, plant and equipment		17		24		104		55		69		26
Acquisitions/divestments of subs. and other operations, net¹⁾		-69		5		-9,256		-89		-45		-208
Product development		-266		-204		-177		-167		-211		-262
Other investing activities		—		-5		668		301		-126		-42
Interest-bearing securities		-5,799		161		1,189		-246		1,141		-3,432

Cash flow from investing activities		-7,124		-934		-8,562		-1,109		-499		-5,031

Financing activities
Proceeds from issuance of long-term debt		7,804		77		2,213		83		579		344
Repayment of long-term debt		-510		-5,242		-8,036		-160		-544		-291
Dividends paid		-3,328		-5		-3,456		-42		-2,489		-9
Repayment of lease liabilities		-617		-548		-636		-567		-618		-596
Other financing activities		940		-449		1,436		-200		-1,486		1,983

Cash flow from financing activities		4,289		-6,167		-8,479		-886		-4,558		1,431

Effect of exchange rate changes on cash		-375		827		-2,024		-165		-3,084		2,566

Net change in cash and cash equivalents		2,730		-3,069		-5,162		3,119		-2,692		3,268

Cash and cash equivalents, beginning of period		40,543		43,612		48,774		45,655		48,347		45,079

Cash and cash equivalents, end of period		43,273		40,543		43,612		48,774		45,655		48,347

¹⁾	Includes acquisition of Cradlepoint of SEK -9.5 b. in Q4 2020.



22 Ericsson \| Second quarter report 2021		Financial statements

Condensed Parent Company income statement


	Q2				Jan-Jun				Jan-Dec
SEK million	2021		2020		2021		2020		2020
Net sales		—		—		—		—		—
Cost of sales		—		—		—		—		—
Gross income		—		—		—		—		—
Operating expenses¹⁾		-172		-241		-345		-492		-1,378
Other operating income and expenses		-178		354		436		1,195		2,866

EBIT		-350		113		91		703		1,488

Financial net¹⁾		5,241		1,140		5,593		1,572		6,845

Income after financial items		4,891		1,253		5,684		2,275		8,333

Transfers to (-)/ from untaxed reserves		—		—		—		—		-1,540
Income tax		-137		-144		-263		-318		-408

Net income		4,754		1,109		5,421		1,957		6,385

¹⁾	Amounts reported for Jan-June/April-June 2020 deviate from what was reported in the Second quarter report 2020 due to incorrect allocation of financial items to operating income. This was corrected in the Third quarter report 2020.

Condensed Parent Company statement of comprehensive income (loss)


	Q2				Jan-Jun				Jan-Dec
SEK million	2021		2020		2021		2020		2020
Net income		4,754		1,109		5,421		1,957		6,385
Revaluation of borrowings due to change in credit risk		39		-1,032		-16		693		99
Tax on items that will not be reclassified to profit or loss		-8		212		3		-143		-20
Other comprehensive income, net of tax		31		-820		-13		550		79

Total comprehensive income		4,785		289		5,408		2,507		6,464



23 Ericsson \| Second quarter report 2021		Financial statements

Condensed Parent Company balance sheet


	Jun 30		Dec 31
SEK million	2021		2020
Assets
Fixed assets
Intangible assets		11		26
Tangible assets		454		460
Financial assets¹⁾		107,805		104,989

		108,270		105,475

Current assets
Receivables		26,806		30,230
Short-term investments		12,648		6,621
Cash and cash equivalents		29,315		28,775

		68,769		65,626

Total assets		177,039		171,101

Stockholders’ equity, provisions and liabilities
Equity
Restricted equity		48,164		48,164
Non-restricted equity		32,686		33,915

		80,850		82,079

Provisions		274		343
Non-current liabilities		21,777		22,111
Current liabilities		74,138		66,568

Total stockholders’ equity, provisions and liabilities		177,039		171,101

¹⁾ Of which interest-bearing securities, non-current		20,974		21,597



24 Ericsson \| Second quarter report 2021		Financial statements

Accounting policies and Explanatory notes (unaudited)

Note 1 – Accounting policies

The group

This condensed consolidated interim financial report for the quarterly reporting period ended June 30, 2021, has been prepared in accordance with International Accounting Standard IAS 34 “Interim Financial Reporting”. The term “IFRS” used in this document refers to the application of IAS and IFRS as well as interpretations of these standards as issued by IASB’s Standards Interpretation Committee (SIC) and IFRS Interpretations Committee (IFRIC). The accounting policies adopted are consistent with those of the annual report for the year ended December 31, 2020 and should be read in conjunction with that annual report. There are no amendments of IFRS during 2021 that are estimated to have a material impact on the result and financial position of the Company.

Changes applied as from Q1 2021

- Change in name from Operating income to EBIT

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

- Changes in presentation of cash flow statement

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

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

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

Note 2 – Critical accounting estimates and judgements

COVID-19 impacts on the Financial statements

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

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

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



25 Ericsson \| Second quarter report 2021		Accounting policies and Explanatory notes

Note 3 – Segment information

Net sales by segment by quarter


	2021						2020
Isolated quarters, SEK million	Q2			Q1			Q4			Q3			Q2			Q1
Networks		39,875			36,274			49,366			41,659			39,827			35,126
Of which Products		30,414			27,495			37,523			30,992			28,966			24,748
Of which Services		9,461			8,779			11,843			10,667			10,861			10,378
Digital Services		7,887			6,898			12,671			8,733			8,575			7,345
Of which Products		3,989			3,581			7,430			4,621			4,598			3,798
Of which Services		3,898			3,317			5,241			4,112			3,977			3,547
Managed Services		5,119			4,865			5,815			5,498			5,573			5,714
Emerging Business and Other		2,060			1,741			1,738			1,582			1,603			1,565

Total		54,941			49,778			69,590			57,472			55,578			49,750


	2021						2020
Sequential change, percent	Q2			Q1			Q4			Q3			Q2			Q1
Networks		10	%		-27	%		19	%		5	%		13	%		-21	%
Of which Products		11	%		-27	%		21	%		7	%		17	%		-21	%
Of which Services		8	%		-26	%		11	%		-2	%		5	%		-22	%
Digital Services		14	%		-46	%		45	%		2	%		17	%		-44	%
Of which Products		11	%		-52	%		61	%		1	%		21	%		-48	%
Of which Services		18	%		-37	%		27	%		3	%		12	%		-39	%
Managed Services		5	%		-16	%		6	%		-1	%		-2	%		-19	%
Emerging Business and Other		18	%		0	%		10	%		-1	%		2	%		-10	%

Total		10	%		-28	%		21	%		3	%		12	%		-25	%


	2021						2020
Year over year change, percent	Q2			Q1			Q4			Q3			Q2			Q1
Networks		0	%		3	%		11	%		6	%		5	%		5	%
Of which Products		5	%		11	%		20	%		13	%		8	%		4	%
Of which Services		-13	%		-15	%		-11	%		-9	%		-2	%		7	%
Digital Services		-8	%		-6	%		-4	%		-12	%		-5	%		-6	%
Of which Products		-13	%		-6	%		1	%		-17	%		0	%		-4	%
Of which Services		-2	%		-6	%		-10	%		-4	%		-9	%		-9	%
Managed Services		-8	%		-15	%		-17	%		-14	%		-12	%		-2	%
Emerging Business and Other		29	%		11	%		0	%		-3	%		-4	%		-11	%

Total		-1	%		0	%		5	%		1	%		1	%		2	%


	2021						2020
Year to date, SEK million	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Networks		76,149			36,274			165,978			116,612			74,953			35,126
Of which Products		57,909			27,495			122,229			84,706			53,714			24,748
Of which Services		18,240			8,779			43,749			31,906			21,239			10,378
Digital Services		14,785			6,898			37,324			24,653			15,920			7,345
Of which Products		7,570			3,581			20,447			13,017			8,396			3,798
Of which Services		7,215			3,317			16,877			11,636			7,524			3,547
Managed Services		9,984			4,865			22,600			16,785			11,287			5,714
Emerging Business and Other		3,801			1,741			6,488			4,750			3,168			1,565

