In a challenging operating environment, Ericsson delivered third quarter results in line with our guidance. Consistent with the rest of our industry, we expect the macroeconomic uncertainty to persist into 2024, which impacts our customers’ investment ability. We are addressing these challenges with a focus on elements within our control, namely cost management and operational efficiency. We are on a journey to fundamentally reposition our business and we continue to execute on our strategy to extend our leadership in mobile networks, grow our enterprise business, and drive lasting cultural transformation.

Q3 in line with guidance

Q3 performance was in line with guidance, with an EBITA² margin of 7.3% and an EBITA² of SEK 4.7 b. Group organic sales¹ declined by -10%, with a -16% organic decline in Networks partly offset by 5% organic growth in Cloud Software and Services and 11% in Enterprise.

Networks organic sales¹ in North America were down by -60% YoY from a record quarter in Q3 2022, due to customers‘ inventory adjustments and a slower deployment pace. Sequentially, Networks sales declined by -2% in line with previous trends. The decline in North America was partly offset by growth in India as well as some early 5G markets resuming investments.

Our efforts to increase resiliency and reduce sensitivity to mix and volume changes pays off. Despite large market mix shifts in Networks, where North America declined YoY from 48% to 23% of sales, our gross margin remained as high as 40%.

Future networks need to be increasingly resilient, open, sustainable, and intelligent. Open RAN plays an important role in achieving this vision, and we are leading the industrialization of cloudification, open fronthaul and open management for network programmability. More than one million Ericsson radios in the field are hardware prepared for open fronthaul which underpins our support for openness across our Cloud RAN and radio portfolios.

Cloud Software and Services continued executing on the turnaround. With an EBITA² of SEK 0.4 b. in Q3, we have now achieved a positive EBITA on a rolling four quarter basis. While results fluctuate between quarters due to the nature of this business, we are well on track to deliver at least break-even for full-year 2023 and improving from there on.

In Enterprise we saw continued strong growth in Enterprise Wireless Solutions, and we had a second consecutive quarter of positive EBITA in Global Communications Platform.

Last week, we announced a SEK -32 b. impairment of goodwill attributed to our acquisition of Vonage. Since the announcement of our acquisition in

2021, macroeconomic headwinds, including rising interest rates and changing demand trends, have significantly impacted the market capitalization of Vonage’s publicly traded peers.

Vonage is key to our expansion in Enterprise where we are enabling the next wave of innovation in our industry. We recently announced a significant milestone, in partnership with Deutsche Telecom, to be the first in the industry to unlock a market opportunity estimated at USD 20 b. by 2028³. By offering communication and network APIs to developers and enterprises, we are opening up new ways for operators to monetize their investments in mobile networks, and for developers to leverage network capabilities to create exciting new applications. We are seeing significant inbound interest from operators to further develop this market.

Free cash flow before M&A decreased to SEK -0.5 (2.5) b., mainly due to increased working capital for large deployment projects such as in India. Next year, with reduced build-out pace in these projects, we expect working capital to taper off and free cash flow before M&A to start gradually approaching our long-term target of 9-12% of net sales.

Looking ahead

For Q4 we expect similar market trends as in Q3, while the cost-out impact will increase. We expect a group Q4 EBITA margin² at around 10%.

We expect the underlying uncertainty impacting our Mobile Networks business to persist into 2024. We are proactively addressing the challenges in the current environment and are focusing on what we can control, including reducing costs. Our cost-out actions are already impacting the P&L and we are now expecting to yield SEK 12 b. in run-rate savings by year end, which is an increase of SEK 1 b. compared with previous indication. We will continue to take decisive cost-out actions to ensure Ericsson is well positioned to deliver value for our shareholders. Key to our strategy execution is to keep investments in technology leadership and long-term transformation intact, while managing our balance sheet.

The mobile networks market has been flattish for two decades, but with cyclicality, and we expect that to continue. However, the high paced mobile data growth, further spurred by new use cases, is the underlying driver for the market to recover to a more normal level. We are also relatively early in the 5G cycle with 75% of all radio base station sites, outside China, not yet updated with 5G mid-band. Competitive dynamics in our customer markets tend to lead to relatively sharp increase in investments when the market turns, and we are seeing some positive signs in early 5G markets.

Our long-term EBITA margin² target of 15-18% remains, and we aim to reach it as soon as possible, subject to market mix recovery. Given current uncertainty we will not give guidance beyond Q4, 2023. As timing for the market mix recovery is in our customers’ hands, we prudently plan for current market conditions to prevail into 2024. We are managing our business accordingly, with focus on cost management and operational efficiency. When the market recovers, we will have significant operating leverage following the actions we are taking.

While near-term dynamics are uncertain, we are convinced that the recovery will come. Our goal is to make Ericsson a more profitable company, returning to our cash flow target level and capturing the next major wave of networks innovation with a substantial platform business.

