31 slides from Telefonaktiebolaget Lm Ericsson Class A's earnings presentation, Apr 21, 2016
Slide 1: First Quarter 2016
FIRST QUARTER 2016 April 21, 2016
Slide 2: Helena Norrman, Senior Vice President Communications
HElena norrman Senior Vice President Communications
Slide 3: First Quarter 2016 forward-looking statements
FIRST QUARTER 2016 This presentation contains forward-looking statements. Such statements are based on our current expectations and are subject to certain risks and uncertainties that could negatively affect our business. Please read our earnings reports and our most recent annual report for April 2
Slide 4: Hans Vestberg, President and CEO
HANS VESTBERg President and CEO
Slide 5: Key developments Q1
key developments Q1 Market › Strong focus on 5G and Internet of Things (IoT) at MWC › Weak macro-economic environment in certain emerging markets. However transition from 3G to 4G continues. › Less coverage projects in Europe › Continued operator focus on digital transformation Ericsson › Stable sal
Slide 6: Net sales and operating income Q1 2016
Ericsson q1 2016 SEK b. 80 Net sales and sales development 13% 11% 9% 8% 60 3% 1% › Reported sales down -2% YoY 40 -1% -2% – Organic FX adjusted sales stable YoY 20 – Lower Network Rollout activities in Europe and Lat Am -9% – Lower software sales in IP and core, stable sales in Radio 0 Q1 Q2 Q3 Q4
Slide 7: Regional sales Q1 YoY
Regional sales Q1 YoY Weak macro-economic environment in certain markets © Telefonaktiebolaget LM Ericsson 2016 | FIRST QUARTER REPORT 2016 | APRIL 21, 2016 | Page 7
Slide 8: Jan Frykhammar, CFO and Executive Vice President
JAN FRYKHAMMAR CFO and Executive Vice President
Slide 9: Cost Savings
Cost Savings Operating expenses › Cost and efficiency program on track SEK b. – Target to achieve net annual savings of SEK 9 b. during 2017 – Increased efforts to further reduce cost of sales 18 17.8 17.7 › Operating expenses decreased YoY to SEK 14.2 15.6 15.6 15.9 16 15.3 (15.6) b. 14.7 14.9 14.2
Slide 10: Currency exposure
Currency exposure Sales YoY change, Q1 2016 Reported Organic and FX adj. SEK/USD Networks -2% -3% 8.80 Global Services -4% 0% 8.60 Support Solutions 10% 5% Group -2% -1% 8.40 8.20 2015 8.11 2016 8.00 Sales net exposure, 2015 7.80 7.60 Jan Feb Mar Apr May Jun Jul Aug Sep Okt Nov Dec SEK and JPY, 2% o
Slide 11: Gross margin Q1
Gross margin Q1 Gross margin › Gross margin 33.3% (35.4%) YoY – Gross margin declined despite higher IPR revenues and 40% increased capacity sales in North America – Lower margin in Global Services 38% – Higher share of mobile broadband coverage projects in 36% parts of Asia 33.9% 34% – Lower softwa
Slide 12: Operating Income Q1 YoY
Operating Income Q1 YoY SEK b. Q1 2015 Q1 2016 6.7% Increased restructuring Gross margin, 4.0% excluding Primarily restructuring in R&D 33.9% (36.3%) SEK 0.2 (-1.4) b. 3.5 Reported sales -2% 2.1 Q115 Volume Gross margin Expenses Hedge impact Other Q116 Improve profitability: Efficiency improvements,
Slide 13: Operating income by Segment
Operating income by Segment SEK b. Q1 2015 Q1 2016 -0.4 Operating -0.7 6.7% margin, excl. 0.2 2.3 restructuring -11% (-3%) Operating Operating margin, excl. margin, excl. 4.0% restructuring restructuring 9% (12%) 8% (3%) Operating margin, excl. 3.5 restructuring 2.1 12% (3%) Global Services Q115 Net
Slide 14: Change in gross cash Q1
Change in gross cash Q1 16Q1A Operating Cash Flow Investing1 Financing FX on cash -2.4 b -2.0 b +0.1 b -1.0 bb 80 75 70 65 +3.6 -5.5 -0.5 60 -1.5 -0.5 +0.1 -0.0 -1.0 55 50 66.3 Change in gross cash SEK -5.3 b 45 61.0 40 35 30 Gross Cash Net Income Change Net Restructuring CAPEX Acquisitions, Other f
Slide 15: Hans Vestberg, President and CEO
HANS VESTBERg President and CEO
Slide 16: Networks
Networks SEK b. Net sales and sales development 40 13% 8% 9% 8% 30 3% › Organic FX adjusted sales down -3% YoY 20 -2% -4% -2% – Lower software sales in IP and core 10 -13% – Radio business stable with growth in North America and South East Asia 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 – Lower mobile broadband i
Slide 17: Global Services
Global services SEK b. Net sales and sales development 30 30% 20% 20 › Organic FX adjusted sales flat YoY 10% – Lower Network Rollout activities in Europe and Latin 10 0% America – Professional Services stable, Systems Integration grew 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 -10% › Operating income SEK 0.6 (1.
