6-K
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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN ISSUER

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

the Securities Exchange Act of 1934

April 20, 2018

Commission File Number

000-12033

LM ERICSSON TELEPHONE COMPANY

(Translation of registrant’s name into English)

Torshamnsgatan 21, Kista

SE-164 83, Stockholm, Sweden

(Address of principal executive offices)

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

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

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

 

 

 

Announcement of LM Ericsson Telephone Company, April 20, 2018 regarding “Ericsson reports first quarter results 2018”.


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SIGNATURES

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

 

TELEFONAKTIEBOLAGET LM ERICSSON (publ)
By:  

/s/    XAVIER DEDULLEN        

  Xavier Dedullen
  Senior Vice President, Chief Legal Officer
By:  

/s/    CARL MELLANDER        

  Carl Mellander
  Senior Vice President, Chief Financial Officer
 

Date: April 20, 2018


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LOGO

First quarter report 2018

Stockholm, April 20, 2018

 

First quarter highlights (In 2017, certain items affecting comparability had a significant negative impact on the results.)
   Reported sales decreased by -9% YoY. Sales, adjusted for currency, decreased by -2% YoY with lower revenues in market areas North East Asia as well as in South East Asia, Oceania and India. The other market areas showed growth.
   Gross margin was 34.2% (15.7%) 1). Gross margin excluding restructuring charges improved YoY, to 35.9% (18.7%) 1), supported by cost reductions and the continued ramp-up of Ericsson Radio System (ERS).
   Operating income (loss) was SEK -0.3 (-11.3) b. Operating income (loss) excluding restructuring charges was SEK 0.9 (-9.5) b.
   Networks operating margin excluding restructuring charges was 13.5% (12.8%) 1) with strong gross margin and increased investments in R&D.
   Digital Services gross margin excluding restructuring charges improved YoY, to 41.4% (-25.5%) 1), driven by improved services margins as a result of cost reductions. Operating income (loss) excluding restructuring charges was SEK -2.0 (-8.8) b.
   Managed Services operating margin excluding restructuring charges was 1.9% (-28.7%) 1) as a result of cost reductions and customer contract reviews.
   Cash flow from operating activities was SEK 1.6 (-1.5) b. and free cash flow was SEK 0.3 (-3.2) b. Net cash increased YoY to SEK 35.6 (28.3) b.

 

1) Write-down of assets as well as provisions and adjustments related to certain customer projects had a significant negative impact on the 2017 results. In addition, a restate of 2016 and 2017 numbers has been made following IFRS 15 introduction.

 

     Q1     Q1     YoY     Q4     QoQ  

SEK b.

   2018     2017     change     2017     change  

Net sales

     43.4       47.8       -9     57.9       -25

Sales growth adj. for comparable units and currency

     —         —         -2     —         -24

Gross margin

     34.2     15.7     —         21.6     —    

Operating income (loss)

     -0.3       -11.3       —         -19.3       —    

Operating margin

     -0.7     -23.6     —         -33.3     —    

Net income (loss)

     -0.7       -10.0       —         -18.5       —    

EPS diluted, SEK

     -0.25       -3.08       —         -5.63       —    

EPS (non-IFRS), SEK 1)

     0.11       -2.19       —         -1.09       —    

Cash flow from operating activities

     1.6       -1.5       —         11.2       -86

Free cash flow 2)

     0.3       -3.2       —         10.1       -97

Net cash, end of period

     35.6       28.3       26     34.7       3

Gross margin excluding restructuring charges

     35.9     18.7     —         25.1     —    

Operating income (loss) excluding restructuring charges

     0.9       -9.5       —         -16.9       —    

Operating margin excluding restructuring charges

     2.0     -19.9     —         -29.1     —    

 

1) EPS diluted, excl. amortizations and write-downs of acquired intangible assets, and excluding restructuring charges. When a company reports a loss, the number of shares used for calculating earnings diluted per share shall be the same as for basic calculation.
2) Free cash flow: Cash flow from operating activities less net capital expenditures and other investments, see APMs at the end of the report.

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

 

1      Ericsson  |  First Quarter Report 2018


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Ceo comments

 

“We have continued to execute on our focused business strategy creating solutions that help our customers improve their business. Our efforts to improve efficiency in service delivery and common costs are starting to pay off. The gross margin1) improved to 36% (19%) in the quarter, tracking well towards our Group target of 37-39% by 2020.

A cornerstone in our strategy is to invest in R&D for both technology leadership and cost leadership, which will allow us to generate higher gross margins. We continue to increase our R&D investments in Networks to lead in 5G. In Digital Services we continue to increase investments into our new cloud-native portfolio as well as changing our ways of working for better R&D efficiency. In Managed Services we continue to focus on machine intelligence, automation and analytics to further enhance user experience, improve efficiency and better manage the increasingly complex networks of tomorrow.

In Networks we have seen the portfolio becoming more competitive in the last three quarters of 2017, resulting in market share gains, as reported by external sources. In Networks the gross margin1) improved to 40% (35%). In Digital Services, the gross margin1) improved to 41% (-25%), supported by cost reductions mainly in service delivery. However, operating income in Digital Services remains challenging. In Managed Services the gross margin1) improved to 9% (-7%) supported by efficiency gains in service delivery and customer contract reviews, resulting in a positive operating income1).

In segment Emerging Business and Other, we are gradually increasing investments in growth areas such as IoT and Unified Delivery Network (UDN). While the combined operating income of Media

Solutions and Red Bee Media improved YoY, these businesses showed a loss2) of SEK -0.5 b. in the quarter. We expect to close the announced Media Solutions divestment by the end of the third quarter.

In the quarter we reduced the total workforce by more than 3,000. Since the reduction activities were launched in July last year, we have reduced the total workforce by almost 18,000. To date, the annual run-rate effect of cost savings is approximately SEK 8.5 b., compared with the target of SEK 10 b. for mid-2018. The run-rate reduction does not yet fully impact the quarterly results.

Free cash flow improved to SEK 0.3 (-3.2) b. – another step forward in improving our financial resilience. Net cash was SEK 35.6 (28.3)b.

The improvements in the quarter are encouraging. However, more work remains to be done. We have confidence in the strategic direction laid out and remain fully committed to our long-term targets. Looking ahead, we expect the rapidly increasing focus on 5G to continue, with initial business discussions focusing on enhanced mobile broadband. We continue to work closely with customers to define the optimal business models to enable them to tap into new revenue streams and capture the full value of 5G.”

Börje Ekholm

President and CEO

 

1) Excluding restructuring charges

 

2) Excluding restructuring charges and corporate allocations
 

 

Planning assumptions going forward

Market related

 

  The Radio Access Network (RAN) equipment market is estimated to decline by -2% for full-year 2018 with 2% CAGR (2018-2022). In 2018, the Chinese market is expected to decline due to reduced LTE investments, while there is positive momentum in North America.

Currency exposure

 

  Rule of thumb: A weakening by 10% of USD to SEK would have a negative impact of approximately -5% on net sales and approximately -1 percentage point on operating margin (based on 2017 full-year currency exposure). For historical rates, see www.ericsson.com/en/investors

Ericsson related

 

  5-year average sales seasonality between Q1 and Q2 is +9%

 

  Focusing the business and addressing low-performing operations are expected to reduce full-year sales by up to SEK 10 b. in 2019 compared with 2016.

 

  The current revenue baseline of the IPR licensing contract portfolio is approximately SEK 7 b. on an annual basis.

 

  The plan is to implement cost savings with an annual run-rate effect of at least SEK 10 b. by mid-2018, compared with the Q2 2017 annual run rate.
  Operating expenses typically vary between quarters due to seasonality.

 

  Restructuring charges for full-year 2018 are estimated to be SEK 5-7 b and slightly higher in Q2 vs Q1.

 

  Actual and estimated net impact from amortization and capitalization of development expenses and from recognition and deferral of hardware costs:

 

    Q1
2018
    Q2
2018
    Q2
2017
    FY
2017
    FY
2018
    FY
2019
 

SEK b.

  Actual     Estimate     Actual     Actual     Estimate     Estimate  

Cost of sales

    -0.3       -0.2       -0.4       -2.6       -1    

R&D expenses

    -0.4       -0.4       0.1       -0.3       -2    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total impact

    -0.7       -0.6       -0.3       -2.9       -3       -1 to -2  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

  The divestment of Media Solutions is expected to be closed by the end of Q3 2018. Results will be reported as share of earnings according to the equity method. Ericsson’s holding will be 49% of the shares. Media Solutions sales were SEK 3.2 b. in 2017.

 

  Consequences of Q1 and Q2 changes in product responsibilities between segments are described in detail in Financial highlights, page 4.
 

 

2      Ericsson  |  First Quarter Report 2018    CEO comments


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Financial highlights

 

SEK b.

   Q1
2018
    Q1
2017
    YoY
change
    Q4
2017
    QoQ
change
 

Net sales

     43.4       47.8       -9     57.9       -25

Sales growth adj. for comparable units and currency

     —         —         -2     —         -24

Gross income

     14.9       7.5       98     12.5       19

Gross margin (%)

     34.2     15.7     —         21.6     —    

Research and development expenses

     -9.1       -9.1       0     -9.9       —    

Selling and administrative expenses

     -6.2       -8.2       —         -8.2       —    

Impairment losses on trade receivables

     0.0       -1.6       —         -0.7       —    

Other operating income and expenses

     0.1       0.1       -40     -12.9       —    

Operating income (loss)

     -0.3       -11.3       —         -19.3       —    

Operating margin (%)

     -0.7     -23.6     —         -33.3     —    

Financial net

     -0.5       -0.4       —         -0.5       —    

Taxes

     0.1       1.7       -92     1.3       -90

Net income (loss)

     -0.7       -10.0       —         -18.5       —    

Gross income excluding restructuring charges

     15.6       9.0       74     14.6       7

Gross margin excluding restructuring charges

     35.9     18.7     —         25.1     —    

Operating income (loss) excl. restructuring charges

     0.9       -9.5       —         -16.9       —    

Operating margin excluding restructuring charges

     2.0     -19.9     —         -29.1     —    

Restructuring charges

     -1.2       -1.7       —         -2.4       —    

 

Net sales

Sales as reported decreased by -9 %YoY. Sales adjusted for comparable units and currency decreased by -2% YoY with growth in North America, Europe and Latin America as well as the Middle East and Africa. Sales as reported in Networks declined by -10% YoY, mainly due to lower mobile broadband investments in Mainland China and earlier completion of larger mobile broadband projects in market area South East Asia, Oceania and India. Digital Services sales declined by -9% YoY, mainly due to continued decline in legacy product sales and related services. Managed Services sales declined by -8% YoY as a result of customer contract reviews and reduced variable sales in certain large contracts. Sales in Emerging Business and Other (former segment Other) declined by -7% YoY due to lower sales in the media business.

Sequential sales decreased by -25%. Sales adjusted for comparable units and currency decreased by -24% QoQ, in line with normal seasonality.

IPR licensing revenues

IPR licensing revenues declined YoY to SEK 1.9 (2.1) b. and from SEK 2.1 b. in Q4 2017, mainly due to currency effects.

Gross margin

Gross margin increased to 34.2% (15.7%) with significant improvements in Networks, Digital Services and Managed Services. Effects of cost reductions, a continued ramp-up of the Ericsson Radio System (ERS) product platform and good progress in addressing low-performing customer contracts in Managed Services were key drivers of the improvement. Write-down of assets, as well as provisions and adjustments related to certain customer projects had a significant negative impact on gross margin in 2017. Restructuring charges included in the gross margin amounted to SEK -1.2 (-1.7) b. and gross margin, excluding restructuring charges, was 35.9% (18.7%). Completion of amortization of software release development expenses had a positive effect on gross margin YoY and QoQ.

