Ericsson

Hello everyone and welcome to the presentation of Ericsson's fourth quarter 2025 results. With me here in the studio today are Barry Ekholm, our President and CEO, and Lars Sandstrom, our Chief Financial Officer. As usual, we'll have a short presentation followed by Q&A, and in order to ask a question, you need to join the conference by phone. Details can be found in today's earning 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. Actual results may differ materially due to factors mentioned in today's press release and discussed in the 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 now hand the call over to Birger and to Lars for their introductory comments.

Thanks Daniel. So good morning everyone and thanks for joining us today. It was a strong end of the year as we executed with discipline and made solid progress against our strategic priorities. We are building a more resilient Ericsson. We expanded EBITDA margins year on year for the ninth consecutive quarter. And we're getting closer to our long-term target of 15-18% EBITDA margin. And we ended the year with a net cash position of over 61 billion kronor. Our cost initiatives are just one component of our actions to structurally improve margins and cash flow. And you have seen that we have reduced the headcount, for example, by 5,000 over the past year. And we expect to continue reducing headcount going forward. And last week we announced some initiatives we're taking in Sweden as part of a global effort we do to keep cost efficiency in our business. With the operational improvements we've implemented over the past few years, they are now getting increasingly visible in the P&L, and we had another 48% gross margin quarter now in Q4. The EBITDA margin was 18%, both for the quarter and the full year, and that means that we are tracking very close to our long-term financial targets after normalizing for the about 3 percentage point benefit from the iConnective game. And now, going forward, we expect to see improving operating leverage as our top line accelerates that we could see in Q4. Now that the underlying demand environment for mobile networks remained actually flattish, but it is encouraging that we had an organic growth of 6% during Q4. And the reason for this is that over the past few years, we have invested in the number of growth opportunities and growth initiatives like 5G core, mission-critical networks, and enterprises. And I'll expand a bit more on this. In my view, we're actually entering a very exciting era of what we can call hyper-connectivity. So now we're starting to see everything being connected. I would say Ericsson is really well-placed for this paradigm shift. And I believe we have the right strategy to win. To date, AI investments have been focused on models, semiconductors, data centers, etc. For sure, these are really critical. But the real economic value will actually come in AI applications and devices. So think about drones, humanoids. could be connected glasses, XR glasses, could be instantaneous or simultaneous translation services. You have a number of these things. All these new type of use cases, AI use cases, will really change the nature of traffic with much more demand for uplink and low latency. And it has to be resilient and trusted. So When you think about this new world with AIs going into the physical world, if you call it that, kind of a physical AI, those applications and use cases will be distributed. But more importantly, they will also typically be mobile. So they will require advanced wireless connectivity. So best effort connectivity, Wi-Fi, 4G, and I would even say 5G non-standalone, will simply not be enough. Instead, we will require 5G standalone today, and then later on we'll require 6G. But this new world will also require better mid-bank coverage to get the right performance of the network. And I'll take just one example, and you see China having a 10x denser grid than the rest of the world. And I would say that's one of the reasons why many are saying China is a formidable competitor in AI today as they are moving into AI applications. So at this point in time, it's a very exciting time. Our strategy is to lead in mobile networks with high performance, autonomous and programmable networks that are 5G native. and at the same time scale this mobile platform to new areas like mission-critical enterprise solutions, but also providing tools to developers. So now let me go briefly through some of the progress we made against our strategic initiatives during the last year. Through our high-performing programmable and autonomous network, we're enabling our CSB customers to deliver differentiated performance and create new applications and use cases to monetize. And when you think about differentiated performance, it's actually creating dedicated performance for the application you have at hand. And during the year, we actually signed several key agreements with frontrunner customers like Telstra, Vodafone, but we also made critical inroads in the important Japanese market with all leading operators. These advanced networks that we're