6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN ISSUER

Pursuant to Rule 13a-16 or 15d-16 of

the Securities Exchange Act of 1934

July 17, 2019

Commission File Number 000-12033

LM ERICSSON TELEPHONE COMPANY

(Translation of registrant’s name into English)

Torshamnsgatan 21, Kista

SE-164 83, Stockholm, Sweden

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. Form 20-F ☒ Form 40-F ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐

Announcement of LM Ericsson Telephone Company, July 17, 2019 regarding “Second quarter report 2019”.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


TELEFONAKTIEBOLAGET LM ERICSSON (publ)

By:		/s/ XAVIER DEDULLEN
		Xavier Dedullen
		Senior Vice President, Chief Legal Officer

By:		/s/ CARL MELLANDER
		Carl Mellander
		Senior Vice President, Chief Financial Officer

Date: July 17, 2019

LOGO

Second quarter report 2019

Stockholm, July 17, 2019

Second quarter highlights

•

Sales were SEK 54.8 (49.8) b. Sales adjusted for comparable units and currency increased by 7% driven by growth in Networks in North America and North East Asia. Reported sales grew by 10%.

•

Gross margin was 36.6% (34.8%). Gross margin excluding restructuring charges was 36.7% (36.7%).

•

Networks gross margin excluding restructuring charges improved to 41.4% (40.2%) YoY. Sequentially, Networks gross margin decreased from 43.2%, mainly due to costs related to a previously communicated license settlement agreement, negative impact from strategic contracts and lower IPR licensing revenues.

•

Operating income was SEK 3.7 (0.2) b. and operating margin was 6.8% (0.3%). Operating income excluding restructuring charges was SEK 3.9 (2.0) b. and operating margin excluding restructuring charges was 7.0% (4.1%).

•

Net income improved to SEK 1.8 (-1.8) b.

•

Free cash flow before M&A was SEK 2.2 (-0.2) b. Net cash amounted to SEK 33.8 (33.1) b.


SEK b.	Q2 2019			Q2 2018			YoY change			Q1 2019			QoQ change			6 months 2019			6 months 2018
Net sales		54.8			49.8			10	%		48.9			12	%		103.7			93.2
Sales growth adj. for comparable units and currency		—			—			7	%		—			—			—			—
Gross margin		36.6	%		34.8	%		—			38.4	%		—			37.5	%		34.5	%
Operating income (loss)		3.7			0.2			—			4.9			-24	%		8.6			-0.1
Operating margin		6.8	%		0.3	%		—			10.0	%		—			8.3	%		-0.2	%
Net income (loss)		1.8			-1.8			—			2.4			-23	%		4.3			-2.5
EPS diluted SEK		0.51			-0.58			—			0.70			-27	%		1.21			-0.83
EPS (non-IFRS) SEK¹⁾		0.59			-0.09			—			0.80			-26	%		1.39			0.02
Free cash flow excluding M&A		2.2			-0.2			—			4.1			-45	%		6.3			0.6
Net cash, end of period		33.8			33.1			2	%		36.1			-7	%		33.8			33.1
Gross margin excluding restructuring charges		36.7	%		36.7	%		—			38.5	%		—			37.5	%		36.3	%
Operating income (loss) excluding restructuring charges		3.9			2.0			89	%		5.1			-24	%		9.0			2.9
Operating margin excluding restructuring charges		7.0	%		4.1	%		—			10.4	%		—			8.6	%		3.1	%

¹⁾	EPS diluted, excl. amortizations and write-downs of acquired intangible assets, and excluding restructuring charges. Potential ordinary shares are not considered when their conversion to ordinary shares would increase earnings per share.

Non-IFRS financial measures are reconciled to the most directly reconcilable line items in the financial statements at the end of this report.



1 Ericsson \| Second Quarter Report 2019

CEO comments

Organic sales growth¹⁾ was 7% in the quarter, mainly driven by sales in North America and North East Asia. We see strong momentum in our 5G business with both new contracts and new commercial launches as well as live networks. To date, we have provided solutions for almost two-thirds of all commercially launched 5G networks.

5G momentum is increasing. Initially, 5G will be a capacity enhancer in metropolitan areas. However, over time, new exciting innovations for 5G will come with IoT use cases, leveraging the speed, latency and security 5G can provide. This provides opportunities for our customers to capture new revenues as they provide additional benefits to consumers and businesses.

In the quarter, gross margin²⁾ was unchanged YoY at 36.7%, with improvements in segment Networks being offset by lower margins in Digital Services and Managed Services.

Networks had another solid quarter with an organic sales growth¹⁾ of 11% YoY, driven by 4G and 5G investments in North America and North East Asia as well as increased volumes related to strategic contracts. While the strategic contracts will be margin accretive in the long term, the impact on near-term profitability is negative. In the quarter we had a negative impact on gross margin and expect this impact to increase during the second half of the year. In addition, costs related to the previously announced license settlement agreement impacted margins negatively. Despite this, gross margin²⁾ improved to 41.4% (40.2%) YoY mainly due to increased IPR revenues. To ensure we meet customer requirements for fast and agile deliveries, we have decided to invest in a state-of-the-art 5G production site in the US to complement our global supply chain.

In Digital Services we continue to execute on the plan to reach low single-digit margins for 2020. The improvements are not linear and will vary between quarters. Organic sales¹⁾ in Digital Services were down by -3% YoY as a result of rapid decline in legacy products. Gross margin²⁾ was 37.1% (42.6%). The decline in gross margin was mainly driven by a change in sales mix. The mix may vary between quarters. Our 5G and Cloud native portfolio is gaining customer traction and we are increasing related R&D investments to ensure portfolio readiness. The reshaped BSS strategy is gaining momentum and contracts were signed with several new customers in the quarter. The share of recurrent business is increasing, we are tracking towards having 75% of the 45 critical and non-strategic contracts addressed by year-end and we have cost efficiency programs in place throughout Digital Services.

In Managed Services the strategy is to enhance the customer offering by relying more on automation, machine learning and AI, which will longer-term improve the margin profile of the business. Near-term margins are negatively impacted by the increase in R&D investments. Organic sales¹⁾ declined by -6%, mainly explained by the negative effect from the customer contract reviews. Gross margin²⁾ declined to 12.3% (14.0%) YoY, negatively impacted by timing of costs.

Organic sales growth¹⁾ in Emerging Business and Other was 24% driven by a continued growth in iconectiv. Operating income²⁾ improved YoY to SEK -0.7 (-1.2) b. supported by increased profits in iconectiv and the divestment of MediaKind. In this segment we invest in initiatives that aim to scale and help create future business for Ericsson. With the exception of iconectiv, the portfolio is still in an early investment phase.

Driven by improved earnings, free cash flow excluding M&A improved to SEK 2.2 (-0.2) b.

We are in ongoing settlement negotiations with the United States Securities and Exchange Commission (SEC) and the United States Department of Justice (DOJ) in connection with their previously reported investigation under the U.S. Foreign Corrupt Practices Act (FCPA). We are not able to estimate the length of these settlement discussions. Further, as this is an ongoing legal matter we cannot provide any detail. However, it is our current assessment that the resolution of these matters will result in material financial and other measures, the magnitude and impact of which cannot be reliably estimated or ascertained at this time.

We continue to take strategic contracts and the large-scale network deployments expected to commence in parts of Asia, will gradually impact margins negatively in the short term but strengthen our position in the long term. Continued technology and market investments, especially in 5G, automation and AI, are fundamental for long-term competitiveness and a key part of our focused strategy to strengthen our long-term business and path to reaching our targets for 2020 and 2022.

Börje Ekholm

President and CEO

1)	Organic sales growth: Sales growth adjusted for comparable units and currency

2)	Excluding restructuring charges

Planning assumptions going forward

Market related

•

The Radio Access Network (RAN) equipment market is estimated to increase by 3% for full-year 2019 with 2% CAGR for 2018-2023. (Source: Dell’Oro.)

Ericsson related

Net sales

•

Two-year average sales seasonality between Q2 and Q3 is 3%. The current sales level in North America is expected to remain throughout 2019.

•

The revenues for current IPR licensing contract portfolio is approximately SEK 9 b. on an annual basis.

Gross margin

•

Strategic contracts in Networks, with initially low margins, taken to strengthen the market position, will have a negative impact on gross margin without jeopardizing the 2020 target. The negative impact is expected to increase in 2H 2019.

•

Large 5G deployments in parts of Asia are expected to commence at the end of 2019 and will gradually impact gross margin negatively in the short term.

•

The share of services sales in North America is expected to gradually increase, impacting gross margin negatively.

•

The targeted improvements in Digital Services are not linear and will vary between quarters.

Operating expenses

•

Operating expenses typically decrease somewhat between Q2 and Q3 due to seasonality.

•

Costs for 5G field trials will continue to impact SG&A.

•

Networks R&D expenses are expected to flatten out.

Restructuring charges

•

Restructuring charges for full-year 2019 are estimated to be SEK -2 to -4 b. (the previous estimate was SEK -3 to -5 b.).

Currency exposure

•

Rule of thumb: A change of 10% of USD to SEK would have an impact of approximately +/-5% on net sales and approximately +/-1 percentage point on operating margin.



2 Ericsson \| Second Quarter Report 2019		CEO comments

Financial highlights


SEK b.	Q2 2019			Q2 2018			YoY change			Q1 2019			QoQ change			6 months 2019			6 months 2018
Net sales		54.8			49.8			10	%		48.9			12	%		103.7			93.2
Sales growth adj. for comparable units and currency		—			—			7	%		—			—			—			—
Gross income		20.1			17.3			16	%		18.8			7	%		38.9			32.2
Gross margin (%)		36.6	%		34.8	%		—			38.4	%		—			37.5	%		34.5	%
Research and development (R&D) expenses		-9.5			-9.8			—			-9.2			4	%		-18.7			-18.9
Selling and administrative expenses		-7.0			-7.1			—			-6.0			15	%		-13.0			-13.2
Impairment losses on trade receivables		0.2			-0.4			—			0.6			-73	%		0.7			-0.4
Other operating income and expenses		0.1			0.0			—			0.8			-91	%		0.8			0.1
Operating income (loss)		3.7			0.2			—			4.9			-24	%		8.6			-0.1
Operating margin (%)		6.8	%		0.3	%		—			10.0	%		—			8.3	%		-0.2	%
Financial income and expenses, net		-0.4			-0.8			-46	%		-0.6			-27	%		-1.0			-1.4
Taxes		-1.5			-1.2			25	%		-1.9			-23	%		-3.3			-1.0
Net income (loss)		1.8			-1.8			—			2.4			-23	%		4.3			-2.5
Restructuring charges		-0.1			-1.9			—			-0.2			-43	%		-0.3			-3.1
Gross income excluding restructuring charges		20.1			18.3			10	%		18.8			7	%		38.9			33.9
Gross margin excluding restructuring charges		36.7	%		36.7	%		—			38.5	%		—			37.5	%		36.3	%
R&D expenses excluding restructuring charges		-9.5			-9.3			2	%		-9.0			5	%		-18.5			-18.0
SG&A expenses excluding restructuring charges		-6.9			-6.6			5	%		-6.0			15	%		-12.9			-12.7
Operating income (loss) excl. restructuring charges		3.9			2.0			89	%		5.1			-24	%		9.0			2.9
Operating margin excluding restructuring charges		7.0	%		4.1	%		—			10.4	%		—			8.6	%		3.1	%

Net sales

Sales adjusted for comparable units and currency increased by 7% YoY, driven by growth in Networks. Networks sales adjusted for comparable units and currency increased by 11% YoY, with strong sales growth in North America and in North East Asia. Digital Services sales adjusted for comparable units and currency declined by -3% YoY due to lower legacy product sales. Managed Services sales adjusted for comparable units and currency declined by -6% YoY, as a result of exited contracts. Sales adjusted for comparable units and currency in Emerging Business and Other increased by 24% YoY driven by growth in iconectiv.