Total		104,719			49,778			232,390			162,800			105,328			49,750


	2021						2020
Year over year change, percent	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Networks		2	%		3	%		7	%		5	%		5	%		5	%
Of which Products		8	%		11	%		12	%		9	%		6	%		4	%
Of which Services		-14	%		-15	%		-5	%		-2	%		2	%		7	%
Digital Services		-7	%		-6	%		-6	%		-8	%		-5	%		-6	%
Of which Products		-10	%		-6	%		-5	%		-8	%		-2	%		-4	%
Of which Services		-4	%		-6	%		-8	%		-7	%		-9	%		-9	%
Managed Services		-12	%		-15	%		-12	%		-9	%		-7	%		-2	%
Emerging Business and Other		20	%		11	%		-4	%		-6	%		-8	%		-11	%

Total		-1	%		0	%		2	%		1	%		2	%		2	%



26 Ericsson \| Second quarter report 2021		Accounting policies and Explanatory notes

Gross income by segment by quarter


	2021				2020
Isolated quarters, SEK million	Q2		Q1		Q4		Q3		Q2		Q1
Networks		19,111		16,714		21,430		19,375		16,022		15,586
Digital Services		2,990		3,002		5,183		3,787		3,738		2,929
Managed Services		975		942		1,031		1,093		955		933
Emerging Business and Other		781		637		613		507		202		340

Total		23,857		21,295		28,257		24,762		20,917		19,788


	2021				2020
Year to date, SEK million	Jan-Jun		Jan-Mar		Jan-Dec		Jan-Sep		Jan-Jun		Jan-Mar
Networks		35,825		16,714		72,413		50,983		31,608		15,586
Digital Services		5,992		3,002		15,637		10,454		6,667		2,929
Managed Services		1,917		942		4,012		2,981		1,888		933
Emerging Business and Other		1,418		637		1,662		1,049		542		340

Total		45,152		21,295		93,724		65,467		40,705		19,788

EBIT (loss) by segment by quarter


	2021				2020
Isolated quarters, SEK million	Q2		Q1		Q4		Q3		Q2		Q1
Networks		8,645		7,240		10,604		9,165		5,255		5,827
Digital Services		-1,567		-1,519		499		-591		-697		-1,417
Managed Services		416		313		401		491		263		408
Emerging Business and Other		-1,671		-773		-496		-422		-970		-512

Total		5,823		5,261		11,008		8,643		3,851		4,306


	2021				2020
Year to date, SEK million	Jan-Jun		Jan-Mar		Jan-Dec		Jan-Sep		Jan-Jun		Jan-Mar
Networks		15,885		7,240		30,851		20,247		11,082		5,827
Digital Services		-3,086		-1,519		-2,206		-2,705		-2,114		-1,417
Managed Services		729		313		1,563		1,162		671		408
Emerging Business and Other		-2,444		-773		-2,400		-1,904		-1,482		-512

Total		11,084		5,261		27,808		16,800		8,157		4,306



27 Ericsson \| Second quarter report 2021		Accounting policies and Explanatory notes

Net sales by market area by quarter


	2021						2020
Isolated quarters, SEK million	Q2			Q1			Q4			Q3			Q2			Q1
South East Asia, Oceania and India		7,099			6,676			9,748			7,801			6,582			5,917
North East Asia		7,123			6,491			12,823			8,814			7,790			3,907
North America		17,950			17,081			19,101			18,356			18,407			17,911
Europe and Latin America^{1) 2)}		14,011			12,647			17,125			13,318			13,061			12,241
Middle East and Africa		4,459			4,393			6,518			5,520			5,431			5,829
Other^{1) 2)}		4,299			2,490			4,275			3,663			4,307			3,945

Total		54,941			49,778			69,590			57,472			55,578			49,750

¹⁾ Of which in Sweden		404			389			363			249			284			227
²⁾ Of which in EU		7,256			6,801			8,874			7,090			7,278			6,259

	2021						2020
Sequential change, percent	Q2			Q1			Q4			Q3			Q2			Q1
South East Asia, Oceania and India		6	%		-32	%		25	%		19	%		11	%		-36	%
North East Asia		10	%		-49	%		45	%		13	%		99	%		-60	%
North America		5	%		-11	%		4	%		0	%		3	%		3	%
Europe and Latin America ^{1) 2)}		11	%		-26	%		29	%		2	%		7	%		-30	%
Middle East and Africa		2	%		-33	%		18	%		2	%		-7	%		-31	%
Other^{1) 2)}		73	%		-42	%		17	%		-15	%		9	%		-5	%

Total		10	%		-28	%		21	%		3	%		12	%		-25	%

¹⁾ Of which in Sweden		4	%		7	%		46	%		-12	%		25	%		-3	%
²⁾ Of which in EU		7	%		-23	%		25	%		-3	%		16	%		-29	%

	2021						2020
Year over year change, percent	Q2			Q1			Q4			Q3			Q2			Q1
South East Asia, Oceania and India		8	%		13	%		6	%		5	%		-5	%		-4	%
North East Asia		-9	%		66	%		32	%		39	%		20	%		2	%
North America		-2	%		-5	%		10	%		-3	%		4	%		11	%
Europe and Latin America		7	%		3	%		-2	%		-7	%		-7	%		-7	%
Middle East and Africa		-18	%		-25	%		-23	%		-9	%		-4	%		8	%
Other^{1) 2)}		0	%		-37	%		3	%		-8	%		10	%		-7	%

Total		-1	%		0	%		5	%		1	%		1	%		2	%

¹⁾Of which in Sweden		42	%		71	%		54	%		1815	%		91	%		18	%
²⁾ Of which in EU		0	%		9	%		1	%		-4	%		5	%		-4	%

	2021						2020
Year to date, SEK million	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
South East Asia, Oceania and India		13,775			6,676			30,048			20,300			12,499			5,917
North East Asia		13,614			6,491			33,334			20,511			11,697			3,907
North America		35,031			17,081			73,775			54,674			36,318			17,911
Europe and Latin America^{1) 2)}		26,658			12,647			55,745			38,620			25,302			12,241
Middle East and Africa		8,852			4,393			23,298			16,780			11,260			5,829
Other^{1) 2)}		6,789			2,490			16,190			11,915			8,252			3,945

Total		104,719			49,778			232,390			162,800			105,328			49,750

¹⁾ Of which in Sweden		793			389			1,123			760			511			227
²⁾ Of which in EU		14,057			6,801			29,501			20,627			13,537			6,259

	2021						2020
Year to date, year over year change, percent	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
South East Asia, Oceania and India		10	%		13	%		1	%		-1	%		-5	%		-4	%
North East Asia		16	%		66	%		26	%		23	%		13	%		2	%
North America		-4	%		-5	%		5	%		3	%		7	%		11	%
Europe and Latin America^{1) 2)}		5	%		3	%		-6	%		-7	%		-7	%		-7	%
Middle East and Africa		-21	%		-25	%		-9	%		-2	%		2	%		8	%
Other^{1) 2)}		-18	%		-37	%		-1	%		-2	%		1	%		-7	%

Total		-1	%		0	%		2	%		1	%		2	%		2	%

¹⁾ Of which in Sweden		55	%		71	%		91	%		115	%		50	%		18	%
²⁾Of which in EU		4	%		9	%		0	%		-1	%		1	%		-4	%



28 Ericsson \| Second quarter report 2021		Accounting policies and Explanatory notes

Net sales by market area by segment


	Q2 2021															Jan-Jun 2021
SEK million	Networks			Digital Services			Managed Services			Emerging Business and Other			Total			Networks			Digital Services			Managed Services			Emerging Business and Other			Total
South East Asia, Oceania and India		5,160			866			1,059			14			7,099			10,003			1,631			2,120			21			13,775
North East Asia		6,215			697			159			52			7,123			11,606			1,556			329			123			13,614
North America		15,370			1,833			714			33			17,950			30,324			3,311			1,350			46			35,031
Europe and Latin America		8,738			2,882			2,285			106			14,011			16,695			5,365			4,394			204			26,658
Middle East and Africa		2,365			1,189			902			3			4,459			4,713			2,341			1,791			7			8,852
Other¹⁾		2,027			420			0			1,852			4,299			2,808			581			0			3,400			6,789

Total		39,875			7,887			5,119			2,060			54,941			76,149			14,785			9,984			3,801			104,719

Share of total		73	%		14	%		9	%		4	%		100	%		73	%		14	%		10	%		4	%		100	%

¹⁾	Includes IPR licensing revenues.


