TIDM61QS
RNS Number : 8484P
Telefonaktiebolaget Lm Ericsson
11 October 2023
Ericsson announces impairment charge of SEK 32 billion and
provides update on Q3 earnings
-- Non-cash impairment of SEK 32 billion in the third quarter
2023, relating to the impairment of goodwill attributed to the
Vonage acquisition.
-- Vonage remains critical to the enterprise strategy and
Ericsson's positive outlook on the potential of the Global Network
Platform remains unchanged.
-- Ericsson also announces highlights from the Q3 results with a
group EBITA margin excluding restructuring charges of 7.3% which is
in line with previous guidance.
Ericsson (NASDAQ: ERIC) today announced that, in accordance with
IFRS accounting requirements, it will record a non-cash impairment
charge of SEK 32 billion in the third quarter of 2023. The
impairment charge represents 50% of the total amount of goodwill
and other intangible assets attributed to Vonage. The impairment
will be reported in segment Enterprise as an item affecting
comparability.
The impairment is a consequence of the significant drop in the
market capitalization of Vonage's publicly traded peers, increased
interest rates and overall slowdown in Vonage's core markets.
Ericsson continues to advance its enterprise strategy, with
Vonage's network API capabilities being central to this strategy
and the development of a Global Network Platform (GNP). The
impairment does not alter Ericsson's positive outlook on the GNP
market potential.
Vonage remains key to Ericsson's strategy to expand in
Enterprise. The Enterprise strategy is underpinned by the
development in the third quarter in which Ericsson announced an
important milestone with a major commercial partnership in its GNP
business. The development of GNP is creating a new market for
exposing 5G capabilities through network APIs and the market
opportunity is estimated at USD 20 billion by 2028 by telecom
consultancy and research firm STL Partners. This market will open
up new ways for operators to monetize their investments in networks
from enterprises and in turn drive further investments in mobile
infrastructure. Ericsson expects the first revenues from network
APIs during 2023.
Q3 earnings in line with guidance (preliminary and unaudited
numbers)
Isolated quarters, excluding Q3 Q3 YoY Q2 QoQ
restructuring and impairment
charges, SEK b.
2023 2022 Change 2023 Change
------------------------------- ------- ------- ---------- ------- ---------
Net Sales 64.5 68.0 -5% 64.4 0%
------------------------------- ------- ------- ---------- ------- ---------
Of which Networks 41.5 48.1 -14% 42.4 -2%
------------------------------- ------- ------- ---------- ------- ---------
Of which Cloud Software 1 5
& Services 15.6 14.2 10% . 1 3%
------------------------------- ------- ------- ---------- ------- ---------
Of which Enterprise 6.7 5.0 34% 6.4 5%
------------------------------- ------- ------- ---------- ------- ---------
Gross Income 25.3 28.2 -10% 24. 7 3%
------------------------------- ------- ------- ---------- ------- ---------
Of which Networks 16.6 21.4 -23% 16.7 -1%
------------------------------- ------- ------- ---------- ------- ---------
Of which Cloud Software
& Services 5.6 4.6 23% 5.1 10%
------------------------------- ------- ------- ---------- ------- ---------
Of which Enterprise 3. 3 2.4 34% 3.0 10%
------------------------------- ------- ------- ---------- ------- ---------
Gross Margin 39.2% 41.4% 38.3%
------------------------------- ------- ------- ---------- ------- ---------
Operating Expenses -21.3 -21.3 0% - 22.2 -4%
------------------------------- ------- ------- ---------- ------- ---------
EBITA 4.7 7.7 -39% 3.7 28%
------------------------------- ------- ------- ---------- ------- ---------
EBITA Margin 7.3% 11.3% 5.7%
------------------------------- ------- ------- ---------- ------- ---------
Networks 12.6% 20.0% 11.4%
------------------------------- ------- ------- ---------- ------- ---------
Cloud Software & Services 2.8% -5.0% -1.9%
------------------------------- ------- ------- ---------- ------- ---------
-20. -13.
