24 slides from Telefonaktiebolaget Lm Ericsson Class A's earnings presentation, Jan 26, 2017
Slide 1: Jan 26, 2017
Jan 26, 2017
Slide 2: Fourth Quarter 2016
FOURTH ERICSSON QUARTER 2016 Jan 26, 2017 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 an
Slide 3: Borje Ekholm, President and CEO
ERICSSON BORJE EKHOLM President and CEO
Slide 4: Market and Ericsson
Market Challenging macro, especially in emerging markets, impacting operator investment levels Continued industry convergence across telecom, IT and media sectors Increased customer focus on digital transformation enabled by 5G, loT and Cloud Ericsson Sales and gross margin declined primarily relate
Slide 5: Full Year 2016
FULL YEAR 2016 » Weaker demand for mobile broadband especially in markets with a weak macroeconomic environment >» Operating income decreased due to lower sales and lower gross margin, partly offset by lower operating expenses » Cash flow from operating activities was SEK 14.0 (20.6) b. — Impacted b
Slide 6: Proposed Dividend by Board of Directors
PROPOSED DIVIDEND BY BOARD OF DIRECTORS W = Dividend per share Earnings per share, basic » SEK 1.00 (3.70) — In total ~SEK 3.3 (12.1) b. SEK » The dividend proposal is aligned with 2016 earnings and current market outlook 4.17 3.72 3.70 3.40 3:57 3.00 » Record date: March 31, 2017 2.75 1.80 1.00 201
Slide 7: Jan Frykhammar, Executive Vice President
ERICSSON JAN FRYKHAMMAR Executive Vice President
Slide 8: Fourth Quarter 2016
W FOURTH QUARTER 2016 >» Sales declined -11% YoY due to lower IPR revenues SEK b. excl. 1604 | 1504 16Q3 — FX and IPR adjusted sales declined -7% YoY restructuring | — The underlying market remained weak in quarter with further weakness in Latin America Sales 65:2 SMS) oil » Stronger than expected Q
Slide 9: Regional Sales Q4 YoY
REGIONAL SALES Q4 YoY W SEK 74 b. 63% 25% SEK 65 b. -49 -4% 9% 8% 4% 4% 5% —) | Ra © Ss ys se a S 30 a i a s S e oe cS & & S w se SI Ss Co S As RJ Sy Se > ¢ c) Major IPR agreement signed Q4 2015 impacting region Other © Telefonaktiebolaget LM Ericsson 2017 | FOURTH QUART
Slide 10: Regional Sales Q4 QoQ
REGIONAL SALES Q4 QoQ W 57% SEK 65.2 b. = 19% SEK51.1b. 2% 1% ‘ . s ae RO a e # Bo @ #& e s é a ye oe a s & S * ne & & & se" ea c SY OF Ro & s & 0 ae x RS ¢ Ye Se oe iS) NS x 3 $ x Mi % 3 Sf x + ~s w > £ S 2 & Ss 3 ¢ SS = ) Driven by currency and hardware deliveries previously planned for Q1 17 17 |
Slide 11: Segment Summary
SEGMENT SUMMARY Excluding restructuring charges Networks SEK b 1604 | 1504 Sales 324 37.3 23.3 Opincome 3.2 74 0.4 16Q3 » Sales adj. for FX and IPR -6% YoY — Weak mobile broadband market » Sales adj. for FX +33% QoQ — Hardware deliveries » Op margin 10% (20%) — Lower IPR and lower sales >» Full year
Slide 12: Carl Mellander, Chief Financial Officer
ERICSSON CARL MELLANDER Chief Financial Officer
Slide 13: Operating Income Q4 YoY, excl. restructuring
OPERATING INCOME S Q4 YoY, EXCL. RESTRUCTURING SEK b. OM 16% a om 1% i co | OM 7% program ae Q415 IPR Q415 adj. for Expenses Volume Gross Other Q416 adjustment IPR excl one-offs margin Operating margin 7% Q416 (compared with 10% Q415 when adjusted for IPR)
Slide 14: Gross Margin
GROSS MARGIN EXCL. RESTRUCTURING W » YoY gross margin declined due to lower IPR 40% > 36 30% 5 36.6% © 4 % » 5.1% 9f licensing revenues and a higher share of services ah 33.9% 33.2% sales with reduced margin aa 29.4% 29.4% f >» QoQ gross margin was stable >» Current industry trends and business mix
Slide 15: Cost Savings
COST SAVINGS >» Cost and efficiency program tracking towards target of operating expenses (opex) of SEK 53 b. >» Opex excl. restr. and one-time items decreased YoY to SEK 14.8 (15.5) b. ~ Mainly related to cost and efficiency program — One-time items of SEK -0.4 b. ~ FX headwind >» Cost of sales red
Slide 16: Change in Gross Cash YoY
W CHANGE IN GROSS CASH YOY a 70 | +84 6. = oe J - +2 Ee 663 12.3 ora 40 4 = Change in gross cash SEK -8.4 b 30 + ; T T , r Gross Cash NetIncome Change Net Restructuring CAPEX Acquisitions, Other Dividend FXoncash Gross Cash 1512A reconciled to Operating divestments & financing 1612A cash Assets Othe
Slide 17: Main Components, Products and Services
W Main components Main components products services Customer Support Network Rollout Network Managed Services Radio Transport OSS & BSS Cloud, NFV/SDN Consulting & Systems Integration IT Managed Services Telecom core IP routing Media Compression Content delivery Consulting & Systems Integration Broa
Slide 18: Planning Assumptions
PLANNING ASSUMPTIONS EXTRACTED FROM THE Q4 REPORT W » Business — Current industry trends and business mix in mobile broadband are expected to prevail in 2017 - Q4 sales impacted by hardware deliveries, previously planned for Q117 — RAN equipment market in USD estimated to decline by -2% to -6% in 20
Slide 19: Borje Ekholm, President and CEO
ERICSSON BORJE EKHOLM President and CEO
Slide 20: Focus Forward
FOCUS FORWARD » Review priorities to set future direction for company - Involving key teams to secure quality of decisions and speed in implementation once decisions are made - Emphasis on refining strategy to focus investments in areas where we both must and can win » Near term focus to create stab
Slide 21: Mobile World Congress
AN MOBILE WORLD CONGRESS FEB 27-MAR 2 HALE 2, FIRA GRAN VIA, BARCELONA Media and analyst briefing — Monday Feb 27 nf 00 am Seminars and meeti igs with _ and experts — Feb 27-28 e ™~ ‘ \yf ra 4 4 ays Vy f mM : i ; Main themes: 5G, Cloud a Mita Transformation
Slide 22: © Telefonaktiebolaget LM Ericsson 2017 | FOURTH QUARTER REPORT 2016 | JAN 26, 2017
© Telefonaktiebolaget LM Ericsson 2017 | FOURTH QUARTER REPORT 2016 | JAN 26, 2017 | Page 22 W
Slide 23: Ericsson
ERICSSON
Slide 24: Fourth Quarter 2016
FOURTH ERICSSON QUARTER 2016 Jan 26, 2017 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 an