TELEFONAKTIEBOLAGET LM ERICSSON (publ)
By:		/s/ STELLA MEDLICOTT
		Stella Medlicott
		Senior Vice President,
		Chief Marketing and Communications Officer
By:		/s/ CARL MELLANDER
		Carl Mellander
		Senior Vice President, Chief Financial Officer

		Building on our strong position and despite challenging market conditions we delivered a solid quarter – meeting expectations. We continue to execute with discipline and focus without losing sight of the long term. We are leveraging our 5G technology, growing our enterprise business and driving our cultural transformation
to accelerate our growth trajectory and shape the communications industry landscape.

Q2 in line with our expectations

Performance in Q2 was in line with our expectations, despite the uncertain macro backdrop and significant changes in market mix. This is a testament to our strategy, the excellence of our portfolio, and our ability to adapt and execute.

Group organic sales declined by -9%, as a Networks decline of -13% was partly mitigated by a 20% organic growth in Enterprise. Group EBITA excluding restructuring charges was SEK 3.7 (7.5) b. or 5.7% (12.0%) of sales.

In Networks, we saw strong execution with record build-out speed in India, where we now have a leading market share. Sales growth in India partly offset the expected softening we saw in other markets, notably in North America, where build-out pace moderated and customer inventory levels were reduced. Despite the business mix change and several large rollout contracts, Networks had a gross margin² of over 39%.

In Cloud Software and Services, we continue to execute on the turnaround, including exiting subscale business and improving delivery efficiency. We are on track to deliver an EBITA² of at least break-even for the full year 2023.

In Enterprise we saw continued strong growth in Enterprise Wireless Solutions, and we recorded positive EBITA in the Global Communications Platform business.

We landed another important 5G licensing agreement with a device vendor, further validating our IPR portfolio strength, positioning us well for continued IPR growth as we license vendors previously unlicensed for 5G.

We are well on track to reduce our annual run rate by at least SEK 11 b. by year-end, which will positively impact the P&L over the coming quarters with full effect during 2024.

Free cash flow before M&A was SEK -5.0 (4.4) b. primarily driven by lower EBIT² and increased working capital including the payment to the US Department of Justice. We expect an improvement in cash flow during the second part of the year and gradually move towards our long-term target of 9-12% of Net sales.

Driving execution of our strategy

Ericsson is shaping the industry landscape by leveraging the full value of 5G and creating the world’s most powerful innovation platform. We remain focused on three priorities: i) bolstering our leadership in mobile networks; ii) growing our enterprise business; and iii) driving our cultural transformation.

Leadership in mobile networks is the cornerstone of our success. Our competitive advantage is clear – we deliver leading performance, energy efficiency and cost optimization. Our radios carry about half of the world’s 5G traffic outside China.

Building on this position and our market leading technologies, we are expanding into the fast-growing enterprise segment, substantially increasing our addressable market and diversifying our portfolio. 5G offers advanced capabilities such as Quality of Service, speed, latency, and location, and our platform allows these capabilities to be monetized in new ways by exposing them through network APIs. Operators and enterprises are showing great interest, as our platform will enable operators to offer differentiated performance levels and allow developers to integrate these capabilities into both existing and innovative new use cases.

We continue our relentless focus on enhancing our ethics and compliance program. Our compliance program and controls have been significantly enhanced since 2019 and our monitorship is entering its final year. We conduct testing to ensure our compliance program is effective and fully embedded across the company.

Looking ahead

For Q3 we expect similar market mix and trends as in Q2. In addition, Q3 will benefit from an early impact of our strong focus on cost-out execution. Overall, we thus expect Q3 EBITA margin² to be in line with or slightly higher than Q2, followed by a seasonally stronger Q4.

As we look ahead, a fundamental driver of network capex is the continued rapid data traffic growth. Average smartphone usage is expected to exceed 20 GB/month in 2023 with strong growth. 240 operators have launched 5G, bringing new revenue growth with pricing model innovation. We forecast 5G subscriptions to top 1.5 billion by end-2023 and reach 4.6 billion by 2028. Fixed Wireless Access (FWA) also grows quickly, driving further traffic growth.

Traffic growth and operators’ desire to meet expectations for network quality with cost and energy efficiency, will stimulate investments. We estimate 75% of all base station sites outside China are not yet updated with 5G mid-band, and migration to 5G standalone will continue in order to deliver on 5G’s full potential.

We are confident that the market will recover as a consequence of these factors, and Ericsson is well positioned to benefit from increased investments. The exact timing of these increased network investments is, of course, in the hands of our customers, but we expect that the market will see a gradual recovery in late 2023 and improve in 2024.

Our technology leadership, solid performance and growth potential, position us well for the future. We are navigating the current environment with discipline and focus, and we tackle areas within our control. We execute on the Cloud Software and Services turnaround, portfolio adjustments, enhanced R&D productivity, IPR growth and cost reductions. Based on the expected recovery of the mobile networks market towards the end of the year, we remain focused on reaching the lower end of the 15-18% EBITA margin² long-term target range in 2024.

Börje Ekholm

President and CEO

 

1	Sales adjusted for comparable units and currency

 

2	Excluding restructuring charges

 

Segments

Group sales increased by 3% to SEK 64.4 (62.5) b. Sales adjusted for comparable units and currency declined by -9%.

Networks sales adjusted for comparable units and currency declined by -13% YoY. Networks sales doubled in market area South East Asia, Oceania and India while it declined in the other market areas, especially in North America where customers have lowered their capex spend and reduced inventory levels following high investment levels in 2021 and 2022. Networks accounted for 66% (74%) of Group sales.

Cloud Software and Services sales adjusted for comparable units and currency grew by 1% YoY, including 10% sales growth in North America. Sales in the quarter were supported by higher sales of 5G and IPR licensing revenues. Cloud Software and Services accounted for 23% (22%) of Group sales.

Enterprise sales adjusted for comparable units and currency increased by 20% YoY driven by Enterprise Wireless Solutions. Global Communications Platform (the consolidation of Vonage) sales were SEK 4.2 (0.0) b. in the quarter. Enterprise accounted for 10% (3%) of Group sales.

IPR licensing revenues increased to SEK 3.2 (1.4) b YoY. The increase is primarily related to a contract signed in the fourth quarter 2022 and a new contract with a device vendor signed in the second quarter 2023. The new contract includes revenue for past unlicensed quarters.

Market Areas

Sales adjusted for comparable units and currency increased in market area South East Asia, Oceania and India, while sales declined in the other four market areas.

In market area South East Asia, Oceania and India, sales adjusted for comparable units and currency increased by 71% YoY primarily driven by 5G market share gains in India. Reported sales increased by 74% YoY.

In market area North America, sales adjusted for comparable units and currency declined by -42% YoY as a result of customers lowering their capex spend and reducing inventory levels following high investment levels in 2021 and 2022. Cloud Software and Services grew by 10% in constant currency, driven by 5G. Reported sales decreased by -37% YoY.

In market area Europe and Latin America, sales adjusted for comparable units and currency decreased by -3% YoY. Sales in Europe declined by -6% following high investment levels in 2022, while sales in Latin America increased by 3% mainly driven by 5G deployments. Reported sales increased by 4% YoY.