Börje Ekholm

President and CEO

Segments

Group sales decreased by -5% to SEK 64.5 (68.0) b. Sales adjusted for comparable units and currency declined by -10%. 

Networks sales adjusted for comparable units and currency declined by -16% YoY. Networks sales almost doubled in market area South East Asia, Oceania and India. However, it declined in three market areas, especially in North America where customers have lowered roll-out pace and reduced inventory levels, following high investments in 2021 and 2022.

Reported Networks sales declined by -14% and accounted for 64% (71%) of total sales.

Cloud Software and Services sales adjusted for comparable units and currency increased by 5% YoY. Sales grew in four of the five market areas.

Reported Cloud Software and Services sales increased by 10% and accounted for 24% (21%) of total sales.

Enterprise sales adjusted for comparable units and currency increased by 11% YoY driven by Enterprise Wireless Solutions. Global Communications Platform (Vonage) sales were SEK 4.2 b. in the quarter.

Reported Enterprise sales increased by 34% and accounted for 10% (7%) of total sales.

IPR licensing revenues increased to SEK 2.8 (1.6) b. as a result of new contracts signed during the past 12 months.

Market Areas

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

In market area South East Asia, Oceania and India, sales adjusted for comparable units and currency increased by 74% YoY 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 -51% YoY. Networks sales adjusted for comparable units and currency declined by -60% as a result of customers’ reduced inventory levels and lower roll-out pace following high investment levels in both 2021 and 2022.

Reported sales decreased by -49% YoY.

In market area Europe and Latin America, sales adjusted for comparable units and currency decreased by -6% YoY. Sales in both Europe and Latin America declined following high investment levels in 2022. Sales in Europe were also impacted by a decline in managed services due to descoping of contracts.

Reported sales increased by 1% YoY.

In market area North East Asia, sales adjusted for comparable units and currency declined by -2% YoY as investments declined in several markets after elevated 5G investment levels in 2022. Reported sales decreased by -4% YoY.

In market area Middle East and Africa, sales adjusted for comparable units and currency increased by 10% YoY primarily driven by the next wave of 5G investments in countries in the Middle East.

Reported sales increased by 14% YoY.

Market area Other primarily includes IPR licensing revenues and almost all sales from segment Enterprise. Sales adjusted for comparable units and currency increased by 21% driven mainly by IPR licensing revenues and Enterprise Wireless Solutions.

Reported sales increased by 41% YoY.

Gross income

Gross income decreased to SEK 24.7 (28.1) b. with a gross margin of 38.4% (41.4%). Gross income excluding restructuring charges decreased to SEK 25.3 (28.2) b. due to lower sales and lower gross margin in Networks. Gross margin excluding restructuring charges was 39.2% (41.4%).

Networks gross income and gross margin, excluding restructuring charges, decreased mainly due to changed business mix, partly mitigated by higher IPR licensing revenues and a lower cost base. Cloud Software and Services gross income and gross margin, excluding restructuring charges, increased supported by higher IPR licensing revenues and improved delivery performance. Enterprise gross income excluding restructuring charges increased while gross margin excluding restructuring charges remained stable.

Research and development (R&D) expenses

R&D expenses amounted to SEK -11.9 (-11.9) b. including restructuring charges of SEK -0.2 (0.0) b. R&D expenses increased in segment Enterprise through the acquisition of Vonage (which was consolidated from the date of the acquisition on July 21, 2022) as well as through increased investments to expand the Enterprise Wireless Solutions portfolio. R&D expenses declined in Networks and Cloud Software and Services.

Selling and administrative (SG&A) expenses

SG&A expenses were SEK -9.6 (-9.4) b. including restructuring charges of SEK -0.1 (0.0) b. SG&A expenses increased in Enterprise through the acquisition of Vonage (which was consolidated from the date of the acquisition on July 21, 2022). Furthermore, SG&A expenses increased due to continued investments in go-to-market activities in Enterprise Wireless Solutions. Following execution of cost-out activities, SG&A expenses declined in Networks and Cloud Software and Services.

Other operating income and expenses

As previously disclosed, in Q3 2023, the Company recognized a non-cash impairment charge of SEK -31.9 b. The impairment charge represented 50% of the total amount of goodwill and other intangible assets attributed to Vonage. The impairment did not impact EBITA. The impairment was reported in segment Enterprise as an item affecting comparability.

Other operating income and expenses was SEK -32.0 (0.2) b. negatively impacted by the impairment of goodwill.

Restructuring charges

Restructuring charges amounted to SEK -0.9 (-0.1) 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 3.8 (7.6) b. corresponding to an EBITA margin of 5.9% (11.2%). EBITA excluding restructuring charges declined to SEK 4.7 (7.7) b. The decline was driven by lower sales and changed mix in Networks. EBITA margin excluding restructuring charges was 7.3% (11.3%).

