Telefonaktiebolaget LM Ericsson (publ)

Hello, everyone, and welcome to the presentation of Ericsson's third quarter 2026 results. Joining us today, we have Per Naviger, our president and CEO, and also 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 are available in the earnings release and also on the investor relations website. Today's presentation contains forward-looking statements and is being recorded. Actual results may differ materially due to various risks and uncertainties. Please refer to today's earnings report and the annual report for additional information. I'll now hand the call over to Per for his introductory comments.

Thanks Daniel and good morning everyone. So today marks my first earnings call as CEO of Ericsson. I'm pleased to begin by reporting a strong third quarter where we are executing well in a challenging environment. So looking at top line, organic sales grew 7% with organic growth in all segments. Growth was driven by solid customer demand in strategic markets and effective commercial execution. Our gross margin was 47.7% and EBITDA margin came in at 17%. The quarter demonstrates the earnings leverage we create with sales growth and discipline on costs. Lars will soon go through the numbers in more detail. Let me give a few more general reflections first. Since the announcement of my appointment, I have spent a lot of time meeting with customers. A consistent theme is the need for increasingly intelligent and autonomous networks to improve performance, efficiency and customer experience. So with the rapid development of AI, it's obvious that many new applications are going to be dependent on mobile connectivity. This means that networks will need to be even more reliable and resilient in the future. We are well positioned to help our customers on this journey. So with AI models optimized for their use cases and leveraging Ericsson's purpose-built Silicon, we enable our customers to get more out of their spectrum assets without increasing power consumption. So we will continue to invest and make sure we stay on the forefront of this development. At the same time, we remain realistic about the market. The RAN market is broadly flat and component costs are increasing in the wake of course the AI boom. So far we've been able to mitigate with tactical actions such as product substitution and upselling. These tactical efforts however, they will not be enough long term. We are also taking structural action including portfolio optimization, raising prices, supply chain measures and efficiency improvements. Many customer contracts are multi-year, so structural mitigations will take time to flow through. We will not be immune to higher component costs, but protecting the value of our technology and the profitability of our mobile networks business remains our top priority. We are also maintaining cost discipline, while at the same time prioritizing the investments needed for technology leadership and supporting our customers. The organizational changes that we announced today are part of that work. So from January, we are creating Market Area Asia Pacific by combining Northeast Asia with Southeast Asia Oceania and India. This will help us operate more effectively across the region while maintaining strong customer focus at country level. We are strengthening our focus on seamless connectivity and want to make sure that we can offer a rich indoor portfolio that leverages the full R&D competence in the company. We are therefore making changes to enterprise wireless solutions to capture these R&D synergies, drive product innovation and accelerate the growth with both CSPs and enterprise customers. These changes will also create a leaner executive team with clear accountability and ability to move fast in a dynamic market. So with that I will hand over to Lars to go through the financial results in more detail.

