Ericsson

Hello everyone and welcome to the presentation of Ericsson's first quarter 2025 results. With me here in the studio today are Buria Ekholm, our President and CEO, and Lars Sandström, our Chief Financial Officer. As usual we'll have a short presentation followed by Q&A and in order to ask a question you'll need to join the conference by phone. Details can be found in today's earnings release and on the Investor Relations website. Please be advised that today's call is being recorded and that today's presentation may include forward-looking statements. These statements are based on our current expectations and certain planning assumptions, which are subject to risk and uncertainties. The actual results may differ materially due to factors mentioned in today's press release and discussed in this conference call. We encourage you to read about these risks and uncertainties in our earnings report as well as in our annual report. I'll hand the call now over to Burya and to Lars for their introductory comments.

Great. Thanks, Daniel. And good morning, everyone, and thanks for joining us today. So we executed well in Q1 despite the challenging and fast-changing macro backdrop. Organic sales were stable with strong growth in market area Americas. Gross margin came in at 48.5 and we delivered an EBITDA margin of 12.6%. The improvement that we saw was broad-based across all segments and market areas and it's really thanks to strong execution of our plans. Cloud software and services can call out a bit because it also had the first positive first quarter ever. We also continue to make good progress against our strategic priorities in the quarter by strengthening our leadership in mobile networks and announcing new partnerships that will accelerate the development of programmable networks with differentiated connectivity and open API architectures. In mobile networks, we expanded our leading portfolio and we're on track to offer a portfolio of 130 radios this year that all support programmable networks. We also announced the first programmable network in Asia Pacific with Telstra in Australia. In enterprise, we're seeing improved commercial traction as customers are moving from proof of concept into commercial deployment. One example here is Jaguar Land Rover that's implementing a private 5G network to fully digitalize their manufacturing. Again, benefiting from the flexibility of a 5G network. Another is in network APIs, where the top three U.S. operators have announced they'll launch a fraud detection API this year in partnership with Aduna. As you may recall, Aduna is the joint venture we announced last year to aggregate and sell network APIs. So we now continue to see the network API ecosystem scaling up with additional partners joining Eduna and the first early revenues coming in. So we're seeing good momentum on our strategy built on programmable networks offering differentiated services, which will allow new ways for our operator customers to generate new revenue sources on their network investments. Of course, the current macroeconomic turmoil and tariffs are impacting our industry, and we will not be immune. We've taken actions over the many years to actually build resilience into our supply chain, including how and where we develop and manufacture our products. So our focus remains on controlling what we actually can control, including, of course, pricing and spending. And the actions we've taken position Ericsson well to succeed across varying market conditions. Let me now comment further on the market development we saw in Q1. As you know, in February we announced the consolidation of our regional structure. So this is the first quarter with two new market areas, market area Americas and market area Europe, Middle East and Africa. In market area America, sales increased by 20% year over year, with good growth in North America, partly offset by lower sales in Latin America, where we of course face intense competition from the Chinese vendors. Networks grew strongly in North America, benefiting from our previous contract wins, but I would like to single out this also from the accelerated network investments by the other customers. And it's worthwhile to remember that historically, North America is a frontrunner in the adoption of new technology and thereby often a leading indicator for other markets. Sales in Europe, Middle East and Africa declined by 7% year over year. And there you have, of course, that Europe was stable and that was supported by market share gains and network modernization. In Southeast Asia, Oceania and India, sales decreased by 17% year over year as a result of more normalized operator investment levels in India. And here, you remember, we had a relatively high level in Q1 of last year. Lastly, sales in Northeast Asia slowed. This was due to reduced customer investments in some 5G frontrunner markets. With that, let me hand over to Lars to go through the financials in detail. All right.