EBITA margin excluding restructuring charges rolling four quarters was 8.1%.

EBIT

Reported EBIT decreased to SEK -28.9 (7.1) b. with an EBIT margin of -44.8% (10.5%) impacted by impairment of goodwill of SEK -31.9 b.

EBIT excluding impairment of goodwill and restructuring charges decreased by SEK -3.3 b. to SEK 3.9 b. The result included an increase in amortization of intangible assets of SEK -0.3 b. YoY, mainly related to the acquisition of Vonage in 2022. EBIT margin excluding impairment of goodwill and restructuring charges was 6.0% (10.6%).

Financial income and expenses, net

Financial income and expenses declined to SEK -0.7 (-0.5) b. Interest expenses increased due to higher market interest rates and increased borrowings.

Income tax

Taxes were SEK -0.9 (-1.2) b. An effective tax rate of 35% is estimated for the full year, excluding the impact of the goodwill impairment in the current quarter.

Net income (loss)

Net income (loss) declined to SEK -30.5 (5.4) b. and EPS diluted decreased to SEK -9.21 (1.56) YoY, to a large extent due to the impairment of goodwill. Net income excluding impairment of goodwill was SEK 1.4 (5.4) b.

Employees

The number of employees on September 30, 2023, was 101,351 compared with 103,890 on June 30, 2023.

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

Sales increased by SEK 5.9 b. or 3% to SEK 191.5 (185.6) b. Sales in Networks declined by -6% to SEK 126.4 b., sales in Cloud Software and Services grew by 9% to SEK 44.1 b., while sales in Enterprise grew by 130% to SEK 19.0 b. impacted by the acquisition of Vonage.

Sales adjusted for comparable units and currency decreased by -7% but were supported by increased IPR licensing revenues. Sales adjusted for comparable units and currency in market area South East Asia, Oceania and India grew by 88%, and declined in three of the other market areas. Adjusted for comparable units and currency, Networks sales decreased by -11%, Cloud Software and Services sales grew by 4% and Enterprise sales grew by 14%.

Reported gross income decreased to SEK 73.0 (77.7) b. with a gross margin of 38.1% (41.9%). Gross income excluding restructuring charges declined to SEK 74.8 (77.8) b. resulting in a gross margin of 39.1% (41.9%). 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 a business mix shift from front-runner markets to large deployments in other geographies. Gross income improved in Enterprise and Cloud Software and Services YoY.

Operating expenses, excluding amortization and restructuring charges increased by SEK -4.7 b. including a negative currency effect of SEK -1.6 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.

As a result of lower gross income and higher operating expenses, reported EBITA decreased to SEK 8.2 (20.0) b. corresponding to an EBITA margin of 4.3% (10.8%). EBITA excluding restructuring charges decreased to SEK 13.2 (20.2) b. with an EBITA margin of 6.9% (10.9%).

Reported EBIT decreased to SEK -26.2 (19.2) b. YoY, corresponding to an EBIT margin of -13.7% (10.3%). EBIT excluding impairment of goodwill and restructuring charges decreased to SEK 10.7 (19.3) b. YoY with an EBIT margin of 5.6% (10.4%).

Net income year to date declined to SEK -29.5 (12.9) b. impacted by impairment of goodwill of SEK -31.9 b., restructuring charges of SEK -5.0 (-0.2) b. and by higher operating expenses excluding restructuring charges of SEK -6.3 b. YoY. The higher operating expenses were primarily related to segment Enterprise through the consolidation of Vonage with an impact from regular amortization of intangible assets of SEK -2.0 b. The negative impact was partly mitigated by lower tax of SEK 3.0 b. YoY. EPS diluted decreased to SEK -8.96 (3.80).

Mobile Networks – Segment Networks

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

Net sales

Sales adjusted for comparable units and currency decreased by -16% YoY, primarily driven by a -60% sales drop in North America with operators reducing their roll-out pace and inventory levels. Sales in market area South East Asia, Oceania and India doubled, as a result of market share gains in India, with high deployment pace. IPR licensing revenues were SEK 2.3 (1.3) b. Networks reported sales decreased by -14% YoY.

It is expected that the seasonality between Q3 and Q4 will be somewhat less than normal, mainly due to sequentially flat sales in India.

Gross income

Gross income decreased by SEK -5.2 b. YoY to SEK 16.1 b., resulting in a gross margin of 38.9% (44.4%). Gross income excluding restructuring charges decreased to SEK 16.6 (21.4) b. with a gross margin of 39.9% (44.4%). The business mix shift, with a slowdown in investments in most 5G front-runner markets combined with large deployments with an initial dilutive effect on the margins in other geographies, continued to impact gross margin negatively. Increased IPR licensing revenues had a positive effect on gross income and margin YoY.