Reported sales increased by 10% YoY.

Sequentially, sales as well as sales adjusted for comparable units and currency increased following a seasonally weak Q1.

IPR licensing revenues

IPR licensing revenues increased to SEK 2.2 (1.8) b. YoY. The increase was mainly due to new contracts signed and currency effects of a stronger USD versus SEK. Sequentially IPR licensing revenues decreased from SEK 2.5 b. after a strong Q1.

Gross margin

Gross margin increased to 36.6% (34.8%) YoY. Gross margin excluding restructuring charges was flat at 36.7%. Networks gross margin increased, partly due to increased IPR and licensing revenues. Gross margin declined YoY in Digital Services, Managed Services as well as in Emerging Business and Other.

Sequentially, gross margin decreased to 36.6% from 38.4%. Gross margin excluding restructuring charges decreased to 36.7% from 38.5% mainly due to lower gross margin in Networks. Networks gross margin was negatively impacted by costs related to the announced license settlement agreement, lower IPR and licensing revenues as well as an increased share of strategic contracts.

Operating expenses

R&D expenses decreased to SEK -9.5 (-9.8) b. YoY. R&D expenses excluding restructuring charges increased to SEK -9.5 (-9.3) b., negatively impacted by currency effects. R&D expenses increased in Networks and Managed Services. The increase was however partly offset by lower R&D expenses in Digital Services and Emerging Business and Other. The net impact of capitalized and amortized development expenses was SEK 0.1 (-0.3) b.

Selling and administrative (SG&A) expenses slightly decreased to SEK -7.0 (-7.1) b. YoY. SG&A expenses excluding restructuring charges increased to SEK -6.9 (-6.6) b. YoY, negatively impacted by costs for field trials and currency effects.

Impairment losses on trade receivables were positive at SEK 0.2 (-0.4) b., due to a provision for impairment losses on trade receivables which was converted to a provision for customer financing. The corresponding negative amount was reported as SG&A expenses.

Operating expenses increased sequentially due to seasonality, lower positive impact from impairment of accounts receivables, higher provisions for variable payments and negative currency effects.

Other operating income and expenses

Other operating income and expenses was flat YoY at SEK 0.1 b.

Restructuring charges

Restructuring charges decreased to SEK -0.1 (-1.9) b. YoY.



3 Ericsson \| Second Quarter Report 2019		Financial highlights

Operating income and margin

Operating income and margin improved YoY to SEK 3.7 (0.2) b. and 6.8% (0.3%) respectively. Operating income and margin excluding restructuring charges improved to SEK 3.9 (2.0) b. and 7.0% (4.1%) respectively, as a result of increased sales.

Sequentially, operating income and margin decreased to SEK 3.7 b. from SEK 4.9 b. and to 6.8% from 10.0% respectively. Operating income excluding restructuring charges decreased to SEK 3.9 b. from SEK 5.1 b.

In Q1 2019, operating income was significantly supported by capital gains of SEK 0.8 b. and reversal of a provision for trade receivables of SEK 0.7 b.

Financial income and expenses, net

Financial income and expenses (net) improved to SEK -0.4 (-0.8) b. YoY, mainly due to lower negative effects of foreign exchange revaluation. The currency hedge effects, which derive from the hedge loan balance in USD, impacted financial income and expenses (net) by SEK 0.0 (-0.3) b. The SEK was flat against the USD between March 31, 2019 (SEK/USD rate 9.26) and June 30, 2019 (SEK/USD rate 9.27). In the quarter, interest expenses on financial leases were SEK -0.1 (0.0) b. as an effect of IFRS 16 implementation.

Taxes

Taxes were SEK -1.5 (-1.2) b., which equals to a tax rate of 44%, and include a non-recurring major tax provision. The Company has implemented IFRIC 23, which requires quarterly assessments of uncertain tax positions. This has led to variations of taxes between quarters. The tax rate on income before tax is calculated based on the forecasted geographical distribution of profits for 2019.

Net income (loss) and EPS

Net income increased to SEK 1.8 (-1.8) b. and EPS diluted increased to SEK 0.51 (-0.58) YoY.

Employees

The number of employees on June 30, 2019, was 94,756, a net increase of 176 employees in the quarter.



4 Ericsson \| Second Quarter Report 2019		Financial highlights

Market area sales


	Second quarter 2019										Change
SEK b.	Networks		Digital Services		Managed Services		Emerging Business and Other		Total		YoY			QoQ
South East Asia, Oceania and India		5.0		0.9		1.0		0.0		7.0		0	%		13	%
North East Asia		5.4		0.9		0.2		0.0		6.5		37	%		70	%
North America		14.2		2.2		1.2		0.0		17.7		23	%		9	%
Europe and Latin America		8.1		2.9		2.9		0.1		14.1		1	%		7	%
Middle East and Africa		3.1		1.6		1.0		0.0		5.6		-3	%		4	%
Other ¹⁾		2.0		0.4		0.0		1.5		3.9		-1	%		-8	%

Total		37.8		9.0		6.3		1.7		54.8		10	%		12	%

¹⁾	Market Area “Other” includes primarily licensing revenues and the major part of segment Emerging Business and Other

South East Asia, Oceania and India

Sales remained flat YoY. Managed Services sales increased, mainly as a result of a contract won in 2018. Digital Services sales decreased due to lower legacy product sales in India, while Networks sales were stable.

North East Asia

Sales increased YoY, primarily driven by Networks sales with 5G deliveries in South Korea and continued 4G deployment in mainland China to accommodate increased traffic demand. Digital Services sales grew, mainly through achieving project milestones. 5G commercial licenses have been issued recently in mainland China.

North America

Sales increased YoY, driven by continued 4G and 5G investments by all major customers. Managed Services sales grew, driven by strong sales of variable parts in large customer contracts.

Europe and Latin America

Sales slightly increased YoY. Networks sales increased driven by earlier announced contract wins in Europe. Managed Services sales declined due to earlier communicated customer contract exits.

Middle East and Africa

Sales declined YoY. Networks and Digital Services sales declined due to timing of project milestones. Managed Services sales declined due to earlier communicated customer contract exits.

Other

Sales were flat YoY. Growth in IPR licensing revenues and iconectiv (part of segment Emerging Business and Other) was offset by the divestment of MediaKind. IPR licensing revenues amounted to SEK 2.2 (1.8) b., supported by a new contract signed in Q1 2019 and currency effects of a stronger USD versus SEK.



5 Ericsson \| Second Quarter Report 2019		Market area sales

Segment results

Networks


SEK b.	Q2 2019			Q2 2018			YoY change			Q1 2019			QoQ change			6 months 2019			6 months 2018
Net sales		37.8			32.4			17	%		33.5			13	%		71.3			61.0
Of which products		26.7			22.3			20	%		23.8			12	%		50.5			41.8
Of which IPR licensing revenues		1.8			1.5			24	%		2.1			-11	%		3.9			3.0
Of which services		11.1			10.1			10	%		9.7			14	%		20.8			19.2
Sales growth adjusted for comparable units and currency		—			—			11	%		—			—			—			—
Gross income		15.7			12.6			25	%		14.5			8	%		30.1			23.7
Gross margin		41.4	%		38.8	%		—			43.2	%		—			42.3	%		38.8	%
Operating income		5.7			3.5			60	%		5.5			4	%		11.2			6.9
Operating margin		15.0	%		10.9	%		—			16.3	%		—			15.6	%		11.3	%
Restructuring charges		0.0			-0.7			—			0.0			—			0.0			-1.2
Gross income excl. restructuring charges		15.7			13.0			20	%		14.5			8	%		30.1			24.6
Gross margin excl. restructuring charges		41.4	%		40.2	%		—			43.2	%		—			42.2	%		40.3	%
Operating income excl. restructuring charges		5.7			4.3			32	%		5.5			4	%		11.2			8.1
Operating margin excl. restructuring charges		15.0	%		13.3	%		—			16.4	%		—			15.7	%		13.4	%

Net sales

Sales adjusted for comparable units and currency increased by 11% YoY. The increase is mainly due to strong growth in North America and in North East Asia, driven by 4G and 5G investments.

Reported sales increased by 17% YoY.

Gross margin

Gross margin increased to 41.4% (38.8%) YoY. Gross margin excluding restructuring charges increased to 41.4% (40.2%) mainly driven by higher IPR licensing revenues and a favorable business mix. The increase was partly offset by costs related to a previously announced license settlement agreement, ending patent infringement lawsuits, and negative impact from strategic contracts. The strategic contracts are taken to strengthen the market position and their negative impact on gross margin may vary between quarters.

Gross margin decreased to 41.4% from 43.2% QoQ. The decrease was mainly due to costs related to the new license settlement agreement, certain negative impact from strategic contracts and lower IPR licensing revenues.

Operating income and margin

Operating income increased to SEK 5.7 (3.5) b. YoY and operating margin improved to 15.0% (10.9%). Operating income excluding restructuring charges increased to SEK 5.7 (4.3) b. and operating margin improved to 15.0% (13.3%). The improvement was driven by higher sales and higher gross margin but was partly offset by increased R&D and SG&A expenses. R&D expenses increased due to investments in 5G. The total impact of amortization and capitalization of development expenses and of recognition and deferral of hardware costs contributed with SEK 0.4 (0.0) b. to operating income.

Strategy execution

As presented at the 2018 Capital Markets Day, the target for Networks is to generate an operating margin of 15-17% (excluding restructuring charges) by 2020. Important ongoing strategic activities are to:

•

Invest in R&D to safeguard a leading product portfolio and cost leadership

•

Increase investments in automation and serviceability driving down costs

•

Selectively gain market share based on technology and cost competitiveness.

At the close of the quarter, across radio and core, Ericsson had supplied equipment to 15 live 5G networks.