 

Sequentially, gross margin increased with significant improvements in all segments.

Operating expenses

Operating expenses decreased to SEK 15.3 (18.9) b. Write-down of assets as well as provisions and adjustments related to certain customer projects had a significant negative impact on the 2017 operating expenses.

Selling and administrative expenses decreased YoY. Cost reductions contributed with SEK 0.6 b. to the decline.

R&D expenses were SEK -9.1 (-9.1) b. The net effect of higher amortized than capitalized R&D expenses was SEK -1.1 b. Investments in Networks’ R&D increased YoY in accordance with the strategy.

Operating expenses decreased sequentially, following normal seasonality.

Operating expenses were negatively impacted by restructuring charges of SEK -0.4 (-0.3) b. and were flat QoQ.

Other operating income and expenses

Other operating income and expenses were SEK 0.1 (0.1) b. compared with SEK -12.9 b. in Q4 2017, which included write-down of goodwill of SEK -13.0 b.

Consequences of technology and portfolio shifts

Due to technology and portfolio shifts, the company is reducing the capitalization of development expenses for product platforms and software releases as well as the deferral of hardware costs. As a consequence, higher amortization than capitalization of development expenses and higher recognition than deferral of hardware costs had a negative impact on operating income YoY. The amounts related to capitalized software releases were fully amortized in 2017, positively impacting gross income QoQ.

 

 

3      Ericsson  |  First Quarter Report 2018    Financial highlights


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Net impact from amortization and capitalization of development expenses and from recognition and deferral of hardware costs

 

SEK b.

   Q1
2018
     Q1
2017
     Q4
2017
 

Cost of sales

     -0.3        -0.5        -0.8  

R&D expenses

     -0.4        0.7        -0.6  
  

 

 

    

 

 

    

 

 

 

Total impact

     -0.7        0.3        -1.4  
  

 

 

    

 

 

    

 

 

 

Restructuring charges

Restructuring charges were SEK -1.2 (-1.7) b. Restructuring charges in Q4 2017 were SEK -2.4 b.

Operating income (loss)

Operating income (loss) increased YoY to SEK -0.3 (-11.3) b., supported by improved gross margin and reduced operating expenses, partly offset by lower sales.

The change in net impact from amortizations and capitalization of development expenses YoY was SEK -0.9 b.

Operating income (loss) improved sequentially, supported by improved gross margin, reduced operating expenses and reduced restructuring charges, partly offset by lower sales.

Write-down of assets as well as provisions and adjustments related to certain customer projects had a significant impact on the 2017 operating expenses.

Financial net

Financial net was SEK -0.5 (-0.4) b. Revaluation and realization effects of foreign exchange forecast hedging were negative at SEK -0.1 b. in the quarter. Financial net was stable sequentially.

Taxes

Taxes were positive in the quarter following the negative income.

Net income (loss) and EPS

Net income (loss) and EPS diluted increased significantly both YoY and QoQ, following the improved operating income.

 

Employees

The number of employees on March 31, 2018, was 97,581 – a net reduction of 3,154 employees in the quarter and of 13,317 employees compared with March 31, 2017. The decrease is mainly a result of cost and efficiency activities.

Focused strategy execution

The following four measures are indicators of the progress of strategy execution.

 

Area    Activity    Status Q1 2018
Networks    Transition to new Ericsson Radio System    84% (2017: 61%) YTD accumulated (ERS radio unit deliveries out of total radio unit deliveries)
Digital Services    - Growth in sales of new product portfolio - Addressing critical customer contracts    - Net sales flat 12 months rolling (full-year 2017: -4%)
- Out of 45 contracts identified, in total 8 have been addressed (2 in Q417)
Managed Services    Addressing low-performing customer contracts    Out of a total of 42 contracts identified, 31 (full-year 2017: 23) have been addressed to result in an annualized profit improvement of SEK 0.7 b. (end 2017: SEK 0.5 b.)

Changes in segment reporting

As of Q1 2018, sales related to 3PP routing business are reported in Networks (earlier Digital Services). Comparative periods have been restated to reflect this change. In Q1 2018, these sales were SEK 151 (160) million.

As of Q2 2018, sales related to Application Development and Maintenance (ADM) and certain sales related to Business Support Solution (BSS) will be moved between the segments Managed Services and Digital Services, with increased sales in Managed Services and a corresponding sales decrease in Digital Services (net effect of SEK 1.9 b in 2017).

 

 

4      Ericsson  |  First Quarter Report 2018    Financial highlights


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Market area sales

 

     First quarter 2018      Change  

SEK b.

   Networks      Digital
Services
     Managed
Services
     Emerging
Business
and Other
     Total      YoY     QoQ  

South East Asia, Oceania and India

     4.4        1.2        0.7        0.0        6.4        -24     -19

North East Asia

     2.2        0.7        0.4        0.0        3.4        -39     -48

North America

     9.3        1.3        0.7        0.0        11.3        -6     -23

Europe and Latin America

     7.5        2.7        2.9        0.1        13.1        7     -23

Middle East and Africa

     3.5        1.4        0.9        0.0        5.8        8     -24

Other 1)

     1.6        0.3        0.0        1.5        3.5        -17     -20
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total

     28.6        7.7        5.5        1.6        43.4        -9     -25
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

1)  Market Area “Other” includes primarily licensing revenues and the major part of segment Emerging Business and Other

 

South East Asia, Oceania and India

Sales declined YoY due to completion of major projects in Networks. Digital Services sales increased slightly.

North East Asia

Sales declined YoY due to lower Networks sales in Mainland China as a consequence of reduced LTE investments. Operators in Mainland China and Japan were awaiting results of spectrum allocations, which impacted sales negatively in the quarter.

North America

Reported sales declined YoY, while currency-adjusted sales increased by 6% . This growth was driven by Networks due to investments in network expansions and in 5G readiness. Digital Services sales declined YoY, due to timing of project milestones. Managed Services sales declined.

Europe and Latin America

Sales increased YoY, driven by higher Networks sales primarily in Latin America, positively impacted by project timing. Parts of Europe also contributed to Networks sales growth YoY. Growth was partly offset by lower sales in Digital Services. In line with the strategy, sales were negatively impacted by contract reviews in Digital Services and Managed Services.

Middle East and Africa

Sales grew YoY, positively impacted by deployment of network modernization and LTE contracts in parts of the Middle East.

Other

Sales declined YoY, mainly in Media Solutions and Red Bee Media. IPR licensing revenues amounted to SEK 1.9 (2.1) b.

 

 

5      Ericsson  |  First Quarter Report 2018    Market area sales


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Segment results

Networks

 

SEK b.

   Q1
2018
    Q1
2017
    YoY
change
    Q4
2017
    QoQ
change
 

Net sales

     28.6       31.6       -10     37.1       -23

Of which products

     19.5       21.9       -11     25.4       -23

Of which IPR licensing revenues

     1.5       1.7       -12     1.7       -12

Of which services

     9.1       9.8       -7     11.7       -22

Sales growth adjusted for comparable units and currency

     —         —         -2     —         -22

Gross income

     11.1       10.0       11     11.8       -6

Gross margin

     38.9     31.7     —         32.0     —    

Operating income

     3.4       2.7       24     1.9       73

Operating margin

     11.8     8.6     —         5.2     —    

Restructuring charges

     -0.5       -1.3       —         -1.3       —    

Gross income excl. restructuring charges

     11.5       11.2       3     12.9       -11

Gross margin excl. restructuring charges

     40.4     35.3     —         34.8     —    

Operating income excl. restructuring charges

     3.9       4.1       -5     3.2       20

Operating margin excl. restructuring charges

     13.5     12.8     —         8.6     —    

 

Net sales

Sales as reported declined by -10% YoY. Sales adjusted for comparable units and currency declined by -2%. The YoY decline is mainly due to lower LTE investments in Mainland China and completion of larger projects in market area South East Asia, Oceania and India. This decline was partly offset by strong growth in Europe and Latin America as well as in the Middle East and Africa. Investments in network expansions and 5G readiness in North America continued and sales grew in constant currencies.

Sales decreased by -23% QoQ, in line with normal seasonality. Sales adjusted for comparable units and currency decreased by -22% QoQ.

Gross margin

Gross margin increased to 38.9% (31.7%) YoY. Gross margin was positively impacted by improved margins of hardware and services, driven by cost reductions and a successful shift of the radio platform. The gross margin increase was partly offset by higher recognition than deferral of hardware costs.

Gross margin improved QoQ from 32.0%.

Write-down of assets as well as provisions and adjustments related to certain customer projects had a negative impact on gross margin in 2017.

Operating margin

Operating margin improved YoY to 11.8% (8.6%), due to improved gross margin and lower restructuring charges. The improvement was partly offset by lower sales and increased R&D expenses.

Operating margin improved significantly QoQ from 5.2%.

Write-down of assets as well as provisions and adjustments related to certain customer projects had a negative impact on operating margin in 2017.

Net impact from amortization and capitalization of development expenses and from recognition and deferral of hardware costs  

SEK b.

   Q1
2018
     Q1
2017
     Q4
2017
 

Cost of Sales

     -0.3        -0.2        -0.5  

R&D expenses

     0.1        0.1        -0.1  
  

 

 

    

 

 

    

 

 

 

Total impact

     -0.2        -0.2        -0.6  
  

 

 

    

 

 

    

 

 

 

Strategy execution

As presented at the 2017 Capital Markets Day, the ambition for Networks is to improve the operating margin to 15%-17% in 2020. Three important activities for profitability improvements are to

- invest in R&D to safeguard a leading portfolio

- fully transition the radio unit deliveries to Ericsson Radio System (ERS) in order to increase competitiveness

- continue to make savings in service delivery and common costs.

The ERS, which was introduced to the market in 2015, has proven to be competitive, creating improved earnings and a stronger market position. In the first quarter 2018, ERS accounted for 84% of total radio unit deliveries. The plan is to have fully transitioned the radio unit deliveries to ERS by the end of 2018.

 

 

6      Ericsson  |  First Quarter Report 2018    Segment results  |  Networks


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Digital Services

 

SEK b.

   Q1
2018
    Q1
2017
    YoY
change
    Q4
2017
    QoQ
change
 

Net sales

     7.7       8.4       -9     12.5       -39

Of which products

     3.9       4.3       -9     6.4       -39

Of which IPR licensing revenues

     0.3       0.4       -12     0.4       -12

Of which services

     3.7       4.1       -9     6.1       -39

Sales growth adjusted for comparable units and currency

     —         —         -3     —         -38

Gross income (loss)

     2.9       -2.3       —         1.2       155

Gross margin

     38.5     -27.8     —         9.2     —    

Operating income

     -2.6       -9.0       —         -12.3       —    

Operating margin (loss)

     -33.4     -107.6     —         -97.9     —    

Restructuring charges

     -0.6       -0.3       —         -0.7       —    

Gross income (loss) excl. restructuring charges

     3.2       -2.1       —         1.8       80

Gross margin excl. restructuring charges

     41.4     -25.5     —         14.1     —    

Operating income (loss) excl. restructuring charges

     -2.0       -8.8       —         -11.6       —    

Operating margin excl. restructuring charges

     -25.8     -104.4     —         -92.4     —    

 

Net sales

Sales as reported declined by -9% YoY. Sales adjusted for comparable units and currency decreased by -3% YoY. The ongoing digitalization drives opportunities for operators to reduce costs and be more agile by: automating operations, serving and engaging with customers digitally and building programmable core networks. Consequently, operators increasingly invest in the areas where Digital Services provide solutions. The momentum is strong for the new portfolio of 5G-ready and cloud-native products, with several important customer wins in the quarter. Currency-adjusted sales of new products grew in the quarter, however not enough to compensate for the legacy product sales decline.