Gross margin excluding restructuring charges is expected to be within the range of 39-41% in Q4.

EBIT and EBITA

EBIT excluding restructuring charges decreased to SEK 5.2 (9.6) b. with an EBIT margin of 12.5% (20.0%). EBITA excluding restructuring charges declined to SEK 5.2 (9.7) b. as a result of lower sales and the business mix shift. The decline in gross income was partly offset by lower operating expenses. EBITA margin excluding restructuring charges was 12.6% (20.0%).

Reported EBIT declined to SEK 4.6 (9.6) b. while EBITA declined to SEK 4.7 (9.6) b. Reported EBIT and EBITA were impacted by the lower gross income and by restructuring charges of SEK -0.6 (0.0) b.

Net sales rolling four quarters were SEK 185.1 b. and the EBITA margin excluding restructuring charges rolling four quarters was 15.7%.

Mobile Networks – Segment Cloud Software and Services

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

Net sales

Sales adjusted for comparable units and currency increased by 5% YoY. Sales increased in four of the five market areas. Cloud Software and Services reported sales increased by 10% YoY.

It is expected that the seasonality between Q3 and Q4 will be lower than normal.

Gross income

Gross income increased by SEK 1.0 b. YoY to SEK 5.5 b. with a gross margin of 35.3% (31.8%). Gross income excluding restructuring charges was SEK 5.6 (4.6) b. while gross margin increased to 36.2% (32.1%). The gross income and margin increases were mainly driven by increased sales, as well as improved delivery performance.

EBIT and EBITA

EBIT excluding restructuring charges increased to SEK 0.4 (-0.7) b. with an EBIT margin of 2.7% (-5.2%). EBITA excluding restructuring charges increased to SEK 0.4 (-0.7) b. as a result of higher sales and improved business mix in the quarter as well as lower operating expenses. EBITA margin excluding restructuring charges was 2.8% (-5.0%).

Reported EBIT increased to SEK 0.1 (-0.8) b. while reported EBITA increased to SEK 0.1 (-0.8) b. EBIT and EBITA were impacted by restructuring charges of SEK -0.3 (-0.1) b.

EBITA excluding restructuring charges 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 focus from market share gains to profitable business. Results will vary between quarters.

Net sales rolling four quarters were SEK 64.3 b. and the EBITA margin excluding restructuring charges rolling four quarters was 0.7%.

Enterprise – Segment Enterprise

Net sales

Sales adjusted for comparable units and currency increased by 11% YoY, driven by Enterprise Wireless Solutions. Reported sales increased by SEK 1.7 b. to SEK 6.7 (5.0) b. This increase was driven by Global Communications Platform (the consolidation of Vonage) reporting sales of SEK 4.2 (2.9) b. and Enterprise Wireless Solutions reporting SEK 1.2 (0.8) b., resulting in a reported sales growth of 34%.

Vonage was consolidated from the date of the acquisition on July 21, 2022, however when comparing the pre- and post-acquisition figures, the Vonage Communications Platform (VCP) sales grew by 7% in USD YoY, of which sales from the current communications API offerings grew by 11%.

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

Gross income

Gross income increased to SEK 3.3 (2.4) b. with a gross margin of 48.7% (48.8%). Gross income excluding restructuring charges increased to SEK 3.3 (2.4) b. driven mainly by Global Communications Platform (the consolidation of Vonage) and Enterprise Wireless Solutions. Gross margin excluding restructuring charges was 48.8% (48.8%).

EBITA (loss)

EBITA (loss) was SEK -0.6 (-1.0) b. EBITA (loss) excluding restructuring charges was SEK -0.6 (-1.0) b., where the increase was primarily a result of one-off acquisition costs of SEK -0.4 b. in Q3 2022. Enterprise Wireless Solutions continued the growth investments in R&D and go-to-market activities which resulted in an EBITA (loss) excluding restructuring charges of SEK -0.7 (-0.5) b. Global Communications Platform as well as Technologies and New Businesses reported a positive EBITA. EBITA margin excluding restructuring charges was -8.9% (-20.3%).

EBIT (loss)

EBIT (loss) was SEK -33.3 (-1.5) b. EBIT (loss) excluding impairment of goodwill and restructuring charges was SEK -1.4 (-1.5) b. impacted by amortization of intangible assets of SEK -0.8 b. from acquired businesses.

Segment Other

Net sales

Sales adjusted for comparable units and currency, decreased by -8% YoY. Reported sales were stable at SEK 0.7 (0.7) b. The expected sales decline related to the divestment of IoT was offset by one-off sales related to legacy contracts which amounted to SEK 0.1 b.

Gross income

Gross income and gross income excluding restructuring charges were both SEK -0.2 (-0.2) b. Gross income remained stable due to a one-off impairment of assets in the Media Businesses which was offset by a market-exit cost taken in Q2 2022.

