Telefonaktiebolaget Lm Ericsson Class A · OMXSTO:ERIC_A
Telefonaktiebolaget Lm Ericsson Class A — Ericsson — Investor Day (December 2022)
116 slides from Telefonaktiebolaget Lm Ericsson Class A's investor day presentation, Dec 15, 2022
Slide 1: Capital Markets Day 2022
Capital Markets Day 2022 New York December 15, 2022 | 2022-12-15 | Ericsson Capital Markets Day 2022 | Open | Page 1
Slide 2: Welcome
Welcome Peter Nyquist VP Investor Relations | 2022-12-15 | Ericsson Capital Markets Day 2022 | Open | Page 2
Slide 3: Agenda
Agenda 9.00 AM Welcome Peter Nyquist Ericsson strategy and outlook Börje Ekholm Technology leadership drives industry development Erik Ekudden Wireless Solutions strategy update George Mulhern Global Communications Platform strategy update Rory Read The customer view Niklas Heuveldop Q&A 10.50-11.05
Slide 4: Safe harbor statement
Safe harbor statement 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
Slide 5: Ericsson strategy and outlook
Ericsson strategy and outlook Börje Ekholm President & CEO | 2022-12-15 | Ericsson Capital Markets Day 2022 | Open | Page 5
Slide 6: Our journey
Our journey We are shaping today's industry landscape and defining the next stage of growth Past Present Future Network infrastructure Leading 5G Leading network company infrastructure provider platform for exponential with solutions for CSPs innovation and enterprises | 2022-12-15 | Ericsson Capita
Slide 7: Our turnaround fundamentally reset the business to sustainable profitability
Our turnaround fundamentally reset the business to sustainable profitability 2022 Q3 2017 YTD -10% Re-establish technology leadership +3% Revenue1 by increasing R&D in core business Revenue1 Operational reset Losing Market Take out cost, focused portfolio, reduced share SG&A/services, and low-margin
Slide 8: Established leadership position in mobile networks
Established leadership position in mobile networks ~39% ~50% • Present in 137 out of 228 live 5G of the 5G traffic2 is carried RAN revenue share1 (up 6 p.p from 2017) over Ericsson’s radio networks networks • Technology leadership 16 of 20 #1 (74% best network performance wins among Ericsson RAN cus
Slide 9: We will not compromise our values: Putting policies and controls into firm action
We will not compromise our values: Putting policies and controls into firm action Changes made to culture and governance Ongoing improvements • Accountability and ownership • Institutionalize risk management processes • Launched Ericsson on the Move to drive culture • Continue to improve safety and
Slide 10: We plan for a flat market in early transition to 5G
We plan for a flat market in early transition to 5G RAN market1 USD b. 0% • Challenging macro environment • Underlying fundamentals are strong: – Continuous high data traffic growth 11% – Early in 5G transition – 80%2 of sites 2G, 3G, & remain to be upgraded 4G RAN 5G RAN – Outperforming in the tech
Slide 11: Upsides beyond current market forecast
Upsides beyond current market forecast Fixed Wireless Access Mission Critical Networks XR 300M connections by 2028, >70% of G20 governments XR can be the next paradigm generating more traffic than expected to deploy shift, driving multiple times entire mobile traffic today 5G by 2028 higher network
Slide 12: Ericsson strategy
Ericsson strategy Superior experience for consumers Reliable & easy to use solutions for businesses Customer values Leading network performance, relentless efficiency and revenue growth in an open world Businesses Leadership in mobile networks Focused expansion into enterprise • Invest in technology
Slide 13: Cloud Software & Services critical for Ericsson – Leader in 5G Core
Cloud Software & Services critical for Ericsson – Leader in 5G Core • Cloud Software & Services is a strategic part of our core business • Delivering cutting-edge software and services on standard IT hardware • Foundation for API exposure Network Business and operations Core networks managed service
Slide 14: Transforming to a platform company to drive growth and monetization with our customers
Transforming to a platform company to drive growth and monetization with our customers Superior experience for consumers Reliable & easy to use solutions for businesses Real-time Remote Autonomous Digital Video Communication gaming AR/XR … Collaboration … health vehicles twins Device APIs Communicat
Slide 15: Entry into enterprise expands addressable market