In market area North East Asia, sales adjusted for comparable units and currency declined by -32% YoY as investments declined in several 5G front-runner markets after elevated 5G investment levels in 2022. Reported sales declined by -31% YoY.    

In market area Middle East and Africa, sales adjusted for comparable units and currency decreased by -4% YoY driven by the macro environment. Reported sales increased by 2% YoY.

Market area Other primarily includes IPR licensing revenues and the majority of sales from segment Enterprise. Sales adjusted for comparable units and currency increased by 38% YoY driven mainly by IPR licensing revenues and Enterprise Wireless Solutions.

 

Gross income

Gross income decreased to SEK 24.1 (26.3) b. Gross income excluding restructuring charges decreased to SEK 24.7 (26.3) b. as a consequence of lower sales and lower gross margin in Networks. Gross margin excluding restructuring charges was 38.3% (42.2%).

Networks gross income and gross margin excluding restructuring charges decreased as a result of lower sales and changed business mix, partly mitigated by higher IPR revenues in the sales mix. Cloud Software and Services gross income and gross margin excluding restructuring charges increased, supported by higher sales and higher IPR revenues in the sales mix. Enterprise gross income excluding restructuring charges increased while gross margin excluding restructuring charges decreased as a result of changed business mix after the Vonage consolidation.

Research and development (R&D) expenses

R&D expenses amounted to SEK -13.8 (-11.5) b. including a negative currency effect of SEK -0.4 b. and restructuring charges of SEK -1.7 (0.0) b. R&D expenses increased in segment Enterprise through the acquisition of Vonage and increased investments to expand the Enterprise Wireless Solutions portfolio. R&D expenses decreased in Networks and segment Other.

Selling and administrative (SG&A) expenses

SG&A expenses were SEK -10.6 (-7.9) b. including a negative currency effect of SEK -0.2 b. and restructuring charges of SEK -0.9 (0.0) b. The increase is related to Enterprise where the acquisition of Vonage had an impact of SEK -2.0 b. (of which amortization of intangible assets amounted to SEK -0.7 b.). Furthermore, SG&A expenses increased due to continued investments in the go-to-market activities in Enterprise Wireless Solutions.

Other operating income and expenses

Other operating income and expenses was SEK 0.3 (0.4) b.

Restructuring charges

Restructuring charges amounted to SEK -3.1 (0.0) b. as a result of the ongoing cost-reduction activities, mainly redundancy costs. For full-year 2023, total restructuring charges are estimated to be SEK -7 b.

EBITA

EBITA decreased to SEK 0.5 (7.5) b. corresponding to an EBITA margin of 0.8% (12.0%). EBITA excluding restructuring charges declined by SEK -3.8 b. YoY to SEK 3.7 b. In addition to the decrease in gross income driven by Networks, operating expenses excluding amortization of intangible assets and restructuring charges increased by SEK -2.1 b., mainly due to the consolidation of Vonage in segment Enterprise. EBITA margin excluding restructuring charges was 5.7% (12.0%).

EBITA margin excluding restructuring charges rolling four quarters was 9.1%.

EBIT

EBIT decreased to SEK -0.3 (7.3) b. with an EBIT margin of -0.5% (11.7%). EBIT excluding restructuring charges decreased by SEK -4.5 b. to SEK 2.8 b. The result includes an increase in amortization of intangible assets of SEK -0.7 b., mainly related to the acquisition of Vonage in 2022. EBIT margin excluding restructuring charges was 4.4% (11.8%).

 

Financial income and expenses, net

Financial income and expenses was SEK -0.4 (-0.8) b. The currency hedge effect was SEK -0.1 (-0.5) b. YoY. The USD strengthened against the SEK between March 31, 2023 (SEK/USD 10.37) and June 30, 2023 (SEK/USD 10.88).

Income tax

Taxes were SEK 0.1 (-1.9) b. The reported positive tax is a result of the negative income after financial items. A tax rate of 30% is estimated for the full year.

Net income (loss)

Net income declined to a loss of SEK -0.6 (4.7) b. impacted by restructuring charges of SEK -3.1 (0.0) b., lower gross income excluding restructuring charges of SEK -1.7 b. YoY as well as increased operating expenses excluding restructuring charges of SEK -2.8 b. YoY. The decline was partly mitigated by lower tax impact of SEK 2.0 b. YoY. EPS diluted decreased to SEK -0.21 (1.35).

Employees

The number of employees on June 30, 2023, was 103,890 compared with 104,931 on March 31, 2023. The impact from the cost-reduction activities will be increasingly visible over coming quarters.

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

Reported sales increased by SEK 9.5 b. or 8% to SEK 127.0 b. Reported sales declined by -2% to SEK 84.9 b. in Networks, sales in Cloud Software and Services grew by 9% to SEK 28.5 b., while Enterprise grew by 275% to SEK 12.4 b. on the back of the acquisition of Vonage.

Sales adjusted for comparable units and currency decreased by -5%. Sales doubled in market area South East Asia, Oceania and India, while sales declined in the other market areas. Sales were supported by increased IPR licensing revenues. Networks sales adjusted for comparable units and currency decreased by -8%, Cloud Software and Services sales grew by 3% and Enterprise sales grew by 20%.

Reported gross income decreased to SEK 48.3 (49.6) b. with a gross margin of 38.0% (42.2%). Gross income excluding restructuring charges was stable at SEK 49.6 (49.6) b., with Global Communications Platform (the consolidation of Vonage) contributing SEK 3.4 b., resulting in a gross margin of 39.0% (42.2%). Gross income and gross margin were impacted by lower sales and gross margin in Networks as a result of reduction in capex spend by several operators and business mix shift from front-runner markets to large deployment in other geographies.

Reported EBITA decreased to SEK 4.4 (12.4) b. corresponding to an EBITA margin of 3.5% (10.6%). EBITA excluding restructuring charges decreased to SEK 8.5 (12.5) b. with an EBITA margin of 6.7% (10.6%). While gross income excluding restructuring charges was stable, operating expenses excluding amortization and restructuring charges increased by SEK -5.0 b. including a negative currency effect of SEK -1.2 b. The increase in operating expenses was driven by the Enterprise segment through the acquisition of Vonage as well as continued investments in R&D and the go-to-market activities in Enterprise Wireless Solutions.

Reported EBIT decreased to SEK 2.7 (12.1) b. YoY, corresponding to an EBIT margin of 2.2% (10.3%). EBIT excluding restructuring charges decreased to SEK 6.8 (12.1) b. YoY with an EBIT margin of 5.4% (10.3%).

Net income year to date declined to SEK 1.0 (7.6) b. impacted by restructuring charges of SEK -4.1 (-0.1) b. and higher operating expenses excluding restructuring charges of SEK -6.3 b. YoY, primarily in segment Enterprise through the consolidation of Vonage with an impact from amortization of intangible assets of SEK -1.3 b. This result was partly mitigated by lower tax impact of SEK 2.7 b. YoY. EPS diluted decreased to SEK 0.25 (2.23).

