First quarter highlights - Driving gross margin improvements and cost efficiencies
- Sales declined organically[1] by -14% YoY, due to a -19% decline in Networks. Reported sales decreased to
SEK 53.3 (62.6) b. -
Gross income excluding restructuring charges decreased to
SEK 22.8 (24.9) b. as lower sales were partly offset by an improvement in gross margin. Reported gross income wasSEK 22.7 (24.2) b. - Gross margin excluding restructuring charges improved to 42.7% (39.8%) supported by a competitive product portfolio, cost actions, improved commercial discipline, as well as increased IPR licensing revenues. Reported gross margin was 42.5% (38.6%).
-
EBITA excluding restructuring charges amounted to
SEK 5.1 (4.8) b. with a margin of 9.6% (7.7%), which included a one-time gain ofSEK 1.9 b. Reported EBITA wasSEK 4.9 (3.8) b. -
Net income was
SEK 2.6 (1.6) b. EPS diluted wasSEK 0.77 (0.45). -
Free cash flow before M&A was
SEK 3.7 (-8.0) b. reflecting improved management of working capital. -
Net cash on
March 31, 2024 , wasSEK 10.8 b. compared withSEK 7.8 b. onDecember 31, 2023 .
SEK b. |
Q1 2024 |
Q1 2023 |
YoY change |
Q4 2023 |
QoQ change |
Net sales | 53.325 | 62.553 | -15% | 71.881 | -26% |
Sales growth adj. for comparable units and currency[2] | - | - | -14% | - | - |
Gross margin[2] | 42.5% | 38.6% | - | 39.8% | - |
EBIT | 4.100 | 3.046 | 35% | 5.848 | -30% |
EBIT margin[2] | 7.7% | 4.9% | - | 8.1% | - |
EBITA[2] | 4.893 | 3.848 | 27% | 6.694 | -27% |
EBITA margin[2] | 9.2% | 6.2% | - | 9.3% | - |
Net income | 2.613 | 1.575 | 66% | 3.409 | -23% |
EPS diluted, SEK | 0.77 | 0.45 | 71% | 1.02 | -25% |
Measures excl. restructuring charges[2] | |||||
Gross margin excluding restructuring charges | 42.7% | 39.8% | - | 41.1% | - |
EBIT excluding restructuring charges | 4.305 | 4.026 | 7% | 7.368 | -42% |
EBIT margin excluding restructuring charges | 8.1% | 6.4% | - | 10.3% | - |
EBITA excluding restructuring charges | 5.098 | 4.828 | 6% | 8.214 | -38% |
EBITA margin excluding restructuring charges | 9.6% | 7.7% | - | 11.4% | - |
Free cash flow before M&A | 3.671 | -8.016 | - | 12.464 | -71% |
Net cash, end of period | 10.805 | 13.573 | -20% | 7.832 | 38% |
[1] Sales adjusted for comparable units and currency
[2] Non-IFRS financial measures are reconciled at the end of this report to the most directly reconcilable line items in the financial statements.
Comments from
In Q1, we continued to execute on our strategy to strengthen our leadership in mobile networks, drive a focused expansion in enterprise, and pursue cultural transformation. We maintained our leading market position, but as expected our customers continued to exercise caution with their investments. Against this tough market backdrop, we delivered solid expansion in gross margins. This underscores the competitiveness of our solutions, our commercial discipline, and our actions on costs.
We will continue to proactively optimize the business, including through strategic cost-saving measures, to ensure Ericsson is best positioned to increase shareholder value.
Q1 - Market headwinds and execution focus
While organic sales[1] declined by -14%, we reached a gross margin[2] of 42.7%, generated EBITA[3] of
Networks sales[1] decreased organically by -19% YoY as our customers continued to be cautious with their investments. Despite this, we generated a strong gross margin[2] of 44.3% - a testament to our technology leadership, our competitive product portfolio, and the strategic actions we are taking, including on costs.
In
In Enterprise, sales grew organically overall but declined in Global Communications Platform, impacted by a low-margin customer contract loss in Q4 and our decision to reduce our operations in some countries, with the impact expected to continue throughout the year. We continue to focus on leveraging the current business to support the build-out of our Global Network Platform for network APIs.
Our IPR revenues continued to grow, with a new 5G patent license agreement with a handset manufacturer. We are confident of delivering further growth in IPR revenues, benefiting from additional 5G agreements and an expansion into additional licensing areas. The timing of contracts will fluctuate, as we seek to optimize the value of new agreements.
We delivered
We announced further measures in the quarter to improve our cost efficiency and streamline operations, including headcount reductions. This is a necessary action to position the Company for longer-term success.
In March, our independent Monitor certified our compliance program. This is an important step to conclude our plea agreement. Our focus on culture and integrity will continue.
Executing on our strategy
Our strategy is aimed at building a stronger and more profitable Ericsson in the long term, with a vision to capture the next major wave of networks innovation with a substantial platform business.
At
We also took critical steps in our strategy to build a Global Network Platform for network APIs, and announced three key partnerships with
Looking ahead
We expect a further decline in the RAN market, at least through the end of this year, as customers remain cautious with their investments and the pace of investment in
If current trends persist, we expect our sales to stabilize during the second half of the year, benefiting from recent contract wins and the normalization of customer inventory levels in
Our enterprise strategy aims to leverage network capabilities to increase telecoms industry revenue growth above the level that traffic growth alone could deliver. We are creating new, differentiated, products and services, supporting our customers in this transformation. In turn, this will support industry investment levels in the longer term.
While near-term dynamics are challenging, we remain fully committed to our long-term targets, and we continue to be focused on increasing shareholder value.
President and CEO
[1] Sales adjusted for comparable units and currency.
[2] Excluding restructuring charges.
[3] Excluding restructuring charges. Includes a one-time gain of
[4] Before M&A.
NOTES TO EDITORS
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This is information that
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