Gross margin was -23.6% (-25.2%) while gross margin excluding restructuring charges was -24.5% (-25.2%).

EBITA (loss)

EBITA (loss) and EBITA (loss) excluding restructuring charges were both SEK -0.3 (-0.2) b. EBITA margin was -45.6% (-33.3%).

EBITA margin excluding restructuring charges was -47.9% (-33.3%).

EBITA declined YoY mainly related to the impairment of assets in the Media Businesses and negative impact from revaluation of Ericsson Ventures in the quarter, partly offset by the divestment of the IoT business.

EBIT (loss)

EBIT (loss) and EBIT (loss) excluding restructuring charges were both SEK -0.3 (-0.2) b. EBIT margin was -45.6% (-33.5%).

EBIT margin excluding restructuring charges was -47.9% (-33.5%).

Cash flow from operating activities

Cash flow from operating activities decreased to SEK 1.4 (4.7) b. YoY due to lower EBIT, while cash flow from working capital was SEK -3.1 (-3.3) b. YoY. Cash flow in the quarter was impacted by cash outlays of SEK -1.0 b. related to restructuring. Sequentially working capital increased in Q3, following the business mix shift which includes large deployment projects with longer order-to-cash cycle. The increase in working capital was partly offset by lower trade receivables and contract assets due to lower sales. In addition, inventory of components decreased. As the large contracts are completed, working capital is projected to be reduced.

Free cash flow

Free cash flow before M&A was SEK -0.5 (2.5) b. due to lower cash flow from operating activities. Capex net and other investing activities decreased to SEK -1.3 (-1.4) b. Repayment of lease liabilities was flat at SEK -0.7 (-0.7) b. YoY. Free cash flow before M&A rolling four quarters was SEK 3.3 b., or 1.2% in relation to sales.

Cash flow from investing activities

Cash flow from investing activities was SEK -1.9 (-58.9) b., of which M&A activities were SEK -0.2 (-51.4) b. In Q3 2022 Ericsson acquired Vonage. Free cash flow after M&A was SEK -0.7 (-48.9) b.

Cash flow from financing activities

Cash flow from financing activities was SEK 5.1 (-5.3) b. Ericsson utilized USD 0.4 b. from the liquidity revolving credit facility in the quarter, and increased the borrowings under its commercial paper program by SEK 1.5 b.

Financial position

Sequentially, gross cash increased by SEK 4.8 b. to SEK 40.5 b. driven by increased borrowings. In the quarter Ericsson expanded the liquidity revolving credit facility by an additional USD 0.5 b. to USD 1.0 b., of which USD 0.4 b. was utilized. Total borrowings amounted to SEK 38.9 b., an increase of SEK 5.0 b. QoQ. Ericsson has an unutilized revolving credit facility of USD 2.0 b., linked to long-term sustainability goals. In the quarter, the facility was extended by one year to 2028.

The average maturity of long-term borrowings was 3.3 years as of Sep 30, 2023, a decrease from 4.1 years 12 months earlier. Net cash decreased sequentially by SEK -0.3 b. to SEK 1.6 b. due to negative free cash flow after M&A.

Liabilities for post-employment benefits decreased to SEK 18.4 b. from SEK 22.8 b. due to significantly higher discount rates. The Swedish defined benefit obligation (DBO) was calculated using a discount rate based on the yields of Swedish government bonds. If the discount rate had been based on Swedish covered mortgage bonds, the liability for post-employment benefits would have been approximately SEK 6.6 b. (SEK 11.8 b. lower than current DBO).

Market

The global RAN equipment market is estimated to decline by -3% (0%) in 2023. North America is expected to decline by -37% (-13%), Europe to remain flat at 0% (0%) and China to decline by -4% (-4%).

Source: Dell’Oro Mobile RAN Quarterly Report 2Q23, August 2023. Numbers in parenthesis are from the previous comparable report from July 2023 “2023 Dell’Oro Mobile RAN 5-year forecast”.

Ericsson

Net sales

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

Net sales may show large variations between quarters, including currency changes. See below for specific Q4 guidance.

Operating expenses excluding 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.

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

EBITA

For Q4, Group EBITA margin excluding restructuring charges is expected to be around 10%.

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

Segments

Networks

It is expected that the seasonality between Q3 and Q4 will be somewhat less than normal, mainly due to sequentially flat sales in India.

Gross margin excluding restructuring charges is expected to be within the range of 39-41% in Q4.

Cloud Software and Services

It is expected that the seasonality between Q3 and Q4 will be lower than normal.

EBITA excluding restructuring charges is expected to reach at least break-even for full-year 2023. Results will vary between quarters.

Enterprise

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

Parent Company

Income after financial items January – September 2023, was SEK -14.7 (21.9) b. including impairment of investments in subsidiaries of SEK -31.9 b. in the third quarter.