Entry into enterprise expands addressable market USD b. +7% ~190 CAGR 2022-’25 5G NW API CPaaS +27% 153 ●5G in early days with majority of global rollout to come UCaaS & CCaaS +12% Enterprise Private NW ●5G proliferates enterprise networks & Wireless WAN +34% with pre-packaged solutions & WWAN Mobil
Slide 16: Clear path to higher margins – within long-term target range by 2024
Clear path to higher margins – within long-term target range by 2024 EBITA margin1 bridge Illustrative 18% Long- term target range 15% SEK 13.3% Inflation, changing business 7-9 b. mix, and commercial and operating leverage Q3’22 R4Q Cost efficency IPR Other 2024 excl. one-off items2 1) Numbers excl
Slide 17: All segments contributing to higher margins
All segments contributing to higher margins We are committed to deliver profitable and sustainable growth to achieve long-term EBITA target by 2024 EBITA margin1 bridge Illustrative 18% Long- term target range 15% 13.3% Q3’22 R4Q excl. Networks Cloud Software and Enterprise FY 2024 Long-term target
Slide 18: Prudent financial management in uncertain times
Prudent financial management in uncertain times Near-term capital allocation priorities Organic & inorganic investments to support growth and technology Target to leadership generate free Safeguard cash flow1 of Shareholder distribution balance sheet 9-12% of Target a stable to progressive strengths
Slide 19: Embedding a sustainable mindset across our people, policies and practices
Embedding a sustainable mindset across our people, policies and practices Talent Sustainability Inclusion Trust ●Attract and retain ●Net Zero across value ●Respect and support ●Prioritize our values, the world-class talent chain by 2040 communities we safety of our people operate in ●Build a culture
Slide 20: Key takeaways
Key takeaways 1. We are transforming into a platform company 2. We are continuously improving and are running the company better than ever before 3. We aim to reach break-even in Cloud Software & Services business in 2023 4. We will prudently manage our costs, investments and balance sheet 5. We wil
Slide 21: Technology leadership drives industry development
Technology leadership drives industry development Erik Ekudden CTO, SVP and Head of Technology & Strategy | 2022-12-15 | Ericsson Capital Markets Day 2022 | Open | Page 21
Slide 22: Industry development - towards a global platform for innovation and monetization
Industry development - towards a global platform for innovation and monetization Network API Transforming the industry by building the network platform monetization Enterprise The networking Our targeted expansion into enterprise adjacencies virtuous circle of growth Mobile networks Our leadership i
Slide 23: Industry development - our leadership in the mobile industry
Industry development - our leadership in the mobile industry AI/Automation Limitless connectivity Mobile Mobile SA, Slicing & cognitive networks networks Broadband Cloud native 5G Industry scale Core and RAN Open RAN 4G 5G 5G Advanced 6G | 2022-12-15 | Ericsson Capital Markets Day 2022 | Open | Page
Slide 24: Superior network experience
Superior network experience Example: Uplink performance optimized for best user experience 16 5G 4T/4R 5G Massive MIMO Operators selecting Ericsson technology for best user experience | 2022-12-15 | Ericsson Capital Markets Day 2022 | Open | Page 24
Slide 25: XR can be the next paradigm shift after the smartphone
XR can be the next paradigm shift after the smartphone VR to AR AR takes lead All day XR Near term Mid term Long term Head-Up-Display, blended information Recognize surrounding, geo-specific Fully immersive Ericsson technology will have an advantage | 2022-12-15 | Ericsson Capital Markets Day 2022 |
Slide 26: AI delivering value in telecom networks today
AI delivering value in telecom networks today 18% 25% Network load redistribution – more Better 5G coverage with efficient use of resources Infrastructure 5G-aware traffic management Self-Organizing Network Energy Network management & 15 min 14% performance sustainability AI vs 1 week to automatical
Slide 27: Ericsson standardization leadership
Ericsson standardization leadership 3GPP O-RAN Alliance Open source 1st 2nd 1st in approved NR contributions in total contributions to in number of commits in and specification impact in O-RAN Alliance OSC (Q2 2021 – Q2 2022) RAN1-2 in Rel-17 Innovations like Innovations like Non RT-RIC1 open platfo
Slide 28: Industry development - our targeted expansion into enterprise adjacencies