6 Ericsson \| Second Quarter Report 2019		Segment results \| Networks

Digital Services


SEK b.	Q2 2019			Q2 2018			YoY change			Q1 2019			QoQ change			6 months 2019			6 months 2018
Net sales		9.0			8.8			2	%		7.8			15	%		16.8			16.1
Of which products		4.6			4.5			3	%		3.9			17	%		8.5			8.4
Of which IPR licensing revenues		0.4			0.3			24	%		0.5			-11	%		0.9			0.7
Of which services		4.4			4.4			0	%		3.9			13	%		8.3			7.7
Sales growth adjusted for comparable units and currency		—			—			-3	%		—			—			—			—
Gross income		3.3			3.5			-4	%		2.9			15	%		6.2			6.4
Gross margin		36.8	%		39.1	%		—			36.8	%		—			36.8	%		39.5	%
Operating income (loss)		-1.4			-2.4			—			-1.8			—			-3.2			-5.0
Operating margin		-15.6	%		-26.9	%		—			-23.0	%		—			-19.1	%		-30.9	%
Restructuring charges		-0.1			-0.9			—			-0.2			—			-0.3			-1.5
Gross income excl. restructuring charges		3.3			3.8			-11	%		2.9			14	%		6.3			6.9
Gross margin excl. restructuring charges		37.1	%		42.6	%		—			37.6	%		—			37.3	%		42.7	%
Operating income (loss) excl. restructuring charges		-1.3			-1.5			—			-1.6			—			-2.9			-3.5
Operating margin excl. restructuring charges		-14.6	%		-16.9	%		—			-20.6	%		—			-17.4	%		-21.9	%

Net sales

Reported sales increased by 2% YoY. Sales adjusted for comparable units and currency declined by -3% YoY impacted by lower legacy product sales, primarily in India. The decline was partly offset by growth in the new portfolio for Cloud Infrastructure and Operations Support Systems (OSS).

Gross margin

Gross margin decreased to 36.8% (39.1%) YoY. Gross margin excluding restructuring charges declined to 37.1% (42.6%), negatively impacted by a business mix with a lower share of software sales. The business mix may vary between quarters depending on project mix and timing.

Gross margin excluding restructuring charges declined to 37.1% from 37.6% QoQ, due to a business mix with a lower share of software sales.

Operating income (loss)

Operating income was SEK -1.4 (-2.4) b. Operating income excluding restructuring charges was SEK -1.3 (-1.5) b., with a positive impact from reduced operating expenses. Operating expenses, excluding restructuring charges and excluding the net impact from capitalized and amortized development expenses, declined by SEK 0.9 b. in the first six months 2019 despite adverse currency effects. The net impact of capitalized and amortized development expenses was SEK -0.3 (-0.4) b. in the quarter.

Strategy execution

Top priority for Digital Services is to turn the segment into a profitable business, targeting low single-digit operating margin by 2020 (excluding restructuring charges).

A key activity for turnaround of the Digital Services business is to complete, renegotiate or exit 45 identified critical and non-strategic customer contracts. Two additional contracts were addressed in the quarter, and a total of 27 contracts have been addressed to date. This is in line with the plan to have completed 75% of the 45 contracts by the end of 2019.

New ways of working and investments in automation to further improve R&D efficiency as well as investments in the new portfolio of 5G and cloud-native products will continue to strengthen the current market position and prepare Digital Services for profitable growth.

New product offerings were launched in the quarter, including Ericsson Edge NFVi (Network Function Virtualization infrastructure), an edge solution for distributed cloud services, and Ericsson Partner VNF (Virtual Network Functions) Certification Program for virtual network function vendors. These cloud and NFVi offerings are part of the Ericsson 5G Platform. Rolling 12 months sales of the new portfolio increased by 13%, driven by customer investments in 4G and 5G.

At the close of the quarter, across radio and core, Ericsson had supplied equipment to 15 live 5G networks.



7 Ericsson \| Second Quarter Report 2019		Segment results \| Digital Services

Managed Services


SEK b.	Q2 2019			Q2 2018			YoY change			Q1 2019			QoQ change			6 months 2019			6 months 2018
Net sales		6.3			6.5			-3	%		5.9			8	%		12.2			12.4
Sales growth adjusted for comparable units and currency		—			—			-6	%		—			—			—			—
Gross income		0.8			0.8			-4	%		1.0			-25	%		1.8			1.3
Gross margin		12.3	%		12.4	%		—			17.7	%		—			14.9	%		10.5	%
Operating income		0.2			0.3			-32	%		1.3			-84	%		1.5			0.4
Operating margin		3.2	%		4.6	%		—			21.4	%		—			11.9	%		3.2	%
Restructuring charges		0.0			-0.1			—			0.0			—			0.0			-0.2
Gross income excl. restructuring charges		0.8			0.9			-15	%		1.0			-25	%		1.8			1.5
Gross margin excl. restructuring charges		12.3	%		14.0	%		—			17.7	%		—			14.9	%		11.7	%
Operating income excl. restructuring charges		0.2			0.4			-52	%		1.3	¹⁾		-84	%		1.5			0.6
Operating margin excl. restructuring charges		3.2	%		6.5	%		—			21.4	%		—			12.0	%		4.6	%

¹⁾	Q1 2019 Operating income was SEK 0.5 b., when excluding restructuring charges and reversal of a provision for impairment of trade receivables

Net sales

Sales adjusted for comparable units and currency decreased by -6% YoY due to earlier communicated customer contract exits. Sales in Network Design & Optimization (project business) showed growth.

Reported sales decreased by -3% YoY. Sales increased adjusted for customer contract exits.

Gross margin

Gross margin was stable YoY. Gross margin excluding restructuring charges declined to 12.3% (14.0%) YoY, mainly due to timing of costs.

Gross margin decreased to 12.3% from 17.7% QoQ, mainly due to timing of costs. Gross margin in Q1 2019 was supported by seasonally lower costs.

Operating income and margin

Operating income decreased to SEK 0.2 (0.3) b. YoY. Operating income excluding restructuring charges declined to SEK 0.2 (0.4) b., mainly as a result of lower gross margin and increased investments in automation, analytics and AI-driven offerings.

Operating income declined to SEK 0.2 b. from SEK 1.3 b. QoQ. Reversal of a provision for impairment of trade receivables of SEK 0.7 b. had a significant positive impact in Q1 2019. In addition, operating expenses increased sequentially mainly as a result of continued investments in automation, analytics and AI-driven offerings.

Operating margin for the first six months 2019 was 5.8%, excluding restructuring charges and the positive effect from reversal of a provision for impairment of trade receivables, of SEK 0.7 b., in Q1 2019. This in line with the 2020 ambition.

Strategy execution

AI and automation are essential to managing the increasing complexity of current and future networks. To address and lead the evolution from network-centric towards user-experience-centric operations, in Q1 2019 Ericsson launched a new AI-based managed services offering for operators – the Ericsson Operations Engine. This offering addresses the increasing network complexity, including operators’ need to handle growing volumes of devices, multiple technologies (4G, 5G, IoT), and more diverse service requirements.

Further investments continue to be made in automation, analytics and AI-driven offerings, to support 5G, IoT and cloud as well as to increase service delivery efficiency.

As presented at the 2018 Capital Markets Day, the ambition for Managed Services is to improve operating margin to 5-8% (excluding restructuring charges) in 2020.



8 Ericsson \| Second Quarter Report 2019		Segment results \| Managed Services

Emerging Business and Other (includes Emerging Business, iconectiv, Red Bee Media and Media Solutions)


SEK b.	Q2 2019			Q2 2018			YoY change			Q1 2019			QoQ change			6 months 2019			6 months 2018
Net sales		1.7			2.1			-18	%		1.8			-4	%		3.4			3.7
Of which Emerging Business and iconectiv		1.0			0.7			44	%		1.0			2	%		2.1			1.3
Of which Red Bee Media		0.6			0.6			8	%		0.6			2	%		1.2			1.1
Of which Media Solutions		0.0			0.7			—			0.1			—			0.1			1.3
Sales growth adjusted for comparable units and currency		—			—			24	%		—			—			—			—
Gross income		0.3			0.5			-38	%		0.4			-24	%		0.7			0.8
Gross margin		18.5	%		24.4	%		—			23.4	%		—			21.0	%		22.9	%
Operating income (loss)		-0.7			-1.3			—			0.0			—			-0.8			-2.5
Operating margin		-44.1	%		-63.5	%		—			-1.7	%		—			-22.4	%		-66.9	%
Restructuring charges		0.0			-0.1			—			0.0						0.0			-0.2
Gross income excl. restructuring charges		0.3			0.6			-43	%		0.4			-22	%		0.7			1.0
Gross margin excl. restructuring charges		19.2	%		27.4	%		—			23.5	%		—			21.4	%		26.0	%
Operating income (loss) excl. restructuring charges		-0.7			-1.2			—			0.0	¹⁾		—			-0.7			-2.3
Of which Emerging Business, iconectiv and common costs		-0.5			-0.7			—			-0.5			18	%		-1.0			-1.3
Of which Red Bee Media		0.0			-0.1			—			0.0			—			0.0			-0.2
Of which Media Solutions		-0.2			-0.4			—			0.4			—			0.3			-0.8
Operating margin excl. restructuring charges		-42.8	%		-57.4	%		—			-1.3	%		—			-21.6	%		-61.9	%

¹⁾	Q1 2019 Operating income was SEK -0.8 b., when excluding restructuring charges and capital gains of SEK 0.8 b. in Media Solutions and Red Bee Media

Net sales

Reported sales decreased by -18% YoY due to the 51% divestment of MediaKind. Sales adjusted for comparable units and currency increased by 24% YoY. The increase was driven by iconectiv, specifically the number portability contract in the United States for which deliveries started in May 2018.

Reported Sales decreased QoQ, due to the 51% divestment of MediaKind in Q1 2019.

Gross margin

Gross margin declined to 18.5% (24.4%) YoY. Gross margin excluding restructuring charges declined to 19.2% (27.4%). The decline was mainly due to the divestment of 51% of MediaKind and to a provision of SEK -0.1 b. for a customer claim related to a legacy product.

Gross margin decreased QoQ to 18.5% from 23.4%. Gross margin excluding restructuring charges decreased to 19.2% from 23.5% mainly due to a provision for a customer claim related to a legacy product.

Operating income (loss)

Operating income improved to SEK -0.7 (-1.3) b. YoY. Operating income excluding restructuring charges improved to SEK -0.7 (-1.2) b., driven by increased profits in iconectiv and reduced losses in Media Solutions.

Media Solutions (MediaKind and transaction-related costs etc.) operating income excluding restructuring charges was SEK -0.2 (-0.4) b. The quarterly result includes Ericsson’s 49% share in earnings of the Media-Kind business. Capital gains of SEK 0.7 b. from this divestment in February 2019 had a positive impact on operating income in Q1 2019.

Red Bee Media operating income excluding restructuring charges was SEK 0.0 (-0.1) b. Capital gains related to the divestment of certain assets in Red Bee Media had a positive impact on operating income in Q1 2019.

Operating income for Emerging business, iconectiv and common costs excluding restructuring charges was SEK -0.5 (-0.7) b. The improvement was due to increased sales in iconectiv. Operating income excluding restructuring charges declined QoQ due to lower gross margin.

Strategy execution

Emerging Business and iconectiv

Selective and disciplined investments and a lean startup approach have been implemented in Emerging Business, to build a position and grow sales in new areas. iconectiv offers software-based interconnection solutions, providing number portability between operators. With the exception of iconectiv, the portfolio is still in an early investment phase with focus on generating sales and scaling the business. The main go-to-market model is via mobile operators, leveraging access to licensed spectrum.

Red Bee Media

The target remains; to achieve a sustainable profitable business by continuing to develop and manage the business as an independent and focused media services entity within Ericsson.

Media Solutions

51% of the MediaKind business was divested on February 1, 2019. After the transaction, Ericsson carries 49% of the MediaKind results as “share in earnings of JV and associated companies”.