At the end of the quarter, gross cash (cash, cash equivalents plus interest-bearing securities, current and non-current) amounted to SEK 25.6 (29.9) b.

There was a decrease in intercompany lending of SEK 8.6 b. and in intercompany borrowing of SEK 3.0 b. in the quarter.

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

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. On October 6, 2023, plaintiff filed its opening brief in the United States Court of Appeals for the Second Circuit. Ericsson is due to file its opposition brief on December 1, 2023, and 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. (collectively, “Ericsson”). 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, and also named Ericsson AB (collectively with Ericsson, the “Ericsson corporate defendants”), CEO Börje Ekholm and a former employee (who has not been served with process) 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. Plaintiffs filed their oppositions to defendants’ motions to dismiss the amended complaint in June 2023, and defendants filed reply briefs in support of their motions to dismiss in July 2023. No date has been set for oral argument and all defendants continue to vigorously defend this matter.

Beginning on August 4, 2023, a number of civil lawsuits have been filed against Telefonaktiebolaget LM Ericsson in Solna District Court, Sweden. As of October 17, 2023, 53 claimants have filed suit, which are coordinated and financed by a UK-based litigation funder. The claimants consist of a group of non-Swedish funds and financial institutions that allegedly are or have been shareholders of the Company. Their damages claims are primarily based on alleged inadequate disclosure of the contents of the Company’s 2019 Iraq internal investigation report. While the court has not yet issued any summons, the Company intends to vigorously defend itself against the claims.

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).

POST-CLOSING EVENTS

Oct 11, 2023, Ericsson announces changes to the Executive Team

Ericsson (NASDAQ: ERIC) today announces the appointment of Chris Houghton to Chief Operating Officer (COO) and Åsa Tamsons to Head of Business Area Enterprise Wireless Solutions. Both Mr. Houghton and Ms. Tamsons will report to Börje Ekholm, President and CEO of Ericsson. These appointments underscore Ericsson’s commitment to accelerating its business transformation.

Chris Houghton, who is currently Senior Vice President, Market Area North East Asia, has been with Ericsson for 35 years and brings deep institutional knowledge across key markets and operational areas of the business. In the new role, Mr. Houghton will focus on cross group initiatives, including ongoing cost efficiency initiatives.

Åsa Tamsons, currently serving as Senior Vice President, Business Area Technologies & New Businesses (BTEB), is appointed Head of Business Area Enterprise Wireless Solutions. Ms. Tamsons brings a strong track-record in developing and growing new businesses. In her new role, Ms. Tamsons will focus on growing Enterprise Wireless Solutions but also to increase the pace towards breakeven.

On the new appointees, Börje Ekholm notes: “The Chief Operating Officer’s objective will be to strengthen and oversee the operational execution across the Group and to enhance alignment and co-ordination across operational areas. This will enable me to fully focus on the key strategic priorities of our business. I’m happy that Chris with his extensive international experience has accepted to take on this new role within Ericsson”.

Börje Ekholm continues: “BTEB’s role within Ericsson is to create and scale strategic growth businesses that deliver long term profit and positive impact on people and our planet. During Åsa’s tenure BTEB has reached profitability and Åsa has done a great job over the last five years. I’m now looking forward to having her head another very important business area within Ericsson and drive growth and profitability improvements.”

The appointments of Chris Houghton and Åsa Tamsons are effective as of November 1, 2023. As of then, Business Area Technologies & New Businesses, will report to the Chief Operating Officer.

Ericsson today also announces that George Mulhern, Senior Vice President and Head of Business Area Enterprise Wireless Solutions (BEWS), will become advisor to BEWS from November 1, 2023, and retire from Ericsson during 2024. Nunzio Mirtillo, Senior Vice President and Head of Market Area South East Asia, Oceania & India, will retire from Ericsson during 2024.

Mr. Ekholm comments: “Nunzio has been with Ericsson for 35 years and has contributed immensely to the success of the Company. His dedication and everlasting focus on growth has been an inspiration to me and many colleagues. I wish him all the best in his future endeavors.”

“We are the world’s foremost expert in wireless edge solutions and dedicated networks offerings to enterprises. George has contributed greatly to the process of integrating Cradlepoint into the Ericsson offering. I wish him all the best.”

Recruitment processes to appoint successors to Mr. Houghton as Head of Market Area North East Asia, and Mr. Mirtillo as Head of Market Area South East Asia, Oceania & India, have been initiated. Mr. Houghton remains in the role until the process has been concluded.

https://www.ericsson.com/en/press-releases/2023/10/ericsson-

announces-changes-to-the-executive-team

Oct 11, 2023, Ericsson announces impairment charge of SEK 32 billion and provides update on Q3 earnings

Ericsson (NASDAQ: ERIC) today announced that, in accordance with IFRS accounting requirements, it will record a non-cash impairment charge of SEK 32 billion in the third quarter of 2023. The impairment charge represents 50% of the total amount of goodwill and other intangible assets attributed to Vonage. The impairment will be reported in segment Enterprise as an item affecting comparability.