Slide 18: Support Solutions
Support solutions Net sales and sales development SEK b. 6 40% 30% 21% 4 › Organic FX adjusted sales up 5% YoY 13% 11% 9% 8% 10% – Higher IPR revenues 2 -21% – OSS and BSS declined due to lower software licenses sales 0 – TV and Media sales flat Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 › Operating income SEK 0.2
Slide 19: Ericsson accelerates transformation to drive growth and profitability
Ericsson accelerates transformation to drive growth and profitability
Slide 20: Today's announcement
Today’s announcement › New company structure to accelerate strategy execution and improve performance › Focus on meeting changing customer requirements and capture market opportunities to drive growth › Strong focus on cost and efficiency across company › New business unit structure and appointments
Slide 21: Transformation status
Transformation status We are transforming… … but challenges still exist Workforce transformation Organic growth 17K left 14K joined 2014 2015 2011 2012 2013 2014 2015 Growth in targeted areas Profitability +20 % ~45 SEK b. 2014 2015 2011 2012 2013 2014 2015 Strong partnerships & collaborations New c
Slide 22: New structure, July 1
New structure, july 1 regions, Business units and Group Functions 10 Regions › 10 Regions focusing on quality in sales and service delivery to operators › 3 Customer Groups with central go-to-market for non-operator customers 3 Customer Groups (Industry & Society, IPR and Cable & Broadcast) › Busine
Slide 23: New structure effective July 1, 2016
Ericsson New structure – effective July 1, 2016 Group Functions C CEO GF Finance & Common GF Sales Functions GF Legal Affairs Hans Vestberg GF Strategy GF Human Resources U GF Technology GF Marketing & Communications GF Sustainability & CR Business Unit S Network Products Region (10) Business Unit N
Slide 24: Overview new structure
Overview new structure % of Ericsson Addressable market Main components Main components sales 20152 2014 (USD b.)1 products services Customer Support Radio Network Rollout Networks ~ 70% ~120 Transport Network Managed Services OSS & BSS Consulting & Cloud IT & Cloud ~ 25% Systems Integration ~100 NF
Slide 25: Efficiency benefits and customer benefits
Efficiency Customer benefits Benefits Simplified structure between Evolved go-to-market model business units and regions – Optimized for Simplified with clear end-to-end increased accountability and different customer accountability, based on structure empowerment needs customer type Closer set-up b
Slide 26: New structure supports profit improvements
New Structure supports profit improvements Clear structure to support strategy execution Stronger support for Executing on current cost core business & efficiency program Remove duplications in portfolios Build success 9% operating in targeted margin, 2015 growth areas Monetize footprint Efficiency
Slide 27: Aligns strategy with reporting
Aligns strategy with reporting › Financial reporting according to new structure Business Unit Network Products › More information at CMD – November 9, 2016 Business Unit Network Services › Restated numbers will be presented beginning 2017 Business Unit IT & Cloud Products › External reporting from Q
Slide 28: Today's announcement
Today’s announcement › New company structure to accelerate strategy execution and improve performance › Focus on meeting changing customer requirements and capture market opportunities to drive growth › Strong focus on cost and efficiency across company › New business unit structure and appointments
Slide 29: © Telefonaktiebolaget LM Ericsson 2016 | FIRST QUARTER REPORT 2016 | APRIL 21, 2016
© Telefonaktiebolaget LM Ericsson 2016 | FIRST QUARTER REPORT 2016 | APRIL 21, 2016 | Page 29
Slide 30: Ericsson
ERICSSON
Slide 31: First Quarter 2016 forward-looking statements
FIRST QUARTER 2016 This presentation contains forward-looking statements. Such statements are based on our current expectations and are subject to certain risks and uncertainties that could negatively affect our business. Please read our earnings reports and our most recent annual report for April 2