Broadband  |  2024-01-24

Ericsson CEO Comments on Q4 and Full-Year Results 2023 - Goal is to make Ericsson a more profitable company

Source: Ericsson
Curated by: Gert Jan Wolf - Editor-in Chief for The Critical Communications Review

Börje Ekholm, President and CEO of Ericsson commented on te Q4 and Full-Year Results 2023:

"In 2023, we continued to execute on our strategy to strengthen our leadership in mobile networks, grow our enterprise business and drive cultural transformation. We concluded 2023 with a Q4 EBITA margin[2] of 11.4% and a historic 5-year USD 14 b. contract. Despite headwinds and a very weak mobile networks market, we were able to generate a full-year EBITA[2] of SEK 21.4 b. While the actions we have taken to improve performance are paying off, we are not satisfied with our profitability and there is more work to do. As we look to 2024, we expect the market outside China to further decline, with similar uncertainties as experienced in 2023. In this environment, we remain laser focused on managing elements within our control, including operational efficiency and tight cost management. We are confident in our strategy and are committed to driving long-term value for our shareholders."

Fourth quarter highlights – Solid EBITA and cash flow in a challenged market 

  • Sales declined organically[1] by -17% YoY, driven by a -23% decline in Networks. Reported sales were down by -16% to SEK 71.9 b.  
  • Gross income excluding restructuring charges decreased to SEK 29.6 (35.7) b. Gross margin excluding restructuring charges was 41.1% (41.5%). Adjusted for the retroactive element in
  • IPR revenues in Q4 2022 the gross margin increased YoY.  
  • Reported gross income was SEK 28.6 (35.6) b. with a gross margin of 39.8% (41.4%).   
  • EBITA excluding restructuring charges amounted to SEK 8.2 (9.3) b. with an EBITA margin of 11.4% (10.8%).   
  • EBIT excluding restructuring charges amounted to SEK 7.4 (8.1) b. with an EBIT margin of 10.3% (9.4%).  
  • Free cash flow before M&A was SEK 12.5 (16.9) b. Q4 2022 was positively impacted by retroactive IPR payments. 

Full-year highlights 

  • Sales declined organically[1] by -10%, impacted by a -15% decrease in Networks, partly offset by an 11% growth in Enterprise. Reported sales were SEK 263.4 (271.5) b.
  • Gross income excluding restructuring charges was SEK 104.4 (113.5) b., mainly related to Networks. Gross margin excluding restructuring charges was 39.6% (41.8%). Reported gross income was SEK 101.6 (113.3) b. with a gross margin of 38.6% (41.7%).  
  • EBITA excluding restructuring charges was SEK 21.4 (29.5) b. with a margin of 8.1% (10.9%).
  • EBITA was SEK 14.9 (29.1) b. with a margin of 5.7% (10.7%).  
  • Reported EBIT was SEK -20.3 (27.0) b. impacted by SEK -31.9 b. of goodwill impairment recorded in Q3 related to Vonage.   
  • Net income (loss) was SEK -26.1 (19.1) b. EPS diluted was SEK -7.94 (5.62). Net income (loss) was impacted by SEK -31.9 b. of goodwill impairment and SEK -6.5 (-0.4) b. of restructuring charges.  
  • Free cash flow before M&A amounted to SEK -1.1 (22.2) b. Net cash was SEK 7.8 (23.3) b. at year-end 2023.   
  • A dividend for 2023 of SEK 2.70 (2.70) per share will be proposed to the AGM by the Board of Directors.  

Looking ahead  

The mobile network industry remains challenging. We expect the current market uncertainties to prevail into 2024 with a further decline of the RAN market outside China as our customers remain cautious and the investment pace is normalizing in India. The new US contract will start to ramp up in the second half of 2024.   

Underlying demand from growing data traffic and 5G only being in the early stages of build-out will require additional network investments. In our view, the current investment levels are unsustainably low for many operators. We are therefore confident that a market recovery should materialize. However, the timing of market recovery is ultimately in the hands of our customers. It is critical for us to lead in technology while focusing on operational efficiency, to ensure we are well positioned when the market recovers. Our strong IPR portfolio with over 60,000 patents gives us great opportunities to grow our licensing revenue, with a continued emphasis on ensuring that the full value is recognized in all contracts.    

Our goal is to make Ericsson a more profitable company based on a leading position in mobile infrastructure and a high-growth Enterprise platform business.