Enterprise -8.9% 3 % 2 %
------------------------------- ------- ------- ---------- ------- ---------
Free Cash Flow before M&A -0.5 2.5 -5.0
------------------------------- ------- ------- ---------- ------- ---------
Restructuring charges -0.9 -0.1 -3.1
------------------------------- ------- ------- ---------- ------- ---------
Performance in Q3 was in line with guidance with an EBITA margin
excluding restructuring charges of 7.3% corresponding to an EBITA
of SEK 4.7 billion. Group organic sales (adjusted for comparable
units and currency) declined by -10%, with -16% organic decline in
Networks partly offset by 5% organic growth in Cloud Software and
Services and 10% organic growth in Enterprise.
Networks organic sales were down by -60% in North America YoY,
with operators reducing their capex spend and adjusting
inventories. It is worth noting that Q3 last year was a record
quarter in North America. The sharp decline in North America was
partly offset by strong sales in India.
Cloud Software and Services continued to execute on the
turnaround strategy. With an EBITA excluding restructuring charges
of SEK 0.4 billion in Q3 Cloud Software and Services has now
achieved break-even on a four rolling quarters basis.
Enterprise reported continued strong growth in Enterprise
Wireless Solutions and a slightly positive EBITA excluding
restructuring charges in the Global Communications Platform
business (Vonage) in the quarter.
Free cash flow before M&A was SEK -0.5 (2.5) billion. The
negative free cash flow this year is a result of the build-up of
working capital for the large roll-out projects.
Ericsson will, as previously communicated, announce its full
report for the third quarter 2023 on October 17, at approximately
07.00 CEST.
FOR FURTHER INFORMATION, PLEASE CONTACT
Contact person
Peter Nyquist, Head of Investor Relations
Phone: +46 705 75 29 06
E-mail: peter.nyquist@ericsson.com
Additional contacts
Stella Medlicott, Senior Vice President, Marketing and Corporate
Relations
Phone: +46 730 95 65 39
E-mail: media.relations@ericsson.com
Investors
Lena Häggblom, Director, Investor Relations
Phone: +46 72 593 27 78
E-mail: lena.haggblom@ericsson.com
Alan Ganson, Director, Investor Relations
Phone: +46 70 267 27 30
E-mail: alan.ganson@ericsson.com
Media
Ralf Bagner, Head of Media Relations
Phone: +46 76 128 47 89
E-mail: ralf.bagner@ericsson.com
Media relations
Phone: +46 10 719 69 92
E-mail: media.relations@ericsson.com
Forward-looking statements
This release includes forward-looking statements, including
expected write-down of our goodwill and other asset impairments,
amounts of such impairments, effect of impairments on cash flow and
dividend capacity, financial condition, performance and results of
operations, business plans, objectives, market conditions, and
assumptions upon which those statements are based including, in
particular the following risks and uncertainties:
- Final determination of the extent of the impairment based on
fair value analysis compared to carrying value
- Completion of the quarterly financial statements and review by
our independent registered public accounting firm
- Potential changes in estimated impairment amounts based on the
completion of the review process
- Extent of impairment impacts on cash flow and dividend
capacity
- Our goals, strategies, planning assumptions and operational or
financial performance expectations
- Industry trends, future characteristics and development of the
markets in which we operate
- Our future liquidity, capital resources, capital expenditures,
cost savings and profitability
- The expected demand for our existing and new products and
services as well as plans to launch new products and services
including research and development expenditures
- The ability to deliver on future plans and to realize
potential for future growth
- Technology and industry trends including the regulatory and
standardization environment in which we operate, competition and
our customer structure.
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similar words or expressions are used to identify forward-looking
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including any underlying assumptions, are forward-looking
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We caution investors that these statements are subject to risks
and uncertainties many of which are difficult to predict and
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not limited to, the factors described in the section "Risk Factors"
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Report 2022.
These forward-looking statements also represent our estimates
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applicable law or stock exchange regulations.
This is information that Telefonaktiebolaget LM Ericsson is
obliged to make public pursuant to the EU Market Abuse Regulation.
The information was submitted for publication, through the agency
of the contact person set out above, at 19:45 CEST on October 11,
2023.
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END
UPDGPGCAUUPWGMG
(END) Dow Jones Newswires
October 12, 2023 02:00 ET (06:00 GMT)
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