Sales declined by -39% QoQ following a seasonally strong Q4 and lower sales in large transformation projects. Sales adjusted for comparable units and currency declined by -38% QoQ.

Gross margin

Improved services margin had a positive impact on gross margin YoY and QoQ. The improvement was driven by cost reductions in service delivery. In addition, lower sales in large low-margin transformation projects had a positive impact. Completion of amortization of software release development expenses had a positive effect on gross margin YoY and QoQ.

Write-down of assets as well as provisions and adjustments related to certain customer projects had a significant negative impact on gross margin in 2017.

Operating income (loss)

Operating income (loss) improved YoY, driven by increased gross margin and reduced operating expenses. Operating expenses continued to decline, when excluding related restructuring charges and SEK -0.4 (0.6) b. in impact from capitalized development expenses. Activities to improve efficiencies have accelerated in the quarter and further cost reductions are planned for the remainder of 2018. Total restructuring charges of SEK -0.6 (-0.3) b. had a negative impact on operating income YoY.

Operating income (loss) improved QoQ driven by gross margin improvements and reduced operating expenses.

Write-down of assets, as well as provisions and adjustments related to certain customer projects had a significant negative impact on operating income in 2017.

 

Net impact from amortization and capitalization of development expenses  

SEK b.

   Q1
2018
     Q1
2017
     Q4
2017
 

Cost of Sales

     0.0        -0.2        -0.3  

R&D expenses

     -0.4        0.6        -0.5  
  

 

 

    

 

 

    

 

 

 

Total impact

     -0.4        0.3        -0.7  
  

 

 

    

 

 

    

 

 

 

Strategy execution

As presented at the Capital Markets Day 2017, the target is to turn Digital Services into profits by 2020. Cost reduction activities were intensified in the quarter across the areas of service delivery, selling and administrative expenses and R&D. Cost reduction activities will continue by addressing complexity and inefficiency. While new ways of working are improving R&D efficiency, investments continue in a portfolio of 5G-ready and cloud-native products in order to defend the position and prepare Digital Services for future growth.

A key activity for profitability turnaround is to manage and complete 34 identified critical multi-year customer contracts and to either exit or complete 11 identified non-strategic contracts. 6 of the 45 contracts were successfully addressed in the quarter. At the end of the quarter, 8 contracts of the 45 have been addressed and the plan is to complete or exit approximately 50% of the 45 contracts during 2018.

 

 

7      Ericsson  |  First Quarter Report 2018    Segment results  |  Digital Services


Table of Contents

Managed Services

 

SEK b.

   Q1
2018
    Q1
2017
    YoY
change
    Q4
2017
    QoQ
change
 

Net sales

     5.5       6.0       -8     6.2       -11

Sales growth adjusted for comparable units and currency

     —         —         -4     —         -11

Gross income (loss)

     0.4       -0.5       —         -0.7       —    

Gross margin

     7.9     -8.9     —         -11.8     —    

Operating income (loss)

     0.1       -1.8       —         -1.3       —    

Operating margin

     1.0     -30.1     —         -20.7     —    

Restructuring charges

     -0.1       -0.1       —         -0.4       —    

Gross income (loss) excl. restructuring charges

     0.5       -0.4       —         -0.4       —    

Gross margin excl. restructuring charges

     8.8     -7.5     —         -6.5     —    

Operating income (loss) excl. restructuring charges

     0.1       -1.7       —         -0.9       —    

Operating margin excl. restructuring charges

     1.9     -28.7     —         -14.6     —    

 

Net sales

Sales as reported decreased by -8% YoY, as a result of contract reviews and reduced variable sales in certain large Managed Services Networks contracts. Sales in Managed Services IT showed good growth. Sales adjusted for comparable units and currency decreased by -4% YoY. Sales development is in line with the focused business strategy.

Sales as reported decreased by -11% QoQ.

Gross margin

Gross margin increased both YoY and QoQ, supported by results of efficiency measures as well as reviewed and addressed contracts. The QoQ gross margin increase was also supported by lower restructuring charges. Gross margin increased to 7.9% (-8.9%) YoY, and sequentially from -11.8%.

Write-down of assets as well as provisions and customer project adjustments had a significant negative impact on gross margin in 2017.

Operating income (loss)

Operating income (loss) increased to SEK 0.1 (-1.8) b. YoY, due to higher gross margin and lower operating expenses. Restructuring charges were SEK -0.1 (-0.1) b.

Sequentially, operating income (loss) increased, due to higher gross margin and lower operating expenses.

Write-down of assets as well as provisions and customer project adjustments had a significant negative impact on operating income in 2017.

Strategy execution

As part of the focused business strategy, Managed Services has its full attention on turning the business around through addressing low-performing operations and non-strategic contracts as well as improving efficiency in the service delivery process. Investments continue in machine intelligence, automation and analytics to further enhance user experience, improve efficiency and better manage the increasingly complex networks of tomorrow.

As presented at the 2017 Capital Markets Day, the ambition for Managed Services is to improve the operating margin to 4%-6% in 2020. In order to focus the business and improve profitability, 42 managed services contracts (out of >300) have been identified for exit, renegotiation or transformation. After Q1 2018, review actions for 31 of the 42 contracts have been completed resulting in an annualized profit improvement of approximately SEK 0.7 b. going forward.

 

 

8      Ericsson  |  First Quarter Report 2018    Segment results  |  Managed Services


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Emerging Business and Other (includes Emerging Business, Media Solutions, Red Bee Media and iconectiv)

 

SEK b.

   Q1
2018
    Q1
2017
    YoY
change
    Q4
2017
    QoQ
change
 

Net sales

     1.6       1.8       -7     2.1       -21

Sales growth adjusted for comparable units and currency

     —         —         -2     —         -20

Gross income

     0.3       0.3       3     0.2       42

Gross margin

     21.1     18.9     —         11.7     —    

Operating income (loss)

     -1.2       -3.2       —         -7.7       —    

Operating margin

     -71.4     -177.1     —         -369.2     —    

Restructuring charges

     -0.1       0.0       —         -0.1       —    

Gross income excl. restructuring charges

     0.4       0.4       10     0.3       36

Gross margin excl. restructuring charges

     24.3     20.4     —         14.1     —    

Operating income (loss) excl. restructuring charges

     -1.1       -3.1       —         -7.6       —    

Operating margin excl. restructuring charges

     -67.7     -174.6     —         -364.3     —    

 

Net sales

Sales as reported declined by -7% YoY. Sales adjusted for comparable units and currency decreased by -2%. Red Bee Media sales declined due to earlier renegotiations and scope changes of contracts. Media Solutions sales declined mainly due to lower sales in the discontinued portfolio including related services sales. Sales in Emerging Business and iconectiv grew YoY. In Emerging Business there was a continued YoY growth in IoT, while Unified Delivery Network (UDN) sales grew both YoY and QoQ.

Sales declined by -21% QoQ, mainly due to lower sales in Media Solutions and Red Bee Media, following a seasonally strong Q4. Sales adjusted for comparable units and currency decreased by -20% QoQ.

Gross margin

Gross margin increased YoY, mainly driven by improved gross margins in iconectiv and Media Solutions.

Gross margin increased QoQ. Write-down of assets had a significant negative impact on gross margin in Q4 2017. Gross margin in Q1 2018 was negatively impacted by customer penalties of SEK -0.1 b.

Operating income (loss)

Operating income improved YoY. Write-down of assets had a significant negative impact on operating income (loss) in Q1 2017. Income for Media Solutions and iconectiv improved YoY. Red Bee Media income was negatively impacted by lower sales and actions are ongoing to improve operations and reduce costs.

In Q1 2018, sales for the media business (Media Solutions and Red Bee Media) were SEK 1.0 (1.3) b. and operating income (loss) excluding restructuring charges and corporate allocations was SEK -0.5 (-2.6) b. Write-down of assets had a significant negative impact on operating income (loss) in Q1 2017.

Emerging Business operating income declined YoY, driven by increased investments in accordance with the strategy.

Operating income (loss) improved QoQ as write-down of assets had a significant negative impact on operating income in Q4 2017. Reduced sequential sales and customer penalties of SEK -0.1 b. had a negative impact on Q1 2018 operating income (loss). Media Solutions result declined QoQ partly due to lower sales and costs related to the planned transaction in Q3 2018.

 

Net impact from amortization and capitalization of development expenses  

SEK b.

   Q1
2018
     Q1
2017
     Q4
2017
 

Cost of Sales

     0.0        0.0        0.0  

R&D expenses

     -0.1        0.1        -0.1  
  

 

 

    

 

 

    

 

 

 

Total impact

     -0.1        0.1        -0.1  
  

 

 

    

 

 

    

 

 

 

Strategy execution

As outlined at the Capital Markets Day in 2017, the target for segment Emerging Business and Other is a break-even operating income by 2020.

Selective investments will continue in Emerging Business to build a position and grow sales in new areas.

For Red Bee Media the target is to achieve a sustainable profitable business, by continuing to develop the business as an independent entity within Ericsson and further improve operations.

In Media Solutions, Ericsson is partnering with One Equity Partners (OEP) and retaining a 49% ownership stake. This allows Ericsson to capture the upside of the business while at the same time taking an active part in the expected consolidation of the industry. Activities are ongoing to complete the transaction as planned during Q3 2018.

 

 

9      Ericsson  |  First Quarter Report 2018    Segment results  |  Emerging Business and Other


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Cash flow

 

SEK b.

   Q1
2018
     Q1
2017
     Q4
2017
 

Net income reconciled to cash

     -1.0        -8.2        -4.0  

Changes in operating net assets

     2.6        6.6        15.2  

Cash flow from operating activities

     1.6        -1.5        11.2  

Cash flow from investing activities

     -1.8        -13.6        -3.8  

Cash flow from financing activities

     -0.1        10.9        2.1  

Effect of exchange rate changes on cash

     1.1        0.2        0.2  

Net change in cash and cash equivalents

     0.8        -4.0        9.7  

Free cash flow: Cash flow from operating activities less net capital expen-ditures and
other investments

     0.3        -3.2        10.1  

 

Operating activities

Cash flow from operating activities was SEK 1.6 b., driven by decreased trade receivables following seasonally lower sales and good collection. Sale of trade receivables decreased compared with the same period last year. Inventory increased due to seasonally lower delivery volumes. Cash outlays related to restructuring charges were SEK -1.4 (-1.6) b. in the quarter.

Investing activities

Cash flow from investing activities was SEK -1.8 b., impacted by investments in property, plant and equipment of SEK -0.9 b. and capitalized development expenses of SEK -0.3 b. In addition, Ericsson acquired a company related to Emerging Business in the quarter.

Financing activities

Cash flow from financing activities was slightly negative at SEK -0.1 b. Net change in cash and cash equivalents was SEK 0.8 b.

Free cash flow

Free cash flow was SEK 0.3 (-3.2) b.

 

 

10      Ericsson  |  First Quarter Report 2018    Cash flow


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Financial position

 

SEK b.