	Q2 2021
Sequential change, percent	Networks			Digital Services			Managed Services			Emerging Business and Other			Total
South East Asia, Oceania and India		7	%		13	%		0	%		100	%		6	%
North East Asia		15	%		-19	%		-6	%		-27	%		10	%
North America		3	%		24	%		12	%		154	%		5	%
Europe and Latin America		10	%		16	%		8	%		8	%		11	%
Middle East and Africa		1	%		3	%		1	%		-25	%		2	%
Other		160	%		161	%		—			20	%		73	%

Total		10	%		14	%		5	%		18	%		10	%


	Q2 2021															Jan-Jun 2021
Year over year change, percent	Networks			Digital Services			Managed Services			Emerging Business and Other			Total			Networks			Digital Services			Managed Services			Emerging Business and Other			Total
South East Asia, Oceania and India		15	%		-20	%		3	%		75	%		8	%		15	%		-12	%		9	%		-16	%		10	%
North East Asia		-3	%		-41	%		-8	%		-9	%		-9	%		27	%		-24	%		-12	%		0	%		16	%
North America		-3	%		6	%		-19	%		43	%		-2	%		-2	%		1	%		-33	%		31	%		-4	%
Europe and Latin America		12	%		9	%		-10	%		19	%		7	%		11	%		7	%		-14	%		17	%		5	%
Middle East and Africa		-21	%		-18	%		-7	%		0	%		-18	%		-28	%		-16	%		-4	%		-30	%		-21	%
Other		-15	%		-16	%		-100	%		30	%		0	%		-38	%		-38	%		—			21	%		-18	%

Total		0	%		-8	%		-8	%		29	%		-1	%		2	%		-7	%		-12	%		20	%		-1	%



29 Ericsson \| Second quarter report 2021		Accounting policies and Explanatory notes

Top 5 countries in sales


	Q2						Jan-Jun
Country, percentage of net sales¹⁾	2021			2020			2021			2020
United States		34	%		35	%		35	%		36	%
Japan		5	%		3	%		7	%		4	%
India		4	%		2	%		3	%		3	%
Australia		3	%		4	%		3	%		4	%
China		3	%		9	%		3	%		7	%

¹⁾	Based on Jan-Jun 2021.

IPR licensing revenues by segment by quarter


	2021				2020
Isolated quarters, SEK million	Q2		Q1		Q4		Q3		Q2		Q1
Networks		1,904		671		2,105		1,773		2,282		2,019
Digital Services		418		147		463		389		501		443

Total		2,322		818		2,568		2,162		2,783		2,462


	2021				2020
Year to date, SEK million	Jan-Jun		Jan-Mar		Jan-Dec		Jan-Sep		Jan-Jun		Jan-Mar
Networks		2,575		671		8,179		6,074		4,301		2,019
Digital Services		565		147		1,796		1,333		944		443

Total		3,140		818		9,975		7,407		5,245		2,462

Note 4 – Provisions

Provisions


	2021				2020
Isolated quarters, SEK million	Q2		Q1		Q4		Q3		Q2		Q1
Opening balance		11,045		10,466		10,922		10,603		11,060		10,923
Additions		616		1,753		1,245		1,093		2,116		793
Utilization/Cash out		-2,179		-979		-761		-475		-2,066		-673
Of which restructuring		-161		-336		-332		-160		-137		-186
Reversal of excess amounts		-170		-339		-673		-172		-192		-124
Reclassification, translation difference and other		-80		144		-267		-127		-315		141

Closing balance		9,232		11,045		10,466		10,922		10,603		11,060

Of which restructuring		807		950		1,200		1,659		1,594		1,202

	2021				2020
Year to date, SEK million	Jan-Jun		Jan-Mar		Jan-Dec		Jan-Sep		Jan-Jun		Jan-Mar
Opening balance		10,466		10,466		10,923		10,923		10,923		10,923
Additions		2,369		1,753		5,247		4,002		2,909		793
Utilization/Cash out		-3,158		-979		-3,975		-3,214		-2,739		-673
Of which restructuring		-497		-336		-815		-483		-323		-186
Reversal of excess amounts		-509		-339		-1,161		-488		-316		-124
Reclassification, translation difference and other		64		144		-568		-301		-174		141

Closing balance		9,232		11,045		10,466		10,922		10,603		11,060

Of which restructuring		807		950		1,200		1,659		1,594		1,202



30 Ericsson \| Second quarter report 2021		Accounting policies and Explanatory notes

Note 5 – Financial risk management

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

Financial instruments


SEK billion	Jun 30 2021								Dec 31 2020
	Fair value hierarchy level								Fair value hierarchy level
	Carrying value		Level 1		Level 2		Level 3		Carrying value		Level 4		Level2		Level 3
Assets at fair value through profit or loss
Customer finance¹⁾		2.5		—		—		2.5		3.1		—		—		3.1
Interest-bearing securities		33.6		33.6		—		—		28.1		28.1		—		—
Cash equivalents²⁾		23.3		—		23.3		—		23.6		—		23.6		—
Other financial assets		1.5		—		—		1.5		1.5		—		—		1.5
Other current assets		0.7		—		0.7		—		1.5		—		1.5		—
Assets at fair value through OCI
Trade receivables		45.2		—		—		45.2		42.1		—		—		42.1
Assets at amortized costs
Interest-bearing securities		0.3		—		—		—		0.4		—		—		—
Cash equivalents²⁾		3.2		—		—		—		3.6		—		—		—
Other financial assets		0.5		—		—		—		0.5		—		—		—

Total financial assets		110.8								104.4

Financial liabilities at designated FVTPL
Parent company borrowings		-30.3		-14.1		-16.2		—		-27.2		-18.9		-8.3		—
Financial liabilities at FVTPL
Other current liabilities		-0.4		—		-0.4		—		-0.2		—		-0.2		—
Liabilities at amortized cost
Trade payables		-29.6		—		—		—		-32.0		—		—		—
Borrowings		-3.1		—		—		—		-2.9		—		—		—

Total financial liabilities		-63.4								-62.3

¹⁾	Year to date movements of customer finance receivables are as follows: additions of SEK 8.0 billion, disposals and repayments of SEK 9.1 billion and revaluation gain of SEK 0.4 billion.

²⁾	Total Cash and cash equivalent is SEK 43.3 (43.6) billion, of which SEK 26.5 (27.2) billion relating to Cash equivalents are presented in the table above.

Exchange rates used in the consolidation


	Jan-Jun				Jan-Dec
	2021		2020		2020
SEK/EUR -closing rate		10.11		10.50		10.06
SEK/USD -closing rate		8.51		9.37		8.19



31 Ericsson \| Second quarter report 2021		Accounting policies and Explanatory notes

Note 6 – Cash flow

Information on investments

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


	2021				2020
Isolated quarters, SEK million	Q 2		Q 1		Q 4		Q 3		Q 2		Q 1
Additions
Property, plant and equipment		1,007		915		1,090		963		1,327		1,113
Capitalized development expenses		266		204		177		167		211		262
IPR, brands and other intangible assets		1		4		124		—		97		1

Total		1,274		1,123		1,391		1,130		1,635		1,376

Depreciation, am ortization and in pairm entlosses
Property, plant and equipment		910		874		1,186		916		1,003		1,009
Capitalized development expenses		329		224		230		230		272		174
Goodwill, IPR, brands and other intangible assets		294		283		276		365		258		321
Right-of-use assets		564		554		601		594		623		616

Total		2,097		1,935		2,293		2,105		2,156		2,120


	2021				2020
Year to date, SEK million	Jan-Jun		Jan-Mar		Jan-Dec		Jan-Sep		Jan-Jun		Jan-Mar
Additions
Property, plant and equipment		1,922		915		4,493		3,403		2,440		1,113
Capitalized development expenses		470		204		817		640		473		262
IPR, brands and other intangible assets		5		4		222		98		98		1