Industry development - our targeted expansion into enterprise adjacencies Additional traffic & performance demands for mobile networks WWAN Pre-packaged Enterprise networking Enterprise Static and local Dedicated NW Security as a service networking (fixed networks) Fixed Wireless Mission critical Be
Slide 29: New markets capitalizing on 5G R&D investments
New markets capitalizing on 5G R&D investments From separate industry networks to a global platform Pre-packaged enterprise solutions Fixed Wireless Mobile Extended Mission Private Wireless … WAN/ Edge Broadband reality (XR) Critical NW Networks Access Security OSS/BSS/Exposure 5G RAN 5G Core Device
Slide 30: Enabling enterprises and developers to use network capabilities and APIs
Enabling enterprises and developers to use network capabilities and APIs - new monetization opportunities Superior experience for consumers Reliable & easy to use solutions for businesses Real-time Remote Autonomous Digital Video Communication gaming AR/XR … Collaboration … health vehicles twins Dev
Slide 31: Industry development - transforming the industry by building the network platform
Industry development - transforming the industry by building the network platform Additional traffic & performance demands for mobile networks Network API HCP based Global Network CPaaS monetization APIs Platform WWAN Pre-packaged Enterprise networking Enterprise Static and local Dedicated NW Securi
Slide 32: Key takeaways
Key takeaways Transforming the industry by building a network platform Network API monetization Enabling enterprises & developers to use network capabilities and APIs Enterprise New markets capitalizing on 5G R&D investments The networking virtuous Cloud and 5G networking is a foundation for next ge
Slide 33: Enterprise Wireless Solutions
Enterprise Wireless Solutions George Mulhern SVP and Head of Enterprise Wireless Solutions | 2022-12-15 | Ericsson Capital Markets Day 2022 | Open | Page 33
Slide 34: Agenda
Agenda Creating Enterprise Wireless Solutions Market Opportunity Our Offering Key takeaways | 2022-12-15 | Ericsson Capital Markets Day 2022 | Open | Page 34
Slide 35: Supporting enterprises in leveraging 5G to drive business transformation
Supporting enterprises in leveraging 5G to drive business transformation CSP-FOCUSED ENTERPRISE FOCUSED 5G ENTERPRISE-FOCUSED Leader in 5G infrastructure deployments + Industry’s first and broadest ‘5G for Enterprise’ solutions = Enterprise Wireless Solutions Technology transformation portfolio for
Slide 36: Networking solutions converging into single-pane-of-glass offerings
Networking solutions converging into Multi-billion dollar market single-pane-of-glass offerings opportunity for Secure Enterprise 5G Private Local Area Cellular $1.04b.1 $3.1b.1 Network 5G drives networks 39% 5G 31% transition in Edge-to-Core Networking Secure Private Distributed Wireless Wide Area
Slide 37: Success stories
Enterprise 5G gaining adoption, Key levers to enable enabling use cases where WiFi struggles scaling 5G SD-WAN Prominent fast-food ‘5G SD-WAN’ to provide application restaurant performance and resiliency 5G infrastructure roll-out franchise Private 5G Device ecosystem Leading electric ‘Private 5G’ c
Slide 38: Simplified 5G consumption through convergence
Simplified 5G consumption through convergence 1 2 3 4 5 Programmable macro 5G-optimized SD-WAN Cloud security and Private 5G solutions 5G Edge solutions network solutions solutions unified policy solutions Secure, policy-based, Connect people, places Programmable interface Application availability C
Slide 39: The go-to-market for Enterprise Wireless Solutions
The go-to-market for Enterprise Wireless Solutions Enterprise sales force ● Go-to-market model adapted for scaling in Global 2-Tier Communication the Enterprise Distribution Model Service Providers segment Regional ● Market power and Enterprise Distributors SSP/MSP Enterprise Wireless Customers leve
Slide 40: Subscription model driving enhanced cash position and higher margins
Subscription model driving enhanced cash position and higher margins Cradlepoint subscription model and billings ● Cradlepoint invoices and gets paid for 100% 36 months delivery in average 12 months of the subscription services upfront Hardware + Services Renewal ● Most of the revenue is deferred an
Slide 41: Global Communications Platform update
Global Communications Platform update Rory Read SVP, Head of Business Area Global Communications Platform | 2022-12-15 | Ericsson Capital Markets Day 2022 | Open | Page 41
Slide 42: Agenda
Agenda About Vonage Market Opportunity Ericsson + Vonage = A Powerful Combination GNP - Communications and Network APIs | 2022-12-15 | Ericsson Capital Markets Day 2022 | Open | Page 42