   Mar 31
2018
    Mar 31
2017
    Dec 31
2017
 

+ Cash and cash equivalents

     36.7       33.0       35.9  

+ Interest-bearing securities, current

     5.5       13.5       6.7  

+ Interest-bearing securities, non-current

     27.1       19.1       25.1  

Gross cash

     69.3       65.6       67.7  

– Borrowings, current

     2.6       9.5       2.5  

– Borrowings, non-current

     31.1       27.8       30.5  

Net cash

     35.6       28.3       34.7  

Equity

     93.5       122.4       97.6  

Total assets

     260.7       292.0       259.9  

Capital turnover (times)

     1.1       1.0       1.2  

Return on capital employed (%)

     -1.0     -24.6     -20.6

Equity ratio (%)

     35.9     41.9     37.5

Return on equity (%)

     -3.5     -31.4     -28.1

 

Gross cash increased by SEK 1.6 b. and net cash increased by SEK 0.9 b. in the quarter. Gross cash was SEK 69.3 b. and net cash was SEK 35.6 b.

Post-employments benefits increased in the quarter, to SEK 25.6 b. from SEK 25.0 b. due to normal service and interest costs as well as negative returns on assets, partially offset by increased discount rate in the US.

The average maturity of long-term borrowings as of March 31, 2018, was 4.1 years, the same as 12 months earlier.

Debt maturity profile, Parent Company

SEK b.

 

LOGO

 

 

11      Ericsson  |  First Quarter Report 2018    Financial position


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Parent Company

 

Income after financial items was SEK 0.37 (-0.05) b.

At the end of the quarter, gross cash (cash, cash equivalents, short-term investments, and interest-bearing securities non-current) amounted to SEK 52.3 (51.3) b.

In the quarter, a dividend of SEK 3.3 b. was recognized, as anticipated, after decision by the Annual General Meeting on the 28th of March. The dividend was paid out in first week of April.

In accordance with the conditions of the long-term variable compensation program (LTV) for Ericsson employees, 3,436,265 shares from treasury stock were sold or distributed to employees during the first quarter. The holding of treasury stock at March 31, 2018, was 46,829,234 Class B shares.

 

 

12      Ericsson  |  First Quarter Report 2018    Parent Company


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Other information

 

Changes to Ericsson’s Executive Team and Group structure

On January 31, 2018, Ericsson announced changes to the Group structure and its Executive Team. A Business Area Technology and Emerging Business was created. Effective April 1, 2018, Åsa Tamsons was appointed Senior Vice President, Head of Business Area Technology and Emerging Business as well as member of the Executive Team.

The Company announced that it would simplify its group function structure, from six functions to four. The majority of current Group Function Technology & Emerging Business, including hosted group responsibilities such as Ericsson Research, would form part of Business Area Technology and Emerging Business.

Effective February 1, 2018, Group Function Marketing & Communications and Group Function Sustainability & Public Affairs would be merged into a new Group Function Marketing & Corporate Relations, headed by Helena Norrman, former Head of Group Function Marketing & Communications.

Ericsson reported restated financials for 2016 and 2017

On March 16, 2018, Ericsson reported restated consolidated income statement information for 2016 and 2017, in line with the new accounting standard IFRS 15, applied as of January 1, 2018.

Changes to Ericsson’s Executive Team

On March 27, 2018, the Board of Directors of Ericsson appointed Xavier Dedullen Senior Vice President, Chief Legal Officer and Head of Legal Affairs & Compliance, effective April 1, 2018. Effective the same date he would take a place in the Executive Team.

In addition, Erik Ekudden, Chief Technology Officer, has been appointed Senior Vice President, Chief Technology Officer and member of Ericsson’s Executive Team, reporting to Börje Ekholm.

Chief Legal Officer Nina Macpherson has decided, after a distinguished career, to leave the company to retire. Nina Macpherson has led the company’s global legal affairs function and has been part of the Ericsson Executive Team since January 1, 2011.

Resolutions at the AGM

On March 28, 2018, Ericsson held its AGM in Kista, Stockholm. The proposed dividend of SEK 1.00 per share was approved by the AGM.

In accordance with the proposal of the Nomination Committee. Ronnie Leten was elected new Chairman of the Board. Jon Fredrik Baksaas, Jan Carlson, Eric A. Elzvik, Nora Denzel, Börje Ekholm, Kristin S. Rinne, Helena Stjernholm and Jacob Wallenberg were re-elected to the Board. Kurt Jofs and Ronnie Leten were elected new Board members. Leif Johansson, Kristin Skogen Lund and Sukhinder Singh Cassidy left the Board in connection with the AGM.

In accordance with the Board of Directors’ proposal, the AGM resolved to approve the Guidelines for remuneration to Group Management and the implementation of a Long-Term Variable Compensation Program 2018 for members of the Executive Team.

Ongoing litigation with LG Electronics

In March 2018, Ericsson Inc and Telefonaktiebolaget LM Ericsson sued LG Electronics, Inc. and LG Electronics MobileComm U.S.A., in the U.S. District Court for the Eastern District of Texas, Civil Action No. 4:18-cv-186Inc. Ericsson is seeking a declaratory judgment that the global, reciprocal cross-license that Ericsson offered during its negotiations with LG complied with Ericsson’s FRAND commitment. Ericsson also claims that LG is an unwilling licensee, failed to negotiate in good faith, and breached its contractual obligation to ETSI.

POST-CLOSING EVENTS

Putative class action suit

In April 2018, the present CEO and CFO of Ericsson as well as three former executives were named defendants in a putative class action filed in the United States District Court for the Southern District of New York. The complaint alleges violations of United States securities laws, principally in connection with service revenues and recognition of expenses on long-term service projects . Ericsson is evaluating the complaint.

 

 

13      Ericsson  |  First Quarter Report 2018    Other information


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Risk factors

 

Ericsson’s operational and financial risk factors and uncertainties are described in our Annual Report 2017.

Risk factors and uncertainties in focus short term for the Parent Company and the Ericsson Group include, but are not limited to:

 

  Potential negative effects on operators’ willingness to invest in network development due to uncertainty in the financial markets and a weak economic business environment, or reduced consumer telecom spending, or increased pressure on Ericsson to provide financing, or delayed auctions of spectrums

 

  Intense competition from existing competitors as well as new entrants, including IT companies entering the telecommunications market, which could have a material adverse effect on the results

 

  Uncertainty regarding the financial stability of suppliers, for example due to lack of financing

 

  Effects on gross margins and/or working capital of the business mix in the Networks segment between capacity sales and new coverage build-outs

 

  Effects on gross margins of the business mix including new network build-outs and new managed services or digital transformation deals with initial transition costs

 

  Effects of the ongoing industry consolidation among our customers as well as between our largest competitors, e.g. with postponed investments and intensified price competition as a consequence

 

  New and ongoing partnerships which may not be successful and expose us to future costs

 

  Changes in foreign exchange rates, in particular USD

 

  Political unrest and uncertainty in certain markets, as well as escalating trade disputes

 

  Effects on production and sales from restrictions with respect to timely and adequate supply of materials, components and
   

production capacity and other vital services on competitive terms

 

  No guarantees that strategy execution, specific restructuring or cost-savings initiatives, profitability restoring efforts and/or organizational changes will be sufficient, successful or executed in time to deliver any improvements in earnings

 

  Cybersecurity incidents, which may have a material negative impact.

 

  Rapidly changing technologies and the ways these are brought to the market, which could be disruptive to the business.

Ericsson stringently monitors the compliance with all relevant trade regulations and trade embargoes applicable to dealings with customers operating in countries where there are trade restrictions or trade restrictions are discussed. Ericsson operates globally in accordance with Group policies and directives for business ethics and conduct and has a dedicated anti-corruption program. However, in some of the countries where the company operates, corruption risks can be high and compliance failure could have a material adverse impact on our business, financial condition and brand.

Stockholm, April 20, 2018

Telefonaktiebolaget LM Ericsson (publ)

Börje Ekholm, President and CEO

Org. No. 556016-0680

Date for next report: July 18, 2018

 

 

14      Ericsson  |  First Quarter Report 2018    Risk factors


Table of Contents

Editor’s note

 

Ericsson invites media, investors and analysts to conference calls on April 20, 2018; one starting at 09.00 (CET) and the other at 14.00 (CET).

Live audio webcasts of the conference calls as well as supporting slides will be available at:

www.ericsson.com/press and

www.ericsson.com/investors

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

For further information, please contact:

Helena Norrman, Senior Vice President, Chief Marketing and

Communications Officer

Phone: +46 10 719 34 72

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 10 714 64 99, +46 70 575 29 06
E-mail:    peter.nyquist@ericsson.com
Stefan Jelvin, Director,
Investor Relations
Phone:    +46 10 714 20 39, +46 70 986 02 27
E-mail:    stefan.jelvin@ericsson.com
Åsa Konnbjer, Director,
Investor Relations
Phone:    +46 10 713 39 28, +46 73 082 59 28
E-mail:    asa.konnbjer@ericsson.com
Rikard Tunedal, Director,
Investor Relations
Phone:    +46 10 714 54 00, +46 761 005 400
E-mail:    rikard.tunedal@ericsson.com
Media
Ola Rembe, Vice President,
Head of External Communications
Phone:    +46 10 719 97 27, +46 73 024 48 73
E-mail:    media.relations@ericsson.com
Corporate Communications
Phone:    +46 10 719 69 92
E-mail:    media.relations@ericsson.com
 

 

15      Ericsson  |  First Quarter Report 2018    Editor’s note


Table of Contents

Forward-looking statements

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

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

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

Important factors that could affect whether and to what extent any of our forward-looking statements materialize include, but are not limited to, the factors described in the section “Risk Factors”, and in “Risk Factors” in the Annual Report 2017.

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

 

 

16      Ericsson  |  First Quarter Report 2018    Forward-looking statements


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Financial statements and

other information

 

Contents

  

Financial statements

  

Consolidated income statement

     18  

Statement of comprehensive income (loss)

     18  

Consolidated balance sheet

     19  

Consolidated statement of cash flows

     20  

Consolidated statement of changes in equity

     21  

Consolidated income statement – isolated quarters

     21  

Consolidated statement of cash flows – isolated quarters

     22  

Parent Company income statement

     23  

Parent Company statement of comprehensive income (loss)

     23  

Parent Company balance sheet

     24  

Additional information

  

Accounting policies

     25  

Segment reporting

     27  

Net sales by segment by quarter

     28  

Sales growth adjusted for comparable units and currency

     29  

Gross income (loss) and gross margin by segment by quarter

     29  

Operating income (loss) and operating margin by segment by quarter

     30  

EBITA and EBITA margin by segment by quarter

     31  

Net sales by market area by quarter

     32  

Top 5 countries in sales

     33  

Net sales by market area by segment

     33  

IPR licensing revenues by segment by quarter

     34  

Provisions

     34  

Information on investments

     35  

Other information

     36  

Number of employees

     36  

 

Items excluding restructuring charges

  

Restructuring charges by function

     37  

Restructuring charges by segment

     37  

Gross income (loss) and gross margin excluding restructuring charges by segment

     38  

Operating income (loss) and operating margin excluding restructuring charges by segment

     39  

Alternative performance measures

  

Sales growth adjusted for comparable units and currency

     40  

Items excluding restructuring charges

     41  

EBITA and EBITA margin

     42  

Cash conversion

     42  

Gross cash and net cash, end of period

     42  

Capital employed

     43  

Capital turnover

     43  

Return on capital employed

     44  

Equity ratio

     44  

Return on equity

     44  

Earnings (loss) per share (non-IFRS)

     45  

Free cash flow

     45  

 

 

 

17      Ericsson  |  First Quarter Report 2018    Financial statements and other information


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Financial statements

Consolidated income statement

 

     Jan-Mar     Jan-Dec  

SEK million

   2018     2017     Change     2017  

Net sales

     43,411       47,803       -9     205,378  

Cost of sales

     -28,553       -40,302       -29     -157,451  
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross income

     14,858       7,501       98     47,927  

Gross margin (%)

     34.2     15.7       23.3

Research and development expenses

     -9,073       -9,066       0     -37,887  

Selling and administrative expenses

     -6,156       -8,223       -25     -29,027  

Impairment losses on trade receivables 1)

     -28       -1,640       -98     -3,649  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

     -15,257       -18,929       -19     -70,563  

Other operating income and expenses

     84       141         -12,131  2) 

Shares in earnings of JV and associated companies

     3       11         24  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     -312       -11,276       -97     -34,743  

Financial income

     -72       -82         -372  

Financial expenses

     -469       -350         -843  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income after financial items

     -853       -11,708       -93     -35,958  

Taxes

     128       1,682         3,525  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     -725       -10,026       -93     -32,433  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to:

        

Stockholders of the Parent Company

     -837       -10,068         -32,576  

Non-controlling interests

     112       42         143  

Other information

        

Average number of shares, basic (million)

     3,286       3,272         3,277  

Earnings (loss) per share, basic (SEK) 3)

     -0.25       -3.08         -9.94  

Earnings (loss) per share, diluted (SEK) 4)

     -0.25       -3.08         -9.94  

 

1)  Impairment of trade receivables has been calculated according to IFRS 9 in 2018 and according to IAS 39 in 2017. Previously, these losses have been reported as selling and administrative expenses.
2)  Includes write-down of goodwill of SEK -13.0 billion.
3)  Based on net income (loss) attributable to stockholders of the Parent Company.
4)  Potential ordinary shares are not considered when their conversion to ordinary shares would increase earnings per share.