building together with frontrunner customers will be key to monetize and scale the AI opportunity. In parallel, we focused on scaling the mobile platform to new use cases and sectors, The most mature new use case is fixed wireless access that during 2025 actually reached 150 million global subscribers. And typically, and most often, they have better customer satisfaction than other access technologies like fiber, for example. And now, as you've heard me say earlier, we're also starting to see traction within mission-critical applications. And this, we think, is a key growth opportunity for us going forward. During 2025, we executed many new agreements in the public safety sector, and we're also targeting national security and defense operations. On the enterprise side, we're continuing to strengthen our position. The market for network API is actually starting to develop. In 2025, Vonage was first to offer aggregated access to network APIs across all three major US carriers. And these advanced APIs included advanced fraud detection, and we have significant customer interest today. Our joint venture, Aduna, onboarded and achieved full coverage in five countries, including the US, Spain, Germany, Canada, and the Netherlands. In Enterprise Wireless Solution, we're seeing the market for private 5G starting to industrialize. It's still, though, early days. But we continue to see growth in our wireless WAN solutions. But that was partly offset by lower sales in private 5G. So it's still a developing market here. But before passing on to Lars to go through a bit more of the numbers, I'd like to take a moment to just go through our capital allocation strategy. Our top priority is to invest for technology leadership, and we expect this to be largely organic. We don't really see any need for large acquisitions going forward, as we believe we have the assets needed to execute on our strategy. However, we expect to see some smaller potential tuck-ins but that will be smaller in nature. So our current very strong financial position offers scope for increased shareholder distributions. And as you have seen in this report, the board is proposing an increased dividend to 3 kronor per share and a buyback program of up to 15 billion kronor. So that would be a total of 25 billion to shareholders. This represents the largest shareholder distribution in our history and reflect our strong position and the board's confidence in our strategy. So Lars will now go through this as well as our financials. So over to you Lars.

All right, thank you. I will begin with some additional comments on the group before moving on to the segments. Net sales in Q4 totaled 69.3 billion SEK, with organic sales growing 6% year-on-year and with growth in all segments. Sales grew in the market area Europe, Middle East and Africa, and in market areas Southeast Asia, Oceania and India. Market area Americas was broadly stable, impacted by intense competition in Latin America, offset by slight growth in North America, driven by higher software growth. and Northeast Asia declined. Reported sales decreased by 5%, impacted by a negative currency effect of 6.8 billion. In Q4, adjusted gross income was 33.2 billion, including a currency headwind of 3.6 billion. Adjusted gross margin reached 48% as a result of our cost reduction measures and operational excellence in both networks and cloud, and software and services. On the cost side, we made steady progress. Operating expenses excluding restructuring charges dropped to 21.4 billion, around 2 billion lower year over year. Of these, about half is currency and the rest is cost initiatives. Excluding FX, R&D remained broadly stable. Adjusted beta was 12.7 billion up by 2.4 billion, including a negative currency impact of 2.5 billion. And the beta margin was up around 4 percentage points to 18.3. Behind this improvement is the good progress we've seen in terms of optimizing our operations and lowering our operating expenses. Cash flow before M&A was 14.9 billion, driven by earnings and reduced net operating assets. As Berger has already highlighted, the board will propose higher shareholder distributions following the good 2025 cash generation. Let's move on to the result for the full year. Net sales amounted to $236.7 billion and organic sales grew by 2%. Growth in America's and in Europe, Middle East and Africa was partly offset by declines in the other market areas. At the same time, reported sales decreased by 5%, impacted by a negative currency effect of 13.9 billion. The sales decline, which gives a significant volume impact on gross income, was more than offset by higher gross margins. adjusted gross margin was 48.1 percent with support from cost reduction initiatives and operational efficiency the result on adjusted gross income was an increase of 2.5 billion to 113.9 billion despite the negative currency impact of 7.2 billion turning to operating costs excluding restructuring charges and impairments Operating expenses dropped to 81.2 billion, which is 7.4 billion lower than the prior year. Of these, about two-thirds come from our cost initiatives, mainly from