Telefonaktiebolaget LM Ericsson Class A · OMXSTO:ERIC_A
Telefonaktiebolaget LM Ericsson Class A — Ericsson — Q3 2011 Earnings Presentation
23 slides from Telefonaktiebolaget LM Ericsson Class A's earnings presentation, Oct 20, 2011
Slide 1: Third Quarter 2011, 20 October 2011
ANN a 7) 7) ° THIRD QUARTER 2011 20 OCTOBER 2011
Slide 2: Helena Norrman, Senior Vice President Communications
Helena norrman SENIOR VICE PRESIDENT COMMUNICATIONS
Slide 3: Forward-looking statements
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 A BETTER UNDERSTANDING OF
Slide 4: Hans Vestberg and Jan Frykhammar
HANS VESTBERG PRESIDENT AND CEO JAN FRYKHAMMAR CFO AND EXECUTIVE VICE PRESIDENT
Slide 5: Mobile broadband the market driver
Mobile broadband the market driver Close to 900 million mobile broadband subscriptions, +60% YoY Smartphones, new devices, tiered pricing Solid industry fundamentals Outsourcing high on operators’ agendas Operator focus on outsourcing of operations to reduce opex IPR’s in focus Industry built on sha
Slide 6: Net sales
NET SALES › Sales +17% YoY • Organic, FX adjusted +24% SEK b › Continued strong demand for mobile 80 broadband 70 60 • Networks +25% YoY 50 40 › Strong services development 30 20 • Global Services +7% YoY 10 0 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2007 2008 2009 2010 2011 Net s
Slide 7: Profitability
profitability › Net income +6% YoY • Positive impact from higher volumes SEK b SEK 12 2.5 › Net income +18% QoQ 10 2.0 • Positive impact from improved operating margin 8 1.5 • Less restructuring 6 1.0 4 › EPS, diluted +4% YoY 0.5 2 • SEK 1.18 (1.14) 0 0.0 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Slide 8: 3Q joint ventures
3Q joint ventures Sales 4,000 3,500 EUR m 3,000 Sony Ericsson 2,500 2,000 1,500 Sales up +33% QoQ 1,000 500 Average selling price up +8% YoY 0 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Android-based smartphones represented >80% of Q3 sales 2008 2009 2010 2011 Sales USD m 800 ST-Ericsson 600 Sa
Slide 9: Networks
networks › Continued high sales in mobile broadband SEK b • Incl. packet core, IP routers and microwave based 50 30% backhaul 25% • All effects from earthquake in Japan on supply chain 40 have been eliminated - normal lead times 20% 30 15% › +25% YoY 20 10% • Negatively impacted by strong SEK 10 5%
Slide 10: Global Services
global services › Professional Services sales +13% YoY in local SEK b currencies 24 20% 18% • Managed Services +8% YoY currency adjusted 20 16% • 14 new managed services contracts of which 6 14% 16 expansions or extensions 12% • 4 significant systems integrations contracts in OSS/BSS, 12 10% Service
Slide 11: Multimedia
multimedia › Back to profit SEK b 6 30% › Revenue management developed 5 favorably YoY 20% 4 › TV solutions improved QoQ 10% 3 • Several IPTV contract wins in the quarter 0% 2 › EBITA margin improved to +11% (0%) 1 -10% YoY 0 -20% Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 • Increased volumes and efficienc
Slide 12: Regional sales
Regional sales 3Q11 SEK 12.1b 3Q11 SEK 5.2 b 3Q11 SEK 9.7 b North America Y/Y -6% Mediterranean China and Y/Y +39% Y/Y +4% Q/Q -2% Q/Q -6% North East Asia Q/Q +7% • Slower networks business • Network modernization after period of high operator investments projects across the region • Growth across a
Slide 13: Jan Frykhammar, CFO and Executive Vice President
JAN FRYKHAMMAR CFO AND EXECUTIVE VICE PRESIDENT
Slide 14: Profitability 3Q
Profitability 3q › Gross margin 35.0% (39.0%) • Down sequentially from 37.8% 50% • Higher proportion of coverage projects • Accelerating network modernization projects in 45% Europe • Increased share of services business 40% • Network modernization projects in Europe, with their lower margins, will
Slide 15: Business mix shift
business mix shift Gross margin 37.8% Gross margin 35.0% Business Mix 2Q 2011 3Q 2011 Expansion phase Higher proportion › Upgrade, capacity increase and coverage projects expansion of installed base - Less capacity › Shorter order cycle and projects - More LTE coverage › More SW and integration serv
Slide 16: Profitability 3Q
Profitability 3q › Operating expenses SEK 13.5 SEK b 18 (13.0) b 16 14 • R&D +8% YoY due to higher planned 12 investments in radio such as TD-LTE and IP 10 as well as the acquired LG-Ericsson 8 6 operations 4 • SG&A flat YoY at SEK 5.7 (5.7) b 2 0 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q
Slide 17: Balance sheet ratios
Balance sheet ratios › Trade receivables increased QoQ to SEK 65.6 (60.2) b › Inventory increased also this quarter, SEK 38.6 (35.1) b. Good progress in normalizing supply chain, however, › DSO 106, up 7 days QoQ, negative impact from remaining effects from mitigating activities taken in weaker SEK
Slide 18: Change in gross cash Q3 2011
Change in gross cash q3 2011 Operating Cash Flow Investing Financing FX on cash 1.6 b (excl short term investments) -3.5 b -0.3 b 0.3 b SEK 90 80 -4,5 -0.7 6.9 -3,5 -0.3 0.3 78.7 Adjusted cash flow 2.4 b 70 76.9 60 Change in gross cash SEK -1.8 b 50 40 Gross Cash 1106A Net Income Change Net Restruct
Slide 19: Long Term Ambition, Executive Performance Stock Plan
Long Term Ambition Executive Performance Stock Plan GROW FASTER THAN THE MARKET › Net sales growth in SEK • 4-10% CAGR 2010-2013 BEST IN CLASS MARGINS › Operating income growth, including JVs and restructuring • 5-15% CAGR 2010-2013 › Base year 2010, excl restructuring STRONG CASH CONVERSION › Cash
Slide 20: Growth levers; Proactively managing uncertainties
Growth levers Continue to invest in areas of portfolio momentum Mobile broadband Managed Services OSS/BSS Market share gain Performance year-to-date reaffirms strengthened global market share Acquisitions & Partnering Telcordia Proactively managing uncertainties Technology shift coincides with macro
Slide 21: Third Quarter 2011, 20 October 2011
ANN a 7) 7) ° THIRD QUARTER 2011 20 OCTOBER 2011
Slide 22: Ericsson
ERICSSON
Slide 23: Ericsson
ERICSSON