21 slides from Telefonaktiebolaget Lm Ericsson Class A's earnings presentation, Apr 17, 2019
Slide 1: Ericsson First quarter 2019
Ericsson First quarter 2019 Apr 17, 2019 © Telefonaktiebolaget LM Ericsson 2019 | First quarter report 2019 | Apr 17, 2019 | Page 1
Slide 2: Peter Nyquist, Vice President Investor Relations
Peter Nyquist Vice President Investor Relations © Telefonaktiebolaget LM Ericsson 2019 | First quarter report 2019 | Apr 17, 2019 | Page 2
Slide 3: First quarter 2019
First quarter 2019 This presentation contains forward-looking statements. Such statements are based on our current expectations and are subject to risks and uncertainties that could materially affect our business and results. Please read our earnings reports and our most recent annual report for a b
Slide 4: Börje Ekholm, President and CEO
Börje Ekholm President and CEO © Telefonaktiebolaget LM Ericsson 2019 | First quarter report 2019 | Apr 17, 2019 | Page 4
Slide 5: Key takeaways
Key takeaways — Organic sales growth 7% YoY – third consecutive quarter with growth • Driven by North America — Underlying OM at 7.2% - excluding positive non-recurrent items and restructuring • Improvements in all segments YoY — Competitive 5G offering – strong momentum with lead customers in lead
Slide 6: Q1 2019 in numbers
Q1 2019 in numbers Financial Performance, Q119 — Organic growth 7% – Reported growth 13% Excluding restructuring charges — Gross margin continued to expand SEK b. 19Q1 18Q1 18Q4 — Networks – profitable growth Net sales 48.9 43.4 63.8 Gross margin 38.5% 35.9% 32.0% — Digital Services – reduced operat
Slide 7: Market area sales Q119, YoY
Market area sales Q119, YoY Net sales bridge, Q119 YoY FX adjusted 28% — Middle East & Africa • Positive 5G momentum in the Middle East • Decline driven by sanctions — South East Asia, Oceania & India -14% • Increased 5G momentum in Australia • Decline due to timing of projects in Digital Services -
Slide 8: Carl Mellander, Chief Financial Officer
Carl Mellander Chief Financial Officer © Telefonaktiebolaget LM Ericsson 2019 | First quarter report 2019 | Apr 17, 2019 | Page 8
Slide 9: Networks
Networks Segment Networks – Financial performance Excluding restructuring charges SEK b. 19Q1 18Q1 18Q4 — Sales adjusted for FX: 10% YoY • Strong growth in North America – 4G and 5G investments Net sales 33.5 28.6 41.6 • Growth in North East Asia – South Korea 5G investments Gross margin 43.2% 40.4%
Slide 10: Digital Services
Digital Services Segment Digital Services – Financial performance Excluding restructuring charges SEK b. 19Q1 18Q1 18Q4 — Sales adjusted for FX stable YoY • Growth in Cloud Core and OSS – partly offset by decline Net sales 7.8 7.3 13.0 in BSS Gross margin 37.6% 42.9% 16.4% • Momentum in new portfoli
Slide 11: Managed Services
Managed Services Segment Managed Services – Financial performance Excluding restructuring charges SEK b. 19Q1 18Q1 18Q4 — Sales adjusted for FX -5% YoY • Lower sales due to contract exits Net sales 5.9 5.9 6.9 • Growth in Network Design and Optimization (NDO) Gross margin 17.7% 9.1% 12.4% • High var
Slide 12: Emerging Business & Other
Emerging Business & Other Segment EB & Other – Financial performance — Emerging Business incl iconectiv Excluding restructuring charges • Sales growth +67% driven by iconectiv - number SEK b. 19Q1 18Q1 18Q4 portability contract in United States • Launched “Ericsson Industry Connect” Net sales 1.8 1.
Slide 13: Gross margin
Gross margin Excluding restructuring charges — Gross margin improved QoQ Underlying gross margin development from 2016 • Lower negative impact from strategic contracts in 39% Networks 37% 37% 36%1 36% • IPR revenues 34% 33% • Lower costs following high costs in Q4 2018 and a shift of 31% 30% 30% 30%
Slide 14: Operating expenses
Operating expenses Excluding restructuring charges Impairment losses on trade R&D bridge Q119 YoY (SEK b.) SG&A Q119 YoY (SEK b.) receivables (SEK b.) Excluding restructuring charges 18Q1 19Q1 18Q1 19Q1 0.6 -8.1 0.4 -0.1 0.2 Managed Emerging Services business -8.7 0.4 -6.1 -6.0 Digital -0.4 Services
Slide 15: Free cash flow
Free cash flow Financial Performance Debt maturity profile (SEK b.) SEK b. 19Q1 18Q1 Net income reconciled to cash 5.5 -1.0 10 Change operating net assets 0.3 2.6 8 Cash flow from operating activities 5.8 1.6 6 CAPEX -1.3 -0.9 4 Other -0.4 0.0 2 Free cash flow excluding M&A 4.1 0.7 0 M&A 0.3 -0.4 20
Slide 16: Planning assumptions – summary
Planning assumptions – summary Please see the Q1 report for the complete planning assumptions Market — RAN equipment market 3% FY 2019, 2% CAGR 2018-2023 (Dell’Oro) — Net sales • Lower than normal sales seasonality between quarters throughout 2019 - current sales level in NA expected to remain. Norm
Slide 17: Börje Ekholm, President and CEO
Börje Ekholm President and CEO © Telefonaktiebolaget LM Ericsson 2019 | First quarter report 2019 | Apr 17, 2019 | Page 17
Slide 18: Closing remarks
Closing remarks — Continued 5G momentum and RAN market back to growth — Will continue to invest and leverage our leading portfolio to capture market opportunities — Continued strong focus on operational efficiency, now combined with strategy for disciplined growth — Confident in reaching 2020 and 20
Slide 19: © Telefonaktiebolaget LM Ericsson 2019 | First quarter report 2019 | Apr 17, 2019
© Telefonaktiebolaget LM Ericsson 2019 | First quarter report 2019 | Apr 17, 2019 | Page 19
Slide 20: W
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Slide 21: Forward-looking statements
Forward-looking statements This presentation includes forward-looking statements, including statements reflecting management’s current views relating to the growth of the market, future market conditions, future events, financial condition, and expected operational and financial performance, includi