9 Ericsson \| Second Quarter Report 2019		Segment results \| Emerging Business and Other

Cash flow


SEK b.	Q2 2019		Q2 2018		Q1 2019		6 months 2019		6 months 2018
Net income reconciled to cash		5.0		-0.3		5.5		10.4		-1.3
Changes in operating net assets		-1.3		1.7		0.3		-1.0		4.3
Cash flow from operating activities		3.6		1.4		5.8		9.4		3.0
Cash flow from investing activities		1.0		1.6		3.3		4.3		-0.2
Cash flow from financing activities		-4.6		-3.7		-2.6		-7.2		-3.8
Effect of exchange rate changes on cash		0.0		1.0		0.6		0.6		2.1
Net change in cash and cash equivalents		0.0		0.4		7.1		7.1		1.2
Free cash flow excluding M&A		2.2		-0.2		4.1		6.3		0.6
Free cash flow		2.2		-0.6		4.4		6.6		-0.3

Operating activities

Net income reconciled to cash was SEK 5.0 (-0.3) b. mainly driven by improved profitability. Cash flow from operating activities was SEK 3.6 (1.4) b. and includes SEK -1.3 b. in changes in operating net assets.

Inventory and trade payables increased due to high business activity while trade receivables decreased driven by strong collection. Sale of trade receivables continued to trend downwards and decreased YoY. Provisions decreased in the quarter, mainly as a result of cash outlays of SEK 2.1 (1.5) b. of which SEK 0.4 (0.8) b. were restructuring charges. Contract liabilities decreased by SEK 1.6 b.

Total cash outlays for 2019, related to the balance for provision as of December 31, 2018, are estimated to be SEK 10 b., of which cash outlays in the quarter were SEK 3.7 b. (including SEK 1.7 b. related to earlier BSS provision). Total cash outlays for the first six months were SEK 6.9 b.

Investing activities

Cash flow from investing activities was SEK 1.0 (1.6) b. including SEK 2.4 b. of decreased interest-bearing securities (i.e. government/ mortgage bonds). Cash flow from investments in property, plant and equipment was SEK -1.1 (-1.0) b., following investments in test equipment. Cash flow from capitalized development expenses was SEK -0.4 (-0.3) b. following increased R&D activities in 5G.

Financing activities

Cash flow from financing activities was SEK -4.6 (-3.7) b. of which the main part relates to payment of dividends of SEK -3.3 b.

Free cash flow

Free cash flow excluding M&A was SEK 2.2 (-0.2) b. and free cash flow (including M&A) was SEK 2.2 (-0.6) b. The increase was mainly driven by improved net income reconciled to cash, partly offset by cash outlays for earlier made provisions.

Effects from implementation of IFRS 16 “Leases”

Cash flow from operating activities was positively impacted by SEK 0.6 b. Financing activities were negatively impacted by amortization of the leasing liability of the same amount. These effects generated a free cash flow that was positively impacted by SEK 0.6 b. through the implementation of IFRS 16.



10 Ericsson \| Second Quarter Report 2019		Cash flow

Financial position


SEK b.	Jun 30 2019			Jun 30 2018			Mar 31 2019
+ Cash and cash equivalents		45.5			37.0			45.5
+ Interest-bearing securities, current		6.4			8.3			3.2
+ Interest-bearing securities, non-current		17.1			21.5			23.0

Gross cash		69.0			66.9			71.7

– Borrowings, current		2.2			2.6			3.0
– Borrowings, non-current		33.0			31.1			32.5

Net cash		33.8			33.1			36.1

Equity		84.5			93.6			84.5
Total assets		280.4			265.3			284.0
Capital turnover (times)		1.3			1.2			1.3
Return on capital employed (%)		11.0	%		-0.2	%		12.6	%
Equity ratio (%)		30.1	%		35.3	%		29.8	%
Return on equity (%)		9.4	%		-5.8	%		10.8	%

Gross cash decreased by SEK -2.7 b. QoQ as a result of payments of dividends. Net cash decreased by SEK -2.4 b. QoQ. Gross cash was SEK 69.0 b. and net cash was SEK 33.8 b. Net cash does not include lease liabilities.

Liabilities for post-employments benefits increased in the quarter, to SEK 33.9 b. from SEK 30.7 b., due to lower interest rates. The Swedish defined benefit obligation (DBO) was calculated using a discount rate based on the yields of Swedish government bonds. If the discount rate had been based on Swedish covered mortgage bonds, the liability for post-employment benefits would have been approximately SEK 10.3 b. lower as of June 30, 2019.

The average maturity of long-term borrowings as of June 30, 2019, was 2.9 years, a decrease from 3.9 years 12 months earlier.

LOGO



11 Ericsson \| Second Quarter Report 2019		Financial position

Parent Company

Income after financial items was SEK 0.8 (1.7) b.

At the end of the quarter, gross cash (cash, cash equivalents, short-term investments and interest-bearing securities non-current) amounted to SEK 51.1 (53.6) b.

There was a decrease in intercompany lending of SEK 4.1 b. and in intercompany borrowing of SEK 12.7 b. in the second quarter.

In accordance with the conditions of the long-term variable compensation program (LTV) for Ericsson employees, 3,767,149 shares from treasury stock were sold or distributed to employees during the second quarter. The holding of treasury stock on June 30, 2019, was 28,855,118 Class B shares.



12 Ericsson \| Second Quarter Report 2019		Parent Company

Other information

Ericsson’s Nomination Committee appointed

On April 26, 2019, Ericsson announced that its Nomination Committee for the Annual General Meeting 2020 had been appointed.

The Nomination Committee consists of:

•

Johan Forssell, Investor AB

•

Karl Åberg, AB Industrivärden and Svenska Handelsbankens Pensionsstiftelse

•

Jonas Synnergren, Cevian Capital Partners Limited

•

Anders Oscarsson, AMF – Försäkring och Fonder

•

Ronnie Leten, the Chair of the Board of Directors.

Johan Forssell is the Chair of the Nomination Committee.

Stella Medlicott appointed Senior Vice President and Head of Marketing & Corporate Relations

On June 4, 2019 Ericsson announced that, effective June 10, 2019, Stella Medlicott is appointed Senior Vice President and Head of Group Function Marketing & Corporate Relations at Ericsson. Stella Medlicott is a member of Ericsson’s Executive Team, reporting to CEO. As a member of Ericsson’s Executive Team, Stella Medlicott replaces Helena Norrman as of June 10, 2019.

Ericsson and Intellectual Ventures signed license agreement

On June 10, 2019 Ericsson announced that Ericsson and Intellectual Ventures have signed a license agreement ending all patent infringement lawsuits between the companies, including a lawsuit that went to trial earlier this year and resulted in a USD 43 million jury verdict for Intellectual Ventures. Since 2012, Intellectual Ventures has filed a number of patent infringement lawsuits against Ericsson and its customers in the U.S. and Europe seeking injunctions and monetary damages. The terms of the agreement are confidential.

SEC and DOJ inquiries

Ericsson is in ongoing settlement negotiations with the United States Securities and Exchange Commission (SEC) and the United States Department of Justice (DOJ) in connection with their previously reported investigation under the U.S. Foreign Corrupt Practices Act (FCPA). Ericsson is not able to estimate the length of these settlement discussions. Further, as this is an ongoing legal matter the Company cannot provide any detail. However, based on the current status of the discussions, it is Ericsson’s assessment that the resolution of these matters will result in material financial and other measures, the magnitude and impact of which cannot be reliably estimated or ascertained at this time. Potential future cash outflows are currently not possible to reliably estimate. Accordingly, no provisions have been recorded for such potential exposure.



13 Ericsson \| Second Quarter Report 2019		Other information

Risk factors

Ericsson is exposed to a number of risks in its activities. To stimulate identification and support cross-functional treatment within the Ericsson Group, risks are grouped in a number of categories, including for example risks relating to technology, IPR, compliance, project execution, operations, products and services, treasury and accounting, the geopolitical environment, M&A, cyber security and occupational health and safety.

Ericsson’s risk management is embedded into strategy development and operational processes and is a part of the Ericsson Group Management System to ensure accountability, effectiveness, efficiency, business continuity and compliance. Risks are defined in both a short-term and long-term perspective and are related to long-term objectives as per the strategic direction as well as to short-term objectives.

Risk factors and uncertainties of relevance to Ericsson are described in the Annual Report 2018. Updates to these risk factors and uncertainties observed by Ericsson that are deemed of short-term relevance include, but are not limited to, the following:

•

As with other companies across the world, cyber-attacks are targeting Ericsson’s infrastructure, products, operations, and personnel, which requires the Company to invest in defensive countermeasures throughout the organization and in Ericsson’s supply chain. As attacks continue to increase in frequency and severity, there is no guarantee that existing protections will prevent material adverse effects on Ericsson’s business, operations, financial condition, reputation and brand.

•

Geopolitical turbulence and trade frictions, e.g. between China and the USA, and continued or increased tension in parts of the world, such as the Middle East, may continue to prevail and to increasingly be a matter to address for Ericsson and its customers. This could result in material negative impact on Ericsson’s global operations, lead to increased, unrecoverable, costs and may have a negative impact on the Company’s profitability. It may also be disruptive to Ericsson’s international supply chain and export/import activities (including component supply, manufacturing, sourcing and deliveries of products and services).

This report has not been reviewed by Telefonaktiebolaget LM Ericsson’s auditors.

Date for next report: October 17, 2019



14 Ericsson \| Second Quarter Report 2019		Risk factors

Board Assurance

The Board of Directors and the CEO certify that the financial report for the six months gives a fair view of the performance of the business, position and profit or loss of the Company and the Group, and describes the principal risks and uncertainties that the Company and the companies in the Group face.

Stockholm, July 17, 2019

Telefonaktiebolaget LM Ericsson (publ)

Org. Nr. 556016-0680


Helena Stjernholm Deputy Chair	Ronnie Leten Chair	Jacob Wallenberg Deputy Chair

Jon Fredrik Baksaas Member of the Board	Jan Carlson Member of the Board	Nora Denzel Member of the Board

Eric A. Elzvik Member of the Board	Kurt Jofs Member of the Board	Kristin S. Rinne Member of the Board

	Börje Ekholm President, CEO and member of the Board

Torbjörn Nyman Member of the Board	Kjell-Åke Soting Member of the Board	Roger Svensson Member of the Board



15 Ericsson \| Second Quarter Report 2019		Board Assurance

Editor’s note

Press briefing and live webcast

Ericsson invites media, investors and analysts to conference calls on July 17, 2019; one starting at 09.00 (CET) and the other at 14.00 (CET).

Live audio webcasts of the conference calls as well as supporting slides will be available at:

www.ericsson.com/investors and

www.ericsson.com/press

Replay of the conference calls will be available approximately one hour after each call has ended and will remain available for seven days.