Slide 43: VCP is uniquely positioned to address the largest Cloud TAM
VCP is uniquely positioned to address the largest Cloud TAM covering UCaaS, CCaaS and CPaaS Vonage Communications Platform (VCP) + 2001 25 b.+ Company founded Minutes & messages Headquarters: Holmdel, NJ terminated annually Artificial Intelligence Studio / Visual Builder USD 1.4 b.+ 80% + 2021 annua
Slide 44: Cloud Communications total addressable market growing
Cloud Communications total addressable market growing from USD 41 b. in 2021 to USD 73 b. in 2025 CPaaS VCP uniquely positioned and has CCaaS leading industry recognition 16% UCaaS CAGR 22 28% CPaaS Universe 2022 - Leader Top Rankings in CX & Solutions 14 19% Capability 8 7 CCaaS Radar 2022, EMEA Le
Slide 45: The Cloud and 5G communications wave has just begun
The Cloud and 5G communications wave has just begun Convergence of technology waves Is changing how the world connects 6+ 2.3 4.4 billion trillion billion smart- texts sent 5G phones annually subscribers globally by 2027 49 100 319 billion zeta-bytes billion mobile of data in emails payment the clou
Slide 46: Combined Vonage and Ericsson strategy creates near-term opportunities
Combined Vonage and Ericsson strategy creates near-term opportunities Vonage’s Leading Global Communications Platform Ericsson Global Leader in 5G Global Developer 5G leadership Community Large enterprise R&D Scale customer base Easy-to-use Leading network API Platform exposure APIs enhanced by Whit
Slide 47: Communications and Network APIs
Communications and Network APIs Existing CPaaS and New Network-based Use Cases Silent IP Chat Auth + Auth QoS Video Location • Ericsson to leverage Vonage CPaaS to VCP GNP build global 5G API platform Device Data SMS Communications APIs Network APIs • Developers can embed network Voice More to come
Slide 48: New 5G APIs expected to drive substantial incremental TAM
New 5G APIs expected to drive substantial incremental TAM CPaaS + GNP TAM (USD b.) Smart Manufacturing 5G APIs Remote Medical Procedures 5G early stages USD 22 b. Holographic Communication USD 8 n. Tele-operated Driving USD 1 b. 2016 2021 2025 CPaaS 5G APIs | 2022-12-15 | Ericsson Capital Markets Da
Slide 49: Key takeaways
Key takeaways Market Opportunity Customer Base First-mover GNP Large and growing cloud Large, diverse client base VCP on top of 5G will deliver communications TAM across industries the experiences of the future New addressable market with One of the largest global New opportunities for CSPs to 5G AP
Slide 50: The customer view
The customer view Niklas Heuveldop SVP and Head of Market Area North America | 2022-12-15 | Ericsson Capital Markets Day 2022 | Open | Page 50
Slide 51: Agenda
Agenda Global market update Business opportunity Market outlook | 2022-12-15 | Ericsson Capital Markets Day 2022 | Open | Page 51
Slide 52: Global market update
Global market update Continued high pace of 5G deployments globally Business fundamentals remain solid, despite macro- and – almost 80%1 of all base stations remain to be upgraded to 5G geopolitical challenges Geopolitical Inflation Energy prices tension 15 101 Consumer Critical Climate action 27 be
Slide 53: Business opportunity
Business opportunity Monetization picking up with nation-wide coverage and differentiated Early success in eMBB and FWA, proven potential in customer experience enterprise and public sector transformation Enterprise and public sector transformation Enhanced Fixed mobile wireless access broadband 5G
Slide 54: Business opportunity – Enhanced Mobile Broadband
Business opportunity Enterprise & public sector Enhanced Mobile Broadband eMBB FWA • Over 10x capacity increase and over 30%1 better energy efficiencies realized modernizing to 5G U.S. • Early indications of revenue growth (2.5-5.5%)2 in frontrunner markets offering differentiated South customer exp
Slide 55: Business opportunity – Fixed Wireless Access
Business opportunity Enterprise & public sector – Fixed Wireless Access eMBB FWA • U.S.: >3 million FWA connections, targeting 11-13 million by 2025 • Australia: ~1 million FWA connections, U.S. targeting 3 million by 2027 India • India: Reliance Jio targeting 100 million 5G FWA connections • Approx
Slide 56: Business opportunity – Enterprise and Public Sector
Business opportunity Enterprise & public sector – Enterprise and Public Sector eMBB FWA Significant traction in Industry engagements across geographies and verticals • 25+ countries, 20+ operators, 100+ partners • Almost 70% year-over-year growth in our Private Networks offerings (2022 Q3) • 5G enab
