Ericsson reports fourth quarter and full-year results 2022

In market area South East Asia, Oceania and India, sales adjusted for comparable units and currency increased by 21% primarily driven by 5G market share gains in India in Q4, 2022.

Fourth quarter highlights

• The quarter was impacted by an IPR agreement resulting in total IPR revenues of SEK 6.0 (2.4) b. and previously announced charges of SEK -4.0 b., including DOJ provision, IoT divestment and Cloud Software and Services contract and portfolio exits.    
• Group organic sales<1> grew by 1% YoY., of which IPR revenues contributed with 5 percentage points. Reported sales were SEK 86.0 (71.3) b. of which Vonage contributed SEK 4.1 b.   
• Gross income increased to SEK 35.6 (30.8) b., while gross margin decreased to 41.4% (43.2%) primarily due to business mix change in Networks and previously announced charges for contract exits and portfolio adjustments in Cloud Software and Services.    
• EBITA excluding restructuring charges amounted to SEK 9.3 (12.8) b. with an EBITA margin of 10.8% (17.9%). EBITA was impacted by the previously announced charges.   
• Free cash flow before M&A was SEK 16.9 (13.5) b. mainly driven by reduced inventory and high cash collection including IPR collection.   
• Return on capital employed was 15.4% (26.6%) driven by lower EBIT.

India Highlights

• In market area South East Asia, Oceania and India, sales adjusted for comparable units and currency increased by 21% primarily driven by 5G market share gains in India in Q4, 2022.
• In Q4 India stands second amongst the top 5 countries in net sales after the United States.
• The Networks business grew in India on the back of significant market share gains.

Full-year highlights

• Group organic sales<1> grew by 3%, driven by a 4% increase in Networks and 16% in Enterprise. Reported sales were SEK 271.5 (232.3) b.  
• Gross income increased to SEK 113.3 (100.7) b. with increases in segments Networks, Cloud Software and Services, and Enterprise.  
• EBITA amounted to SEK 29.1 (33.3) b. with an EBITA margin of 10.7% (14.3%). EBITA was negatively impacted by previously announced charges of SEK -5.5 b., partly compensated by increased IPR licensing revenues.  
• EBIT margin excl. restructuring charges was 10.1% (13.9%). Excluding Vonage and previously announced charges during the year, EBIT margin was 12.9%, reaching the 2022 target of 12-14%.  
• Net income was SEK 19.1 (23.0) b. EPS diluted was SEK 5.62 (6.81).·       Free cash flow before M&A amounted to SEK 22.2 (32.1) b. Net cash was SEK 23.3 (65.8) b. at year-end 2022.    
• Return on capital employed was 14.0% (18.4%) driven by higher capital employed and lower EBIT.     
• A dividend for 2022 of SEK 2.70 (2.50) per share will be proposed to the AGM by the Board of Directors.

Börje Ekholm, President and CEO of Ericsson said: "With our fourth quarter result we are on track to deliver on our long-term EBITA target of 15-18% by 2024. We remain fully committed to our strategic ambitions and have full confidence in the long term. During the quarter, we made measurable progress towards achieving these ambitions, against a backdrop of broad macroeconomic headwinds. As we said during our Capital Markets Day, there are near-term uncertainties, however, we are still in the early phase of global 5G rollout and widespread enterprise digitalization."

Ekholm further added: "Our strategy remains rooted in driving sustainable growth and maximizing value across all stakeholders. We are confident that we have the right team and strategy in place to extend our leadership in mobile networks; achieve profitability in Cloud Software and Services; execute in our high growth Enterprise segment; shape the industry landscape by becoming a platform company leveraging the 5G innovation platform; and continue our unwavering commitment to a culture of integrity."

He also announced that: "This quarter, we signed a multiyear IPR patent license agreement with a major licensee. This positive outcome positions us well to capture further 5G patent license agreements among handset manufacturers and in new areas such as consumer electronics and IoT. We expect significant IPR revenue growth over the coming 18-24 months."

Speaking of business growth in India he said: "Networks business grew in India on the back of significant market share gains. As anticipated, the growth from share gains in several markets could not fully compensate for reduced operator capex and inventory reductions in other markets, including North America. Gross margin<2> was 44.6% (46.4%), negatively impacted by this business mix shift including a higher share of services sales from large network rollout projects. The IPR patent license agreement had positive margin impact."

"Our Enterprise strategy is underpinned by two pillars: First, our Enterprise Wireless Solutions business, focused on capturing the multi-billion-dollar enterprise market opportunity for 5G optimized networking and security solutions. Second, through the Global Communication Platform business, we will enable new ways of monetizing 5G by transforming how network features such as speed and latency are globally exposed, consumed and paid for," he added.