 

Mobile networks – Segment Networks

 

SEK b.		Q2 2023				Q2 2022				YoY change				Q1 2023
Net sales			42.4				46.0				-8	%			42.5
Of which IPR licensing revenues			2.6				1.2				119	%			2.0
Sales growth adj. for comparable units and FX			—				—				-13	%			—
Gross income			16.3				20.7				-21	%			16.9
Gross margin			38.4	%			45.1	%			—				39.7	%
EBIT			2.6				8.9				-70	%			6.0
EBIT margin			6.2	%			19.3	%			—				14.2	%
EBITA			2.7				8.9				-70	%			6.0
EBITA margin			6.3	%			19.3	%			—				14.2	%
Restructuring charges			-2.2				0.0				—				-0.4
Measures excl. restructuring charges
Gross margin excl. restructuring charges			39.3	%			45.2	%			—				40.6	%
EBIT excl. restructuring charges			4.8				8.9				-46	%			6.4
EBIT margin excl. restructuring charges			11.3	%			19.4	%			—				15.1	%
EBITA excluding restructuring charges			4.9				8.9				-46	%			6.4
EBITA margin excl. restructuring charges			11.4	%			19.4	%			—				15.2	%

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

 

•

Continued momentum in India, now Ericsson’s 2nd largest market.

•

Network traffic growth continues with new use cases like FWA.

•

Organic sales in North America declined by -50%.

•

Building next-generation smart manufacturing and technology hub in Estonia.

Net sales

Sales adjusted for comparable units and currency decreased by -13% YoY, primarily driven by a -50% sales drop in North America with operators reducing their capex spend and adjusting inventories. Sales in market area South East Asia, Oceania and India doubled, as a result of market share gains in India, with high deployment levels. Networks reported sales decreased by -8%.

Gross income

Gross income decreased by SEK -4.4 b. to SEK 16.3 b. resulting in a gross margin of 38.4% (45.1%). Gross income excluding restructuring charges decreased to SEK 16.7 (20.8) b., with a gross margin of 39.3% (45.2%). As expected, the gross margin was impacted by a business mix shift caused by a slowdown in investments in 5G front-runner markets, combined with large deployments with an initial dilutive effect on the margins in other geographies. Adjustments of the supply chain continue, with focus on adaptability to demand changes and geopolitical requirements, impacting gross margin negatively. The increase in IPR licensing revenues, also including retroactive revenues, had a positive impact on the margin in the quarter.

Gross margin in Q3 is estimated to be 38-40%, with a negative impact from business mix shift partly offset by cost optimization.

EBIT and EBITA

EBIT excluding restructuring charges decreased to SEK 4.8 (8.9) b. with an EBIT margin of 11.3% (19.4%). EBITA excluding restructuring charges declined to SEK 4.9 (8.9) b. as a result of a lower gross income due to lower sales as well as a margin impact due to business mix shift. EBITA margin excluding restructuring charges was 11.4% (19.4%).

Reported EBIT declined to SEK 2.6 (8.9) b. while reported EBITA declined to SEK 2.7 (8.9) b. In addition to the lower gross income, EBIT and EBITA were impacted by restructuring charges of SEK -2.2 (0.0) b.

Net sales rolling four quarters were SEK 191.7 b. and the EBITA margin excluding restructuring charges rolling four quarters was 17.5%.

Mobile networks – Segment Cloud Software and Services

 

SEK b.		Q2 2023				Q2 2022				YoY change				Q1 2023
Net sales			15.1				14.0				8	%			13.4
Of which IPR licensing revenues			0.6				0.3				119	%			0.4
Sales growth adj. for comparable units and FX			—				—				1	%			—
Gross income			4.9				4.7				5	%			4.5
Gross margin			32.7	%			33.5	%			—				33.4	%
EBIT (loss)			-1.2				-0.7				—				-0.9
EBIT margin			-7.9	%			-5.2	%			—				-7.0	%
EBITA (loss)			-1.2				-0.7				—				-0.9
EBITA margin			-7.9	%			-5.1	%			—				-6.9	%
Restructuring charges			-0.9				0.0				—				-0.5
Measures excl. restructuring charges
Gross margin excl. restructuring charges			33.9	%			33.5	%			—				36.1	%
EBIT (loss) excl. restructuring charges			-0.3				—0.7				—				-0.4
EBIT margin excl. restructuring charges			-1.9	%			-5.2	%			—				-3.3	%
EBITA (loss) excluding restructuring charges			-0.3				—0.7				—				-0.4
EBITA margin excl. restructuring charges			-1.9	%			-5.1	%			—				-3.2	%

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

 

•

Sales increased by 1% adjusted for comparable units and currency.

•

EBITA excl. restructuring charges improved YoY to SEK -0.3 (-0.7) b.

•

On track to reach break-even for full-year 2023.

Net sales

Sales adjusted for comparable units and currency increased by 1% YoY, primarily driven by 5G sales in North America, while sales decreased in managed services. Reported sales increased by 8% YoY.

Gross income

Gross income increased by SEK 0.3 b. to SEK 4.9 b. with a gross margin of 32.7% (33.5%). Gross income excluding restructuring charges was SEK 5.1 (4.7) b. resulting in a gross margin of 33.9% (33.5%). The increase in IPR licensing revenues in the sales mix as well as improved delivery performance had a positive impact on the margin YoY.

EBIT (loss) and EBITA (loss)

EBIT (loss) and EBITA (loss) excluding restructuring charges were SEK -0.3 (-0.7) b. with an EBIT margin excluding restructuring charges of -1.9% (-5.2%) and an EBITA margin excluding restructuring charges of -1.9% (-5.1%). The improvement is driven by higher gross income as a result of improved operational performance including exiting subscale business and improving delivery efficiency.

Reported EBIT (loss) and EBITA (loss) were both SEK -1.2 (-0.7) b. with an EBIT margin of -7.9% (-5.2%) and an EBITA margin of -7.9% (-5.1%). A higher gross income was offset by restructuring charges of SEK -0.9 (0.0) b.

The EBITA excluding restructuring charges for Cloud Software and Services is expected to reach at least break-even for full-year 2023. Strategy execution continues, by limiting subscale software development, accelerating automation to reduce deployment and maintenance efforts, and changing the focus from market share gains to profitable business. Results will vary between quarters. EBITA excluding restructuring charges in Q3 is expected to be in line with Q2.

Net sales rolling four quarters were SEK 62.9 b. and the EBITA margin excluding restructuring charges rolling four quarters was -1.1%.

