Telefonaktiebolaget LM Ericsson Class A · OMXSTO:ERIC_A
Telefonaktiebolaget LM Ericsson Class A — Ericsson — Q4 2015 Earnings Presentation
27 slides from Telefonaktiebolaget LM Ericsson Class A's earnings presentation, Jan 27, 2016
Slide 1: Fourth Quarter 2015
FOURTH QUARTER 2015 January 27, 2016
Slide 2: Helena Norrman, Chief Marketing and Communications Officer
HElena norrman Senior Vice President Chief Marketing and Communications Officer
Slide 3: Forward-looking statements
FOURTH QUARTER 2015 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 Januar
Slide 4: Hans Vestberg, President and CEO
HANS VESTBERg President and CEO
Slide 5: Key market developments
key market developments › Strong focus on 5G and Internet of Things (IoT) › Transition from 3G to 4G in emerging markets › Accelerating ICT transformation in mature 4G markets › Currency movements and weaker macro in parts of the world impact customer investments © Telefonaktiebolaget LM Ericsson 20
Slide 6: Key Ericsson developments
key ericsson developments › Important IPR agreements signed › Stable investments in North America › Good growth in targeted areas › Strategic partnership with Cisco › Cost and efficiency program on track › NRO closer to sustainable profitability › Cash conversion target achieved › Proposed dividend
Slide 7: Regional sales full year 2015 YoY
Regional sales full year 2015 YoY 74% SEK 247 b. 33% 7% 21% SEK 228 b. -14% 7% 18% -5% 0% 1% 2% Sales impacted by strong USD © Telefonaktiebolaget LM Ericsson 2016 | FOURTH QUARTER REPORT 2015 | JANUARY 27, 2016 | Page 7
Slide 8: Ericsson FY 2015
Ericsson FY 2015 Net sales, SEK b. 227 228 247 › Organic FX adjusted sales -5% – North America impacted by operators’ 2013 2014 2015 focus on cash flow Operating income, SEK b. 11% – Growth in Professional Services and IPR 10% 8% licensing business 9% OM%, excl. restructuring 8% › Operating margin,
Slide 9: Regional sales Q4 YoY
Regional sales Q4 YoY 91% SEK 74 b. 31% SEK 68 b. -30% -13% -11% -7% 34% -7% -3% 9% 8% Strong growth in IPR licensing and North America. Emerging markets slowed down. © Telefonaktiebolaget LM Ericsson 2016 | FOURTH QUARTER REPORT 2015 | JANUARY 27, 2016 | Page 9
Slide 10: Ericsson Q4 2015 net sales and operating income
Ericsson Q4 2015 SEK b. Net sales and sales development 80 13% 11% 9% 8% 60 1% 3% 0% › Reported sales up 8% YoY 40 -1% – Organic FX adjusted sales down -1% YoY 20 -9% › Reported sales up 24% QoQ 0 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 – Additional hardware sales in North America 2013 2014 2015 – Mainland China
Slide 11: Jan Frykhammar, Executive Vice President and CFO
JAN FRYKHAMMAR Executive Vice President and CFO
Slide 12: IPR licensing business
IPR licensing business IPR revenues SEK b. 14.4 › IPR licensing revenues SEK 14.4 (9.9) b. Including Apple – Contract signed with Apple 2 agreement 10.6 › Initial payment Excluding 9.9 › Ongoing royalties Samsung – Cross license agreements signed with all major 6.2 1 6.6 6.4 handset and infrastructu
Slide 13: Cost and efficiency program
Cost and efficIency program › Cost and efficiency program on track Yearly run-rate savings related – Target to achieve net annual savings of SEK 9 b. during 2017 to additional restructuring 9 – Increased efforts to further reduce cost of sales charges (SEK b.) › Operating expenses, excluding restruc
Slide 14: Fourth quarter gross margin and operating expenses
FOURTH quarter Gross margin 37.1% 36.5% 36.4% 36.6% 36.3% 35.2% 35.4% 33.2% 33.9% All comments exclude restructuring charges › Gross margin 36.6% (37.6%) YoY – Lower mobile broadband software sales – Strong sales of hardware Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 – One-time inventory write-down, SEK -0.4 b. 201