Total		2,397		1,123		5,532		4,141		3,011		1,376

Depreciation, am ortization and in pairm entlosses
Property, plant and equipment		1,784		874		4,114		2,928		2,012		1,009
Capitalized development expenses		553		224		906		676		446		174
Goodwill, IPR, brands and other intangible assets		577		283		1,220		944		579		321
Right-of-use assets		1,118		554		2,434		1,833		1,239		616

Total		4,032		1,935		8,674		6,381		4,276		2,120

Note 7 – Contingent liabilities and Assets pledged as collateral

Contingent liabilities and Assets pledged as collateral


SEK million	Jun 30 2021		Dec31 2020
Contingent liabilities		1,477		1,198
Assets pledged as collateral		7,555		6,808



32 Ericsson \| Second quarter report 2021		Accounting policies and Explanatory notes

Note 8 – Share information

Number of shares and earnings per share


	Q 2				Jan-Jun
	2021		2020		2021		2020
Number of shares, end of period (million)		3,334		3,334		3,334		3,334
Of which class A-shares (million)		262		262		262		262
Of which class B-shares (million)		3,072		3,072		3,072		3,072
Number of treasury shares, end of period (million)		4		11		4		11
Number of shares outstanding, basic, end of period (million)		3,330		3,324		3,330		3,324
Numbers of shares outstanding, diluted, end of period (million)		3,333		3,330		3,333		3,330
Average number of treasury shares (million)		5		12		5		15
Average number of shares outstanding, basic (million)		3,329		3,322		3,329		3,320
Average number of shares outstanding, diluted (million) ¹⁾		3,332		3,329		3,332		3,326
Earningsper share,basic (SEK)²⁾		1.10		0.74		2.06		1.39
Earningsper share,diluted (SEK) ¹⁾		1.10		0.74		2.06		1.39

¹⁾	Potential ordinary shares are not considered when their conversion to ordinary shares would increase earnings per share.

²⁾	Based on net income attributable to owners of the Parent Company.

Note 9 – Employee information

Number of employees


	2021				2020
End ofperiod	Jun 30		Mar 31		Dec 31		Sep 30		Jun 30		Mar 31
South East Asia, Oceania and India		26,325		26,123		25,869		25,633		25,265		24,942
North East Asia		14,043		14,033		13,944		13,955		13,965		13,786
North America		10,256		10,161		10,175		9,537		9,785		9,718
Europe and Latin America ¹⁾		46,616		46,482		46,580		46,495		46,521		46,402
Middle East and Africa		4,384		4,314		4,256		4,206		4,264		4,247

Total		101,624		101,113		100,824		99,826		99,800		99,095

¹⁾Of which Sweden		13,626		13,379		13,173		13,046		12,884		12,746

Note 10 – Business combinations

Acquisition Cradlepoint—Final PPA


SEK billion	2020
Total considerationincl.cash		9.5
Net assets acquired
Cash and cash equivalents		0.3
Inventory		0.6
Otherassets		0.8
Intangible assets		3.2
Other liabilities¹⁾		-3.1

Total identifiable netassets		-0.2

Goodw ill		7.5

Total		9.5

¹⁾	Includes deferred tax liabilities of SEK -1.0 billion.

On November 1, 2020, the Company acquired all of the shares in Cradlepoint Inc, a US-based market leader in Wireless Edge WAN 4G and 5G Enterprise solutions. The investment is key to Ericsson’s ongoing strategy of capturing market share in the rapidly expanding 5G Enterprise space. Cradlepoint complements Ericsson’s existing 5G Enterprise portfolio which includes Dedicated Networks and a global IoT platform. Goodwill in this transaction represents future customers, future technology and synergies to the sales channels and commercial model applied by Cradlepoint and is not expected to be deductible for tax purposes. In Q2 2021 the final fair values at the acquisition date of the assets acquired and liabilities assumed was finalized, see table above. The main change between the provisional and final fair values in the balance sheet is an increase in goodwill of SEK 0.5 billion with a corresponding increase of deferred revenues. This resulted in a positive impact in the income statement of SEK 0.1 billion in Q2 2021.



33 Ericsson \| Second quarter report 2021		Accounting policies and Explanatory notes

Alternative performance measures (unaudited)

In this section, the Company presents its Alternative Performance Measures (APMs), which are not recognized measures of financial performance under IFRS. The presentation of APMs has limitations as analytical tools and should not be considered in isolation or as a substitute for related financial measures prepared in accordance with IFRS.

APMs are presented to enhance an investor’s evaluation of ongoing operating results, to aid in forecasting future periods and to facilitate meaningful comparison of results between periods.

Management uses these APMs to, among other things, evaluate ongoing operations in relation to historical results, for internal planning and forecasting purposes and in the calculation of certain performance-based compensation. APM’s should not be viewed as substitutes for income statement or cash flow items computed in accordance with IFRS.

As from 2021 Operating income has been renamed as EBIT and Operating margin as EBIT margin. The definitions of EBIT and EBIT margin remain unchanged. The APMs have been updated with the new names.

As from 2021 EBITA excluding restructuring charges has been added. The main reason for the update is that Ericsson’s long-term target is expressed as EBITA excluding restructuring charges as a percentage of net sales.

The APM Sales growth adjusted for comparable units and currency has been added with the split by market area. Previously the information was provided by segment, but as from 2021 the information is also provided by market area.

This section also includes a reconciliation of the APMs to the most directly reconcilable line items in the financial statements. For more information about non-IFRS key operating measures, see Ericsson Annual Report 2020.

Sales growth adjusted for comparable units and currency

Sales growth adjusted for the impact of acquisitions and divestments as well as the effects of foreign currency fluctuations. Also named organic growth.


	2021						2020
Isolated quarters, year over year change	Q2			Q1			Q4			Q3			Q2			Q1
Reported netsales		54,941			49,778			69,590			57,472			55,578			49,750
Acquired business		-450			-225			-206			-415			-422			-319
Net FX impact		5,455			5,341			5,472			4,304			-326			-1,654
Com parable net sales, excluding FX impact		59,946			54,894			74,856			61,361			54,830			47,777
Com parable quarter net sales adj. for acq/div business¹⁾		55,578			49,750			66,373			57,150			54,810			48,798
Sales growth adjusted for comparable units and currency (% )		8	%		10	%		13	%		7	%		0	%		-2	%

	2021						2020
Year to date, year over year change	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Reported netsales		104,719			49,778			232,390			162,800			105,328			49,750
Acquired business		-675			-225			-1,362			-1,156			-741			-319
Net FX impact		10,796			5,341			7,796			2,324			-1,980			-1,654
Com parable net sales, excluding FX impact		114,840			54,894			238,824			163,968			102,607			47,777
Com parable quarter net sales adj. for acq/div business¹⁾		105,328			49,750			227,132			160,758			103,608			48,798
Sales growth adjusted for comparable units and currency (% )		9	%		10	%		5	%		2	%		-1	%		-2	%

¹⁾	Adjusted for acquisition of Cradlepoint in November 2020.



34 Ericsson \| First Quarter Report 2021		Alternative performance measures

Items excluding restructuring charges

Gross income, operating expenses, and EBIT are presented excluding restructuring charges and, for certain measures, as a percentage of net sales. Operating income has been renamed to EBIT and Operating margin to EBIT margin. The definition on EBIT and EBIT margin remain unchanged.