 

Enterprise – Segment Enterprise

 

SEK b.		Q2 2023				Q2 2022				YoY change				Q1 2023 1
Net sales			6.4				1.7				275	%			6.0
Of which Global Comms Platform (Vonage)			4.2				—				—				3.9
Of which Enterprise Wireless Solutions			1.0				0.6				69	%			0.8
Sales growth adj. for comparable units and FX			—				—				20	%			—
Gross income			3.0				0.9				228	%			2.8
Gross margin			46.3	%			52.8	%			—				47.4	%
EBIT (loss)			-1.7				-0.6				—				-1.7
EBIT margin			-26.3	%			-34.8	%			—				-28.6	%
EBITA (loss)			-0.9				-0.5				—				-0.9
EBITA margin			-14.0	%			-28.5	%			—				-15.8	%
Restructuring charges			-0.1				0.0				—				-0.1
Measures excl. restructuring charges
Gross margin excl. restructuring charges			46.3	%			52.8	%			—				47.6	%
Global Comms Platform (Vonage)			40.7	%			—				—				43.5	%
Enterprise Wireless Solutions			58.2	%			52.9	%			—				56.7	%
EBIT (loss) excl. restructuring charges²			-1.6				-0.6				—				-1.6
EBIT margin excl. restructuring charges²			-25.5	%			-34.6	%			—				-27.1	%
EBITA (loss) excluding restructuring charges²			-0.8				-0.5				—				-0.9
Of which Global Comms Platform (Vonage)			0.0				—				—				0.0
Of which Enterprise Wireless Solutions			-0.9				-0.5				—				-0.8
EBITA margin excl. restructuring charges²			-13.2	%			-28.3	%			—				-14.3	%

 

1	Financial information by segment has been restated for the quarters 2022, where the divested IoT business in Q1 2023 has moved from segment Enterprise to segment Other.

2	Common costs are included at segment level only (not distributed within the segment).

 

•

Reported sales growth driven by the Vonage acquisition.

•

Organic sales growth driven by Enterprise Wireless Solutions.

•

Increased gross income excl. restructuring charges to SEK 3.0 (0.9) b.

•

Global Communications Platform was EBITA positive.

Net sales

Reported sales were SEK 6.4 (1.7) b. The increase of SEK 4.7 b. YoY was driven primarily by Global Communications Platform (the consolidation of Vonage) which contributed SEK 4.2 b. Sales adjusted for comparable units and currency increased by 20%, driven by Enterprise Wireless Solutions. Enterprise Wireless Solutions reported sales of SEK 1.0 (0.6) b. representing a sales growth of 69%.

Vonage was not consolidated in Q2 2022, however when comparing the pre- and post-acquisition figures, the Vonage Communications Platform (VCP) sales grew by 12% in USD YoY, while sales from the current communications API offerings grew by 19%.

Investments continue in line with the strategic imperative to build the Global Network Platform (network APIs).

Gross income

Gross income was SEK 3.0 (0.9) b. with a gross margin of 46.3% (52.8%). Gross income excluding restructuring charges was SEK 3.0 (0.9) b. driven mainly by Global Communications Platform (the consolidation of Vonage) and Enterprise Wireless Solutions. Gross margin excluding restructuring charges declined to 46.3% (52.8%) due to the consolidation of Vonage with lower gross margin than the remaining part of the Enterprise segment.

EBITA (loss)

EBITA (loss) was SEK -0.9 (-0.5) b. EBITA (loss) excluding restructuring charges was SEK -0.8 (-0.5) b., where the decline was mainly driven by Enterprise Wireless Solutions, due to increased growth investments in R&D and go-to market activities. In addition, operating expenses were higher due to the consolidation of all costs for Private Cellular Networks (Dedicated Networks). Technologies and New Businesses reported a positive EBITA. The segment’s operating expenses were impacted by a negative currency effect. EBITA margin excluding restructuring charges was -13.2% (-28.3%).

EBIT (loss)

EBIT (loss) was SEK -1.7 (-0.6) b. EBIT (loss) excluding restructuring charges was SEK -1.6 (-0.6) b. impacted by amortization of intangible assets of SEK -0.8 b., from acquired businesses.

Segment Other

 

SEK b.		Q2 2023				Q2 2022				YoY change				Q1 2023 1
Net sales			0.5				0.8				-32	%			0.7
Sales growth adj. for comparable units and FX			—				—				-18	%			—
Gross income			-0.1				0.0				—				0.0
Gross margin			-22.2	%			-3.3	%			—				-2.6	%
EBIT (loss)			-0.1				-0.2				—				-0.3
EBIT margin			-10.8	%			-29.7	%			—				-46.3	%
EBITA (loss)			-0.1				-0.2				—				-0.3
EBITA margin			-10.6	%			-29.7	%			—				-46.3	%
Restructuring charges			0.0				0.0				—				0.0
Measures excl. restructuring charges
Gross margin excl. restructuring charges			-22.6	%			-3.3	%			—				-2.6	%
EBIT (loss) excl. restructuring charges			-0.1				-0.2				—				-0.3
EBIT margin excl. restructuring charges			-11.2	%			-29.7	%			—				-48.2	%
EBITA (loss) excluding restructuring charges			-0.1				-0.2				—				-0.3
EBITA margin excl. restructuring charges			-11.0	%			-29.7	%			—				-48.2	%

 

1	Financial information by segment has been restated for the quarters 2022, where the divested IoT business in Q1 2023 has moved from segment Enterprise to segment Other.

Net sales

Reported sales declined to SEK 0.5 (0.8) b. mainly related to the divestment of the IoT business in Q1 2023.

Gross income

Gross income and gross income excluding restructuring charges were both SEK -0.1 (0.0) b. Gross margin was -22.2% (-3.3%) while gross margin excluding restructuring charges was -22.6% (-3.3%).

EBITA (loss)

EBITA (loss) and EBITA (loss) excluding restructuring charges were both SEK -0.1 (-0.2) b. EBITA margin was -10.6% (-29.7%). EBITA margin excluding restructuring charges was -11.0% (-29.7%).

EBITA improved mainly due to the divestment of the IoT business.

EBIT (loss)

EBIT (loss) and EBIT (loss) excluding restructuring charges were both SEK -0.1 (-0.2) b. EBIT margin was -10.8% (-29.7%). EBIT margin excluding restructuring charges was -11.2% (-29.7%).

 

Cash flow from operating activities

Cash flow from operating activities decreased to SEK -2.9 (6.3) b. due to lower EBIT and increased working capital YoY. Working capital increased in the quarter following the current business mix shift including large rollout projects with longer order-to-cash cycle. Cash flow was also impacted by payment of the earlier provisioned USD -0.2 b. (SEK -2.1 b.) fine to the U.S. Department of Justice (DOJ) regarding non-criminal breaches of the 2019 Deferred Prosecution Agreement (DPA). Taxes paid were SEK -1.5 (-1.0) b.

Free cash flow

Free cash flow before M&A was SEK -5.0 (4.4) b. due to lower cash flow from operating activities. Capex net and other investing activities increased to SEK -1.4 (-1.3) b., primarily driven by increased product development, partly offset by decreased investment in property, plant and equipment. Repayment of lease liabilities was SEK -0.7 (-0.6) b. YoY, mainly related to property leases. M&A activities of SEK -0.9 b. were primarily related to an acquisition within Enterprise Wireless Solutions. Free cash flow after M&A was SEK -5.9 (4.6) b. Free cash flow before M&A rolling four quarters was SEK 6.4 b., or 2.3% in relation to sales.

Cash flow from investing activities

Cash flow from investing activities was SEK -2.4 (21.9) b. In Q2 2022, Ericsson disposed of interest-bearing securities of SEK 22.7 b.