SG&A, and the rest is currency. Adjusted beta increased to 42.9 billion, and the margin was 18.1, or 14.9 excluding the capital gain from iConnective. Net income for the full year was 28.7 billion, including the benefit from iConnective, the gain from iConnective. Cash flow before M&A was 26.8 billion, a reduction of around 13 billion compared to the prior year. In 2024, a strong working capital reduction contributed to higher operating cash flow. I'll cover cash flow more in details here later. So let's move to the segments. In networks, sales decreased by 6% year-over-year to 44.2 billion with a negative currency impact of 4.4 billion. So organic sales increased by 4%. We saw organic growth in market area Europe, Middle East, and Africa driven by Middle East and Africa. Sales also grew in Southeast Asia driven by Vietnam. Sales declined slightly in Americas due to continued price competition in Latin America. Sales were broadly stable in North America with continued healthy investment levels. Sales also declined in Northeast Asia due to timing of network investments. And networks adjusted gross margin increased to 49.6% despite the high share of service sales. And the margin benefited from cost reduction, actions and operational efficiencies. Adjusted EBITDA in networks was stable at 10.1 billion, despite the currency headwind of 1.8 billion. And adjusted EBITDA margin was 22.8%, an increase of 1.2 percentage points compared to last year. And looking at the right-hand graph, the full-year adjusted gross margin reached 50% and stabilized at the new level. And adjusted EBITDA margin reached 20.7%. Moving on to segment cloud software and services. Sales increased by 3% year-over-year to 20 billion, despite the negative currency impact of 1.8 billion. Organically, sales grew by 12%, mostly driven by higher core sales across all market areas and timing of project deliveries. Adjusted gross margin came in at 44.3%, an improvement of around 5 percentage points compared to last year. driven by a high share of software sales and continued delivery efficiency. Adjusted EBITDA increased to 3.7 billion with a margin of 18.6%, supported by the effective implementation of our strategic initiatives. Looking at the right hand graph, the full year adjusted gross margin was 43% and adjusted EBITDA margin 11.4%. These are both new high levels. Enterprise sales stabilized on an organic basis in Q4, growing 2%. Reported sales decreased by 25%, and that's an impact of the sale of iConnective and currency. Global communications platform organically grew by 3%, driven by an expansion in CPaaS. And adjusted gross margin declined to 52.1%, driven by the iConnective divestment. Adjusted EBITDA landed at minus 1.1 billion, improving by 0.1 billion compared to last year, despite the iConnective impact. Turning to free cash flow, which was 14.9 billion before M&A in the quarter and 26.8 billion for the year. We deliver a cash flow to net sales of 11% for the year within our 9 to 12% target. The decrease in cash flow year on year is due to very strong working capital reductions in 2024. Working capital in 2025 was broadly stable at historical low levels. A net crash increased sequentially by 9.4 billion to 61.2 billion. Return on capital employed in 2025 was 24.1%, including die-connected gain. While excluding it, it was around 19%. Then turning to capital allocation. During 2025, the board has undertaken a review of the balance sheet and the capital allocation principles. On the balance sheet, we remain committed to an investment-grade credit rating and to maintaining a solid net cash position. Turning next to the four capital allocation priorities. First, the top priority is to maintain a technology leadership who continued R&D investment to ensure customer confidence at all times. Second, we are committed to a stable to progressive ordinary dividends. And third, as already mentioned, we remain selective with inorganic investments. And finally, any excess cash will be distributed to shareholders. So for 2025, the board will propose an increased dividend of 3 kronor per share and a share buyback program of up to 15 billion at the AGM. After adjusting for the total sharehold distribution of approximately 25 billion, the 2025 net cash position is at a solid level, considering future investment needs and the business outlook. Next, I will cover the outlook. Global uncertainty remains with potential for further changes in tariffs and broader macroeconomic factors. The outlook assumes stable exchange rates and no tariff changes here. So for networks, we expect Q1 sales growth to be broadly similar to the three-year average quarter-on-quarter seasonality. For cloud software and services, We expect Q1 sales growth to be below the three-year average, quarter-on-quarter seasonality. And we expect networks adjusted gross margin to be in the range of 49% to 51% for Q1. And restructuring charges for the full year 26 are expected to be at an elevated level with proposed headcount reductions recently announced in Sweden and continued actions across other markets. With that, I hand back to you, Berger.