	2021						2020
Isolated quarters, SEK million	Q2			Q1			Q4			Q3			Q2			Q1
Gross income		23,857			21,295			28,257			24,762			20,917			19,788
Net sales		54,941			49,778			69,590			57,472			55,578			49,750
Gross margin (% )		43.4	%		42.8	%		40.6	%		43.1	%		37.6	%		39.8	%

Gross income		23,857			21,295			28,257			24,762			20,917			19,788
Restructuring charges included in cost of sales		6			62			5			73			312			335
Gross income excluding restructuring charges		23,863			21,357			28,262			24,835			21,229			20,123
Net sales		54,941			49,778			69,590			57,472			55,578			49,750
Gross margin excluding restructuring charges(% )		43.4	%		42.9	%		40.6	%		43.2	%		38.2	%		40.4	%

Operating expenses		-17,352			-15,976			-17,571			-16,121			-17,045			-15,543
Restructuring charges included in R&D expenses		-1			—			-21			244			227			-39
Restructuring charges included in selling and administrative expenses		-1			15			8			13			144			5
Operating expenses excluding restructuring charges		-17,354			-15,961			-17,584			-15,864			-16,674			-15,577

EBIT		5,823			5,261			11,008			8,643			3,851			4,306
Net sales		54,941			49,778			69,590			57,472			55,578			49,750
EBIT margin (% )		10.6	%		10.6	%		15.8	%		15.0	%		6.9	%		8.7	%

EBIT		5,823			5,261			11,008			8,643			3,851			4,306
Total restructuring charges		4			77			-8			330			683			301
EBIT excluding restructuring charges		5,827			5,338			11,000			8,973			4,534			4,607
Net sales		54,941			49,778			69,590			57,472			55,578			49,750
EBIT margin excluding restructuring charges(% )		10.6	%		10.7	%		15.8	%		15.6	%		8.2	%		9.3	%


	2021						2020
Year to date, SEK million	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Gross income		45,152			21,295			93,724			65,467			40,705			19,788
Net sales		104,719			49,778			232,390			162,800			105,328			49,750
Gross margin (% )		43.1	%		42.8	%		40.3	%		40.2	%		38.6	%		39.8	%
Gross income		45,152			21,295			93,724			65,467			40,705			19,788
Restructuring charges included in cost of sales		68			62			725			720			647			335
Gross income excluding restructuring charges		45,220			21,357			94,449			66,187			41,352			20,123
Net sales		104,719			49,778			232,390			162,800			105,328			49,750
Gross margin excluding restructuring charges(% )		43.2	%		42.9	%		40.6	%		40.7	%		39.3	%		40.4	%
Operating expenses		-33,328			-15,976			-66,280			-48,709			-32,588			-15,543
Restructuring charges included in R&D expenses		-1			—			411			432			188			-39
Restructuring charges included in selling and administrative expenses		14			15			170			162			149			5
Operating expenses excluding restructuring charges		-33,315			-15,961			-65,699			-48,115			-32,251			-15,577
EBIT		11,084			5,261			27,808			16,800			8,157			4,306
Net sales		104,719			49,778			232,390			162,800			105,328			49,750
EBIT margin (% )		10.6	%		10.6	%		12.0	%		10.3	%		7.7	%		8.7	%
EBIT		11,084			5,261			27,808			16,800			8,157			4,306
Total restructuring charges		81			77			1,306			1,314			984			301
EBIT excluding restructuring charges		11,165			5,338			29,114			18,114			9,141			4,607
Net sales		104,719			49,778			232,390			162,800			105,328			49,750
EBIT margin excluding restructuring charges(% )		10.7	%		10.7	%		12.5	%		11.1	%		8.7	%		9.3	%



35 Ericsson \| Second quarter report 2021		Alternative performance measures

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

Earnings before interest, taxes, amortizations, write-downs of acquired intangibles and excluding restructuring charges also expressed as a percentage of net sales.+

EBITA and EBITA margin excluding restructuring charges has been added to the APM.


	2021						2020
Isolated quarters, SEK million	Q2			Q1			Q4			Q3			Q2			Q1
Net income		3,900			3,168			7,192			5,566			2,585			2,280
Taxes		1,469			1,560			3,721			3,186			1,558			1,124
Financial income and expenses, net		454			533			95			-109			-292			902
Amortizations and write-down sof acquired intangibles		294			283			276			365			258			321
EBITA		6,117			5,544			11,284			9,008			4,109			4,627
Net sales		54,941			49,778			69,590			57,472			55,578			49,750
EBITA m argin (% )		11.1	%		11.1	%		16.2	%		15.7	%		7.4	%		9.3	%
Restructuring charges		4			77			-8			330			683			301
EBITA excluding restructuring charges		6,121			5,621			11,276			9,338			4,792			4,928
EBITA margin excluding restructuring charges(% )		11.1	%		11.3	%		16.2	%		16.2	%		8.6	%		9.9	%


	2021						2020
Year to date, SEK million	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Net income		7,068			3,168			17,623			10,431			4,865			2,280
Taxes		3,029			1,560			9,589			5,868			2,682			1,124
Financial income and expenses, net		987			533			596			501			610			902
Amortizations and write-down sofacquired intangibles		577			283			1,220			944			579			321
EBITA		11,661			5,544			29,028			17,744			8,736			4,627
Net sales		104,719			49,778			232,390			162,800			105,328			49,750
EBITA margin (% )		11.1	%		11.1	%		12.5	%		10.9	%		8.3	%		9.3	%
Restructuring charges		81			77			1,306			1,314			984			301
EBITA excluding restructuring charges		11,742			5,621			30,334			19,058			9,720			4,928
EBITA margin excluding restructuring charges(% )		11.2	%		11.3	%		13.1	%		11.7	%		9.2	%		9.9	%

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

Net sales, EBIT margin and restructuring charges as a sum of last four quarters.


	2021						2020
Rolling fourquarters,SEK m illion	Q2			Q1			Q4			Q3			Q2			Q1
Net sales		231,781			232,418			232,390			229,173			228,828			228,060
EBIT		30,735			28,763			27,808			22,925			10,086			9,974
Restructuring charges		403			1,082			1,306			1,641			1,458			893
EBIT excl.restr. charges		31,138			29,845			29,114			24,566			11,544			10,867
EBIT margin excl. restr.charges(% )		13.4	%		12.8	%		12.5	%		10.7	%		5.0	%		4.8	%



36 Ericsson \| Second quarter report 2021		Accounting policies and Explanatory notes

Gross cash and net cash, end of period

Gross cash: Cash and cash equivalents plus interest-bearing securities (current and non-current).

Net cash: Cash and cash equivalents plus interest-bearing securities (current and non-current) less borrowings (current and non-current).


	2021				2020
SEK million	Q2		Q1		Q4		Q3		Q2		Q1
Cash and cash equivalents		43,273		40,543		43,612		48,774		45,655		48,347
+ Interest-bearing securities, current		12,855		4,599		6,820		5,552		5,739		7,834
+ Interest-bearing securities, non-current		20,998		23,477		21,613		23,898		24,025		23,335
Gross cash, end of period		77,126		68,619		72,045		78,224		75,419		79,516
-Borrowings, current		11,737		2,353		7,942		14,587		15,290		17,759
-Borrowings, non-current		21,673		23,299		22,218		22,132		22,581		23,381
Net cash, end of period		43,716		42,967		41,885		41,505		37,548		38,376

Capital employed

Total assets less non-interest-bearing provisions and liabilities.


	2021				2020
SEK million	Q2		Q1		Q4		Q3		Q2		Q1
Total assets		281,045		270,319		271,530		277,187		276,778		292,307
Non-interest-bearing provisions and liabilities
Provisions, non-current		1,922		2,337		2,886		2,378		2,240		2,703
Deferred tax liabilities		975		1,049		1,089		1,102		1,164		1,060
Other non-current liabilities		1,596		1,326		1,383		1,759		1,813		2,178
Provisions, current		7,310		8,708		7,580		8,544		8,363		8,357
Contract liabilities		36,621		32,054		26,440		29,393		31,532		34,265
Trade payables		29,638		29,135		31,988		30,704		32,182		29,840
Other current liabilities		37,153		40,522		38,174		37,905		34,834		40,521
Capital employed		165,830		155,188		161,990		165,402		164,650		173,383

Capital turnover

Annualized net sales divided by average capital employed.

Annualization factor of four is used for isolated quarter.

Annualization factor of four is used for Jan-Mar, two is used for Jan-Jun, 4/3 is used for Jan-Sep and one is used for Jan-Dec.