 

Cash flow from financing activities

Cash flow from financing activities was SEK -7.1 (-14.5) b. The YoY change was mainly driven by repayment of a USD -1.0 b. (SEK -10.0 b.) bond in Q2 2022. Dividends of SEK -4.6 b. were paid out in the quarter, and an additional SEK 1.35 per share (totaling SEK -4.5 b.) will be paid out in October. Furthermore, Ericsson repaid borrowing of SEK -2.8 b., and borrowed SEK 1.0 b. under its commercial paper program.

Financial position

Sequentially, gross cash decreased by SEK -11.6 b. to SEK 35.7 b. and net cash decreased by SEK -11.7 b. to SEK 1.9 b. The sequential change was a result of the negative free cash flow after M&A and the dividend paid to shareholders. In addition, gross cash was affected by repayment of borrowings.

Ericsson has an unutilized revolving credit facility of USD 2.0 b., linked to two of Ericsson’s long-term sustainability goals. The facility is set to expire in 2027 with a one-year extension option. In addition to this facility, Ericsson has signed a new unutilized revolving credit facility of USD 0.5 b. for general corporate purposes.

The average maturity of long-term borrowings was 3.6 years as of June 30, 2023, a decrease from 4.4 years 12 months earlier.

Liabilities for post-employment benefits decreased to SEK 22.8 b. from SEK 26.8 b. due to changes in financial assumptions. The Swedish defined benefit obligation (DBO) was calculated using a discount rate based on the yields of Swedish government bonds. If the discount rate had been based on Swedish covered mortgage bonds, the liability for post-employment benefits would have been approximately SEK 9.0 b. (SEK 13.8 b. lower than current DBO).

Return on capital employed (ROCE) was 2.7% (12.8%) as a result of lower EBIT and higher capital employed.

 

Key data points

Market

The global RAN equipment market is estimated to be stable at 0% (1%) in 2023. North America is expected to decline by -13% (-7%), Europe by 0% (0%) and China by -4% (-4%).

Source: Dell’Oro Mobile RAN 5-year forecast, July 2023. Numbers in parenthesis are from Dell’Oro Mobile RAN Quarterly Report 1Q23, May 2023.

Ericsson

Net sales

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

 

		Q4gQ1				Q1gQ2				Q2gQ3				Q3gQ4
Networks			-23	%			+12	%			+4	%			+22	%
Cloud Software and Services			-35	%			+12	%			+2	%			+35	%

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

Operating expenses excluding Global Communications Platform (consolidation of Vonage) and restructuring charges

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

Positive numbers = decrease in operating expenses.

Negative numbers = increase in operating expenses.

 

Q4gQ1

Q1gQ2

Q2gQ3

Q3gQ4

Ericsson Group

+3.3

-1.5

+0.7

-2.4

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

EBITA

The Q3 EBITA margin excluding restructuring charge is expected to be in line with, or slightly better than Q2, with similar trends and business mix and early benefits of cost-out execution, followed by a seasonally stronger Q4.

Currency exposure

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

Amortization of intangible assets

Amortization of intangible assets is expected to continue to be around SEK -0.9 b. per quarter of which approximately SEK -0.8 b. related to segment Enterprise.

Restructuring charges

Restructuring charges is expected to be around SEK 7 b. for the full year. For 2024, restructuring charges are expected to normalize at about 0.5% of sales.

 

Segments

Networks

Gross margin excluding restructuring charges is estimated to be in the range of 38-40% in Q3.

Cloud Software and Services

EBITA excluding restructuring charges in Q3 is expected to be in line with Q2.

The EBITA excluding restructuring charges is expected to reach at least break-even for full-year 2023.

Enterprise

Amortization of intangible assets is expected to be approximately SEK -0.8 b. per quarter.

 

Parent Company

Income after financial items January–June 2023, was SEK 16.4 (20.0) b.

At the end of the quarter, gross cash (cash, cash equivalents plus interest-bearing securities, current and non-current) amounted to SEK 20.8 (85.1) b.

There was a decrease in intercompany lending of SEK 2.4 b. and an increase in intercompany borrowing of SEK 2.5 b. in the quarter.

The Parent Company has recognized dividends from subsidiaries of SEK 16.1 (16.7) b. in the quarter.

The holding of treasury stock on June 30, 2023, was 14,009,306 Class B shares.

 

Other information

Legal proceedings not involving governmental authorities

On March 3, 2022, Telefonaktiebolaget LM Ericsson and certain officers of Ericsson were named as defendants in a putative class action filed on behalf of purchasers of Ericsson ADS in the United States, in the United States District Court for the Eastern District of New York. An amended complaint was filed on September 9, 2022, which added a former Ericsson officer as a defendant. The amended complaint alleged violations of United States securities laws, in connection with allegedly false and misleading statements principally concerning the Company’s adherence with its compliance and anti-corruption policies and obligations and the conduct of its business in Iraq. On May 24, 2023, the court granted Ericsson’s motion to dismiss and dismissed the case with prejudice, concluding that Ericsson did not violate any disclosure obligation to investors. On June 23, 2023, plaintiff filed a notice of appeal. Ericsson will continue to vigorously defend this matter.

In August 2022, a civil lawsuit was filed in the United States District Court for the District of Columbia against Telefonaktiebolaget LM Ericsson and Ericsson Inc. The lawsuit was brought by US military service members and employees of US government contractors who were killed or injured in terrorist attacks in Iraq, Afghanistan and Syria from 2005 to 2021, as well as by their family members. The lawsuit asserts claims against Ericsson under the US Anti-Terrorism Act alleging that Ericsson made payments that ultimately aided the terrorist organizations that committed, planned or authorized the attacks. In November 2022, Ericsson filed a motion to dismiss the complaint.

On December 20, 2022, plaintiffs filed an amended complaint, which added additional plaintiffs, including a plaintiff injured in Turkey, named Ericsson AB, CEO Börje Ekholm and a former employee as additional defendants and also asserted additional allegations and claims. In March 2023, the Ericsson corporate defendants and Mr. Ekholm filed motions to dismiss the amended complaint. On June 2, 2023, plaintiffs filed an opposition to defendants’ motion to dismiss the amended complaint. Defendants’ reply brief in support of their motion to dismiss was filed on July 12, 2023.

In addition to the proceedings discussed above, the Company is, and in the future may be, involved in various other regulatory investigations, lawsuits, claims and proceedings incidental to the ordinary course of business.

Legal proceedings involving governmental authorities

In February 2022, the Company publicly disclosed that an internal investigation in 2019 included a review of the conduct of Ericsson employees, vendors and suppliers in Iraq during the period between 2011 to 2019. The investigation found serious breaches of compliance rules and the Company’s Code of Business Ethics, and identified evidence of corruption related misconduct and other serious violations, including payments to intermediaries and the potential use of alternate transport routes in connection with circumventing Iraqi Customs at a time when terrorist organizations, including ISIS, controlled some transport routes. The investigation also identified payment schemes and cash transactions that potentially created the risk of money laundering. The investigators could not determine the ultimate recipients of any payments, nor identify that any Ericsson employee was directly involved in financing terrorist organizations. In March 2022, the DOJ informed Ericsson it had determined that, before entering into the DPA, the Company provided insufficient information to the DOJ about the Company’s 2019 internal investigation into conduct in Iraq. The DOJ also determined that the Company breached the DPA by failing to inform the DOJ about the investigation after entering into the DPA.