For further information, please contact:

Carl Mellander Senior Vice President, Chief Financial Officer

Phone: +46 10 713 89 70

E-mail: [email protected] or

[email protected]

Stella Medlicott Senior Vice President, Chief Marketing and Communications Officer

Phone: +46 10 713 65 39

E-mail: [email protected] or

[email protected]

Telefonaktiebolaget LM Ericsson

Org. number: 556016-0680

Torshamnsgatan 21

SE-164 83 Stockholm

Phone: +46 10 719 00 00

www.ericsson.com

Investors

Peter Nyquist, Vice President,

Head of Investor Relations

Phone: +46 10 714 64 99, +46 70 575 29 06

E-mail: [email protected]

Stefan Jelvin, Director,

Investor Relations

Phone: +46 10 714 20 39, +46 70 986 02 27

E-mail: [email protected]

Rikard Tunedal, Director,

Investor Relations

Phone: +46 10 714 54 00, +46 761 005 400

E-mail: [email protected]

Media

Ola Rembe, Vice President,

Head of External Communications

Phone: +46 10 719 97 27, +46 73 024 48 73

E-mail: [email protected]

Corporate Communications

Phone: +46 10 719 69 92

E-mail: [email protected]



16 Ericsson \| Second Quarter Report 2019		Editor’s note

Forward-looking statements

This report includes forward-looking statements, including statements reflecting management’s current views relating to the growth of the market, future market conditions, future events, financial condition, and expected operational and financial performance, including, in particular the following:

•

Our goals, strategies, planning assumptions and operational or financial performance expectations

•

Industry trends, future characteristics and development of the markets in which we operate

•

Our future liquidity, capital resources, capital expenditures, cost savings and profitability

•

The expected demand for our existing and new products and services as well as plans to launch new products and services including research and development expenditures

•

The ability to deliver on future plans and to realize potential for future growth

•

The expected operational or financial performance of strategic cooperation activities and joint ventures

•

The time until acquired entities and businesses will be integrated and accretive to income

•

Technology and industry trends including the regulatory and standardization environment in which we operate, competition and our customer structure.

The words “believe,” “expect,” “foresee,” “anticipate,” “assume,” “intend,” “likely,” “projects,” “may,” “could,” “plan,” “estimate,” “forecast,” “will,” “should,” “would,” “predict,” “aim,” “ambition,” “seek,” “potential,” “target,” “might,” “continue,” or, in each case, their negative or variations, and similar words or expressions are used to identify forward-looking statements. Any statement that refers to expectations, projections or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements.

We caution investors that these statements are subject to risks and uncertainties many of which are difficult to predict and generally beyond our control that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements.

Important factors that could affect whether and to what extent any of our forward-looking statements materialize include, but are not limited to, the factors described in the section “Risk Factors”, and in “Risk Factors” in the Annual Report 2018.

These forward-looking statements also represent our estimates and assumptions only as of the date that they were made. We expressly disclaim a duty to provide updates to these forward-looking statements, and the estimates and assumptions associated with them, after the date of this report, to reflect events or changes in circumstances or changes in expectations or the occurrence of anticipated events, whether as a result of new information, future events or otherwise, except as required by applicable law or stock exchange regulation.



17 Ericsson \| Second Quarter Report 2019		Forward-looking statements

Financial statements

and other information


Contents

Financial statements
19		Consolidated income statement
19		Statement of comprehensive income (loss)
20		Consolidated balance sheet
21		Consolidated statement of cash flows
22		Consolidated statement of changes in equity
22		Consolidated income statement – isolated quarters
23		Consolidated statement of cash flows – isolated quarters
24		Parent Company income statement
24		Parent Company statement of comprehensive income (loss)
25		Parent Company balance sheet

Additional information
26		Accounting policies
27		Changes applied in Q1 2019
27		Changes applied in Q2 2019
28		Net sales by segment by quarter
29		Sales growth adjusted for comparable units and currency
29		Gross income (loss) and gross margin by segment by quarter
30		Operating income (loss) and operating margin by segment by quarter
31		EBITA and EBITA margin by segment by quarter
32		Net sales by market area by quarter
33		Top 5 countries in sales
33		Net sales by market area by segment
34		IPR licensing revenues by segment by quarter
34		Provisions
35		Information on investments
36		Other information
36		Number of employees

Items excluding restructuring charges
37		Restructuring charges by function
37		Restructuring charges by segment
38		Gross income (loss) and gross margin excluding restructuring charges by segment
39		Operating income (loss) and operating margin excluding restructuring charges by segment

Alternative performance measures
40		Sales growth adjusted for comparable units and currency
41		Items excluding restructuring charges
42		EBITA and EBITA margin
42		Cash conversion
43		Gross cash and net cash, end of period
43		Capital employed
43		Capital turnover
44		Return on capital employed
44		Equity ratio
44		Return on equity
45		Earnings (loss) per share (non-IFRS)
45		Free cash flow and free cash flow excluding M&A



18 Ericsson \| Second Quarter Report 2019		Financial statements and other information

Financial statements

Consolidated income statement


	Apr-Jun									Jan-Jun
SEK million	2019			2018			Change			2019			2018			Change
Net sales		54,810			49,808			10	%		103,716			93,219			11	%
Cost of sales		-34,739			-32,475			7	%		-64,866			-61,028			6	%

Gross income		20,071			17,333			16	%		38,850			32,191			21	%

Gross margin (%)		36.6	%		34.8	%					37.5	%		34.5	%
Research and development expenses		-9,518			-9,783			-3	%		-18,685			-18,856			-1	%
Selling and administrative expenses		-6,964			-7,053			-1	%		-12,995			-13,209			-2	%
Impairment losses on trade receivables		151			-369			-141	%		710			-397			-279	%

Operating expenses		-16,331			-17,205			-5	%		-30,970			-32,462			-5	%

Other operating income and expenses		66			11						839			95
Shares in earnings of JV and associated companies		-67			26						-84			29

Operating income (loss)		3,739			165						8,635			-147

Financial income and expenses, net		-441			-810			-46	%		-1,046			-1,351			-23	%

Income after financial items		3,298			-645						7,589			-1,498

Taxes		-1,451			-1,157			25	%		-3,339			-1,029			224	%

Net income (loss)		1,847			-1,802						4,250			-2,527

Net income (loss) attributable to:
Stockholders of the Parent Company		1,705			-1,885						4,022			-2,722
Non-controlling interests		142			83						228			195
Other information
Average number of shares, basic (million)		3,304			3,290						3,302			3,288
Earnings (loss) per share, basic (SEK) ¹⁾		0.52			-0.58						1.22			-0.83
Earnings (loss) per share, diluted (SEK) ²⁾		0.51			-0.58						1.21			-0.83

¹⁾	Based on net income (loss) attributable to stockholders of the Parent Company.

²⁾	Potential ordinary shares are not considered when their conversion to ordinary shares would increase earnings per share.

Statement of comprehensive income (loss)


	Apr-Jun				Jan-Jun
SEK million	2019		2018		2019		2018
Net income (loss)		1,847		-1,802		4,250		-2,527

Other comprehensive income (loss)
Items that will not be reclassified to profit or loss
Remeasurements of defined benefits pension plans incl. asset ceiling		-2,624		123		-5,450		-726
Revaluation of borrowings due to change in credit risk		-108		8		-535		66
Tax on items that will not be reclassified to profit or loss		601		-186		1,257		-53
Items that may be reclassified to profit or loss
Cash flow hedge reserve
Gains/losses arising during the period		-37		—		-206		—
Reclassification adjustments for gains/losses included in profit or loss		—		—		—		—
Adjustments for amounts transferred to initial carrying amount of hedged items		—		—		—		—
Revaluation of other investments in shares and participations
Fair value remeasurement		—		—		—		—
Changes in cumulative translation adjustments		188		1,742		1,595		3,041
Share of other comprehensive income on JV and associated companies		8		9		46		20
Tax on items that may be reclassified to profit or loss		7		—		42		—

Total other comprehensive income (loss), net of tax		-1,965		1,696		-3,251		2,348

Total comprehensive income (loss)		-118		-106		999		-179

Total comprehensive income (loss) attributable to:
Stockholders of the Parent Company		-257		-216		753		-416
Non-controlling interest		139		110		246		237



19 Ericsson \| Second Quarter Report 2019		Financial statements

Consolidated balance sheet


SEK million	Jun 30 2019		Mar 31 2019		Dec 31 2018
ASSETS
Non-current assets
Intangible assets
Capitalized development expenses		3,971		3,971		4,237
Goodwill		30,964		30,870		30,035
Intellectual property rights, brands and other intangible assets		2,467		2,682		3,474
Property, plant and equipment		13,192		13,188		12,849
Right-of-use assets		8,227		8,440		—
Financial assets
Equity in JV and associated companies		1,766		1,830		611
Other investments in shares and participations		1,380		1,366		1,515
Customer finance, non-current		2,428		1,932		1,180
Interest-bearing securities, non-current		17,091		23,022		23,982
Other financial assets, non-current		5,986		6,056		6,559
Deferred tax assets		29,169		29,689		23,152

		116,641		123,046		107,594

Current assets
Inventories		36,135		33,024		29,255
Contract assets		12,593		11,411		13,178
Trade receivables		44,956		50,529		51,172
Customer finance, current		1,109		1,955		1,704
Other current receivables		17,148		15,357		20,844
Interest-bearing securities, current		6,367		3,183		6,625
Cash and cash equivalents		45,498		45,453		38,389

		163,806		160,912		161,167

Total assets		280,447		283,958		268,761

EQUITY AND LIABILITIES
Equity
Stockholders’ equity		84,488		84,619		86,978
Non-controlling interest in equity of subsidiaries		45		-87		792

		84,533		84,532		87,770

Non-current liabilities
Post-employment benefits		33,919		30,714		28,720
Provisions, non-current		2,646		2,670		5,471
Deferred tax liabilities		1,178		792		670
Borrowings, non-current		33,040		32,533		30,870
Lease liabilities, non-current		7,699		8,470		—
Other non-current liabilities		2,160		2,118		4,346

		80,642		77,297		70,077

Current liabilities
Provisions, current		8,712		9,363		10,537
Borrowings, current		2,160		3,015		2,255
Lease liabilities, current		2,397		1,776		—
Contract liabilities		37,264		38,605		29,348
Trade payables		31,388		30,842		29,883
Other current liabilities		33,351		38,528		38,891

		115,272		122,129		110,914

Total equity and liabilities		280,447		283,958		268,761

Assets pledged as collateral		5,824		5,657		5,681
Contingent liabilities ¹⁾		1,511		1,470		1,638

¹⁾

Contingent liabilities does not include any amounts related to investigation by the SEC and the DOJ about Ericsson’s compliance with the U.S. Foreign Corrupt Practices Act (FCPA). For information about the investigation by the SEC and the DOJ, please refer to “Other information” on page 13 of this report.