Statement of comprehensive income (loss)

 

     Jan-Mar      Jan-Dec  

SEK million

   2018      2017      2017  

Net income (loss)

     -725        -10,026        -32,433  

Other comprehensive income (loss)

        

Items that will not be reclassified to profit or loss

        

Remeasurements of defined benefits pension plans incl. asset ceiling

     -849        398        970  

Revaluation of borrowings due to change in credit risk

     58        —          —    

Tax on items that will not be reclassified to profit or loss

     133        -169        -547  

Items that may be reclassified to profit or loss

        

Available-for-sale financial assets

        

Gains/losses arising during the period

     —          32        68  

Reclassification adjustments on gains/losses included in profit or loss

     —          3        5  

Revaluation of other investments in shares and participations

        

Fair value remeasurement

     —          2        99  

Changes in cumulative translation adjustments

     1,299        -22        -3,378  

Share of other comprehensive income on JV and associated companies

     11        10        —    

Tax on items that may be reclassified to profit or loss

     —          -9        -16  
  

 

 

    

 

 

    

 

 

 

Total other comprehensive income (loss), net of tax

     652        245        -2,799  
  

 

 

    

 

 

    

 

 

 

Total comprehensive income (loss)

     -73        -9,781        -35,232  
  

 

 

    

 

 

    

 

 

 

Total comprehensive income (loss) attributable to:

        

Stockholders of the Parent Company

     -200        -9,846        -35,357  

Non-controlling interest

     127        65        125  

 

18      Ericsson  |  First Quarter Report 2018    Financial statements


Table of Contents

Consolidated balance sheet

 

SEK million

   Mar 31
2018
     Dec 31
2017
 

ASSETS

     

Non-current assets

     

Intangible assets

     

Capitalized development expenses

     4,229        4,593  

Goodwill

     28,777        27,815  

Intellectual property rights, brands and other intangible assets

     3,853        4,148  

Property, plant and equipment

     12,912        12,857  

Financial assets

     

Equity in JV and associated companies

     630        624  

Other investments in shares and participations

     1,302        1,279  

Customer finance, non-current

     1,845        2,178  

Interest-bearing securities, non-current

     27,104        25,105  

Other financial assets, non-current

     5,192        5,897  

Deferred tax assets

     23,822        21,963  
  

 

 

    

 

 

 
     109,666        106,459  

Current assets

     

Inventories

     29,009        25,547  

Contract assets

     11,712        13,120  

Trade receivables

     42,455        48,105  

Customer finance, current

     1,709        1,753  

Other current receivables

     23,980        22,301  

Interest-bearing securities, current

     5,453        6,713  

Cash and cash equivalents

     36,697        35,884  
  

 

 

    

 

 

 
     151,015        153,423  
  

 

 

    

 

 

 

Total assets

     260,681        259,882  
  

 

 

    

 

 

 

EQUITY AND LIABILITIES

     

Equity

     

Stockholders’ equity

     92,703        96,935  

Non-controlling interest in equity of subsidiaries

     763        636  
  

 

 

    

 

 

 
     93,466        97,571  

Non-current liabilities

     

Post-employment benefits

     25,646        25,009  

Provisions, non-current

     2,597        3,596  

Deferred tax liabilities

     1,325        901  

Borrowings, non-current

     31,134        30,500  

Other non-current liabilities

     2,792        2,776  
  

 

 

    

 

 

 
     63,494        62,782  

Current liabilities

     

Provisions, current

     6,435        6,283  

Borrowings, current

     2,554        2,545  

Contract liabilities

     30,391        29,076  

Trade payables

     26,453        26,320  

Other current liabilities

     37,888        35,305  
  

 

 

    

 

 

 
     103,721        99,529  
  

 

 

    

 

 

 

Total equity and liabilities

     260,681        259,882  
  

 

 

    

 

 

 

Of which interest-bearing liabilities

     33,688        33,045  

Assets pledged as collateral

     5,148        5,215  

Contingent liabilities

     1,412        1,561  

 

19      Ericsson  |  First Quarter Report 2018    Financial statements


Table of Contents

Consolidated statement of cash flows

 

     Jan-Mar     Jan-Dec  

SEK million

   2018      2017     2017  

Operating activities

       

Net income (loss)

     -725        -10,026       -32,433  

Adjustments to reconcile net income to cash

       

Taxes

     -2,315        -4,112       -9,064  

Earnings/dividends in JV and associated companies

     4        -7       56  

Depreciation, amortization and impairment losses

     1,891        5,431       27,892  

Other

     140        527       440  
  

 

 

    

 

 

   

Net income reconciled to cash

     -1,005        -8,187       -13,109  

Changes in operating net assets

       

Inventories

     -2,813        -3,206       4,719  

Customer finance, current and non-current

     400        -834       798  

Trade receivables and contract assets

     7,316        2,818       1,379  

Trade payables

     -598        363       1,886  

Provisions and post-employment benefits

     -847        4,636       4,755  

Contract liabilities

     757        4,807       5,024  

Other operating assets and liabilities, net

     -1,637        -1,938       4,149  
  

 

 

    

 

 

   
     2,578        6,646       22,710  

Cash flow from operating activities

     1,573        -1,541       9,601  

Investing activities

       

Investments in property, plant and equipment

     -856        -1,015       -3,877  

Sales of property, plant and equipment

     123        69       1,016  

Acquisitions/divestments of subsidiaries and other operations, net

     -449        3       276  

Product development

     -254        -865       -1,444  

Other investing activities

     161        110       -463  

Interest-bearing securities

     -534        -11,886       -11,578  
  

 

 

    

 

 

   

Cash flow from investing activities

     -1,809        -13,584       -16,070  

Cash flow before financing activities

     -236        -15,125       -6,469  

Financing activities

       

Dividends paid

     —          -4       -3,424  

Other financing activities

     -94        10,902       8,902  
  

 

 

    

 

 

   

Cash flow from financing activities

     -94        10,898       5,478  

Effect of exchange rate changes on cash

     1,143        215       -91  
  

 

 

    

 

 

   

Net change in cash and cash equivalents

     813        -4,012       -1,082  
  

 

 

    

 

 

   

Cash and cash equivalents, beginning of period

     35,884        36,966       36,966  
  

 

 

    

 

 

   

Cash and cash equivalents, end of period

     36,697        32,954       35,884  
  

 

 

    

 

 

   

 

20      Ericsson  |  First Quarter Report 2018    Financial statements


Table of Contents

Consolidated statement

of changes in equity

 

     Jan-Mar     Jan-Dec  

SEK million

   2018     2017     2017  

Opening balance 1)

     97,571       135,257       135,257  

Opening balance adjustment due to IFRS 9

     -983       —         —    
  

 

 

   

 

 

   

Adjusted opening balance

     96,588       135,257       135,257  

Total comprehensive income (loss)

     -73       -9,781       -35,232  

Sale/repurchase of own shares

     21       25       -5  

Stock issue (net)

     —         —         15  

Stock purchase plan

     217       210       885  

Dividends paid

     -3,287  2)      -3,277  2)      -3,424  

Transactions with non-controlling interests

     —         —         75  
  

 

 

   

 

 

   

Closing balance

     93,466       122,434       97,571  
  

 

 

   

 

 

   

 

1)  The opening balance adjustment for IFRS 15 on initial application date (January 1, 2016) was SEK -4,353 million. Opening balances of 2017 and 2018 have been restated for IFRS 15.
2)  Includes accrual of SEK 3,287 (3,273) million for the dividend approved by the Annaul General Meeting on March 28, 2018 (March 29, 2017).

Consolidated income statement

- isolated quarters

 

    2018     2017  

Isolated quarters, SEK million

  Q1     Q4     Q3     Q2     Q1  

Net sales

    43,411       57,881       49,413       50,281       47,803  

Cost of sales

    -28,553       -45,365       -36,132       -35,652       -40,302  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross income

    14,858       12,516       13,281       14,629       7,501  

Gross margin (%)

    34.2     21.6     26.9     29.1     15.7

Research and development expenses

    -9,073       -9,938       -10,519       -8,364       -9,066  

Selling and administrative expenses

    -6 156       -8 245       -5 741       -6 818       -8 223  

Impairment losses on trade receivables 1)

    -28       -680       -1,094       -235       -1,640  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

    -15,257       -18,863       -17,354       -15,417       -18,929  

Other operating income and expenses

    84       -12,926  2)      415       239       141  

Shares in earnings of JV and associated companies

    3       -5       6       12       11  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

    -312       -19,278       -3,652       -537       -11,276  

Financial income

    -72       -124       -139       -27       -82  

Financial expenses

    -469       -394       -182       83       -350  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income after financial items

    -853       -19,796       -3,973       -481       -11,708  

Taxes

    128       1,303       516       24       1,682  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

    -725       -18,493       -3,457       -457       -10,026  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to:

         

Stockholders of the Parent Company

    -837       -18,476       -3,561       -471       -10,068  

Non-controlling interests

    112       -17       104       14       42  

Other information

         

Average number of shares, basic (million)

    3,286       3,283       3,279       3,275       3,272  

Earnings (loss) per share, basic (SEK) 3)

    -0.25       -5.63       -1.09       -0.14       -3.08  

Earnings (loss) per share, diluted (SEK) 4)

    -0.25       -5.63       -1.09       -0.14       -3.08  

 

1)  Impairment of trade receivables has been calculated according to IFRS 9 in 2018 and according to IAS 39 in 2017. Previously, these losses have been reported as selling and administrative expenses.
2)  Includes write-down of goodwill of SEK -13.0 billion.
3)  Based on net income (loss) attributable to stockholders of the Parent Company.
4)  Potential ordinary shares are not considered when their conversion to ordinary shares would increase earnings per share.