In June 2022, the SEC informed Ericsson that it opened an investigation concerning matters described in the Company’s 2019 Iraq investigation report. Under Ericsson’s consent judgment with the SEC, Ericsson is permanently enjoined from violating the antibribery, books and records and internal controls provisions in the Foreign Corrupt Practices Act (FCPA). Violations of the injunction, consent judgment or securities law could subject the Company to new civil and criminal penalties as well as new enforcement actions.

On March 2, 2023, the Company reached a resolution (Plea Agreement) with the DOJ regarding the non-criminal breaches of the DPA. Under the Plea Agreement, Ericsson pleaded guilty to previously deferred charges relating to conduct that occurred prior to 2017. In addition, Ericsson agreed to pay a fine of USD 206,728,848. The entry of the Plea Agreement brought the DPA to an end. The Company’s internal investigation and its cooperation with authorities in relation to the matters discussed in the 2019 internal Iraq investigation report remain open and ongoing and are not covered by the Plea Agreement.

On May 24, 2023, Nasdaq Stockholm concluded its review of Ericsson’s public disclosure obligations concerning its 2019 Iraq internal investigation report and dismissed the matter, stating that Nasdaq could not conclude that a reasonable investor would have used the content of the report as part of an investment decision. After having reviewed Nasdaq Stockholm’s investigation and conclusion, on June 8, 2023, the Swedish Financial Supervisory Authority also decided to formally close its review of Ericsson’s prior disclosures relating to the 2019 Iraq internal investigation report.

As previously disclosed, the Company’s 2019 internal Iraq investigation did not conclude that Ericsson made or was responsible for any payments to any terrorist organization. With respect to the matters discussed in the 2019 internal Iraq investigation report, the Company continues to investigate in full cooperation with the DOJ and the SEC. This includes a comprehensive review of the 2019 investigation and further investigation of matters relating to historical operations in Iraq. As additional information continues to be identified and evaluated during the ongoing investigation, we expect that we will continue our cooperation with the DOJ and the SEC and that we will be unable to make conclusive determinations on the outcome of any such investigation until all pertinent information has been identified. The scope and duration of the remaining process are currently uncertain.

As part of its defense to a now settled patent infringement lawsuit filed by Ericsson in 2013 in the Delhi High Court against Indian handset company Micromax, Micromax filed a complaint against Ericsson with the Competition Commission of India (CCI). The CCI decided to refer the case to the Director General’s Office for an in-depth investigation. The CCI opened similar investigations against Ericsson in January 2014 based on claims made by Intex Technologies (India) Limited and, in 2015, based on a now settled claim from iBall. Ericsson has challenged CCI’s jurisdiction in these cases before the Delhi High Court. On July 13 2023, the Division Bench of the Delhi High Court found that in this instance the CCI has no power to conduct the pending investigations against Ericsson. This order may be further appealed to Supreme Court of India by the CCI (which has an initial 90-day period to appeal subject to further extensions which can be granted by the Court).

PRESS RELEASES

Apr 05, 2023 | Acquisition of cloud-based security specialist Ericom by Cradlepoint, part of Ericsson

 

The Cradlepoint acquisition of Ericom strengthens Ericsson’s global enterprise ambitions.

Ericom’s zero-trust and cloud-based security solutions will form the basis of the new Cradlepoint NetCloud Threat Defense cloud service, expanding the company’s mobile-capable and router-integrated SASE (secure access service edge) and zero-trust portfolio of solutions for fixed-site, remote worker, in-vehicle and IoT use cases.

Link to Cradlepoint’s press release (Apr 04, 2023):

https://cradlepoint.com/press-release/cradlepoint-acquires
-ericom-and-its-cloud-based-enterprise-security-solution/

Apr 20, 2023 | Ericsson’s Nomination Committee appointed

Ericsson’s (NASDAQ:ERIC) Nomination Committee for the Annual General Meeting 2024 has been appointed in accordance with the Instruction for the Nomination Committee resolved by the Annual General Meeting 2012.

The Nomination Committee consists of:

 

•

Johan Forssell, Investor AB;

 

•

Karl Åberg, AB Industrivärden;

 

•

Anders Oscarsson, AMF Tjänstepension & AMF Fonder;

 

•

Christer Gardell, Cevian Capital Partners Limited; and

 

•

Jan Carlson, the Chair of the Board of Directors.

Johan Forssell is the Chair of the Nomination Committee.

Shareholders who wish to submit proposals to the Nomination Committee are welcome to contact the Nomination Committee. Proposals must be received in due time before the Annual General Meeting to ensure that the proposals can be considered by the Nomination Committee.

CONTACT THE NOMINATION COMMITTEE:

Telefonaktiebolaget LM Ericsson

The Nomination Committee

c/o The Board of Directors Secretariat

SE-164 83 Stockholm

Sweden

E-mail: nomination.committee@ericsson.com

https://www.ericsson.com/en/press-releases/2023/4/ericssons-nomination-committee-appointed

May 02, 2023 | Ericsson resolves on an acquisition offer for C shares for LTV II 2023, LTV 2022 and LTV 2021

In accordance with the resolutions by the Annual General Meeting 2023, Ericsson (NASDAQ:ERIC) expands its treasury stock in order to provide shares for the Long-Term Variable Compensation Programs LTV II 2023, LTV 2022 and LTV 2021 for Ericsson’s executive team and other executives.

The Board of Directors of Ericsson has today resolved, by virtue of authorizations given by the Annual General Meeting on March 29, 2023 (the “AGM 2023”), to direct an acquisition offer to all holders of C shares to acquire these shares. The acquisition shall be made during the period May 11 – May 25, 2023, and payment for acquired shares shall be made in cash with approximately SEK 5 per share (corresponding to the quota value of the Ericsson share).

The offer is part of the financing of Ericsson’s Long-Term Variable Compensation Programs LTV II 2023, LTV 2022 and LTV 2021 and includes all 10 million C shares which the AGM 2023 resolved to issue to Investor AB for these programs. Investor AB have today subscribed for all 10 million C shares and informed Ericsson that they intend to accept the acquisition offer.

Once all 10 million C shares have been acquired by Ericsson, the Board intends to convert them to B shares. After the conversion, the total number of shares in Ericsson will amount to 3,344,151,735, of which 261,755,983 are A shares and 3,082,395,752 are B shares. Ericsson currently holds 4,009,306 B shares as treasury stock.

https://www.ericsson.com/en/press-releases/2023/5/ericsson
-resolves-on-an-acquisition-offer-for-c-shares-for-ltv-ii-2023-ltv-2022-and-ltv-2021

May 24, 2023 | Nasdaq Stockholm closes review of 2019 Iraq report disclosures

Nasdaq Stockholm has concluded its review of Ericsson’s (NASDAQ: ERIC) public disclosure obligations concerning its 2019 Iraq internal investigation report.

