Ericsson reports third quarter results 2022
Ericsson's Q3 2022 results show 3% organic sales growth to SEK 68.0 billion, aided by the Vonage acquisition. Gross income rose to SEK 28.1 billion, though gross margin decreased to 41.4%. EBITA dropped 18% to SEK 7.6 billion, with a margin of 11.2%, impacted by higher investments and one-off costs. Net income stood at SEK 5.4 billion, down 7%. Free cash flow fell significantly by 80% to SEK 2.5 billion due to working capital buildup. The company emphasizes ongoing contracts expected to enhance sales in Q4 and 2023.
- 3% organic sales growth driven by Networks in North America.
- Successful integration of Vonage contributing SEK 2.9 billion in sales.
- Significant contracts signed, expected to increase sales in Q4 and 2023.
- Gross margin declined to 41.4% from 44.0%.
- EBITA decreased by 18% to SEK 7.6 billion.
- Free cash flow before M&A dropped 80% to SEK 2.5 billion.
- Net cash decreased by 76% from previous quarter.
STOCKHOLM, Oct. 20, 2022 /PRNewswire/ --
Third quarter highlights
- Group organic sales[1] grew by
3% YoY driven primarily by Networks in North America. Reported sales were SEK 68.0 (56.3) b., of which Vonage contributed SEK 2.9 b. since July 21. - Gross income increased to SEK 28.1 (24.8) b. driven by higher sales primarily in Networks, and the consolidation of Vonage.
- Gross margin was
41.4% (44.0% ) impacted by lower IPR revenues of SEK -1.1 b YoY, supply chain costs and larger share of services following footprint expansion in Networks. - EBITA amounted to SEK 7.6 (9.3) b. with an EBITA margin of
11.2% (16.5% ). EBITA was primarily impacted by increased investments in technology, selling expenses in segment Enterprise (mainly from consolidation of Vonage) and one-off costs of SEK -0.5 b. - EBIT amounted to SEK 7.1 (8.8) b. with an EBIT margin of
10.5% (15.7% ). - Significant contracts with further increased geographic footprint have been signed. These and earlier signed contracts will continue to increase sales in Q4 and are expected to contribute with considerable volumes in 2023.
- Net income was SEK 5.4 (5.8) b.
- Free cash flow before M&A was SEK 2.5 (13.0) b. Cash flow was lower mainly due to working capital buildup. Net cash on September 30, 2022, was SEK 13.4 b. compared with SEK 70.3 b. on June 30, 2022.
- Vonage transaction completed on July 21. Vonage EBITA was positive, excluding one-off acquisition cost and acquisition accounting.
SEK b. | Q3 | Q3 | YoY | Q2 | QoQ | Jan-Sep | Jan-Sep | YoY |
Net sales | 68.0 | 56.3 | 21 % | 62.5 | 9 % | 185.6 | 161.0 | 15 % |
Sales growth adj. for comparable units and currency[2] | - | - | 3 % | - | - | - | - | 3 % |
Gross margin[2] | 41.4 % | 44.0 % | - | 42.1 % | - | 41.9 % | 43.4 % | - |
EBIT | 7.1 | 8.8 | -19 % | 7.3 | -3 % | 19.2 | 19.9 | -4 % |
EBIT margin[2] | 10.5 % | 15.7 % | - | 11.7 % | - | 10.3 % | 12.4 % | - |
EBITA[2] | 7.6 | 9.3 | -18 % | 7.5 | 2 % | 20.0 | 21.0 | -4 % |
EBITA margin[2] | 11.2 % | 16.5 % | - | 12.0 % | - | 10.8 % | 13.0 % | - |
Net income | 5.4 | 5.8 | -7 % | 4.7 | 15 % | 12.9 | 12.8 | 1 % |
EPS diluted, SEK | 1.56 | 1.73 | -10 % | 1.35 | 16 % | 3.80 | 3.79 | 0 % |
| ||||||||
Gross margin excluding restructuring charges | 41.4 % | 44.0 % | - | 42.2 % | - | 41.9 % | 43.5 % | - |
EBIT excluding restructuring charges | 7.2 | 8.8 | -19 % | 7.4 | -2 % | 19.3 | 20.0 | -3 % |
EBIT margin excluding restructuring charges | 10.6 % | 15.7 % | - | 11.8 % | - | 10.4 % | 12.4 % | - |
EBITA excluding restructuring charges | 7.7 | 9.3 | -17 % | 7.5 | 2 % | 20.2 | 21.0 | -4 % |
EBITA margin excluding restructuring charges | 11.3 % | 16.5 % | - | 12.0 % | - | 10.9 % | 13.1 % | - |
Free cash flow before M&A | 2.5 | 13.0 | -80 % | 4.4 | -43 % | 5.3 | 18.6 | -71 % |
Net cash, end of period | 13.4 | 55.7 | -76 % | 70.3 | -81 % | 13.4 | 55.7 | -76 % |
[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 Börje Ekholm, President and CEO of Ericsson (NASDAQ: ERIC)
We see robust underlying performance and strong momentum in the business as we continue to execute on our strategy. This includes leadership in mobile networks by growing market share. Since 2017 we have increased RAN market share, excluding Mainland China, from
Group Net Sales[1] in the quarter grew by
Our Networks business saw strong organic sales[1] growth of
To fully benefit from the performance and features of 5G it is crucial to leverage on mid-band frequencies. The global 5G build-out is still in its early stages with less than a quarter of global LTE nodes upgraded with mid-band. We expect to see many new use cases for 5G where we already see Fixed Wireless Access gaining increasing traction. The broader consumer and enterprise applications of 5G will also boost demand for network performance, hence we predict a longer investment cycle than for previous mobile generations.