 

21      Ericsson  |  First Quarter Report 2018    Financial statements


Table of Contents

Consolidated statement

of cash flows – isolated quarters

 

     2018      2017  

Isolated quarters, SEK million

   Q1      Q4      Q3      Q2      Q1  

Operating activities

              

Net income (loss)

     -725        -18,493        -3,457        -457        -10,026  

Adjustments to reconcile net income to cash

              

Taxes

     -2,315        -1,803        -1,323        -1,826        -4,112  

Earnings/dividends in JV and associated companies

     4        -2        73        -8        -7  

Depreciation, amortization and impairment losses

     1,891        16,118        4,146        2,197        5,431  

Other

     140        179        -218        -48        527  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net income reconciled to cash

     -1,005        -4,001        -779        -142        -8,187  

Changes in operating net assets

              

Inventories

     -2,813        8,356        1,061        -1,492        -3,206  

Customer finance, current and non-current

     400        36        456        1,140        -834  

Trade receivables and contract assets

     7,316        -2,246        623        184        2,818  

Trade payables

     -598        2,565        -1,061        19        363  

Provisions and post-employment benefits

     -847        412        -608        315        4,636  

Contract liabilities

     757        2,700        -1,910        -573        4,807  

Other operating assets and liabilities, net

     -1,637        3,337        2,200        550        -1,938  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     2,578        15,160        761        143        6,646  

Cash flow from operating activities

     1,573        11,159        -18        1        -1,541  

Investing activities

              

Investments in property, plant and equipment

     -856        -1,105        -739        -1,018        -1,015  

Sales of property, plant and equipment

     123        898        12        37        69  

Acquisitions/divestments of subsidiaries and other operations, net

     -449        -107        371        9        3  

Product development

     -254        -138        -126        -315        -865  

Other investing activities

     161        -573        42        -42        110  

Interest-bearing securities

     -534        -2,772        3,756        -676        -11,886  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash flow from investing activities

     -1,809        -3,797        3,316        -2,005        -13,584  

Cash flow before financing activities

     -236        7,362        3,298        -2,004        -15,125  

Financing activities

              

Dividends paid

     —          -1        -145        -3,274        -4  

Other financing activities

     -94        2,073        1,563        -5,636        10,902  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash flow from financing activities

     -94        2,072        1,418        -8,910        10,898  

Effect of exchange rate changes on cash

     1,143        240        48        -594        215  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net change in cash and cash equivalents

     813        9,674        4,764        -11,508        -4,012  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash and cash equivalents, beginning of period

     35,884        26,210        21,446        32,954        36,966  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash and cash equivalents, end of period

     36,697        35,884        26,210        21,446        32,954  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

22      Ericsson  |  First Quarter Report 2018    Financial statements


Table of Contents

Parent Company income statement

 

     Jan-Mar      Jan-Dec  

SEK million

   2018      2017      2017  

Net sales

     —          —          —    

Cost of sales

     —          —          —    
  

 

 

    

 

 

    

 

 

 

Gross income

     —          —          —    

Operating expenses

     -154        -289        -1,294  

Other operating income and expenses

     343        572        1,616  
  

 

 

    

 

 

    

 

 

 

Operating income

     189        283        322  

Financial net

     177        -331        -2,297  
  

 

 

    

 

 

    

 

 

 

Income after financial items

     366        -48        -1,975  

Transfers to (–) / from untaxed reserves

     —          —          -120  

Taxes

     -83        -10        -53  
  

 

 

    

 

 

    

 

 

 

Net income (loss)

     283        -58        -2,148  
  

 

 

    

 

 

    

 

 

 

Parent company statement

of comprehensive income (loss)

 

     Jan-Mar      Jan-Dec  

SEK million

   2018      2017      2017  

Net income (loss)

     283        -58        -2,148  

Revaluation of borrowings due to change in credit risk

     58        —          —    

Tax on items that will not be reclassified to profit or loss

     -13        —          —    

Available-for-sale financial assets

        

Gains/losses arising during the period

     —          32        68  

Reclassification adjustments on gains/losses included in profit or loss

     —          3        5  

Revaluation of other investments in shares and participations

        

Fair value remeasurement

     —          —          102  

Tax on items that may be reclassified to profit or loss

     —          -8        -14  
  

 

 

    

 

 

    

 

 

 

Total other comprehensive income, net of tax

     45        27        161  
  

 

 

    

 

 

    

 

 

 

Total comprehensive income (loss)

     328        -31        -1,987  
  

 

 

    

 

 

    

 

 

 

 

23      Ericsson  |  First Quarter Report 2018    Financial statements


Table of Contents

Parent company balance sheet

 

SEK million

   Mar 31
2018
     Dec 31
2017
 

ASSETS

     

Fixed assets

     

Intangible assets

     276        329  

Tangible assets

     293        346  

Financial assets1) 2)

     123,815        119,896  
  

 

 

    

 

 

 
     124,384        120,571  

Current assets

     

Inventories

     —          1  

Receivables 2)

     44,359        41,173  

Short-term investments

     5,028        6,446  

Cash and cash equivalents

     20,215        18,715  
  

 

 

    

 

 

 
     69,602        66,335  
  

 

 

    

 

 

 

Total assets

     193,986        186,906  
  

 

 

    

 

 

 

STOCKHOLDERS’ EQUITY, PROVISIONS AND LIABILITIES

     

Equity

     

Restricted equity

     48,164        48,164  

Non-restricted equity 2)

     36,615        39,578  
  

 

 

    

 

 

 
     84,779        87,742  

Provisions

     534        602  

Non-current liabilities 2)

     61,229        60,623  

Current liabilities

     47,444        37,939  
  

 

 

    

 

 

 

Total stockholders’ equity, provisions and liabilities

     193,986        186,906  
  

 

 

    

 

 

 

1)  Of which interest-bearing securities, non-current

     27,104        25,105  
  

 

 

    

 

 

 

 

2)  The following 2018 opening balances have been adjusted due to IFRS 9: financial assets increased by SEK 8 million, receivables decreased by SEK 4 million, non-restricted equity decreased by SEK –28 million, and non-current liabilities increased by SEK 31 million.

 

24      Ericsson  |  First Quarter Report 2018    Financial statements


Table of Contents

Additional Information

Accounting policies

The group

 

This interim report is prepared in accordance with IAS 34. The term “IFRS” used in this document refers to the application of IAS and IFRS as well as interpretations of these standards as issued by IASB’s Standards Interpretation Committee (SIC) and IFRS Interpretations Committee (IFRIC). The accounting policies adopted are consistent with those of the annual report for the year ended December 31,2017 and should be read in conjunction with that annual report, with exception for the accounting policies described below.

New standards as from January 1, 2018

Two new IFRS standards are effective as from January 1, 2018, IFRS 9 “Financial instruments” and IFRS 15 “Revenue from Customer Contracts”.

Presentation in the financial statements

For IFRS 15 the Company has adopted the full retrospective method for transition, which mean that prior year comparatives have been restated and equity has been adjusted at the initial application date (January 1, 2016). The Company has applied IFRS 9 retrospectively on the required effective date, January 1, 2018. The 2018 opening balances have been adjusted, but the previous periods have not been restated.

Based on the new requirements under IFRS 15, contract assets and contract liabilities have been added as new lines in the consolidated balance sheet and statement of cash flow. Previously, contract assets were reported as trade receivables and contract liabilities were reported as deferred revenue and as advances from customers within other current liabilities. Due to IFRS 9, impairment losses on trade receivables are reported on a separate line in the consolidated income statement. Previously, these losses have been reported as Selling and administrative expenses. In the statement of comprehensive income, a new line has been added for revaluation of borrowings due to changes in credit risk. A new line has been added to the consolidated statement of equity showing the adjustment to the opening balance.

The prior periods financial statements and key ratios presented in this quarterly report have been restated to reflect adoption of these new standards.

Accounting policy – IFRS 9 “Financial instruments”

Financial assets

The Company classifies its financial assets in the following categories: at amortized cost, at fair value through other comprehensive income (FVOCI), and at fair value through profit or loss (FVTPL). The classification depends on the characteristics of the asset and the business model in which it is held.

Financial assets at amortized cost

Financial assets are classified as amortized cost if the contractual terms give rise to payments that are solely payments of principal and interest on the principal amount outstanding and the financial asset is held in a business model whose objective is to hold financial assets in order to collect contractual cash flows. These assets are subsequently measured at amortized cost using the effective interest method, minus impairment allowances.

Financial assets at fair value through other comprehensive income (FVOCI)

Assets are classified as FVOCI if the contractual terms give rise to payments that are solely payments of principal and interest on the principal amount outstanding and the financial asset is held in a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets. These assets are subsequently measured at fair value with changes in fair value recognized in other comprehensive income (OCI), except for effective interest, impairment gains and losses and foreign exchange gains and losses recognized in the income statement. Upon derecognition, the cumulative gain or loss in OCI is reclassified to the income statement.

Financial assets at fair value through profit or loss (FVTPL)

All financial assets that are not classified as either amortized cost or FVOCI are classified as FVTPL. A financial asset is classified as held for trading if it is acquired principally for the purpose of selling in the near term. Derivatives are classified as held for trading, unless they are designated as hedging instruments for the purpose of hedge accounting. Assets held for trading are classified as current assets. Debt instruments classified as FVTPL, but not held for trading, are classified on the balance sheet based on their maturity date (i.e. those with a maturity longer than one year are classified as non-current). Investments in shares and participations are classified as FVTPL and classified as non-current financial assets.

Gains or losses arising from changes in the fair values of the “Financial assets at fair value through profit or loss” category (excluding derivatives and customer financing) are presented in the income statement within Financial income in the period in which they arise. Gains and losses on derivatives are presented in the income statement either as Cost of sales, Other operating income, Financial income or Financial expense, depending on the intent with the transaction. Gains and losses on customer financing are presented in the income statement as Selling expenses.

Impairment in relation to financial assets

At each balance sheet date, financial assets classified as either amortized cost or FVOCI and contract assets are assessed for impairment based on Expected Credit Losses (ECL). Allowances for trade receivables and contract assets are always equal to lifetime ECL. The loss is recognized in the income statement. When there is no reasonable expectation of collection, the asset is written off.

Borrowings

Borrowings by the Parent Company are designated FVTPL because they are managed and evaluated on a fair value basis. Changes in fair value are recognized in the income statement, except for changes in fair value due to change in credit risk which are recognized in Other comprehensive income.

 

 

 

25      Ericsson  |  First Quarter Report 2018

  

 

Additional information


Table of Contents
Summary of changes to classification of financial assets and financial liabilities   

Type of asset

  

IAS 39 classification

  

IFRS 9 classification

  

Reason for IFRS 9 classification

Cash equivalents, interest-bearing securities, and derivatives (held for trading)    FVTPL    FVTPL    Held for trading portfolios are classified as FVTPL (no change).
Cash equivalents (not held for trading)    Loans and receivables    Amortized cost    These assets are held to collect contractual cash flows.
Interest-bearing securities (not held for trading)    Available-for-sale    FVTPL    These assets are not held for trading but are managed and evaluated on a fair value basis.
Trade receivables    Loans and receivables    FVOCI    Trade receivables are managed in a business model whose objective is achieved through both collection of contractual cash flows and selling of assets.
Customer financing    Loans and receivables    FVTPL    Customer finance assets are managed in a business model with the objective to realize cash flows through the sale of assets.
Investments in shares and participations (equity instruments)    Available-for-sale    FVTPL    This is an accounting policy choice under IFRS 9.
Borrowings by parent company    Amortized cost    Designated FVTPL    These borrowings are managed and evaluated on a fair value basis.

 

Fair value hedging and fair value hedge accounting

Fair value hedge accounting is no longer applied as of January 1, 2018.

Financial guarantees

Financial guarantee contracts are initially recognized at fair value (i.e., usually the fee received). Subsequently, these contracts are measured at the higher of:

- The expected credit losses.