In dismissing the matter, Nasdaq stated that it “cannot come to the conclusion that the content of the report was such that a reasonable investor would have used such information as part of his/her investment decision.”

Ericsson has previously addressed Nasdaq Stockholm’s review (including previous responses to the Swedish Shareholders Association).

https://www.ericsson.com/en/press-releases/2023/5/nasdaq
-stockholm-closes-review-of-2019-iraq-report-disclosures

May 25, 2023 | U.S. District Court dismisses securities claim against Ericsson

Yesterday, the U.S. District Court for the Eastern District of New York dismissed with prejudice the securities litigation against Ericsson (NASDAQ: ERIC) brought by certain shareholders.

In its ruling, the court rejected in full the plaintiff’s claims that Ericsson misled investors and concluded that Ericsson did not violate any disclosure obligation to investors.

The motion to dismiss decision is subject to appeal from the plaintiff. Ericsson will continue to vigorously defend this matter if appealed.

Ericsson has also announced this week that Nasdaq Stockholm has formally closed its review into Ericsson’s public disclosure concerning the 2019 Iraq report (read more). Nasdaq, in closing the case, stated that it: “cannot come to the conclusion that the content of the report was such that a reasonable investor would have used such information as part of his/her investment decision”.

https://www.ericsson.com/en/press-releases/2023/5/u.s.
-district-court-dismisses-securities-claim-against-ericsson

May 31, 2023 | New number of shares and votes in Telefonaktiebolaget LM Ericsson

The total number of shares in Telefonaktiebolaget LM Ericsson (NASDAQ:ERIC) as of May 31, 2023, amounts to 3,344,151,735, of which 261,755,983 are A shares and 3,082,395,752 are B shares.

The total number of votes is 569,995,558.2, of which the A shares represent 261,755,983 votes and the B shares represent 308,239,575.2 votes.

The increase in the number of shares and votes is a result of the company’s issue of 10 million C shares completed in May 2023. The C shares have subsequently been repurchased by the company and converted into B shares by virtue of a conversion clause in the articles of association. This is in accordance with the resolution by the AGM 2023 to expand the treasury stock as part of the financing of the Long-Term Variable Compensation Programs LTV II 2023, LTV 2022 and LTV 2021 for the company’s executive team and other executives. The company currently holds 14,009,306 B shares as treasury stock.

https://www.ericsson.com/en/press-releases/2023/5/new
-number-of-shares-and-votes-in-telefonaktiebolaget-lm-ericsson

 

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 material group risks are regularly assessed and reviewed by executives as required by Ericsson’s Material Group Risk Protocol 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 2022 and in the Annual Report on Form 20-F 2022 (in the following, the “Annual Report 2022”). Updates to these risk factors and uncertainties observed by Ericsson that are deemed of short-term relevance include, but are not limited to, the following risks described below. See also the risks set out in the section titled “Forward-Looking Statements.”

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

As described in the Annual Report 2022, including in the risk factor 1.14, Ericsson’s ability to deliver according to market demands and contractual commitments depends significantly on obtaining a timely and adequate supply of materials, components, production capacity and other vital services on competitive terms, including on occasion from single-source suppliers, or in the case of the development and supply of for example key ASIC and FPGA components, printed circuit boards, standard electronics or semiconductors (including foundry node availability) from very few suppliers, on which Ericsson depends. Some of these suppliers have in addition very limited geographical redundancy, making them vulnerable to natural disasters, conflicts or other potentially disruptive events. Due to the current tensions between the US and China, and the tense cross strait relations, this risk has increased. Accordingly, there is a risk that the Company will be unable to obtain key supplies it needs to produce Ericsson’s products and provide Ericsson’s services on commercially reasonable terms, in time, or at all. This is particularly critical in connection with large projects like the current 5G rollout in India. Failure by the Company or any of the Company’s suppliers could delay or interrupt Ericsson’s products or services supply or operations and significantly limit sales or increase Ericsson’s costs, for example through damages. To find an alternative supplier or redesign products to replace components may take significant time, which could cause significant delays or interruptions in the delivery of Ericsson’s products and services and result in a reduction in sales. Ericsson has from time to time experienced interruptions of supply, and the Company may experience such interruptions in the future.

Furthermore, the Company’s procurement of supplies requires Ericsson to predict future customer demands. If Ericsson fails to anticipate customer demand properly, an over or under supply of components and production capacity could occur. In many cases, some of Ericsson’s competitors utilize the same manufacturers, and if they have purchased capacity ahead of Ericsson, the Company could be blocked from acquiring the needed products. This factor could limit Ericsson’s ability to supply its customers and increase costs. At the

same time, Ericsson commits to certain capacity levels or component quantities, which, if unused, will result in charges for unused capacity, unrecoverable costs or the scrapping of costs used to procure such components. The Company is also exposed to financial counterpart risks to suppliers when Ericsson pays in advance for supplies. Such supply disruptions and cost increases may negatively affect the Company’s business, operating results and financial condition.

Ericsson is subject to certain US and other anti-corruption (including anti-bribery, anti-money-laundering, sanctions, terror finance and anti-terrorism) laws, rules and regulations and other regulatory requirements or conditions imposed as a result of foreign direct investment reviews and decisions. Ericsson may be subject to further adverse consequences under the Plea Agreement with the United States Department of Justice (DOJ) and the injunction issued in connection with the 2019 settlement with the U.S. Securities and Exchange Commission (SEC), as well as other ongoing investigations by governmental authorities.

As described in the Annual Report 2022, including in the risk factor 3.3, on January 12, 2023, the Company made a provision in the fourth quarter of 2022 of SEK 2.3 billion (approx. USD 220 million) in relation to the breaches of the Company’s 2019 deferred prosecution agreement (DPA) with the DOJ. The provision also included estimated expenses (SEK 0.1 billion) for the previously announced extended compliance monitorship. On March 2, 2023, the Company reached a resolution (Plea Agreement) with the DOJ regarding the non-criminal breaches of its DPA. Under the Plea Agreement, Ericsson pleaded guilty to previously deferred charges relating to conduct prior to 2017. In addition, Ericsson agreed to pay a fine of USD 206,728,848. The entry of the Plea Agreement brought the DPA to an end. As set forth in the Plea Agreement, Ericsson has certain continuing obligations through June 2024, including cooperation, reporting evidence or allegations of potential Foreign Corrupt Practices Act (FCPA) violations, continuing to engage an independent compliance monitor and continuing to improve its compliance program and internal controls. If Ericsson fails to meet those obligations and is found to have breached the Plea Agreement, the Company could face further adverse consequences, including prosecution for additional federal criminal violations. Ericsson may also be subject to other adverse consequences as a result of entering into the Plea Agreement, including potential debarment from government contracting in the United States and elsewhere, reputational risk, and reluctance by other counterparties to continue business relationships, including customers, suppliers, financial institutions and insurers.