Slide 57: Business opportunity – Enterprise and Public Sector (Belfast Harbour)
Business opportunity Enterprise & public sector – Enterprise and Public Sector eMBB FWA Installation Saving of maintenance and maintenance cost costs for condition- 20% 56% reduction for CCTV for based monitoring surveillance Reduction in time spent Qualitative benefits on inspection of related to s
Slide 58: Business opportunity – Ericsson USA 5G Smart Factory
Business opportunity Enterprise & public sector – Enterprise and Public Sector eMBB FWA Productivity increase/ Reduced manual 65% 2.2x employee, and 75% material handling lead time reduction Reduction in energy Reduced unplanned consumption and 75% 24% 50% downtime less indoor water usage Triple-bot
Slide 59: Market outlook
Market outlook Europe • North America moderates pace as build continues, Europe holds steady, India accelerates • Frontrunners start rebalancing inventory levels as North global supply chain situation improves America India • Mobile data growth, 5G cost and energy efficiencies will drive continued h
Slide 60: Key takeaways
Key takeaways Global market update Business opportunity Market outlook Most of the 5G build out Early success in eMBB & North America moderates remains, solid business FWA, proven potential in pace as build continues, fundamentals enterprise and public India accelerates sector | 2022-12-15 | Ericsso
Slide 61: Q&A
Q&A | 2022-12-15 | Ericsson Capital Markets Day 2022 | Open | Page 61
Slide 62: Networks strategy update
Networks strategy update Fredrik Jejdling EVP and Head of Business Area Networks | 2022-12-15 | Ericsson Capital Markets Day 2022 | Open | Page 62
Slide 63: Agenda
Agenda Our ambition Our strategy Focus on value creation | 2022-12-15 | Ericsson Capital Markets Day 2022 | Open | Page 63
Slide 64: Our journey
Our journey Invest in technology 2017 and cost leadership 2022 Q3 R4Q 15 EBIT +11 38 EBIT R&D Selective market Investments 33% Market share outside China Acceleration of 5G with lead customers (SEK b.) expansion based on technology and cost competitiveness 39% Market share outside China | 2022-12-15
Slide 65: Established a leading position in 5G
Established a leading position in 5G Fastest Ericsson 137 live 5G networks growth of any mobile generation with 1b subscribers in 2022 and 5b in 20281 12 69 50% traffic 13 Around 50 percent of the world's 5G traffic, outside China, is carried over Ericsson's radio networks 17 11 15 Performance leade
Slide 66: Our focus on continuous leadership
Our focus on continuous leadership Investments are vital for competitiveness and to continue being leader in the market, meeting customer demand and increasing market share… and efficiency and productivity are fundamental Lead networks of the future Increase speed, productivity and Invest in technol
Slide 67: We intend to grow by capturing market share in a stable market
We intend to grow by capturing market share in a stable market Mobile radio access network market Forecast shows a flat global RAN market2 going forward. Market BUSD Near-term growth in emerging markets Global RAN market, excl. China 0% including India, with North America normalizing to sustainable
Slide 68: Agenda
Agenda Introduction Our strategy Value of Networks | 2022-12-15 | Ericsson Capital Markets Day 2022 | Open | Page 68
Slide 69: Our strategic priorities and ambitions
Our strategic priorities and ambitions Make our customers Investing in Improve productivity successful technology for and capital efficiency performance and cost leadership 1% Gross Income 10% increase in market share per year accretive yearly productivity gains | 2022-12-15 | Ericsson Capital Marke
Slide 70: Our strategic priorities and ambitions
Our strategic priorities and ambitions Make our customers Investing in Improve productivity successful technology for and capital efficiency performance and cost leadership 1% Gross Income 10% increase in market share per year accretive yearly productivity gains | 2022-12-15 | Ericsson Capital Marke
Slide 71: Customers choose Ericsson to tackle the data growth
Customers choose Ericsson to tackle the data growth From To 10x total capacity per site Make our customers >30% reduced energy consumption1, successful as well as reduced size & weight 34% better uplink performance than competition with same capacity on a customer network2 1)Source: Ericsson, Breaki
Slide 72: Leading the transition to sustainability networks