- The recognized contractual fee less cumulative amortization when amortized over the guarantee period, using the straight-line-method.

Accounting policy – IFRS 15 “Revenue from Contracts with Customers”

IFRS 15, “Revenue from Contracts with Customers” establishes a new principle-based model of recognizing revenue from customer contracts. It introduces a five-step model that requires revenue to be recognized when control over goods and services are transferred to the customer.

The following paragraphs describes the types of contracts, when performance obligations are satisfied, and the timing of revenue recognition. They also describe the normal payment terms associated with such contracts and the resulting impact on the balance sheet over the duration of the contracts. The vast majority of Ericsson’s business is for the sale of standard products and services.

Standard products and services

Products and services are classified as standard solutions if they do not require significant installation and integration services to be delivered. Installation and integration services are generally completed within a short period of time, from the delivery of the related products. These products and services are viewed as separate distinct performance obligations. This type of customer contract is usually signed as a frame agreement and the customer issues individual purchase orders to commit to purchases of products and services over the duration of the agreement.

Revenue for standard products shall be recognized when control over the equipment is transferred to the customer at a point in time. This assessment shall be viewed from a customer’s perspective considering indicators such as transfer of titles and risks, customer acceptance, physical possession, and billing rights. For hardware sales, transfer of control is usually deemed to occur when the equipment arrives at the customer site and for software sales, when the licenses are made available to the customer. Contractual terms may vary, therefore judgment will be applied when assessing the indicators of transfer of control. Revenue for installation and integration services is recognized upon completion of the service.

Transaction prices under these contracts are mostly billed upon delivery of the hardware or software, and completion of installation services, although a proportion may be billed upon formal acceptance of the related installation services. This will result in a contract asset for the proportion of the transaction price that is not yet billed.

Revenue for recurring services such as customer support and managed services is recognized as the services are delivered, generally pro-rata over time. Transaction prices under these contracts are billed over time, often on a quarterly basis. Contract liabilities or receivables may arise depending on whether the quarterly billing is in advance or in arrears.

Contract for standard products and services applies to business in all segments.

Customized solution

Some products and services are sold together as part of a customized solution to the customer. This type of contract requires significant installation and integration services to be delivered within the solution, normally over a period of more than 1 year. These products and services are viewed together as a combined performance obligation. This type of contract is usually sold as a firm contract in which the scope of the solution and obligations of both parties are clearly defined for the duration of the contract.

 

 

 

26      Ericsson  |  First Quarter Report 2018

  

 

Additional information


Table of Contents

Revenue for the combined performance obligation shall be recognized over time if progress of completion can be reliably measured and enforceable right to payment exists over the duration of the contract. The progress of completion is estimated by reference to the output delivered such as achievement of contract milestones and customer acceptance. This method is considered appropriate as it reflects the nature of the customized solution and how integration service is delivered in these projects. Formal acceptance term is considered a key indicator of transfer of control for a customized solution and shall therefore be obtained prior to recognizing revenue. If the criteria above are not met, then all revenue shall be recognized upon the completion of the customized solution, when final acceptance is provided by the customer.

Transaction price under these contracts are represented by progress payments or billing milestones as defined in the contracts. In most cases, revenue recognized is limited to the progress payments or unconditional billing milestones over the duration of the contract, therefore no contract asset or contract liability arises on these contracts. In some contracts, revenue may be recognized in advance of billing milestones if enforceable payment rights exist at all times over the contract duration. This will result in a contract asset balance until billing milestones are reached.

Contract for customized solution applies to the Business Support Systems (BSS) business within the segment Digital Services and the Media Solutions business within the segment Emerging Business and Other.

Intellectual Property Rights (IPR)

This type of contract relates to the patent and licensing business. The Company has assessed that the nature of its IPR contracts is such that they provide customers a license with the right to access Ericsson intellectual properties over time, therefore revenue shall be recognized over the duration of the contract. Royalty revenue based on sales or usage is recognized when the sales and usage occurs.

The transaction price on these contracts is usually structured as a royalty fee based on sales or usage over the period, measured on a quarterly basis. This results in a receivable balance if the billing is performed the following quarter after measurement. Some contracts include lump sum amounts, payable either up front at commencement or on an annual basis. This results in a contract liability balance if payment is in advance of revenue, as revenue is recognized over time.

As described in Note C3 “Segment Information” of the Annual Report 2017, revenue from IPR licensing contracts are allocated to the segments Networks and Digital Services.

 

 

Impact of IFRS 9 and IFRS 15 on balance sheet items               
                   Restated             Adjusted  
     As reported at      IFRS 15      balance at      IFRS 9      balance at  
     31.12 2017      restatement      31.12.2017      adjustment      1.1.2018  

ASSETS

              

Non-current assets

              

Deferred tax assets

     21,228        735        21,963        288        22,251  

Current assets

              

Inventories

     24,960        587        25,547        —          25,547  

Contract assets

     —          13,120        13,120        —          13,120  

Trade receivables

     63,210        -15,105        48,105        -1,240        46,865  

EQUITY AND LIABILITIES

              

Equity

              

Stockholder’s equity

     99,540        -2,605        96,935        -983        95,952  

Non-current liabilities

              

Borrowings, non-current

     30,500        —          30,500        31        30,531  

Current liabilities

              

Provisions

     6,350        -67        6,283        —          6,283  

Contract liabilities

     —          29,076        29,076        —          29,076  

Other current liabilities

     62,370        -27,065        35,305        —          35,305  

 

Segment reporting

Changes applied in Q1 2018

As of Q1 2018, sales related to 3PP routing business are reported in Networks (earlier Digital Services). Comparative periods have been restated to reflect this change. In Q1 2018, these sales were SEK 151 (160) million.

 

 

 

27      Ericsson  |  First Quarter Report 2018

  

 

Additional information


Table of Contents
Net sales by segment by quarter           
     2018     2017  

Isolated quarters, SEK million

   Q1     Q4     Q3     Q2     Q1  

Networks

     28,602       37,077       31,871       31,699       31,638  

Of which Products

     19,473       25,404       21,734       21,281       21,858  

Of which Services

     9,129       11,673       10,137       10,418       9,780  

Digital Services

     7,658       12,521       9,410       10,345       8,389  

Of which Products

     3,945       6,435       4,860       5,369       4,325  

Of which Services

     3,713       6,086       4,550       4,976       4,064  

Managed Services

     5,503       6,203       6,143       6,231       5,995  

Emerging Business and Other

     1,648       2,080       1,989       2,006       1,781  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     43,411       57,881       49,413       50,281       47,803  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2018     2017  

Sequential change, percent

   Q1     Q4     Q3     Q2     Q1  

Networks

     -23     16     1     0     —    

Of which Products

     -23     17     2     -3     —    

Of which Services

     -22     15     -3     7     —    

Digital Services

     -39     33     -9     23     —    

Of which Products

     -39     32     -9     24     —    

Of which Services

     -39     34     -9     22     —    

Managed Services

     -11     1     -1     4     —    

Emerging Business and Other

     -21     5     -1     13     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -25     17     -2     5     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2018     2017  

Year over year change, percent

   Q1     Q4     Q3     Q2     Q1  

Networks

     -10     —         —         —         —    

Of which Products

     -11     —         —         —         —    

Of which Services

     -7     —         —         —         —    

Digital Services

     -9     —         —         —         —    

Of which Products

     -9     —         —         —         —    

Of which Services

     -9     —         —         —         —    

Managed Services

     -8     —         —         —         —    

Emerging Business and Other

     -7     —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -9     —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2018     2017  

Year to date, SEK million

   Jan-Mar     Jan-Dec     Jan-Sep     Jan-Jun     Jan-Mar  

Networks

     28,602       132,285       95,208       63,337       31,638  

Of which Products

     19,473       90,277       64,873       43,139       21,858  

Of which Services

     9,129       42,008       30,335       20,198       9,780  

Digital Services

     7,658       40,665       28,144       18,734       8,389  

Of which Products

     3,945       20,989       14,554       9,694       4,325  

Of which Services

     3,713       19,676       13,590       9,040       4,064  

Managed Services

     5,503       24,572       18,369       12,226       5,995  

Emerging Business and Other

     1,648       7,856       5,776       3,787       1,781  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     43,411       205,378       147,497       98,084       47,803  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2018     2017  

Year over year change, percent

   Jan-Mar     Jan-Dec     Jan-Sep     Jan-Jun     Jan-Mar  

Networks

     -10     -6     —         —         —    

Of which Products

     -11     -4     —         —         —    

Of which Services

     -7     -8     —         —         —    

Digital Services

     -9     -8     —         —         —    

Of which Products

     -9     -10     —         —         —    

Of which Services

     -9     -4     —         —         —    

Managed Services

     -8     -11     —         —         —    

Emerging Business and Other

     -7     -10     —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -9     -7     —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

28      Ericsson  |  First Quarter Report 2018   

 

Additional information


Table of Contents

Sales growth adjusted for comparable units and currency*

 

          
     2018     2017  

Sequential change, percent

   Q1     Q4     Q3     Q2     Q1  

Networks

     -22     —         —         —         —    

Digital Services

     -38     —         —         —         —    

Managed Services

     -11     —         —         —         —    

Emerging Business and Other

     -20     —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -24     —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2018     2017  

Isolated quarter, year over year change, percent

   Q1     Q4     Q3     Q2     Q1  

Networks

     -2     —         —         —         —    

Digital Services

     -3     —         —         —         —    

Managed Services

     -4     —         —         —         —    

Emerging Business and Other

     -2     —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -2     —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2018     2017  

Year to date, year over year change, percent

   Jan-Mar     Jan-Dec     Jan-Sep     Jan-Jun     Jan-Mar  

Networks

     -2     —         —         —         —    

Digital Services

     -3     —         —         —         —    

Managed Services

     -4     —         —         —         —    

Emerging Business and Other

     -2     —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -2     —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

*   Sales growth adjusted for comparable units and currency has not been restated for 2017.