	2021				2020
Isolated quarters,SEK million	Q2		Q1		Q4		Q3		Q2		Q1
Net sales		54,941		49,778		69,590		57,472		55,578		49,750
Annualized net sales		219,764		199,112		278,360		229,888		222,312		199,000
Average capitalem ployed
Capital employed at beginning of period		155,188		161,990		165,402		164,650		173,383		165,273
Capital employed at end of period		165,830		155,188		161,990		165,402		164,650		173,383
Average capital employed		160,509		158,589		163,696		165,026		169,017		169,328
Capital turnover (tim es)		1.4		1.3		1.7		1.4		1.3		1.2


	2021				2020
Yearto date,SEK million	Jan-Jun		Jan-Mar		Jan-Dec		Jan-Sep		Jan-Jun		Jan-Mar
Net sales		104,719		49,778		232,390		162,800		105,328		49,750
Annualized net sales		209,438		199,112		232,390		217,067		210,656		199,000
Average capitalem ployed
Capital employed at beginning of period		161,990		161,990		165,273		165,273		165,273		165,273
Capital employed at end of period		165,830		155,188		161,990		165,402		164,650		173,383
Average capital employed		163,910		158,589		163,632		165,338		164,962		169,328
Capital turnover (tim es)		1.3		1.3		1.4		1.3		1.3		1.2



37 Ericsson \| Second quarter report 2021		Accounting policies and Explanatory notes

Return on capital employed

The annualized total of EBIT as a percentage of average capital employed.

Annualization factor of four is used for isolated quarter.

Annualization factor of four is used for Jan-Mar, two is used for Jan-Jun, 4/3 is used for Jan-Sep and one is used for Jan-Dec.


	2021						2020
Isolated quarters,SEK million	Q2			Q1			Q4			Q3			Q2			Q1
EBIT		5,823			5,261			11,008			8,643			3,851			4,306
Annualized EBIT		23,292			21,044			44,032			34,572			15,404			17,224
Average capital employed
Capital employed at beginning of period		155,188			161,990			165,402			164,650			173,383			165,273
Capital employed at end of period		165,830			155,188			161,990			165,402			164,650			173,383
Average capital employed		160,509			158,589			163,696			165,026			169,017			169,328
Return on capital employed (% )		14.5	%		13.3	%		26.9	%		20.9	%		9.1	%		10.2	%


	2021						2020
Year to date,SEK million	Jan-Jun			Jan-M ar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-M ar
EBIT		11,084			5,261			27,808			16,800			8,157			4,306
Annualized EBIT		22,168			21,044			27,808			22,400			16,314			17,224
Average capital employed
Capital employed at beginning of period		161,990			161,990			165,273			165,273			165,273			165,273
Capital employed at end of period		165,830			155,188			161,990			165,402			164,650			173,383
Average capital employed		163,910			158,589			163,632			165,338			164,962			169,328
Return on capital employed (% )		13.5	%		13.3	%		17.0	%		13.5	%		9.9	%		10.2	%

Equity ratio

Equity expressed as a percentage of total assets.


	2021						2020
SEK million	Q2			Q1			Q4			Q3			Q2			Q1
Total equity		91,695			88,124			85,177			82,485			78,472			79,113
Total assets		281,045			270,319			271,530			277,187			276,778			292,307
Equity ratio (% )		32.6	%		32.6	%		31.4	%		29.8	%		28.4	%		27.1	%

Return on equity

Annualized net income attributable to owners of the Parent Company as a percentage of average stockholders’ equity.

Annualization factor of four is used for isolated quarter.

Annualization factor of four is used for Jan-Mar, two is used for Jan-Jun, 4/3 is used for Jan-Sep and one is used for Jan-Dec.


	2021						2020
Isolated quarters,SEK million	Q2			Q1			Q4			Q3			Q2			Q1
Net income attributable to owners of the Parent Company		3,679			3,187			7,522			5,353			2,452			2,156
Annualized		14,716			12,748			30,088			21,412			9,808			8,624
Average stockholders’ equity
Stockholders’ equity, beginning of period		89,782			86,674			82,830			79,005			79,841			82,559
Stockholders’ equity, end of period		93,331			89,782			86,674			82,830			79,005			79,841
Average stockholders’ equity		91,557			88,228			84,752			80,918			79,423			81,200
Return on equity(% )		16.1	%		14.4	%		35.5	%		26.5	%		12.3	%		10.6	%


	2021						2020
Yearto date,SEK million	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Net income attributable to owners of the Parent Company		6,866			3,187			17,483			9,961			4,608			2,156
Annualized		13,732			12,748			17,483			13,281			9,216			8,624
Average stockholders’ equity
Stockholders’ equity, beginning of period		86,674			86,674			82,559			82,559			82,559			82,559
Stockholders’ equity, end of period		93,331			89,782			86,674			82,830			79,005			79,841
Average stockholders’ equity		90,003			88,228			84,617			82,695			80,782			81,200
Return on equity(% )		15.3	%		14.4	%		20.7	%		16.1	%		11.4	%		10.6	%



38 Ericsson \| Second quarter report 2021		Accounting policies and Explanatory notes

Adjusted earnings per share

Adjusted earnings per share, diluted, excluding amortizations and write-downs of acquired intangible assets and excluding restructuring charges.


	2021				2020
Isolated quarters, SEK	Q2		Q1		Q4		Q3		Q2		Q1
Earnings per share, diluted		1.10		0.96		2.26		1.61		0.74		0.65
Restructuring charges		0.00		0.02		0.01		0.08		0.14		0.07
Amortizations and w rite-downs of acquired intangibles		0.07		0.06		0.06		0.08		0.06		0.07
Adjusted earnings per share		1.17		1.04		2.33		1.77		0.94		0.79


	2021				2020
Yearto date, SEK	Jan-Jun		Jan-Mar		Jan-Dec		Jan-Sep		Jan-Jun		Jan-Mar
Earningspershare, diluted		2.06		0.96		5.26		3.00		1.39		0.65
Restructuring charges		0.02		0.02		0.30		0.29		0.21		0.07
Amortizations and write-downs of acquired intangibles		0.13		0.06		0.27		0.21		0.13		0.07
Adjusted earnings per share		2.21		1.04		5.83		3.50		1.73		0.79

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

Free cash flow before M&A: Cash flow from operating activities less net capital expenditures, other investments (excluding M&A) and repayment of lease liabilities.

Free cash flow after M&A: Cash flow from operating activities less net capital expenditures, other investments and repayment of

lease liabilities.


	2021				2020
Isolated quarters,SEK million	Q2		Q1		Q4		Q3		Q2		Q1
Cash flow from operating activities		5,940		3,205		13,903		5,279		5,449		4,302
Net capital expenditures and other investments(excl M &A)
Investments in property, plant and equipment		-1,007		-915		-1,090		-963		-1,327		-1,113
Sales of property, plant and equipment		17		24		104		55		69		26
Product development		-266		-204		-177		-167		-211		-262
Other investing activities		—		-5		668		301		-126		-42
Repayment of lease liabilities		-617		-548		-636		-567		-618		-596
Free cash flow before M &A		4,067		1,557		12,772		3,938		3,236		2,315
Acquisitions/ divestments of subs and other operations, net		-69		5		-9,256		-89		-45		-208
Free cash flow after M &A		3,998		1,562		3,516		3,849		3,191		2,107


	2021				2020
Yearto date,SEK million	Jan-Jun		Jan-Mar		Jan-Dec		Jan-Sep		Jan-Jun		Jan-Mar
Cash flow from operating activities		9,145		3,205		28,933		15,030		9,751		4,302
Net capital expenditures and other investments(excl M &A)
Investments in property, plant and equipment		-1,922		-915		-4,493		-3,403		-2,440		-1,113
Sales of property, plant and equipment		41		24		254		150		95		26
Product development		-470		-204		-817		-640		-473		-262
Other investing activities		-5		-5		801		133		-168		-42
Repayment of lease liabilities		-1,165		-548		-2,417		-1,781		-1,214		-596
Free cash flow before M &A		5,624		1,557		22,261		9,489		5,551		2,315
Acquisitions/ divestments of subs and other operations, net		-64		5		-9,598		-342		-253		-208
Free cash flow after M &A		5,560		1,562		12,663		9,147		5,298		2,107