Leading the transition to sustainability networks 40% 28% 100% Looking ahead, our ambition is: Lower energy Site renewable Renewable electricity consumption with latest Massive MIMO radios, proven in field energy savings with Deutsche Telekom sourced in our Brazil, China, Estonia and US factories -3
Slide 73: We help our customers to unlock new revenue streams
We help our customers to unlock new revenue streams Make Make ourour USD 46 b. USD 14.5 b. USD 4.2 b. customers Fixed Wireless Access customers CSP addressable market 5G Enterprise wireless successful successful CSP revenues by 2025, across all critical Wide Area Network with a 16% CAGR broadband se
Slide 74: Our strategic priorities and ambitions
Our strategic priorities and ambitions Make our customers Investing in Improve productivity successful technology for and capital efficiency performance and cost leadership 1% Gross Income 10% increase in market share per year accretive yearly productivity gains | 2022-12-15 | Ericsson Capital Marke
Slide 75: We are pushing the technology boundaries
We are pushing the technology boundaries Today: here and now Tomorrow: 1-3 years In the future: 2027+ Investing in technology for Performance 10x 2x • Intent-based / AI-native networks to manage all capacity vs LTE legacy site capacity vs 2021 5G site new services performance • Automated, self-heali
Slide 76: Ericsson Silicon drives form factor and sustainability
Ericsson Silicon drives form factor and sustainability Industry-leading high-performance chips Multi/Wide Highest band radios spectral Investing in efficiency technology for Tailor-made, Leading energy performance yearly cadence efficiency and cost leadership Extended resilience with Lowest radio CO
Slide 77: Ericsson Radio System offers best-in-class TCO and performance
Ericsson Radio System offers best-in-class TCO and performance Ericsson Radio System • Best end-to-end performance and Ericsson Network Manager cost • Multi-standard for efficient Investing in network expansion technology Ericsson Radio System SW • Industry-leading energy-efficient for products perf
Slide 78: Cloud revolutionizes the way we think about networks
Cloud revolutionizes the way we think about networks Ericsson Cloud RAN • Scalable for enterprise growth Service Management & Orchestration • Enables new ways to develop software A1/O1 Investing in • Exposing new functionality to technology developers Ericsson Cloud RAN SW for Cloud platform (CaaS)
Slide 79: Long-term vision provides optionality for our customers
Long-term vision provides optionality for our customers Long-term vision • Best products and solutions Service Management & Orchestration across deployment scenario • Open high-performance A1/O1 A1/O1 Investing in interfaces based on global technology standards Ericsson Cloud RAN SW Ericsson Radio S
Slide 80: Our strategic priorities and ambitions
Our strategic priorities and ambitions Make our customers Investing in Improve productivity successful technology for and capital efficiency performance and cost leadership 1% Gross Income 10% increase in market share per year accretive yearly productivity gains | 2022-12-15 | Ericsson Capital Marke
Slide 81: Heightened focus on productivity and capital efficiency
Heightened focus on productivity and capital efficiency R&D Supply Network deployment Increased velocity with cloud- Industrialized RAN and site E2E digitalized, standardized, native principles portfolio and fully augmented Improve Improved developer Reduced time to install using productivity Smart
Slide 82: Agenda
Agenda Introduction Our strategy Value of Networks | 2022-12-15 | Ericsson Capital Markets Day 2022 | Open | Page 82
Slide 83: Reaching our EBITA targets for 2024
Reaching our EBITA targets for 2024 NW EBITA margin bridge Illustrative A EBITA margin bridge Illustrative FY Guidance from Q3 report: “Somewhat exceed target range of 16–18%” ~ 1% increase in market 18% share per year Somewhat exceed target range of 16–18%1 C B A B Gross 15% Income 13.3% accretive
Slide 84: Key takeaways
Key takeaways Make our customers Invest in technology Improve productivity successful for performance and and efficiency cost leadership | 2022-12-15 | Ericsson Capital Markets Day 2022 | Open | Page 84
Slide 85: Cloud Software & Services strategy update
Cloud Software & Services strategy update Per Narvinger SVP and Head of Cloud Software & Services | 2022-12-15 | Ericsson Capital Markets Day 2022 | Open | Page 85
Slide 86: Agenda