 

    

Gross income (loss) and gross margin by segment by quarter

 

 

Isolated quarters,    2018     2017  

SEK million

   Q1     Q4     Q3     Q2     Q1  

Networks

     11,127       11,849       10,654       10,894       10,031  

Digital Services

     2,947       1,154       2,710       3,335       -2,334  

Managed Services

     437       -731       -449       -26       -532  

Emerging Business and Other

     347       244       366       426       336  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     14,858       12,516       13,281       14,629       7,501  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Isolated quarters,    2018     2017  

As percentage of net sales

   Q1     Q4     Q3     Q2     Q1  

Networks

     38.9     32.0     33.4     34.4     31.7

Digital Services

     38.5     9.2     28.8     32.2     -27.8

Managed Services

     7.9     -11.8     -7.3     -0.4     -8.9

Emerging Business and Other

     21.1     11.7     18.4     21.2     18.9
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     34.2     21.6     26.9     29.1     15.7
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Year to date,    2018     2017  

SEK million

   Jan-Mar     Jan-Dec     Jan-Sep     Jan-Jun     Jan-Mar  

Networks

     11,127       43,428       31,579       20,925       10,031  

Digital Services

     2,947       4,865       3,711       1,001       -2,334  

Managed Services

     437       -1,738       -1,007       -558       -532  

Emerging Business and Other

     347       1,372       1,128       762       336  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     14,858       47,927       35,411       22,130       7,501  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Year to date,    2018     2017  

As percentage of net sales

   Jan-Mar     Jan-Dec     Jan-Sep     Jan-Jun     Jan-Mar  

Networks

     38.9     32.8     33.2     33.0     31.7

Digital Services

     38.5     12.0     13.2     5.3     -27.8

Managed Services

     7.9     -7.1     -5.5     -4.6     -8.9

Emerging Business and Other

     21.1     17.5     19.5     20.1     18.9
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     34.2     23.3     24.0     22.6     15.7
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

 

29      Ericsson  |  First Quarter Report 2018

  

 

Additional information


Table of Contents
Operating income (loss) and operating margin by segment by quarter  
Isolated quarters,    2018     2017  

SEK million

   Q1     Q4     Q3     Q2     Q1  

Networks

     3,371       1,945       2,375       3,424       2,711  

Digital Services

     -2,559       -12,260       -3,690       -2,197       -9,026  

Managed Services

     53       -1,284       -807       -297       -1,807  

Emerging Business and Other

     -1,177       -7,679       -1,530       -1,467       -3,154  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -312       -19,278       -3,652       -537       -11,276  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Isolated quarters,    2018     2017  

As percentage of net sales

   Q1     Q4     Q3     Q2     Q1  

Networks

     11.8     5.2     7.5     10.8     8.6

Digital Services

     -33.4     -97.9     -39.2     -21.2     -107.6

Managed Services

     1.0     -20.7     -13.1     -4.8     -30.1

Emerging Business and Other

     -71.4     -369.2     -76.9 %     -73.1     -177.1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -0.7     -33.3     -7.4     -1.1     -23.6
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Year to date,    2018     2017  

SEK million

   Jan-Mar     Jan-Dec     Jan-Sep     Jan-Jun     Jan-Mar  

Networks

     3,371       10,455       8,510       6,135       2,711  

Digital Services

     -2,559       -27,173       -14,913       -11,223       -9,026  

Managed Services

     53       -4,195       -2,911       -2,104       -1,807  

Emerging Business and Other

     -1,177       -13,830       -6,151       -4,621       -3,154  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -312       -34,743       -15,465       -11,813       -11,276  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Year to date    2018     2017  

As percentage of net sales

   Jan-Mar     Jan-Dec     Jan-Sep     Jan-Jun     Jan-Mar  

Networks

     11.8     7.9     8.9     9.7     8.6

Digital Services

     -33.4     -66.8     -53.0     -59.9     -107.6

Managed Services

     1.0     -17.1     -15.8     -17.2     -30.1

Emerging Business and Other

     -71.4     -176.0     -106.5     -122.0     -177.1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -0.7     -16.9     -10.5     -12.0     -23.6
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

 

30      Ericsson  |  First Quarter Report 2018

  

 

Additional information


Table of Contents
EBITA and EBITA margin by segment by quarter  
Isolated quarters,    2018     2017  

SEK million

   Q1     Q4     Q3     Q2     Q1  

Networks

     3,461       2,032       2,460       3,509       2,892  

Digital Services

     -2,395       -4,879       -3,497       -1,994       -8,268  

Managed Services

     58       -1,277       -806       -298       -1,803  

Emerging Business and Other

     -1,089       -1,201       -1,430       -1,309       -2,222  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     35       -5,325       -3,273       -92       -9,401  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Isolated quarters    2018     2017  

As percentage of net sales

   Q1     Q4     Q3     Q2     Q1  

Networks

     12.1     5.5     7.7     11.1     9.1

Digital Services

     -31.3     -39.0     -37.2     -19.3     -98.6

Managed Services

     1.1     -20.6     -13.1     -4.8     -30.1

Emerging Business and Other

     -66.1     -57.7     -71.9     -65.3     -124.8
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     0.1     -9.2     -6.6     -0.2     -19.7
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Year to date,    2018     2017  

SEK million

   Jan-Mar     Jan-Dec     Jan-Sep     Jan-Jun     Jan-Mar  

Networks

     3,461       10,893       8,861       6,401       2,892  

Digital Services

     -2,395       -18,638       -13,759       -10,262       -8,268  

Managed Services

     58       -4,184       -2,907       -2,101       -1,803  

Emerging Business and Other

     -1,089       -6,162       -4,961       -3,531       -2,222  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     35       -18,091       -12,766       -9,493       -9,401  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Year to date    2018     2017  

As a percentage of net sales

   Jan-Mar     Jan-Dec     Jan-Sep     Jan-Jun     Jan-Mar  

Networks

     12.1     8.2     9.3     10.1     9.1

Digital Services

     -31.3     -45.8     -48.9     -54.8     -98.6

Managed Services

     1.1     -17.0     -15.8     -17.2     -30.1

Emerging Business and Other

     -66.1     -78.4     -85.9     -93.2     -124.8
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     0.1     -8.8     -8.7     -9.7     -19.7
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

 

31      Ericsson  |  First Quarter Report 2018

  

 

Additional information


Table of Contents
Net sales by market area by quarter  
     2018     2017  

Isolated quarters, SEK million

   Q1     Q4     Q3     Q2     Q1  

South East Asia, Oceania and India

     6,379       7,844       7,858       7,234       8,410  

North East Asia

     3,385       6,465       5,653       5,901       5,564  

North America

     11,317       14,685       12,319       12,970       12,027  

Europe and Latin America 1) 2)

     13,061       16,939       13,430       14,231       12,201  

Middle East and Africa

     5,765       7,581       6,297       5,731       5,356  

Other 1) 2)

     3,504       4,367       3,856       4,214       4,245  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     43,411       57,881       49,413       50,281       47,803  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1) Of which in Sweden

     915       872       660       785       1,017  

2) Of which in EU

     8,522       10,822       8,635       8,687       8,328  
     2018     2017  

Sequential change, percent

   Q1     Q4     Q3     Q2     Q1  

South East Asia, Oceania and India

     -19     0     9     -14     —    

North East Asia

     -48     14     -4     6     —    

North America

     -23     19     -5     8     —    

Europe and Latin America 1) 2)

     -23     26     -6     17     —    

Middle East and Africa

     -24     20     10     7     —    

Other 1) 2)

     -20     13     -8     -1     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -25     17     -2     5     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1) Of which in Sweden

     5     32     -16     -23     —    

2) Of which in EU

     -21     25     -1     4     —    
     2018     2017  

Year-over-year change, percent

   Q1     Q4     Q3     Q2     Q1  

South East Asia, Oceania and India

     -24     —         —         —         —    

North East Asia

     -39     —         —         —         —    

North America

     -6     —         —         —         —    

Europe and Latin America 1) 2)

     7     —         —         —         —    

Middle East and Africa

     8     —         —         —         —    

Other 1) 2)

     -17     —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -9     —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1) Of which in Sweden

     -10     —         —         —         —    

2) Of which in EU

     2     —         —         —         —    
     2018     2017  

Year to date, SEK million

   Jan-Mar     Jan-Dec     Jan-Sep     Jan-Jun     Jan-Mar  

South East Asia, Oceania and India

     6,379       31,346       23,502       15,644       8,410  

North East Asia

     3,385       23,583       17,118       11,465       5,564  

North America

     11,317       52,001       37,316       24,997       12,027  

Europe and Latin America 1) 2)

     13,061       56,801       39,862       26,432       12,201  

Middle East and Africa

     5,765       24,965       17,384       11,087       5,356  

Other 1) 2)

     3,504       16,682       12,315       8,459       4,245  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     43,411       205,378       147,497       98,084       47,803  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1) Of which in Sweden

     915       3,334       2,462       1,802       1,017  

2) Of which in EU

     8,522       36,472       25,650       17,015       8,328  
     2018     2017  

Year to date, year-over-year change, percent

   Jan-Mar     Jan-Dec     Jan-Sep     Jan-Jun     Jan-Mar  

South East Asia, Oceania and India

     -24     0     —         —         —    

North East Asia

     -39     -13     —         —         —    

North America

     -6     1     —         —         —    

Europe and Latin America 1) 2)

     7     -9     —         —         —    

Middle East and Africa

     8     -9     —         —         —    

Other 1) 2)

     -17     -18     —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -9     -7     —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1) Of which in Sweden

     -10     -1     —         —         —    

2) Of which in EU

     2     -6     —         —         —    

 

 

32      Ericsson  |  First Quarter Report 2018

  

 

Additional information


Table of Contents
Top 5 countries in sales       
Country    Q1     Jan-Dec  

Percentage of Net sales

   2018     2017     2017  

United States

     27     27     27

India

     6     5     5

China

     4     7     7

Japan

     3     4     4

Saudi Arabia

     3     2     3

 

Net sales by market area by segment by quarter    
     Q1 2018  

SEK million

   Networks     Digital
Services
    Managed
Services
    Emerging
Business
and
Other
    Total  

South East Asia, Oceania and

          

India

     4,419       1,236       716       8       6,379  

North East Asia

     2,243       743       375       24       3,385  

North America

     9,348       1,282       660       27       11,317  

Europe and Latin America

     7,450       2,671       2,875       65       13,061  

Middle East and Africa

     3,495       1,388       878       4       5,765  

Other

     1,647       338       -1       1,520       3,504  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     28,602       7,658       5,503       1,648       43,411  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Share of total

     66     17     13     4     100
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Q1 2018  

Sequential change, percent

   Networks     Digital
Services
    Managed
Services
    Emerging
Business
and
Other
    Total  

South East Asia, Oceania and

          

India

     -25     -6     15     60     -19

North East Asia

     -48     -55     -26     —         -48

North America

     -21     -38     -2     -29     -23

Europe and Latin America

     -16     -40     -17     -26     -23

Middle East and Africa

     -16     -44     -6     -79     -24

Other

     -13     -37     0     -21     -20
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -23     -39     -11     -21     -25
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Q1 2018  

Year over year change, percent

   Networks     Digital
Services
    Managed
Services
    Emerging
Business
and
Other
    Total  

South East Asia, Oceania and

          

India

     -31     1     -6     —         -24

North East Asia

     -48     -13     -7     —         -39

North America

     0     -24     -28     8     -6

Europe and Latin America

     17     -6     -3     171     7

Middle East and Africa

     16     0     -7     —         8

Other

     -23     -12     —         -12     -17
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -10     -9     -8     -7     -9
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

 

 

33      Ericsson  |  First Quarter Report 2018

  

 

Additional information


Table of Contents
IPR licensing revenues by segment by quarter           
Isolated quarters,    2018      2017  

SEK million

   Q1      Q4      Q3      Q2      Q1  

Networks

     1,522        1,731        1,640        1,670        1,724  

Digital Services

     334        380        360        366        379  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     1,856        2,111        2,000        2,036        2,103  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     2018      2017  

Year to date, SEK million

   Jan-Mar      Jan-Dec      Jan-Sep      Jan-Jun      Jan-Mar  

Networks

     1,522        6,765        5,034        3,394        1,724  

Digital Services

     334        1,485        1,105        745        379  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     1,856        8,250        6,139        4,139        2,103  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

Provisions               
     2018      2017  

Isolated quarters, SEK million

   Q1      Q4      Q3      Q2      Q1  

Opening balance

     9,879        9,514        10,357        10,514        6,320  

Additions

     1,315        2,769        1,942        1,403        6,365  

Utilization/Cash out

     -2,216        -2,186        -2,626        -1,324        -2,085  

Of which restructuring

     -1,424        -1,204        -1,461        -1,075        -1,586  

Reversal of excess amounts

     -117        -199        -32        -65        -66  

Reclassification, translation difference and other

     169        -19        -127        -171        -20  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Closing balance

     9,030        9,879        9,514        10,357        10,514  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Of which restructuring

     3,524        4,043        3,458        4,003        4,059  
     2018      2017  

Year to date, SEK million

   Jan-Mar      Jan-Dec      Jan-Sep      Jan-Jun      Jan-Mar  

Opening balance

 &nb