39 Ericsson \| Second quarter report 2021		Accounting policies and Explanatory notes

Sales growth by segment adjusted for comparable units and currency


	2021						2020
Isolated quarter, year over year change, percent	Q2			Q1			Q4			Q3			Q2			Q1
Networks		11	%		15	%		20	%		13	%		4	%		0	%
Digital Services		0	%		3	%		3	%		-5	%		-5	%		-9	%
Managed Services		-2	%		-8	%		-12	%		-9	%		-12	%		-5	%
Emerging Businessand Other¹⁾		13	%		9	%		-4	%		2	%		-6	%		-8	%
Total¹		8	%		10	%		13	%		7	%		0	%		-2	%


	2021						2020
Year to date, year over year change, percent	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Networks		13	%		15	%		10	%		6	%		2	%		0	%
Digital Services		1	%		3	%		-3	%		-6	%		-7	%		-9	%
Managed Services		-5	%		-8	%		-10	%		-9	%		-9	%		-5	%
Emerging Businessand Other¹⁾		11	%		9	%		-4	%		-4	%		-7	%		-8	%
Total¹⁾		9	%		10	%		5	%		2	%		-1	%		-2	%

¹⁾	Adjusted for Cradlepoint acquisition in November 2020.

Sales growth by market area adjusted for comparable units and currency


	2021						2020
Isolated quarter, year over year change, percent	Q2			Q1			Q4			Q3			Q2			Q1
South East Asia, Oceania and India		14	%		21	%		13	%		11	%		-3	%		-6	%
North East Asia		1	%		78	%		38	%		49	%		19	%		-1	%
North America		11	%		10	%		21	%		6	%		1	%		5	%
Europe and Latin America		14	%		12	%		4	%		-1	%		-6	%		-8	%
MiddleEastand Africa		-10	%		-16	%		-17	%		-3	%		-5	%		4	%
Total		8	%		10	%		13	%		7	%		0	%		-2	%


	2021						2020
Year to date, year over year change, percent	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
South EastAsia,Oceania and India		17	%		21	%		5	%		1	%		-4	%		-6	%
North EastAsia		27	%		78	%		30	%		26	%		12	%		-1	%
North America		11	%		10	%		8	%		4	%		3	%		5	%
Europe and Latin Am erica		13	%		12	%		-2	%		-5	%		-7	%		-8	%
MiddleEastand Africa		-13	%		-16	%		-6	%		-1	%		-1	%		4	%
Total		9	%		10	%		5	%		2	%		-1	%		-2	%



40 Ericsson \| Second quarter report 2021		Accounting policies and Explanatory notes

Gross margin by segment by quarter


	2021						2020
Isolated quarters, as percentage of net sales	Q2			Q1			Q4			Q3			Q2			Q1
Networks		47.9	%		46.1	%		43.4	%		46.5	%		40.2	%		44.4	%
Digital Services		37.9	%		43.5	%		40.9	%		43.4	%		43.6	%		39.9	%
Managed Services		19.0	%		19.4	%		17.7	%		19.9	%		17.1	%		16.3	%
Emerging Business and Other		37.9	%		36.6	%		35.3	%		32.0	%		12.6	%		21.7	%
Total		43.4	%		42.8	%		40.6	%		43.1	%		37.6	%		39.8	%


	2021						2020
Yearto date, as percentage of net sales	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Networks		47.0	%		46.1	%		43.6	%		43.7	%		42.2	%		44.4	%
Digital Services		40.5	%		43.5	%		41.9	%		42.4	%		41.9	%		39.9	%
Managed Services		19.2	%		19.4	%		17.8	%		17.8	%		16.7	%		16.3	%
Emerging Business and Other		37.3	%		36.6	%		25.6	%		22.1	%		17.1	%		21.7	%
Total		43.1	%		42.8	%		40.3	%		40.2	%		38.6	%		39.8	%

EBIT margin by segment by quarter


	2021						2020
Isolated quarters, as percentage of net sales	Q2			Q1			Q4			Q3			Q2			Q1
Networks		21.7	%		20.0	%		21.5	%		22.0	%		13.2	%		16.6	%
Digital Services		-19.9	%		-22.0	%		3.9	%		-6.8	%		-8.1	%		-19.3	%
Managed Services		8.1	%		6.4	%		6.9	%		8.9	%		4.7	%		7.1	%
Emerging Business and Other		-81.1	%		-44.4	%		-28.5	%		-26.7	%		-60.5	%		-32.7	%
Total		10.6	%		10.6	%		15.8	%		15.0	%		6.9	%		8.7	%


	2021						2020
Yearto date, as percentage of net sales	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Networks		20.9	%		20.0	%		18.6	%		17.4	%		14.8	%		16.6	%
Digital Services		-20.9	%		-22.0	%		-5.9	%		-11.0	%		-13.3	%		-19.3	%
Managed Services		7.3	%		6.4	%		6.9	%		6.9	%		5.9	%		7.1	%
Emerging Business and Other		-64.3	%		-44.4	%		-37.0	%		-40.1	%		-46.8	%		-32.7	%
Total		10.6	%		10.6	%		12.0	%		10.3	%		7.7	%		8.7	%



41 Ericsson \| Second quarter report 2021		Accounting policies and Explanatory notes

Restructuring charges by function


	2021				2020
Isolated quarters, SEK million	Q2		Q1		Q4		Q3		Q2		Q1
Cost of sales		-6		-62		-5		-73		-312		-335
Research and development expenses		1		0		21		-244		-227		39
Selling and administrative expenses		1		-15		-8		-13		-144		-5
Total		-4		-77		8		-330		-683		-301


	2021				2020
Year to date, SEK million	Jan-Jun		Jan-Mar		Jan-Dec		Jan-Sep		Jan-Jun		Jan-Mar
Cost of sales		-68		-62		-725		-720		-647		-335
Research and development expenses		1		0		-411		-432		-188		39
Selling and administrative expenses		-14		-15		-170		-162		-149		-5
Total		-81		-77		-1,306		-1,314		-984		-301

Restructuring charges by segment


	2021				2020
Isolated quarters, SEK million	Q2		Q1		Q4		Q3		Q2		Q1
Networks		-9		24		-19		-272		-380		-75
of which cost of sales		-1		24		-20		-79		-110		-72
of which operating expenses		-8		0		1		-193		-270		-3
Digital Services		-3		-8		14		-87		34		20
of which cost of sales		-2		-3		-10		-8		3		-16
of which operating expenses		-1		-5		24		-79		31		36
Managed Services		-1		-79		0		-11		-2		-245
of which cost of sales		0		-79		0		-11		-2		-245
of which operating expenses		-1		0		0		0		0		0
Emerging Business and Other		9		-14		13		40		-335		-1
of which cost of sales		-3		-4		25		25		-203		-2
of which operating expenses		12		-10		-12		15		-132		1
Total		-4		-77		8		-330		-683		-301


	2021				2020
Year to date, SEK million	Jan-Jun		Jan-Mar		Jan-Dec		Jan-Sep		Jan-Jun		Jan-Mar
Networks		15		24		-746		-727		-455		-75
of which cost of sales		23		24		-281		-261		-182		-72
of which operating expenses		-8		0		-465		-466		-273		-3
Digital Services		-11		-8		-19		-33		54		20
of which cost of sales		-5		-3		-31		-21		-13		-16
of which operating expenses		-6		-5		12		-12		67		36
Managed Services		-80		-79		-258		-258		-247		-245
of which cost of sales		-79		-79		-258		-258		-247		-245
of which operating expenses		-1		0		0		0		0		0
Emerging Business and Other		-5		-14		-283		-296		-336		-1
of which cost of sales		-7		-4		-155		-180		-205		-2
of which operating expenses		2		-10		-128		-116		-131		1
Total		-81		-77		-1,306		-1,314		-984		-301