Slide 15: Operating Income Q4 YoY
Operating Income Q4 YoY SEK b. Q4 2014 Q4 2015 16.0% 15.0% 10.5% Cost and 9.3% GM excl efficiency restructuring Reported sales program slightly down 11.7 +8% 11.0 6.3 7.1 Q414 Reported Excl restr. Volume Gross Expenses Hedge impact Other Excl restr. Q415 Reported margin Improvements in all segments,
Slide 16: Operating Income Full year 2015 YoY
Operating Income Full year 2015 YoY SEK b. 2014 2015 10.9% Exit Modems 8.8% Operating margin business 8.0% 7.4% excl. restructuring 13% Operating margin Global Services excl. restructuring operating margin 13% excl. restructuring 9% 26.8 21.8 16.8 18.3 2014 Reported Excl restr. Networks Professional
Slide 17: Change in gross cash FY 2015
Change in gross cash FY 2015 1512A Operating Cash Flow Investing1 Financing FX on cash +20.6 b -13.1 b -10.7 b -2.7 bb SEK b. 100 90 -3.7 80 -8.3 -4.8 +0.6 70 +24.3 -11.3 -2.7 60 50 72.2 66.3 Change in gross cash SEK -5.9 b 40 30 Gross Cash Net Income Change Net CAPEX Acquisitions, Other financing D
Slide 18: Hans Vestberg, President and CEO
HANS VESTBERg President and CEO
Slide 19: Networks
Networks SEK b. Net sales and sales development 40 13% 8% 9% › Organic FX adjusted sales flat YoY 30 3% 8% – Higher IPR revenues, additional hardware sales in North America -1% -2% 20 -4% – Strong growth in Mexico, India and Nigeria – Macro economic developments impact Russia, Brazil, parts of the 1
Slide 20: Global Services
Global services Net sales and sales development SEK b. 30 30% 20% 20 › Organic FX adjusted sales -4% YoY 10% – Sales declined in Latin America and Sub-Saharan Africa 10 0% – Reduced sales in Network Rollout – Growth in Professional Services driven by Consulting and Systems 0 -10% Q4 Q1 Q2 Q3 Q4 Q1 Q
Slide 21: Support Solutions
Support solutions Net sales and sales development SEK b. 6 40% 40% 30% 21% › Organic FX adjusted sales up 22% YoY 4 13% 11% 9% 8% – Higher IPR revenues 2 – Strong TV & Media sales in North America -21% › Organic FX adjusted sales increased 70% QoQ 0 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 › Operating income, exc
Slide 22: Proposed dividend by board of directors
Proposed dividend by board of directors 3.70 3.40 3.00 2.75 › SEK 3.70 (3.40) 2.25 2.50 2.00 – Growth of 9% › In total ~SEK 12.2 (11.0) b. › Record date: April 15, 2016 2009 2010 2011 2012 2013 2014 proposal 2015 The proposed dividend reflects the earnings and balance sheet structure in 2015, as wel
Slide 23: Transformation
transformation Active employees Net sales – Targeted areas1 Thousands SEK b. -17 +15 116 114 ~45 ~35 Year-end 2014 Reductions Increases Year-end 2015 2014 2015 1 IP Networks, OSS & BSS, Cloud, TV & Media, Industry & Society Good traction in strategy implementation © Telefonaktiebolaget LM Ericsson 2
Slide 24: Focus 2016
FOCUS 2016 1. Core business – While market conditions are challenging in parts of the world, we will continue to capture business opportunities in 4G and extend technology leadership in 5G. 2. Targeted growth areas – After a period of investing, we need to improve earnings with higher software sales
Slide 25: © Telefonaktiebolaget LM Ericsson 2016 | FOURTH QUARTER REPORT 2015 | JANUARY 27, 2016
© Telefonaktiebolaget LM Ericsson 2016 | FOURTH QUARTER REPORT 2015 | JANUARY 27, 2016 | Page 25
Slide 26: Ericsson
ERICSSON
Slide 27: Forward-looking statements
FOURTH QUARTER 2015 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 Januar