Alright, thank you Per. I will begin with some additional comments on the group before moving on to the segments. Net sales in Q3 totaled 59.5 billion with organic sales increasing 7% year over year. Sales in all market areas grew with the exception of Americas which reported a slight decline of 1%. In Americas sales grew slightly in North America but were lower in Latin America. In the other market areas sales were driven by Japan, India, Vietnam and the Middle East. Sales in market area other grew with enterprise sales broadly stable and growth in IPR. IPR revenues were 3.9 billion with an increase of 0.8 billion year over year. Part of the increase is due to retroactive revenue related to previously unlicensed periods. The current IPR run rate is approximately 13.5 billion. Turning to the rest of the P&L adjusted gross income was 28.4 billion with a gross margin close to 48%. Gross income increased year over year by 1.4 billion due to higher sales in mobile networks. Gross margin was broadly stable. On the cost side, we were affected by component cost increases, mostly in networks. I will cover this in more detail later. Operating expenses excluding restructuring charges improved to 18.4 billion, around 0.7 billion lower year over year. Cost reduction actions are mitigating wage pressures. Adjusted EBITDA was 10.1 billion. Excluding the divestment of iConnective, EBITDA increased year on year. The EBITDA margin was 17%. showing the benefits of operating leverage with higher sales. Cash flow before M&A was 4.9 billion, driven by earnings and impacted by higher inventories. I will come back to this later. Let's move to the segments. In networks, sales increased by 9% year-over-year to 38.7 billion. Year-to-date, organic sales grew by 4%. Organic sales grew in all markets, areas, with the exception of Americas. North America grew slightly, while Latin America declined. Sales were driven by three main building blocks. First, our strong commercial momentum in the past 12 to 18 months is translating into share gains and financial performance in strategic markets, for example Japan. Second, we are seeing a near-term shift in customer behavior with some customers accelerating spend before price increase. And third, good commercial execution on the near-term sales mitigation activities. As you know, we put this in place to support sales and margins as component costs increase. Networks adjusted gross margin was stable at 50.3%, benefiting from product mix and retroactive IPR licensing revenues, offsetting some of the component cost increases. Adjusted gross income increased to 19.4 billion. Adjusted EBITDA was 9 billion, up from 7.2 billion last year, mostly due to higher sales. Adjusted EBITDA margin was 23.1%. And looking at the right hand graph, the rolling four quarter adjusted gross margin was around 50% and adjusted the beta margin around 21%. Moving over to cloud software and services. Sales increased by 3% to 15.8 billion. Growth was broad based across the commodities and benefited from growth in adjacencies, leveraging our capabilities into non-CSP verticals. Adjusted gross margin came in at 43.5%, broadly stable compared to last year. Adjusted gross income increased to 6.9 billion. And adjusted EB increased slightly to 2.0 billion with a margin close to 13%. And looking at the right hand graph here, the rolling four quarter adjusted gross margin was around 44% and adjusted EB margin around 13%. Then on enterprise, reported sales decreased by 10% due to the sale of iConnective in the prior year. On an organic basis, enterprise sales grew by 1%. And within enterprise, we are seeing good customer momentum in the enterprise 5G private networks. And as Pam mentioned, the changes announced today will capture R&D synergies, drive product innovation, accelerate growth. Adjusted gross margin declined to 50%, reflecting the impact of the divestment of iConnecti. Adjusted EBITDA landed at minus 0.5 billion and improved sequentially. Efficiency actions are underway to improve profitability further. Then, turning to free cash flow, which was 4.9 billion before M&A in the quarter, Cash flow generation was supported by earnings, but impacted by increased operating net assets, mainly inventories. The build-up in inventory was due to higher component prices, as well as the usual build-up of finished goods ahead of Q4. We delivered a cash flow to net sales of 11% for the rolling four quarters, within our 9-12% target. Net cash increased sequentially to 60.7 billion, gross cash increased to 98 billion and we raised a Euro 500 million bond in Q3 preparing for upcoming maturities. The share buyback continued in Q3 with 4.5 billion of cash flow used for buybacks impacting net cash. Year to date this has delivered 8 billion back to shareholders with 79 million shares repurchased alongside 5 billion of dividends. Next, I will cover the outlook. Global uncertainty remains elevated given the broad geopolitical and macroeconomic environment including the global semiconductor situation. We are not immune. The industry is entering a period of higher input costs, and the financial impact will continue to build up in the coming quarters. Our near-term mitigation actions across the business, mainly commercial measures, are working well so far. As Pam mentioned, we are continuing with our plans to gradually implement longer-term structural actions. These will be needed to more sustainably offset these impacts and protect our position in the value chain. We are adjusting pricing in current tenders and discussing to broaden price increases and commercial mitigations with current customers. We are also continuing efficiency and supply chain actions. Turning to the Q4 outlook. The outlook assumes the exchange rate specified in the report. And for networks and cloud software services, we expect sales growth to be broadly similar to the three year average quarter on quarter seasonality. We expect networks adjusted gross margin to be in the range of 49 to 51% benefiting from product mix. Restructuring charges for 2026 will be elevated as you have already seen in the first nine months. With that, I hand back to you, Per.