20 Ericsson \| Second Quarter Report 2019		Financial statements

Consolidated statement of cash flows


	Apr-Jun				Jan-Jun				Jan-Dec
SEK million	2019		2018		2019		2018		2018
Operating activities
Net income (loss)		1,847		-1,802		4,250		-2,527		-6,276
Adjustments to reconcile net income to cash
Taxes		310		-1,071		1,114		-3,386		-1,897
Earnings/dividends in JV and associated companies		71		-19		95		-15		-23
Depreciation, amortization and impairment losses		2,274		2,065		4,600		3,956		8,318
Other		450		568		374		708		1,432

Net income reconciled to cash		4,952		-259		10,433		-1,264		1,554

Changes in operating net assets
Inventories		-3,065		-1,910		-6,016		-4,723		-4,807
Customer finance, current and non-current		384		547		-527		947		1,085
Trade receivables and contract assets		3,338		1,661		7,683		8,977		-2,047
Trade payables		1,833		1,252		1,853		654		2,436
Provisions and post-employment benefits		-480		478		-3,939		-369		6,696
Contract liabilities		-1,641		-233		6,822		524		-808
Other operating assets and liabilities, net		-1,698		-94		-6,921		-1,731		5,233

		-1,329		1,701		-1,045		4,279		7,788

Cash flow from operating activities		3,623		1,442		9,388		3,015		9,342
Investing activities
Investments in property, plant and equipment		-1,098		-951		-2,412		-1,807		-3,975
Sales of property, plant and equipment		184		52		416		175		334
Acquisitions/divestments of subsidiaries and other operations, net		3		-431		302		-880		-1,285
Product development		-446		-325		-903		-579		-925
Other investing activities		-36		-398		-201		-237		-523
Interest-bearing securities		2,414		3,656		7,087		3,122		2,242

Cash flow from investing activities		1,021		1,603		4,289		-206		-4,132

Cash flow before financing activities		4,644		3,045		13,677		2,809		5,210
Financing activities
Dividends paid		-3,308		-3,289		-4,294		-3,289		-3,425
Lease liabilities		-623		—		-1,227		—		—
Other financing activities		-680		-383		-1,690		-477		-652

Cash flow from financing activities		-4,611		-3,672		-7,211		-3,766		-4,077

Effect of exchange rate changes on cash		13		980		644		2,123		1,372
Net change in cash and cash equivalents		46		353		7,110		1,166		2,505

Cash and cash equivalents, beginning of period		45,453		36,697		38,389		35,884		35,884

Cash and cash equivalents, end of period		45,499		37,050		45,499		37,050		38,389



21 Ericsson \| Second Quarter Report 2019		Financial statements

Consolidated statement of changes in equity


	Jan-Jun				Jan-Dec
SEK million	2019		2018		2018
Opening balance ¹⁾		87,770		97,571		97,571
Adjustment due to new accounting standards ²⁾		-249		-983		-983

Adjusted opening balance		87,521		96,588		96,588

Total comprehensive income (loss)		999		-179		-6,176
Sale/repurchase of own shares		86		49		107
Stock issue, net		—		—		—
Long-term variable compensation plans		221		391		677
Dividends paid		-4,294		-3,289		-3,425
Transactions with non-controlling interests		—		—		-1

Closing balance		84,533		93,560		87,770

¹⁾	Opening balance of 2018 has been restated for IFRS 15.

²⁾	Opening balance adjustment in 2019 due to IFRS 16, and in 2018 due to IFRS 9.

Consolidated income statement - isolated quarters


	2019						2018
Isolated quarters, SEK million	Q2			Q1			Q4			Q3			Q2			Q1
Net sales		54,810			48,906			63,809			53,810			49,808			43,411
Cost of sales		-34,739			-30,127			-47,430			-34,180			-32,475			-28,553

Gross income		20,071			18,779			16,379			19,630			17,333			14,858

Gross margin (%)		36.6	%		38.4	%		25.7	%		36.5	%		34.8	%		34.2	%
Research and development expenses		-9,518			-9,167			-10,665			-9,388			-9,783			-9,073
Selling and administrative expenses		-6,964			-6,031			-7,685			-6,625			-7,053			-6,156
Impairment losses on trade receivables		151			559			386			-409			-369			-28

Operating expenses		-16,331			-14,639			-17,964			-16,422			-17,205			-15,257

Other operating income and expenses		66			773			-294			31			11			84
Shares in earnings of JV and associated companies		-67			-17			27			2			26			3

Operating income (loss)		3,739			4,896			-1,852			3,241			165			-312

Financial income and expenses, net		-441			-605			-715			-639			-810			-541

Income after financial items		3,298			4,291			-2,567			2,602			-645			-853

Taxes		-1,451			-1,888			-3,930			146			-1,157			128

Net income (loss)		1,847			2,403			-6,497			2,748			-1,802			-725

Net income (loss) attributable to:
Stockholders of the Parent Company		1,705			2,317			-6,553			2,745			-1,885			-837
Non-controlling interests		142			86			56			3			83			112
Other information
Average number of shares, basic (million)		3,304			3,300			3,296			3,293			3,290			3,286
Earnings (loss) per share, basic (SEK) ¹⁾		0.52			0.70			-1.99			0.84			-0.58			-0.25
Earnings (loss) per share, diluted (SEK) ²⁾		0.51			0.70			-1.99			0.83			-0.58			-0.25

¹⁾	Based on net income (loss) attributable to stockholders of the Parent Company.

²⁾	Potential ordinary shares are not considered when their conversion to ordinary shares would increase earnings per share.



22 Ericsson \| Second Quarter Report 2019		Financial statements

Consolidated statement of cash flows - isolated quarters


	2019				2018
Isolated quarters, SEK million	Q2		Q1		Q4		Q3		Q2		Q1
Operating activities
Net income (loss)		1,847		2,403		-6,497		2,748		-1,802		-725
Adjustments to reconcile net income to cash
Taxes		310		804		3,590		-2,101		-1,071		-2,315
Earnings/dividends in JV and associated companies		71		24		-36		28		-19		4
Depreciation, amortization and impairment losses		2,274		2,326		2,469		1,893		2,065		1,891
Other		450		-76		376		348		568		140

Net income reconciled to cash		4,952		5,481		-98		2,916		-259		-1,005

Changes in operating net assets
Inventories		-3,065		-2,951		1,689		-1,773		-1,910		-2,813
Customer finance, current and non-current		384		-911		-863		1,001		547		400
Trade receivables and contract assets		3,338		4,345		-7,521		-3,503		1,661		7,316
Trade payables		1,833		20		829		953		1,252		-598
Provisions and post-employment benefits		-480		-3,459		7,330		-265		478		-847
Contract liabilities		-1,641		8,463		-1,112		-220		-233		757
Other operating assets and liabilities, net		-1,698		-5,223		4,033		2,931		-94		-1,637

		-1,329		284		4,385		-876		1,701		2,578

Cash flow from operating activities		3,623		5,765		4,287		2,040		1,442		1,573

Investing activities
Investments in property, plant and equipment		-1,098		-1,314		-1,080		-1,088		-951		-856
Sales of property, plant and equipment		184		232		57		102		52		123
Acquisitions/divestments of subsidiaries and other operations, net		3		299		20		-425		-431		-449
Product development		-446		-457		-195		-151		-325		-254
Other investing activities		-36		-165		-96		-190		-398		161
Interest-bearing securities		2,414		4,673		-910		30		3,656		-534

Cash flow from investing activities		1,021		3,268		-2,204		-1,722		1,603		-1,809

Cash flow before financing activities		4,644		9,033		2,083		318		3,045		-236

Financing activities
Dividends paid		-3,308		-986		-134		-2		-3,289		—
Lease liabilities		-623		-604		—		—		—		—
Other financing activities		-680		-1,010		-429		254		-383		-94

Cash flow from financing activities		-4,611		-2,600		-563		252		-3,672		-94

Effect of exchange rate changes on cash		13		631		811		-1,562		980		1,143
Net change in cash and cash equivalents		46		7,064		2,331		-992		353		813

Cash and cash equivalents, beginning of period		45,453		38,389		36,058		37,050		36,697		35,884

Cash and cash equivalents, end of period		45,499		45,453		38,389		36,058		37,050		36,697



23 Ericsson \| Second Quarter Report 2019		Financial statements

Parent Company income statement


	Apr-Jun				Jan-Jun				Jan-Dec
SEK million	2019		2018		2019		2018		2018
Net sales		—		—		—		—		—
Cost of sales		—		—		—		—		—
Gross income		—		—		—		—		—
Operating expenses		-236		-352		-757		-506		-1,686
Other operating income and expenses		518		411		969		754		2,111

Operating income		282		59		212		248		425

Financial net		649		1,295		596		1,472		5,340

Income after financial items		931		1,354		808		1,720		5,765

Transfers to (–) / from untaxed reserves		—		—		—		—		-1,535
Taxes		-45		-72		-76		-155		-36

Net income		886		1,282		732		1,565		4,194

Parent Company statement of comprehensive income


	Apr-Jun				Jan-Jun				Jan-Dec
SEK million	2019		2018		2019		2018		2018
Net income		886		1,282		732		1,565		4,194
Revaluation of borrowings due to change in credit risk		-109		-8		-445		50		91
Tax on items that will not be reclassified to profit or loss		23		2		92		-11		-19
Available-for-sale financial assets
Gains/losses arising during the period		—		—		—		—		—
Reclassification adjustments on gains/losses included in profit or loss		—		—		—		—		—
Revaluation of other investments in shares and participations
Fair value remeasurement		—		—		—		—		—
Tax on items that may be reclassified to profit or loss		—		—		—		—		—

Total other comprehensive income, net of tax		-86		-6		-353		39		72

Total comprehensive income		800		1,276		379		1,604		4,266



24 Ericsson \| Second Quarter Report 2019		Financial statements

Parent Company balance sheet


	Jun 30		Dec 31
SEK million	2019		2018
ASSETS
Fixed assets
Intangible assets		74		139
Tangible assets		275		259
Financial assets ¹⁾²⁾		105,117		109,177

		105,466		109,575

Current assets
Inventories		—		—
Receivables ²⁾		24,182		38,760
Short-term investments		5,844		6,268
Cash and cash equivalents		28,179		27,850

		58,205		72,878

Total assets		163,671		182,453

STOCKHOLDERS’ EQUITY, PROVISIONS AND LIABILITIES
Equity
Restricted equity		48,164		48,164
Non-restricted equity ²⁾		37,859		40,752

		86,023		88,916

Provisions		51		86
Non-current liabilities ²⁾		33,129		62,581
Current liabilities		44,468		30,870

Total stockholders’ equity, provisions and liabilities		163,671		182,453

¹⁾Of which interest-bearing securities, non-current		17,091		23,982

²⁾The following 2018 opening balances have been adjusted due to IFRS 9: financial assets increased by SEK 8 million, receivables decreased by SEK -4 million, non-restricted equity decreased by SEK -28 million, and non-current liabilities increased by SEK 31 million.



25 Ericsson \| Second Quarter Report 2019		Financial statements

Additional information

Accounting policies

The group

This interim report is prepared in accordance with IAS 34. The term “IFRS” used in this document refers to the application of IAS and IFRS as well as interpretations of these standards as issued by IASB’s Standards Interpretation Committee (SIC) and IFRS Interpretations Committee (IFRIC). The accounting policies adopted are consistent with those of the annual report for the year ended December 31, 2018 and should be read in conjunction with that annual report, with exception for the accounting policies described below.

New standards as from January 1, 2019

One new IFRS standard IFRS 16 “Leases” and one new interpretation IFRIC 23 “Uncertainty over income tax treatments” are effective as from January 1, 2019. IFRIC 23, has not had a material impact on the Company’s financial statements.

IFRS 16 – Leases

Presentation in the financial statements

The Company has implemented this standard using the cumulative catch-up method, which means that the prior periods financial statements and key ratios presented in this quarterly report have not been restated to reflect adoption of this new standard.