The impairment is a consequence of the significant drop in the market capitalization of Vonage’s publicly traded peers, increased interest rates and overall slowdown in Vonage’s core markets. Ericsson continues to advance its enterprise strategy, with Vonage’s network API capabilities being central to this strategy and the development of a Global Network Platform (GNP). The impairment does not alter Ericsson’s positive outlook on the GNP market potential.

Vonage remains key to Ericsson’s strategy to expand in Enterprise. The Enterprise strategy is underpinned by the development in the third quarter in which Ericsson announced an important milestone with a major commercial partnership in its GNP business. The development of GNP is creating a new market for exposing 5G capabilities through network APIs and the market opportunity is estimated at USD 20 billion by 2028 by telecom consultancy and research firm STL Partners. This market will open up new ways for operators to monetize their investments in networks from enterprises and in turn drive further investments in mobile infrastructure. Ericsson expects the first revenues from network APIs during 2023.

Q3 earnings in line with guidance (preliminary and unaudited numbers)

Performance in Q3 was in line with guidance with an EBITA margin excluding restructuring charges of 7.3% corresponding to an EBITA of SEK 4.7 billion. Group organic sales (adjusted for comparable units and currency) declined by -10%, with -16% organic decline in Networks partly offset by 5% organic growth in Cloud Software and Services and 10% organic growth in Enterprise.

Networks organic sales were down by -60% in North America YoY, with operators reducing their capex spend and adjusting inventories. It is worth noting that Q3 last year was a record quarter in North America. The sharp decline in North America was partly offset by strong sales in India.

Cloud Software and Services continued to execute on the turnaround strategy. With an EBITA excluding restructuring charges of SEK 0.4 billion in Q3 Cloud Software and Services has now achieved break-even on a four rolling quarters basis.

Enterprise reported continued strong growth in Enterprise Wireless Solutions and a slightly positive EBITA excluding restructuring charges in the Global Communications Platform business (Vonage) in the quarter.

Free cash flow before M&A was SEK -0.5 (2.5) billion. The negative free cash flow this year is a result of the build-up of working capital for the large roll-out projects.

Ericsson will, as previously communicated, announce its full report for the third quarter 2023 on October 17, at approximately 07.00 CEST. https://www.ericsson.com/en/press-releases/2023/10/ericsson-

announces-impairment-charge-of-sek-32-billion-and-

provides-update-on-q3-earnings

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”), as well as in Ericsson’s second quarter report 2023. 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’s business depends upon the continued growth of mobile communications and the success of Ericsson’s existing and targeted customer base. If growth slows or if the Company’s customers do not maintain or grow in relevance in the digital value chain, or if Ericsson’s products and/or services are not successful, Ericsson’s customers’ investment in networks may slow or stop, harming the Company’s business and operating results.

As described in the Annual Report 2022, including in the risk factor 1.3, a substantial portion of Ericsson’s business depends on the continued growth of mobile communications in terms of both the number of subscriptions and usage per subscriber, which in turn drives the continued deployment and expansion of network systems by Ericsson’s customers. If communications service providers fail to increase the number of subscribers and/or usage does not increase, or if they fail to utilize opportunities from technological evolution, Ericsson’s business and operating results could be materially adversely affected. Also, if communications service providers fail to monetize services, fail to adapt their business models or experience a decline in their revenues or profitability, their willingness to further invest in their existing and new networks may decrease, which will reduce their demand for Ericsson’s products and services and have an adverse effect on the Company’s business, operating results, and financial condition.

During the first nine months of 2023, macroeconomic conditions, including inflationary pressures, were more challenging than expected, which has led to reduced volumes and pace of investment by many of Ericsson’s customers, and the timing and magnitude of market recovery, particularly in North America, has been slower than expected. There can be no assurance as to when levels of market investment will recover. Traffic development on cellular networks could be further affected if more traffic is offloaded to WI-FI networks, which would have profound effects on operator voice/broadband/SMS revenues with possible reduced capital expenses consequences. Ericsson’s strategy depends on the development and success of global standards. This could be adversely affected in the future by industry forces more interested in de-facto

standards or geopolitical forces leading to standards fragmentation and increased difficulties of creating economies of scale.

Fixed and mobile networks converge, and new technologies, such as IP and broadband, enable communications service providers to deliver services in both fixed and mobile networks. Ericsson is dependent on the uptake of such services and the outcome of regulatory and standardization activities such as spectrum allocation. If delays in uptake, standardization or regulation occur, this could adversely affect Ericsson’s business, operating results, and financial condition.