One cornerstone in our expansion into Enterprise is Vonage. 5G offers unique capabilities such as high speed and low latency. We expect to see these capabilities be exposed, consumed and paid for through network APIs. We are intensively working with frontrunner operators to enable further monetization of their network investments through our global network platform. More broadly, we expect the acquisition to be highly accretive, enabling us to help customers accelerate their digital transformations while also significantly shaping how 5G networks are monetized. This will give the operators new revenue sources driving further investments in the network. In the Enterprise Wireless Solutions business, we have almost doubled sales in Q3 compared with Q3 2021.
In the new Cloud Software & Services segment, revenues were impacted by lower managed services sales and IPR revenues. Gross income was stable after offsetting ongoing 5G Core deployment costs. We have an ambition to unleash the great potential that we believe is present in this business. Our new management team is taking further actions to turn around the business and establish a satisfactory profitability. This includes strong focus on driving down costs, including realizing synergies from combining two business areas, while solidifying our technology and market leadership position. Improvements in performance will be gradual.
In the current inflationary environment, we are making pricing adjustments as well as leveraging product substitution to manage margins. We are also simplifying operations across the company and will continue to be proactive in reviewing options to reduce costs, whilst continuing to develop best-in-class products and services. We are fundamentally strengthening cost competitiveness through an intense focus on internal end-to-end efficiency gains and structural costs. We are dedicated to our long-term target of EBITA margin of 15
Strengthening the Ericsson culture is a key part of our strategic priorities. We are dedicated to acting with integrity in everything we do and have taken significant steps in developing our ethics and compliance program, while enhancing our risk management framework. We have changed, but we have more to do. We continue to engage with the Department of Justice and the Securities and Exchange Commission in relation to the 2019 Iraq investigation report and the DPA breach notices and are fully committed to cooperating with government authorities.
In summary, the focused strategy, which is built on the strength of our mobile networks business and supported by investment in R&D driving technology leadership, is leading to increased market share and delivery of robust financial performance. This is complemented by our high-growth Enterprise market strategy.
I want to thank all of our fantastic team around the world for their hard work and dedication. We look forward to discussing our strategy and execution at our upcoming Capital Markets Day in December.
Börje Ekholm
President and CEO
[1] Sales adjusted for comparable units and currency
[2] Excluding restructuring charges
You find the complete report with tables in the attached PDF or on www.ericsson.com/investors
Video webcast for analysts, investors and journalists
President and CEO Börje Ekholm and CFO Carl Mellander will comment on the report and take questions at a video webcast at 9:00 AM CEST (8:00 AM BST London, 3:00 AM EDT New York).
Join the webcast or please go to www.ericsson.com/investors
To ask a question:Access dial-in information here
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FOR FURTHER INFORMATION, PLEASE CONTACT
Contact person
Peter Nyquist, Head of Investor Relations
Phone: +46 705 75 29 06
E-mail: peter.nyquist@ericsson.com
Additional contacts
Stella Medlicott, Senior Vice President, Marketing and Corporate Relations
Phone: +46 730 95 65 39
E-mail: media.relations@ericsson.com
Investors
Lena Häggblom, Director, Investor Relations
Phone: +46 72 593 27 78
E-mail: lena.haggblom@ericsson.com
Stefan Jelvin, Director, Investor Relations
Phone: +46 709 86 02 27
E-mail: stefan.jelvin@ericsson.com
Media
Kirsty Fitzgibbon, VP, Head of External Relations, acting
Phone: +46 730 95 81 57
E-mail: kirsty.fitzgibbon@ericsson.com
Kristoffer Edshage, Head of Regulatory and Financial Communication
Phone: +46 722 20 44 46
E-mail: media.relations@ericsson.com
Corporate Communications
Phone: +46 10 719 69 92
E-mail: media.relations@ericsson.com
This is information that Telefonaktiebolaget LM Ericsson is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above, at 07:00 CEST on October 20, 2022.
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Ericsson third quarter report 2022 |
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SOURCE Ericsson
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