Telecomunicazioni
Ericsson reports fourth quarter and full-year results 2023
(NASDAQ: ERIC)
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 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 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.
As a result of focused execution and increased resiliency, we were able to adapt in a challenging environment and delivered solid Q4 results. While Group sales[1] declined organically by -17% YoY, EBITA reached SEK 8.2 b . with an EBITA margin of 11.4%. With strong focus on profitability, we were able to deliver a 41.1% gross margin[2], a YoY increase when adjusting for the retroactive element of IPR revenues in Q4 2022. Our investments in geopolitical resiliency continued at a high level.
Networks sales decreased organically by -23% YoY as customers continued to focus on cash flow. Sales in India declined QoQ as the market started its transition to normalized investment levels following an unprecedented roll-out pace. Q4 gross margin grew QoQ to 43.2%.
In Cloud Software and Services, we delivered on our EBITA target to reach at least breakeven in 2023 with an EBITA of SEK 2.0 b . in Q4 and SEK 1.7 b . for the full year. We continue to increase commercial discipline, automation and delivery efficiency, focusing on long-term profitability.
Enterprise sales grew by 7% organically YoY mainly driven by Enterprise Wireless Solutions. EBITA (loss) was stable YoY, negatively impacted by an inventory write-off in Enterprise Wireless Solutions.
Strong cash collection and released working capital from conclusion of large roll-out projects allowed a healthy free cash flow before M&A of SEK 12.5 b . in Q4. We aim to return to our long-term target of free cash flow before M&A of 9-12% of net sales as soon as possible.
We delivered on the SEK 12 b . gross cost run-rate savings, half of which positively impacted the P&L in 2023, with the remainder to impact in 2024. Considering the market outlook, we will continue our strong focus on cost discipline.
Sales adjusted for comparable units and currency
Excluding restructuring charges
Our first strategic pillar is to further enhance our leadership in mobile networks. Technology leadership is core to our strategy, enabling customers to build high-performance, programmable and open networks to deliver superior customer experience, maximize return on investment (ROI) and accelerate business innovation. With our leading technology, customers can reduce their total cost of ownership, reduce non-strategic spend and instead redirect a larger portion of capex to revenue-generating network infrastructure, enabling an accelerated network modernization - as proven by our record win in Q4.
With our second strategic pillar, expansion into Enterprise, we aim at creating new monetization opportunities for our customers. Many operators fight to earn a healthy ROI with current monetization models. By offering network APIs to developers and enterprises, we enable new revenue streams for operators, and new applications that leverage network capabilities. We see good traction with frontrunner customers who share our excitement. In addition, offerings in Enterprise Wireless Solutions expand the market for high-performance mobile technology into enterprise.
2023 has been a year in which we have continued to build and transform our culture focusing on strong decision making and risk management, effective oversight and accountability. Ethical standards shall stand in the center of everything we do and become our competitive strength.
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.
I would like to thank all my colleagues for their dedication to execute on our strategy. Together with our customers, we are well positioned to shape the future industry.
Börje Ekholm
President and CEO
NOTES TO EDITORS
You find the complete report with tables in the attached PDF or on www.ericsson.com/investors
President and CEO Börje Ekholm and CFO Carl Mellander will comment on the report and take questions at a video webcast at 9:00 AM CET ( 8:00 AM GMT London, 3:00 AM EST New York).
Join the webcast or please go to www.ericsson.com/investors
To ask a question: Access dial-in information here
The webcast will be available on-demand after the event and can be viewed at www.ericsson.com/investors.
FOR FURTHER INFORMATION, PLEASE CONTACT
Peter Nyquist , Head of Investor Relations
Phone: +46 705 75 29 06
E-mail: peter.nyquist@ericsson.com
Stella Medlicott , Senior Vice President, Marketing and Corporate Relations
Phone: +46 730 95 65 39
E-mail: media.relations@ericsson.com
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
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
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 07:00 CET on January 23 , 2024.
The following files are available for download:
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