Based on the new requirements under IFRS 16, right-of-use assets and lease liabilities have been added as new lines in the consolidated balance sheet and lease liabilities as a new line in the statement of cash flows. The right-of-use assets and liabilities were previously reported as off-balance and repayment to lessors was reported as a part of cash flow from operating activities. Now the amortization of lease liabilities is reported as cash flow from financing activities.

Transition

The standard is effective for annual periods beginning on or after January 1, 2019. The Company has applied the new standard as from January 1, 2019. At transition, the Company has applied the practical expedient under IFRS 16 to not reassess whether a contract is, or contains, a lease. Therefore, the Company has applied the standard to contracts previously identified as leases, or as containing a lease under IAS 17 and IFRIC 4. The Company has also applied the following practical expedients when applying IFRS 16 at transition date:

•

The IAS 37 onerous lease contract measurement for the operating leases existing as per the transition date. This expedient has been applied as a substitute for the measurement of impairment for the related right-of-use assets. Impairment testing will be applied going-forward.

•

Exclusion of initial direct costs from the measurement of the right-to-use asset at the date of initial recognition.

The Company has implemented the standard using the cumulative catch-up method, with the cumulative effect being adjusted to the opening retained earnings balance in equity at transition date. No restated information has been presented for previous years.

The Company has, as a lessee, recognized lease liabilities for leases previously classified as operating leases. The weighted average incremental borrowing rate applied to lease liabilities recognized in the balance sheet at the transition date was 5.4%. Right-of-use assets have for most contracts been recognized based on the amount equal to the related lease liability. For some larger real estate contracts right-of-use assets have been recognized as if IFRS 16 had been applied since the commencement date, however, using the incremental borrowing rate as per the effective date. The asset value for these contracts is SEK 249 million lower than the related liabilities. This difference causes the reduction of equity as per transition date.

Under IAS 17 operating leases were not recognized in the balance sheet of a lessee. Future undiscounted minimum lease payments obligations were however disclosed in a note, see note C3 Leasing in the annual report of 2018, amounting to SEK 13.4 billion. The lease liabilities were as per January 1st, 2019 recognized in the balance sheet with SEK 10.4 billion. The difference is mainly related to the discounting effect of the liability. The liability is calculated as the net present value of the future payments, while the numbers disclosed according to IAS 17 was not discounted – as prescribed in IAS 17. And also, the exclusion of lease payments related to low-value assets from the balance sheet, they are instead expensed straight-line in the income statement.

Opening balance sheet impact of IFRS 16


SEK million	IFRS 16 adjustment
Right-of-use assets		8,651
Lease liabilities, current		2,195
Lease liabilities, non-current		8,203
Equity		249

In the transition the following items have been considered: Onerous contracts with SEK 767 million, straight-lining, periodization of lease costs, with SEK 721 million and other net adjustments with SEK 10 million. The tax effect on the equity posting is deemed to be immaterial. There is no impact on the income statement.

The impact of right-of-use assets increased the total asset value by approximately 3%.

Accounting policy—IFRS 16 Leases

Leasing when the Company is the lessee

The main types of assets leased by the Company are, in the order of materiality, real estate, IT-equipment and vehicles. Vehicles are mainly used under service contracts.

The Company recognizes right-of-use assets and lease liabilities arising from all leases in the balance sheet, with some exceptions. This model reflects that, at the start of a lease, the lessee always obtains the right to use an asset for a period of time and has an obligation to pay for that right.



26 Ericsson \| Second Quarter Report 2019		Additional information

In the assessment of a lease contract the lease components are separated from non-lease components and the lease term is defined considering any extension or termination options.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted normally using the Company’s incremental borrowing rate. Lease payments included in the liability are fixed payments, variable payments depending on an index or rate, residual values and penalties for termination of contracts.

The right-of-use asset is initially measured at cost, which equals the amount of the initial measurement of lease liability adjusted for any lease payments made at or before the commencement date less any lease incentives received plus any initial direct costs, and restoration costs.

The Company applies the recognition exemption for short-term leases and leases for which the underlying asset is of low-value recognizing the lease payments for those leases as an expense on a straight-line basis over the lease term.

Leasing when the Company is the lessor

Leasing contracts with the Company as lessor are classified as finance leases when the majority of risks and rewards are transferred to the lessee, and otherwise as operating leases. Under a finance lease, a receivable is recognized at an amount equal to the net investment in the lease and revenue is recognized in accordance with the revenue recognition principles. Under operating leases the equipment is recorded as property, plant and equipment and revenue as well as depreciation is recognized on a straight-line basis over the lease term.

APM impact in 2019

Lease interest expense is reported under finance costs according to IFRS 16, which is different from prior to 2019, when it was embedded in the lease expense for operating leases, either as costs of sales or operating expenses. This has had a positive impact on the APM operating margin of approximately 0.3 percentage points year-to-date, because lease interest expense is no longer a part of this measurement. The EBITA year-to-date has increased with SEK 276 million for the same reason.

The reported amortization of lease liabilities is reported as financing cash flows under IFRS 16 and not as operating cash flows as prior to 2019. The impact of this reclassification year-to-date in 2019 is SEK 1,227 million and impacts the APM Free cash flow positively. The APM Cash conversion has also improved for the same reason. The timing of the cash flows is not impacted.

Because right-of-use assets under IFRS 16 are included in total assets the APM capital employed has increased by approximately 5%. The APM equity ratio has decreased for the same reason.

Changes applied in Q1 2019

Cash flow hedge accounting

The company has identified certain customer contracts where a fluctuation in the USD/SEK foreign exchange rate would significantly impact net sales and operating income recorded from the contracts. These contracts are multi-year contracts denominated in USD with highly probable payments at fixed points in time. From Q1 2019, the Company has entered into FX forward contracts that match the terms of the foreign exchange exposure as closely as possible and designated these as hedging instruments.

When applying hedge accounting, the effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in OCI. The gain or loss relating to an ineffective portion is recognized immediately in the Income Statement within Financial income or expenses. Upon recognition of the hedged net sales, the cumulative amount in cash flow hedge reserve is released from OCI as a reclassification adjustment and recognized in net sales.

Market area reporting

As of Q1 2019, sales reported on Morocco is reported on market area Middle East and Africa (earlier Europe and Latin America). Comparative periods have been restated to reflect this change. In Q1 2019, these sales were SEK 151 (103) million. Also “Number of employees” by market area has been updated to reflect this change.

Changes applied in Q2 2019

Restatement – change to the presentation of financial income and expenses

Due to the significant variations in SEK rates in recent months, the Company has considered the change in reporting of foreign exchange effect to reflect how foreign exchange transaction risk is managed on a net basis in the Company. Previously foreign exchange effects were reported within both Financial Income and Financial Expense depending on whether they relate to assets or liabilities. In the Annual Report the foreign exchange effect will be presented as a net amount, reported separately from other financial income and expenses items.

In line with this change the Company also elected to present all financial income and expense, including the foreign exchange effect, on the Income Statement as a single line item ‘Financial income and expenses, net’. Previously, Financial Income and Financial Expenses were presented as separate line items on the Income Statement. The Income Statement for Q2 2019 and all comparative periods have been restated to reflect the new presentation of ‘Financial income and expenses, net’.



27 Ericsson \| Second Quarter Report 2019		Additional information

Net sales by segment by quarter


	2019						2018
Isolated quarters, SEK million	Q2			Q1			Q4			Q3			Q2			Q1
Networks		37,819			33,481			41,641			35,934			32,393			28,602
Of which Products		26,698			23,765			29,803			25,336			22,319			19,473
Of which Services		11,121			9,716			11,838			10,598			10,074			9,129
Digital Services		8,991			7,817			13,007			8,987			8,833			7,262
Of which Products		4,611			3,937			7,462			4,582			4,467			3,947
Of which Services		4,380			3,880			5,545			4,405			4,366			3,315
Managed Services		6,323			5,856			6,881			6,465			6,528			5,896
Emerging Business and Other		1,677			1,752			2,280			2,424			2,054			1,651

Total		54,810			48,906			63,809			53,810			49,808			43,411


	2019						2018
Sequential change, percent	Q2			Q1			Q4			Q3			Q2			Q1
Networks		13	%		-20	%		16	%		11	%		13	%		-23	%
Of which Products		12	%		-20	%		18	%		14	%		15	%		-23	%
Of which Services		14	%		-18	%		12	%		5	%		10	%		-22	%
Digital Services		15	%		-40	%		45	%		2	%		22	%		-39	%
Of which Products		17	%		-47	%		63	%		3	%		13	%		-39	%
Of which Services		13	%		-30	%		26	%		1	%		32	%		-38	%
Managed Services		8	%		-15	%		6	%		-1	%		11	%		-15	%
Emerging Business and Other		-4	%		-23	%		-6	%		18	%		24	%		-21	%

Total		12	%		-23	%		19	%		8	%		15	%		-25	%


	2019						2018
Year over year change, percent	Q2			Q1			Q4			Q3			Q2			Q1
Networks		17	%		17	%		12	%		13	%		2	%		-10	%
Of which Products		20	%		22	%		17	%		17	%		5	%		-11	%
Of which Services		10	%		6	%		1	%		5	%		-3	%		-7	%
Digital Services		2	%		8	%		10	%		1	%		-11	%		-10	%
Of which Products		3	%		0	%		16	%		-6	%		-17	%		-9	%
Of which Services		0	%		17	%		3	%		8	%		-4	%		-12	%
Managed Services		-3	%		-1	%		0	%		-2	%		-2	%		-6	%
Emerging Business and Other		-18	%		6	%		9	%		22	%		2	%		-7	%

Total		10	%		13	%		10	%		9	%		-1	%		-9	%


	2019						2018
Year to date, SEK million	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Networks		71,300			33,481			138,570			96,929			60,995			28,602
Of which Products		50,463			23,765			96,931			67,128			41,792			19,473
Of which Services		20,837			9,716			41,639			29,801			19,203			9,129
Digital Services		16,808			7,817			38,089			25,082			16,095			7,262
Of which Products		8,548			3,937			20,458			12,996			8,414			3,947
Of which Services		8,260			3,880			17,631			12,086			7,681			3,315
Managed Services		12,179			5,856			25,770			18,889			12,424			5,896
Emerging Business and Other		3,429			1,752			8,409			6,129			3,705			1,651

Total		103,716			48,906			210,838			147,029			93,219			43,411


	2019						2018
Year over year change, percent	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Networks		17	%		17	%		5	%		2	%		-4	%		-10	%
Of which Products		21	%		22	%		7	%		3	%		-3	%		-11	%
Of which Services		9	%		6	%		-1	%		-2	%		-5	%		-7	%
Digital Services		4	%		8	%		-2	%		-7	%		-11	%		-10	%
Of which Products		2	%		0	%		-3	%		-11	%		-13	%		-9	%
Of which Services		8	%		17	%		-1	%		-2	%		-8	%		-12	%
Managed Services		-2	%		-1	%		-3	%		-3	%		-4	%		-6	%
Emerging Business and Other		-7	%		6	%		7	%		6	%		-2	%		-7	%

Total		11	%		13	%		3	%		0	%		-5	%		-9	%



28 Ericsson \| Second Quarter Report 2019		Additional information

Sales growth adjusted for comparable units and currency


	2019						2018
Isolated quarter, year over year change, percent	Q2			Q1			Q4			Q3			Q2			Q1
Networks		11	%		10	%		6	%		5	%		2	%		-2	%
Digital Services		-3	%		0	%		5	%		-6	%		-12	%		-3	%
Managed Services		-6	%		-5	%		-5	%		-8	%		-3	%		-4	%
Emerging Business and Other ¹⁾		24	%		38	%		1	%		11	%		1	%		-2	%

Total ¹⁾		7	%		7	%		4	%		1	%		-1	%		-2	%


	2019						2018
Year to date, year over year change, percent	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Networks		11	%		10	%		3	%		2	%		0	%		-2	%
Digital Services		-2	%		0	%		-4	%		-7	%		-8	%		-3	%
Managed Services		-6	%		-5	%		-5	%		-5	%		-3	%		-4	%
Emerging Business and Other ¹⁾		30	%		38	%		3	%		3	%		-1	%		-2	%

Total ¹⁾		7	%		7	%		1	%		-1	%		-2	%		-2	%


¹⁾Adjusted for MediaKind divestment.