Let me start by giving you some additional points on the group before discussing the segments more in detail. Net sales in Q1 amounted to 55 billion and organic sales were stable year on year. Reported sales increased 3%, including a currency benefit of 1.8 billion. North America growth was strong for the fourth quarter in a row, and sales in Europe were stable. Sales in the other markets declined, particularly in India, which had a relatively strong Q1 2024, and in the Middle East and Africa. IPR revenues slightly increased. The run rate exiting Q1 is approximately 13 billion. Adjusted gross margin was 48.5% in Q1, an increase from 42.7% last year. Margin improved, benefiting from product and market mix as well as cost reduction actions. Operating expenses were 20.5 billion flat compared to the prior year. A negative currency impact of 0.5 billion was offset by lower amortization of intangible assets. Adjusted EBITDA increased by 1.8 billion to 6.9 billion. In Q1 2024, we had a one-time gain of 1.9 billion. This quarter, EBITDA was supported by increased gross income and EBITDA money was 12.6%. We also had a currency benefit of 0.4 billion. Cash flow was 2.7 billion, a slight decline compared to last year on the back of an exceptionally strong Q4 with early payments. Let's move on to the financial trends. While the market conditions have clearly been challenging, we have seen a stabilization of sales. Rolling 12-month sales bottomed in Q3 2024. The gross margin trend was driven by product and market mix, supply chain efficiency and cost actions. IPR growth also have contributed. And we again saw favorable EBITDA development, although partly offset by lower sales and somewhat higher operating expenses. Let's move to the segments then. In networks, sales increased by 6% year-on-year to 45.6 billion, including a currency benefit of 1.1 billion. So organic sales increased by 3 percentage points. In the market area America, sales grew 48%, and here we benefit from contract wins and accelerated network investments in North America, which reflected in part some tariff uncertainty. Other market areas declined, with the largest decline in India, where investments levels have now normalized. Networks adjusted gross margin was 51%, benefiting from product and market miss, as well as the cost reduction actions in the past years coming through. Networks adjusted EBITDA was 7.5 billion, and the EBITDA margin increased significantly year on year to 21%. The EBITDA improvement was driven by improved gross income, partly offset by increased R&D expenses. In segment cloud software and services, sales were stable with growth in core networks and software sales offset by lower sales in managed services. Organic sales decreased 3%. Sales growth in market area Southeast Asia, Oceania and India was offset by declining sales elsewhere. Adjusted gross margin increased year-on-year to 39.9%, benefiting from a higher software share, commercial discipline and delivery performance. Improvement in gross margin and lower operating expenses resulted in a positive Q1 EBITDA. In enterprise, sales decreased 1% and organic sales were down 7%. Here, global communications platform declined by 9%, impacted by the decision to focus on more profitable market segments and to reduce activities in some countries. And here we expect a stabilization during 2025. Enterprise wireless solutions grew by 20%, driven by higher subscriber and product sales in enterprise networking. Gross income increased by 0.5 billion and was up year on year across all the business in the segment. Global communications platform increased despite the sales decline. Adjusted EBITDA was minus 0.5 billion. Then turning to free cash flow, which was 2.7 billion before M&A in the quarter. The stepdown from Q4 reflected the unusual seasonality of lower Q1 share of profit and annual cash bonus payments, as well as the unusually high level of early payments in Q4. The cash flow was the result of the improved result and was partly offset by somewhat increased operating working capital, as well as the seasonal payments of incentives and the inflow from IPR payments received from our licensees. Net cash remained at similar levels to last quarter, impacted by the valuation, exchange or exchange rates. Next, I will cover the outlook. The global turmoil we have seen in Q1 and that has continued in recent weeks is already having significant impacts, including currency rates and global trade flows. This can of course affect customer behaviors and investment decisions over time, but so far we have seen limited impacts. So there is increased uncertainty of our forecasts in a number of different areas and the future is quite difficult to predict. With that in mind, turning first to sales. We expect both networks and cloud software and services to be broadly similar to average three-year seasonality in Q2. This includes the partial resolution of the Lenovo patent litigation and assumes current exchange rates. The current volatility of currencies makes predictions more difficult. As an example, if the rates at the end of March had been used for Q1, reported net sales would have been approximately 4% lower. Next, network's gross margin. Here, prediction is also more difficult. Tariffs could, of course, change at any time, and the broader macroeconomic environment and investment climate remains very uncertain. So, difficult to judge, but from what we see today, we expect network growth margin to be in the range of 48-50% for Q2. This includes the positive benefit from retroactive IPR as well as a negative one percentage point estimated impact from margins from tariffs. We still benefit from some earlier tariffs mitigation actions in Q2 and if current tariff proposals stay the same the Q2 impact could be a little bit higher. With that, a hand back to you, Bea.