Ericsson reports first quarter results 2023
On April 18, 2023, Ericsson reported its Q1 2023 results, highlighting a stable organic sales performance with a slight decline in Networks segment sales by 2% due to reduced operator capex. Total reported sales rose to SEK 62.6 billion, up from SEK 55.1 billion YoY. Gross income, excluding restructuring charges, increased to SEK 24.9 billion, while reported gross margin fell to 38.6% from 42.3%. EBITA, excluding restructuring, was SEK 4.8 billion, down 4% YoY. Net income dropped to SEK 1.6 billion, with EPS diluted falling to SEK 0.45. The company reported negative free cash flow of SEK -8.0 billion due to working capital changes. Looking ahead, Ericsson expects a gradual recovery in the second half of 2023, driven by large 5G roll-out projects.
- Reported sales increased to SEK 62.6 billion, a 14% YoY growth.
- Enterprise segment showed strong performance with 19% organic growth.
- Cost savings plan expected to reduce cost run rate by SEK 11 billion by year-end.
- Organic sales in Networks declined by 2% YoY.
- Gross margin dropped to 38.6% from 42.3% due to changing business mix.
- Net income fell by 46% YoY to SEK 1.6 billion.
First quarter highlights – Executing in a challenging market
- Group organic sales[1] were unchanged YoY. As expected, segment Networks organic sales[1] declined by -
2% , driven by lower operator capex and inventory optimization among multiple customers. The decline was offset by growth in other business segments. Reported sales increased toSEK 62.6 (55.1) b.
- Gross income excluding restructuring charges increased to
SEK 24.9 (23.3) b. mainly driven by Enterprise as well asCloud Software and Services. Reported gross income wasSEK 24.2 (23.3) b.
- Gross margin excluding restructuring charges was
39.8% (42.3% ) primarily impacted by changed business mix in Networks. Reported gross margin was38.6% (42.3% ).
- EBITA excluding restructuring charges amounted to
SEK 4.8 (5.0) b. EBITA wasSEK 3.8 (4.9) b.
- Net income was
SEK 1.6 (2.9) b. EPS diluted wasSEK 0.45 (0.88).
- Free cash flow before M&A was
SEK -8.0 (-1.7) b. Cash flow was impacted by an increase in working capital. Net cash onMarch 31, 2023 , wasSEK 13.6 b. compared withSEK 23.3 b. onDecember 31, 2022 .
SEK b. | Q1 | Q1 | YoY | Q4 | QoQ |
Net sales | 62.6 | 55.1 | 14 % | 86.0 | -27 % |
Sales growth adj. for comparable units and currency[2] | - | - | 0 % | - | - |
Gross margin[2] | 38.6 % | 42.3 % | - | 41.4 % | - |
EBIT | 3.0 | 4.7 | -36 % | 7.9 | -61 % |
EBIT margin[2] | 4.9 % | 8.6 % | - | 9.1 % | - |
EBITA[2] | 3.8 | 4.9 | -22 % | 9.0 | -57 % |
EBITA margin[2] | 6.2 % | 9.0 % | - | 10.5 % | - |
Net income | 1.6 | 2.9 | -46 % | 6.2 | -75 % |
EPS diluted, SEK | 0.45 | 0.88 | -49 % | 1.82 | -75 % |
Measures excl. restructuring charges[2] | |||||
Gross margin excluding restructuring charges | 39.8 % | 42.3 % | - | 41.5 % | - |
EBIT excluding restructuring charges | 4.0 | 4.8 | -16 % | 8.1 | -50 % |
EBIT margin excluding restructuring charges | 6.4 % | 8.7 % | - | 9.4 % | - |
EBITA excluding restructuring charges | 4.8 | 5.0 | -3 % | 9.3 | -48 % |
EBITA margin excluding restructuring charges | 7.7 % | 9.1 % | - | 10.8 % | - |
Free cash flow before M&A | -8.0 | -1.7 | - | 16.9 | - |
Net cash, end of period | 13.6 | 65.2 | -79 % | 23.3 | -42 % |
[1] Sales adjusted for comparable units and currency
[2] Non-IFRS financial measures are reconciled at the end of this report to the most directly reconcilable line items in the financial statements.
Comments from
We are on a journey to shape the future industry landscape and extend our addressable market by leveraging our 5G capabilities. We continue to execute on our strategy to strengthen our leadership in Mobile Networks, grow our enterprise business, and drive continued cultural transformation.
Q1 in line with expectations
Group organic sales[1] were flat, as the expected decline in Networks was offset by growth in other business segments, including a
Organic sales[1] in Networks decreased by -
Following the strong cash flow in Q4, the first quarter cash flow was negative. Compared to last year working capital grew related to the changed business mix with the two components: increased customer financing for large roll-out projects in new 5G markets and reduced trade payables. As usual, Q1 cash flow was seasonally impacted by pay-out of accrued employee-related expenses.
Cost saving initiatives accelerated and increased
Cost efficiency is crucial for our long-term competitiveness. We have accelerated our cost-out execution and have identified additional savings opportunities of
Progress in responsible business and integrity
As announced in the quarter, we reached a resolution with the
Driving execution of our strategy
Leadership in Mobile Networks based on technology leadership is a top priority. In Networks we introduced many new market leading products at
We are capitalizing on our leadership position in Mobile Networks and are building momentum towards our vision of a network API platform. Last year we tested Ericsson Dynamic End-user Boost with SmarTone in
With the acquisition of Ericom with its advanced cloud-based security and zero-trust technology, we will accelerate our security offering in Enterprise Wireless Solutions. We now have the capabilities to build a full-stack security service optimized for 5G. A cornerstone in our Enterprise Wireless Solutions is to build a dedicated go-to-market organization which in the short term requires investments. These investments, in combination with the subscription model with deferred revenue, impact reported profitability in the short term. Longer term the business area has an attractive profitability profile.
We continue to finetune our portfolio to optimize profitability across our business. By end of Q1, we closed the divestiture of our IoT platform business, which reduces quarterly losses by about
Managing choppy 2023
We continue to see a choppy environment during 2023 with poor visibility. In Q2, we expect operators to remain cautious with capex investments and continue to adjust inventories. We expect this dynamic to largely be offset by growth from large roll-out projects which, as noted earlier, will be dilutive to gross margin in the short term. In the Enterprise segment, we remain confident of the long-term growth trajectory, and we expect the slower growth we saw in Q1, caused by the slower global economy, to continue in Q2. For Q2, we expect Group EBITA[2] margin to reach mid-single-digit level. We expect a gradual recovery in the second half of 2023, primarily as we expect the inventory adjustments to be completed and our cost reduction activities to start flowing through the P&L. Long-term, previous experience tells us that when operators are seeing underlying traffic growth, this leads to investments in networks in order to avoid deteriorating quality.
Our strategy is paying off and we are excited about our position to capitalize on the full value of 5G. We are driving our transformation to a platform company with a focus on creating a stronger and more profitable
Börje Ekholm
President and CEO
[1] Sales adjusted for comparable units and currency
[2] Excluding restructuring charges
NOTES TO EDITORS
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