On May 24, 2023, Nasdaq Stockholm concluded its review of Ericsson’s public disclosure obligations concerning its 2019 Iraq internal investigation report and dismissed the matter, stating that Nasdaq could not conclude that a reasonable investor would have used the content of the report as part of an investment decision. After having reviewed Nasdaq Stockholm’s investigation and conclusion, on June 8, 2023, the Swedish Financial Supervisory Authority also decided to formally close its review of Ericsson’s prior disclosures relating to the 2019 Iraq internal investigation report.

As previously disclosed, the Company’s 2019 internal Iraq investigation did not conclude that Ericsson made or was responsible for any payments to any terrorist organization. With respect to the matters discussed in the 2019 internal Iraq investigation report, the Company continues to investigate in full cooperation with the DOJ and the SEC. This includes a comprehensive review of the 2019 investigation and further investigation of matters relating to historical

 

operations in Iraq. As additional information continues to be identified and evaluated during the ongoing investigation, we expect that we will continue our cooperation with the DOJ and the SEC and that we will be unable to make conclusive determinations on the outcome of any such investigation until all pertinent information has been identified. The scope and duration of the remaining process are currently uncertain.

Ericsson is, from time to time, involved in lawsuits, legal proceedings and regulatory investigations, and is subject to certain other regulatory requirements, conditions and agreements, including a National Security Agreement entered into with the U.S. Government in connection with the acquisition of Vonage by Ericsson, and approval of the transaction by the Committee on Foreign Investment in the United States. If any of these lawsuits or legal proceedings are determined unfavorably against the Company or it is determined that the Company is not in compliance with any of these regulatory requirements, conditions or agreements, this could result in the Company being required to pay substantial damages, fines and/or penalties or becoming subject to additional enforcement actions, regulatory review and/or adverse decisions.

As mentioned in the Annual Report 2022, including in the risk factor 3.4, in April 2019, Ericsson was informed by China’s State Administration for Market Regulations (SAMR) Anti-monopoly bureau that SAMR has initiated an investigation into Ericsson’s patent licensing practices in China. Ericsson is cooperating with the investigation, which is still in a fact-finding phase. The next steps include continued fact-finding and meetings with SAMR in order to facilitate the authority’s assessment and conclusions. In case of adverse findings, SAMR has the power to impose behavioral and financial remedies, which may have material adverse effects on Ericsson’s business, financial condition and operating results.

On March 3, 2022, Telefonaktiebolaget LM Ericsson and certain officers of Ericsson were named as defendants in a putative class action filed on behalf of purchasers of Ericsson ADS in the United States, in the United States District Court for the Eastern District of New York. An amended complaint was filed on September 9, 2022, which added a former Ericsson officer as a defendant. The amended complaint alleged violations of United States securities laws, in connection with allegedly false and misleading statements principally concerning the Company’s adherence with its compliance and anti-corruption policies and obligations and the conduct of its business in Iraq.

On May 24, 2023, the court granted Ericsson’s motion to dismiss and dismissed the case with prejudice, concluding that Ericsson did not violate any disclosure obligation to investors. On June 23, 2023, plaintiff filed a notice of appeal. Ericsson will continue to vigorously defend this matter.

In August 2022, a civil lawsuit was filed in the United States District Court for the District of Columbia against Telefonaktiebolaget LM Ericsson and Ericsson Inc. The lawsuit was brought by US military service members and employees of US government contractors who were killed or injured in terrorist attacks in Iraq, Afghanistan and Syria from 2005 to 2021, as well as by their family members. The lawsuit asserts claims against Ericsson under the US Anti-Terrorism Act alleging that Ericsson made payments that ultimately aided the terrorist organizations that committed, planned or authorized the attacks. In November 2022, the Company filed a motion to dismiss the complaint. On December 20, 2022, plaintiffs filed an amended complaint, which added additional plaintiffs, named Ericsson AB, CEO Börje Ekholm and a former employee as additional defendants and asserted additional allegations and claims. In March 2023, the Ericsson corporate defendants and Mr. Ekholm filed motions to dismiss the amended complaint. On June 2, 2023, plaintiffs filed an opposition to defendants’ motion to dismiss the amended complaint. Defendants’ reply brief in support of their motion to dismiss was filed on July 12, 2023.

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

Date for next report: 17 October 2023

 

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 14, 2023.

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

Alan Ganson, Director,

Investor Relations

Phone: +46 70 267 27 30

E-mail: alan.ganson@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

 

This report includes forward-looking statements. All statements other than statements of historical fact are forward-looking statements. The words “believe,” “expect,” “anticipate,” “intend,” “likely,” “may,” “could,” “plan,” “estimate,” “forecast,” “will,” “should,” “would,” “predict,” “aim,” “seek,” “potential,” “target,” “might,” “continue” and similar words or expressions are used to identify forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially and adversely from those expressed in, or implied or projected by, the forward-looking statements, including, in particular the following:

 

•

Potential material additional costs and liability resulting from our ongoing compliance with the terms of the Plea Agreement with the DOJ and extended monitorship

 

•

Potential to become a target for public scrutiny as a result of entering into the Plea Agreement with the DOJ, which could damage our reputation and materially and adversely affect our business and prospects

 

•

Risks resulting from entering into the Plea Agreement, including potential debarment from government contracting in the United States and elsewhere, reputational risk, as well as potential counterparty reluctance to continue business relationships

 

•

Potential material additional liability resulting from past conduct, including allegations of past conduct that remains unresolved or unknown in multiple jurisdictions including Iraq, which remains the subject of ongoing investigations by Ericsson and US governmental authorities

 

•

Risks related to internal controls and governance, including the potential to incur material liability in connection with internal controls surrounding payments made to third parties in connection with past conduct in multiple jurisdictions including Iraq which remains the subject of ongoing investigations by Ericsson and US governmental authorities

 

•

The risk that the ongoing investigations by Ericsson and US governmental authorities result in a conclusion by Ericsson or US governmental authorities that the Company’s past conduct included making or having responsibility for making payments to a terrorist organization or other improper payments, which could lead to material additional liability

 

•

Our goals, strategies, planning assumptions and operational or financial performance expectations

 

•

Ongoing geopolitical and trade uncertainty, including challenging global economic conditions, market trends and pandemics such as COVID-19

 

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

 

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Our ability to comply with legal and regulatory requirements internationally

 

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Risks related to cybersecurity and privacy

 

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

 

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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

 

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Our ability to deliver on future plans and achieve future growth

 

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

 

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

 

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Trends related to our industry, including our regulatory environment, competition and customer structure

 

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Other factors included in our filings with the U.S. Securities and Exchange Commission (the “SEC”), including the factors described throughout this report, included in the section Risk Factors, and in “Risk Factors” in the Annual Report 2022, as updated by subsequent reports filed with the SEC.

These forward-looking statements also represent our estimates, assumptions and expectations only as of the date that they were made, and to the extent they represent third-party data, we have not undertaken to independently verify such third-party data and do not intend to do so. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements and are urged to carefully review and consider the various disclosures made in this report and in other documents we file from time to time with our regulators that disclose risks and uncertainties that may affect our business. 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, except as required by applicable law or stock exchange regulations.