42 Ericsson \| Second quarter report 2021		Accounting policies and Explanatory notes

Gross income and gross margin excluding restructuring charges by segment


	2021						2020
Isolated quarters,SEK m illion	Q2			Q1			Q4			Q3			Q2			Q1
Netw orks		19,112			16,690			21,450			19,454			16,132			15,658
DigitalServices		2,992			3,005			5,193			3,795			3,735			2,945
M anaged Services		975			1,021			1,031			1,104			957			1,178
Em erging Businessand Other		784			641			588			482			405			342
Total		23,863			21,357			28,262			24,835			21,229			20,123

	2021						2020
Isolated quarters,aspercentage ofnetsales	Q2			Q1			Q4			Q3			Q2			Q1
Netw orks		47.9	%		46.0	%		43.5	%		46.7	%		40.5	%		44.6	%
DigitalServices		37.9	%		43.6	%		41.0	%		43.5	%		43.6	%		40.1	%
M anaged Services		19.0	%		21.0	%		17.7	%		20.1	%		17.2	%		20.6	%
Em erging Businessand Other		38.1	%		36.8	%		33.8	%		30.5	%		25.3	%		21.9	%
Total		43.4	%		42.9	%		40.6	%		43.2	%		38.2	%		40.4	%

	2021						2020
Yearto date,SEK m illion	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Netw orks		35,802			16,690			72,694			51,244			31,790			15,658
DigitalServices		5,997			3,005			15,668			10,475			6,680			2,945
M anaged Services		1,996			1,021			4,270			3,239			2,135			1,178
Em erging Businessand Other		1,425			641			1,817			1,229			747			342
Total		45,220			21,357			94,449			66,187			41,352			20,123

	2021						2020
Yearto date,aspercentage ofnetsales	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Netw orks		47.0	%		46.0	%		43.8	%		43.9	%		42.4	%		44.6	%
DigitalServices		40.6	%		43.6	%		42.0	%		42.5	%		42.0	%		40.1	%
M anaged Services		20.0	%		21.0	%		18.9	%		19.3	%		18.9	%		20.6	%
Em erging Businessand Other		37.5	%		36.8	%		28.0	%		25.9	%		23.6	%		21.9	%
Total		43.2	%		42.9	%		40.6	%		40.7	%		39.3	%		40.4	%



43 Ericsson \| Second quarter report 2021		Accounting policies and Explanatory notes

EBIT and EBIT margin excluding restructuring charges by segment


	2021						2020
Isolated quarters,SEK million	Q2			Q1			Q4			Q3			Q2			Q1
Networks		8,653			7,217			10,623			9,437			5,635			5,902
Digital Services		-1,565			-1,510			485			-504			-731			-1,437
Managed Services		417			392			401			502			265			653
Emerging Business and Other		-1,678			-761			-509			-462			-635			-511
Total		5,827			5,338			11,000			8,973			4,534			4,607

	2021						2020
Isolated quarters, as percentage of net sales	Q2			Q1			Q4			Q3			Q2			Q1
Networks		21.7	%		19.9	%		21.5	%		22.7	%		14.1	%		16.8	%
Digital Services		-19.8	%		-21.9	%		3.8	%		-5.8	%		-8.5	%		-19.6	%
Managed Services		8.1	%		8.1	%		6.9	%		9.1	%		4.8	%		11.4	%
Emerging Business and Other		-81.5	%		-43.7	%		-29.3	%		-29.2	%		-39.6	%		-32.7	%
Total		10.6	%		10.7	%		15.8	%		15.6	%		8.2	%		9.3	%

	2021						2020
Year to date, SEK million	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Networks		15,870			7,217			31,597			20,974			11,537			5,902
Digital Services		-3,075			-1,510			-2,187			-2,672			-2,168			-1,437
Managed Services		809			392			1,821			1,420			918			653
Emerging Business and Other		-2,439			-761			-2,117			-1,608			-1,146			-511
Total		11,165			5,338			29,114			18,114			9,141			4,607

	2021						2020
Year to date, as percentage of net sales	Jan-Jun			Jan-Mar			Jan-Dec Jan-Sep Jan-Jun Jan-Mar
Networks		20.8	%		19.9	%		19.0	%		18.0	%		15.4	%		16.8	%
Digital Services		-20.8	%		-21.9	%		-5.9	%		-10.8	%		-13.6	%		-19.6	%
Managed Services		8.1	%		8.1	%		8.1	%		8.5	%		8.1	%		11.4	%
Emerging Business and Other		-64.2	%		-43.7	%		-32.6	%		-33.9	%		-36.2	%		-32.7	%
Total		10.7	%		10.7	%		12.5	%		11.1	%		8.7	%		9.3	%

Rolling four quarters of net sales by segment


	2021		2020
Rolling four quarters, SEK million	Q2	Q1	Q4	Q3	Q2	Q1
Networks	167,174	167,126	165,978	161,060	158,662	156,654
Digital Services	36,189	36,877	37,324	37,821	38,969	39,385
Managed Services	21,297	21,751	22,600	23,812	24,673	25,423
Emerging Business and Other	7,121	6,664	6,488	6,480	6,524	6,598
Total	231,781	232,418	232,390	229,173	228,828	228,060

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


	2021		2020
Rolling four quarters, SEK million	Q2	Q1	Q4	Q3	Q2	Q1
Networks	21.5%	19.7%	19.0%	17.0%	15.9%	16.1%
Digital Services	-8.5%	-6.1%	-5.9%	-7.0%	-6.8%	-8.2%
Managed Services	8.0%	7.2%	8.1%	7.4%	7.4%	6.9%
Emerging Business and Other	-47.9%	-35.5%	-32.6%	-30.5%	-196.5%	-195.5%
Total	13.4%	12.8%	12.5%	10.7%	5.0%	4.8%



44 Ericsson \| Second quarter report 2021		Accounting policies and Explanatory notes

EBITA and EBITA margin by segment by quarter


	2021						2020
Isolated quarters, SEK million	Q2			Q1			Q4			Q3			Q2			Q1
Networks		8,679			7,274			10,636			9,347			5,321			5,957
Digital Services		-1,445			-1,400			625			-461			-563			-1,283
Managed Services		417			314			403			492			264			409
Emerging Business and Other		-1,534			-644			-380			-370			-913			-456
Total		6,117			5,544			11,284			9,008			4,109			4,627

	2021						2020
Isolated quarters, as percentage of net sales	Q2			Q1			Q4			Q3			Q2			Q1
Networks		21.8	%		20.1	%		21.5	%		22.4	%		13.4	%		17.0	%
Digital Services		-18.3	%		-20.3	%		4.9	%		-5.3	%		-6.6	%		-17.5	%
Managed Services		8.1	%		6.5	%		6.9	%		8.9	%		4.7	%		7.2	%
Emerging Business and Other		-74.5	%		-37.0	%		-21.9	%		-23.4	%		-57.0	%		-29.1	%
Total		11.1	%		11.1	%		16.2	%		15.7	%		7.4	%		9.3	%

	2021						2020
Year to date, SEK million	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Networks		15,953			7,274			31,261			20,625			11,278			5,957
Digital Services		-2,845			-1,400			-1,682			-2,307			-1,846			-1,283
Managed Services		731			314			1,568			1,165			673			409
Emerging Business and Other		-2,178			-644			-2,119			-1,739			-1,369			-456
Total		11,661			5,544			29,028			17,744			8,736			4,627

	2021						2020
Year to date, as percentage of net sales	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Networks		20.9	%		20.1	%		18.8	%		17.7	%		15.0	%		17.0	%
Digital Services		-19.2	%		-20.3	%		-4.5	%		-9.4	%		-11.6	%		-17.5	%
Managed Services		7.3	%		6.5	%		6.9	%		6.9	%		6.0	%		7.2	%
Emerging Business and Other		-57.3	%		-37.0	%		-32.7	%		-36.6	%		-43.2	%		-29.1	%
Total		11.1	%		11.1	%		12.5	%		10.9	%		8.3	%		9.3	%

Other ratios


	Q2				Jan-Jun
	2021		2020		2021		2020
Days sales outstanding		—		—		94		80
Inventory turn over days		89		85		90		89
Payable days		86		82		94		88



45 Ericsson \| Second quarter report 2021		Accounting policies and Explanatory notes