Agenda About our market Our challenges and priorities Our 2024 EBITA targets | 2022-12-15 | Ericsson Capital Markets Day 2022 | Open | Page 86
Slide 87: Our market
Our market • The 5G and cloud native technology shifts drive the market. • Addressable market forecasted to show a low single digit CAGR 2022-2026. • Pockets of double-digit growth driven by the 5G technology shifts, e.g. ~15% in 5G packet core Network Business and operations Core networks managed s
Slide 88: A segment with distinct business domains
A segment with distinct business domains The creation of Cloud Software & Services from combining Digital Services and Managed Services enables us to: • Capture synergies and create simplified accountability structure in both SG&A and R&D. • Increase customer value with a stronger go-to-market and p
Slide 89: Cutting-edge software and services on standard IT hardware
Cutting-edge software and services on standard IT hardware Business and operations Network managed services Core networks support systems Significant business performance improvements in two, offset by negative in core networks | 2022-12-15 | Ericsson Capital Markets Day 2022 | Open | Page 89
Slide 90: Core networks reality and actions
Core networks reality and actions 4G 5G non-standalone 5G standalone Native Virtualized Cloud native On any cloud • For core networks we and the industry underestimated the complexity of the transition to cloud native and 5G standalone – continued high deployments costs. • 2020-2021 focused on core
Slide 91: Actions within business operations support systems and network managed services
Actions within business operations support systems and network managed services • Streamline portfolio management and go-to-market of combined BSS and OSS software and services offerings. Business and operations support • Focus on reusable software product content as base for customer unique systems
Slide 92: Segment priorities – summary
Segment priorities – summary • Cost out through realized synergies. • Keep technology leadership – continue to invest in key technologies: cloud native, AI/ML and automation. • Apply a stringent profitability discipline to ensure scalable software business. • Reach profitability target 2024. Gradual
Slide 93: Reach our EBITA targets for 2024
Reach our EBITA targets for 2024 EBITA margin bridge Illustrative Cloud Software & Services bridge Illustrative FY guidance FY Guidance from Q3 from Q3 report: report: “EBIT “Somewhat loss, excluding exceed target range of 16–18%” restructuring charges, for full-year 2022 is expected to be in 18% li
Slide 94: Key takeaways
Key takeaways A simplified accountability and Leverage our 5G core market Avoid subscale business – organizational structure leadership and accelerate in stringent aligned with our customers automation and lower our profitability discipline to reach requirements deployment efforts. long-term sustain
Slide 95: Financial update
Financial update Carl Mellander SVP, Chief Financial Officer | 2022-12-15 | Ericsson Capital Markets Day 2022 | Open | Page 95
Slide 96: Agenda
Agenda Executing on our strategy Long term targets Capital allocation | 2022-12-15 | Ericsson Capital Markets Day 2022 | Open | Page 96
Slide 97: Agenda
Agenda Executing on our strategy Long term targets Capital allocation | 2022-12-15 | Ericsson Capital Markets Day 2022 | Open | Page 97
Slide 98: Progress on our path to stronger value creation
Progress on our path to stronger value creation Investment in ASICs, Cloud RAN and 5G Core Market share increased by 2% to 39% since 20201 M&A – Expansion into Enterprise 1Dell’Oro RAN market share excluding Mainland China, rolling 4Q. | 2022-12-15 | Ericsson Capital Markets Day 2022 | Open | Page 9
Slide 99: Value creation driven by strategy execution
Value creation driven by strategy execution Profitability, capital efficiency and FCF, R4Q in % Shareholder distribution and resilience ROIC (excl. restructuring)1 EBIT margin (excl. restructuring)2 FCF before M&A Dividend per share, SEK 2.5 40% 2.0 1.5 35% 1.0 1.0 30% 25% 2017 2018 2019 2020 2021 2
Slide 100: R&D drives margin expansion and market share
R&D drives margin expansion and market share R&D investments Market share and gross margin 2 RAN market share (excluding Mainland China) ● Investments in R&D a key part of our strategy 3 Gross margin (excluding restructuring charges) 50% – Technology leadership yields gross margin expansion in suppo
Slide 101: Business strategy and value creation