Ericsson’s future growth is partly dependent on Enterprises in several industries digitalizing and increasingly utilizing cellular wireless solutions (including Private Cellular Networks), as well as increasingly utilizing and offering automated services, which are growth drivers for the Ericsson Global Network Platform (“GNP”). Ericsson can provide no assurance regarding the timing or magnitude of growth of its GNP. Competing technologies such as Wi-Fi, macroeconomic headwinds, and customers’ unwillingness to pay for services might slow down this development. Legal and regulatory restrictions such as Net neutrality can slow down or restrict global expansion of this business. Furthermore, access to devices, sensors, and spectrum might also impact the pace and ability for enterprises to adopt cellular wireless technology.

Ericsson engages in acquisitions and divestments that may be disruptive and require the Company to incur significant expenses. Ericsson may not be successful in consummating such transactions, protecting the value of acquisitions during integration following consummation, or creating the value anticipated with the acquisition.

As described in the Annual Report 2022, including in the risk factor 1.7, Ericsson makes acquisitions to obtain various benefits, such as reduced time-to-market, access to technology and competence, increased scale or a broadened product portfolio or customer base. Recent examples are the acquisitions of Vonage and Cradlepoint. Acquisitions could result in the incurrence of material contingent liabilities, an increase in amortization expenses related to intangible assets or an impairment of goodwill, which could have a material adverse effect upon Ericsson’s business, operating results, financial condition and liquidity.

Risks Ericsson could face with respect to acquisitions include:

From time-to-time Ericsson also divests parts of Ericsson’s business to optimize the Company’s product portfolio or operations. Any decision to dispose of or otherwise exit businesses may result in the recording of special charges, such as workforce reduction costs and industry- and technology-related write-downs. Risks Ericsson could face with respect to divestments include:

The risks associated with acquisitions and divestments could have a material adverse effect upon Ericsson’s business, operating results, financial condition and liquidity.

Impairment of goodwill, other intangible assets, property and equipment (PP&E) and right-of-use (RoU) assets leased by the Company have impacted and may continue to negatively impact Ericsson’s financial condition and operating results, including its dividend capacity.

As described in the Annual Report 2022, including in the risk factor 2.4, Ericsson has a significant amount of these assets; for example, patents, customer relations, trademarks, software, PP&E and RoU.

Goodwill is the only intangible asset the Company has recognized to have an indefinite useful life. Other intangible assets are mainly

amortized on a straight-line basis over their estimated useful lives, and the assets are reviewed for impairment whenever events such as product discontinuances, product dispositions or other changes in circumstances indicate that the carrying amount may not be fully recoverable. Those intangible assets not yet in use are tested for impairment annually.

Historically, the Company has recognized impairment charges mainly due to restructuring, which is usually limited, but occasionally significant. Additional impairment charges have been incurred and may be incurred in the future and could be significant due to various reasons, including strategy changes, restructuring actions or adverse market conditions that are either specific to us or the broader industries in which Ericsson operates, or more general in nature and that could have an adverse effect on Ericsson’s operating results and financial condition.

Negative deviations in actual cash flows compared to estimated cash flows as well as new estimates that indicate lower future cash flows might result in recognition of future impairment charges. Other impairment indicators, such as the impact of increased interest rates, inflation, macroeconomic conditions, and other market events can also lead to the recognition of impairment charges. Non-cash impairment charges reduce the Company’s non-restricted equity.

In Q3 2023, the Company recognized a non-cash impairment charge of SEK -31.9 billion. The impairment charge represented 50% of the total amount of goodwill and other intangible assets attributed to Vonage. The impairment was reported in segment Enterprise as an item affecting comparability.

Estimates require management judgment as well as the definition of cash-generating units for impairment testing purposes. Other judgments might result in significantly different results and may differ from the actual financial condition in the future.

Stockholm, October 17, 2023

Telefonaktiebolaget LM Ericsson

Börje Ekholm, President and CEO

Org. No. 556016-0680

Date for next report: 23 January 2024

Media and analyst briefing

Ericsson invites media, investors and analysts to a conference call and live video webcast at 9:00 AM CEST on October 17, 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:

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.

Introduction

We have reviewed the condensed interim financial information (interim report) of Telefonaktiebolaget LM Ericsson (publ.) as of September 30, 2023, and the nine months period then ended. The board of directors and the CEO are responsible for the preparation and presentation of the interim report in accordance with IAS 34 and the Swedish Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.

Scope of review

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

A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing, ISA, and other generally accepted auditing standards in Sweden. The procedures performed

in a review do not enable us to obtain assurance that would make us aware of all significant matters that might be identified in an audit. Therefore, the conclusion expressed based on a review does not give the same level of assurance as a conclusion expressed based on an audit.

Conclusion

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

Stockholm, October 17, 2023

Deloitte AB

Thomas Strömberg

Authorized Public Accountant