Business strategy and value creation Business strategy Value creation Business performance and grow Leadership in mobile networks free cash flow Focused expansion into enterprise Cost and capital efficiency Be first in critical innovations, and capture strategic business Capital allocation and objec
Slide 102: Agenda
Agenda Executing on our strategy Long term targets Capital allocation | 2022-12-15 | Ericsson Capital Markets Day 2022 | Open | Page 102
Slide 103: Long-term targets
Long-term targets Financial and sustainability targets Sales Outgrow the market EBITA margin1 15%-18% of sales Free cash flow 9%-12% of sales (before M&A) Sustainability target Net Zero across value chain by 2040 1 Excluding restructuring charges. | 2022-12-15 | Ericsson Capital Markets Day 2022 | O
Slide 104: Growth driven by Networks and Enterprise
Growth driven by Networks and Enterprise Group sales ambition 2024 Illustrative ● Accelerate growth in Enterprise Wireless Solutions Enterprise ● Execution on Vonage business plan, including Global Network Platform ● The 5G and cloud native technology Cloud shifts drive the market. Software & ● Addr
Slide 105: Within our long-term target range by 2024
Within our long-term target range by 2024 EBITA margin1 bridge between Q3 2022 R4Q and FY 2024 Illustrative Changing business mix, 18% market share gain, commercial and operating leverage SG&A: 30% SEK 9 b. in gross 15% cost reduction 13.3% COGS: 70% Q3’22 R4Q Inflation Cost efficency IPR Other 2024
Slide 106: SEK 9 b. in gross cost reduction by end 2023
SEK 9 b. in gross cost reduction by end 2023 Cost reductions Cost out target (end of year gross run rate, SEK b.) • Gross cost reduction to mitigate inflation • Full effect in end 2023 run rate • Restructuring cost expected to be ~1% of net SG&A sales in 2023 30% • Levers to address cost in 2023-202
Slide 107: IPR – delivering further growth
IPR – delivering further growth IPR revenues (2017-2022 Q3) SEK b. 5G SMARTPHONE Technology leadership LAUNCH Q4 2022 revenues 15 estimated at SEK 5.5 - 6.0 b; ● >20 years of licensing through FY 2022 SEK 9.9 – 10.4 b. 13 New growth areas technology and market shifts Oppo Apple 11 LG ● Proven assets
Slide 108: Segment breakdown of bridge to 2024
Segment breakdown of bridge to 2024 EBITA margin1 bridge Illustrative ● Changing business mix compensated by market share gains and commercial activities 18% Networks ● Inflation compensated by cost efficiency in supply and service delivery ● Higher IPR revenues in mix ● Improved business mix with i
Slide 109: Actions to improve working capital efficiency
Actions to improve working capital efficiency Working capital 2017-2022 Q3, SEK b. Drivers for increase Working capital 1 Working capital % of net sales (R4Q) ● Build-up of components and inventory to safeguard deliveries 34 ● Roll-out of large contracts 31 ● Inflation and FX 28 27 23 23 23 24 23 16
Slide 110: Significant improvement in free cash flow margin
Significant improvement in free cash flow margin Free cash flow development, SEK b. FCF b. M&A excl. changes in net operating assets Changes in net operating assets FCF b. M&A FCF b. M&A / Net sales 4.0 32.1 28.1 25.9 -3.6 22.3 14% 9-12% 15.6 -10.1 10% 5.5 3% 2020 2021 2022 YTD Long-term target 5G l
Slide 111: Agenda
Agenda Executing on our strategy Long term targets Capital allocation | 2022-12-15 | Ericsson Capital Markets Day 2022 | Open | Page 111
Slide 112: Strong balance sheet supporting strategy execution
Strong balance sheet supporting strategy execution Balance sheet strength Capital objectives Support Flexibility Robustness Current status Support the Provide ability Minimize risk Free cash flow 9-12% of net SEK 18.8 b. 7.3% of net sales strategic and to act on of financial (before M&A) sales Q3’22
Slide 113: Prudent financial management in uncertain times
Prudent financial management in uncertain times Near-term capital allocation priorities Organic & inorganic investments to support growth and technology Target to leadership generate free Safeguard cash flow1 of Shareholder distribution balance sheet 9-12% of Target a stable to progressive strengths
Slide 114: Key takeaways
Key takeaways Foundation with Clear path to reaching Capital allocation strong return on long-term target supporting business capital and free ranges on EBITA and strategy and value cash flow FCF by 2024 creation | 2022-12-15 | Ericsson Capital Markets Day 2022 | Open | Page 114 This slide contains
Slide 115: Q&A
Q&A | 2022-12-15 | Ericsson Capital Markets Day 2022 | Open | Page 115
Slide 116: 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