Gross income (loss) and gross margin by segment by quarter

	2019						2018
Isolated quarters, SEK million	Q2			Q1			Q4			Q3			Q2			Q1
Networks		15,670			14,455			16,626			14,835			12,565			11,127
Digital Services		3,311			2,878			-1,240			3,208			3,458			2,892
Managed Services		779			1,036			781			805			809			491
Emerging Business and Other		311			410			212			782			501			348

Total		20,071			18,779			16,379			19,630			17,333			14,858


	2019						2018
Isolated quarters, As percentage of net sales	Q2			Q1			Q4			Q3			Q2			Q1
Networks		41.4	%		43.2	%		39.9	%		41.3	%		38.8	%		38.9	%
Digital Services		36.8	%		36.8	%		-9.5	%		35.7	%		39.1	%		39.8	%
Managed Services		12.3	%		17.7	%		11.4	%		12.5	%		12.4	%		8.3	%
Emerging Business and Other		18.5	%		23.4	%		9.3	%		32.3	%		24.4	%		21.1	%

Total		36.6	%		38.4	%		25.7	%		36.5	%		34.8	%		34.2	%


	2019						2018
Year to date, SEK million	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Networks		30,125			14,455			55,153			38,527			23,692			11,127
Digital Services		6,189			2,878			8,318			9,558			6,350			2,892
Managed Services		1,815			1,036			2,886			2,105			1,300			491
Emerging Business and Other		721			410			1,843			1,631			849			348

Total		38,850			18,779			68,200			51,821			32,191			14,858


	2019						2018
Year to date, As percentage of net sales	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Networks		42.3	%		43.2	%		39.8	%		39.7	%		38.8	%		38.9	%
Digital Services		36.8	%		36.8	%		21.8	%		38.1	%		39.5	%		39.8	%
Managed Services		14.9	%		17.7	%		11.2	%		11.1	%		10.5	%		8.3	%
Emerging Business and Other		21.0	%		23.4	%		21.9	%		26.6	%		22.9	%		21.1	%

Total		37.5	%		38.4	%		32.3	%		35.2	%		34.5	%		34.2	%



29 Ericsson \| Second Quarter Report 2019		Additional information

Operating income (loss) and operating margin by segment by quarter


	2019						2018
Isolated quarters, SEK million	Q2			Q1			Q4			Q3			Q2			Q1
Networks		5,680			5,472			6,850			5,656			3,544			3,371
Digital Services		-1,405			-1,798			-7,087			-1,784			-2,374			-2,607
Managed Services		203			1,252			285			409			299			100
Emerging Business and Other		-739			-30			-1,900			-1,040			-1,304			-1,176

Total		3,739			4,896			-1,852			3,241			165			-312


	2019						2018
Isolated quarters, As percentage of net sales	Q2			Q1			Q4			Q3			Q2			Q1
Networks		15.0	%		16.3	%		16.5	%		15.7	%		10.9	%		11.8	%
Digital Services		-15.6	%		-23.0	%		-54.5	%		-19.9	%		-26.9	%		-35.9	%
Managed Services		3.2	%		21.4	%		4.1	%		6.3	%		4.6	%		1.7	%
Emerging Business and Other		-44.1	%		-1.7	%		-83.3	%		-42.9	%		-63.5	%		-71.2	%

Total		6.8	%		10.0	%		-2.9	%		6.0	%		0.3	%		-0.7	%


	2019						2018
Year to date, SEK million	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Networks		11,152			5,472			19,421			12,571			6,915			3,371
Digital Services		-3,203			-1,798			-13,852			-6,765			-4,981			-2,607
Managed Services		1,455			1,252			1,093			808			399			100
Emerging Business and Other		-769			-30			-5,420			-3,520			-2,480			-1,176

Total		8,635			4,896			1,242			3,094			-147			-312


	2019						2018
Year to date As percentage of net sales	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Networks		15.6	%		16.3	%		14.0	%		13.0	%		11.3	%		11.8	%
Digital Services		-19.1	%		-23.0	%		-36.4	%		-27.0	%		-30.9	%		-35.9	%
Managed Services		11.9	%		21.4	%		4.2	%		4.3	%		3.2	%		1.7	%
Emerging Business and Other		-22.4	%		-1.7	%		-64.5	%		-57.4	%		-66.9	%		-71.2	%

Total		8.3	%		10.0	%		0.6	%		2.1	%		-0.2	%		-0.7	%



30 Ericsson \| Second Quarter Report 2019		Additional information

EBITA and EBITA margin by segment by quarter


	2019						2018
Isolated quarters, SEK million	Q2			Q1			Q4			Q3			Q2			Q1
Networks		5,716			5,552			6,916			5,722			3,618			3,461
Digital Services		-1,268			-1,638			-6,911			-1,608			-2,204			-2,443
Managed Services		205			1,253			288			411			303			105
Emerging Business and Other		-688			43			-1,524			-940			-1,202			-1,088

Total		3,965			5,210			-1,231			3,585			515			35


	2019						2018
Isolated quarters As percentage of net sales	Q2			Q1			Q4			Q3			Q2			Q1
Networks		15.1	%		16.6	%		16.6	%		15.9	%		11.2	%		12.1	%
Digital Services		-14.1	%		-21.0	%		-53.1	%		-17.9	%		-25.0	%		-33.6	%
Managed Services		3.2	%		21.4	%		4.2	%		6.4	%		4.6	%		1.8	%
Emerging Business and Other		-41.0	%		2.5	%		-66.8	%		-38.8	%		-58.5	%		-65.9	%

Total		7.2	%		10.7	%		-1.9	%		6.7	%		1.0	%		0.1	%


	2019						2018
Year to date, SEK million	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Networks		11,268			5,552			19,717			12,801			7,079			3,461
Digital Services		-2,906			-1,638			-13,166			-6,255			-4,647			-2,443
Managed Services		1,458			1,253			1,107			819			408			105
Emerging Business and Other		-645			43			-4,754			-3,230			-2,290			-1,088

Total		9,175			5,210			2,904			4,135			550			35


	2019						2018
Year to date As a percentage of net sales	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Networks		15.8	%		16.6	%		14.2	%		13.2	%		11.6	%		12.1	%
Digital Services		-17.3	%		-21.0	%		-34.6	%		-24.9	%		-28.9	%		-33.6	%
Managed Services		12.0	%		21.4	%		4.3	%		4.3	%		3.3	%		1.8	%
Emerging Business and Other		-18.8	%		2.5	%		-56.5	%		-52.7	%		-61.8	%		-65.9	%

Total		8.8	%		10.7	%		1.4	%		2.8	%		0.6	%		0.1	%



31 Ericsson \| Second Quarter Report 2019		Additional information

Net sales by market area by quarter


	2019						2018 ³⁾
Isolated quarters, SEK million	Q2			Q1			Q4			Q3			Q2			Q1
South East Asia, Oceania and India		6,965			6,148			8,244			7,985			6,981			6,379
North East Asia		6,516			3,824			8,387			5,773			4,764			3,385
North America		17,699			16,171			17,999			14,933			14,337			11,317
Europe and Latin America ¹⁾²⁾		14,085			13,124			17,909			14,697			13,999			12,958
Middle East and Africa		5,641			5,412			6,828			5,841			5,801			5,868
Other ¹⁾²⁾		3,904			4,227			4,442			4,581			3,926			3,504

Total		54,810			48,906			63,809			53,810			49,808			43,411

¹⁾Of which in Sweden		149			192			375			429			596			915
²⁾Of which in EU		8,385			7,957			10,319			8,481			8,619			8,522

	2019						2018
Sequential change, percent	Q2			Q1			Q4			Q3			Q2			Q1
South East Asia, Oceania and India		13	%		-25	%		3	%		14	%		9	%		-19	%
North East Asia		70	%		-54	%		45	%		21	%		41	%		-48	%
North America		9	%		-10	%		21	%		4	%		27	%		-23	%
Europe and Latin America ¹⁾²⁾		7	%		-27	%		22	%		5	%		8	%		-22	%
Middle East and Africa		4	%		-21	%		17	%		1	%		-1	%		-25	%
Other ¹⁾²⁾		-8	%		-5	%		-3	%		17	%		12	%		-20	%

Total		12	%		-23	%		19	%		8	%		15	%		-25	%

¹⁾Of which in Sweden		-22	%		-49	%		-13	%		-28	%		-35	%		5	%
²⁾Of which in EU		5	%		-23	%		22	%		-2	%		1	%		-21	%

	2019						2018
Year-over-year change, percent	Q2			Q1			Q4			Q3			Q2			Q1
South East Asia, Oceania and India		0	%		-4	%		5	%		2	%		-3	%		-24	%
North East Asia		37	%		13	%		30	%		2	%		-19	%		-39	%
North America		23	%		43	%		23	%		21	%		11	%		-6	%
Europe and Latin America ¹⁾²⁾		1	%		1	%		7	%		11	%		1	%		8	%
Middle East and Africa		-3	%		-8	%		-13	%		-9	%		-5	%		6	%
Other ¹⁾²⁾		-1	%		21	%		2	%		19	%		-7	%		-17	%

Total		10	%		13	%		10	%		9	%		-1	%		-9	%

¹⁾Of which in Sweden		-75	%		-79	%		-57	%		-35	%		-24	%		-10	%
²⁾Of which in EU		-3	%		-7	%		-5	%		-2	%		-1	%		2	%

	2019						2018 ³⁾
Year to date, SEK million	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
South East Asia, Oceania and India		13,113			6,148			29,589			21,345			13,360			6,379
North East Asia		10,340			3,824			22,309			13,922			8,149			3,385
North America		33,870			16,171			58,586			40,587			25,654			11,317
Europe and Latin America ¹⁾²⁾		27,209			13,124			59,563			41,654			26,957			12,958
Middle East and Africa		11,053			5,412			24,338			17,510			11,669			5,868
Other ¹⁾²⁾		8,131			4,227			16,453			12,011			7,430			3,504

Total		103,716			48,906			210,838			147,029			93,219			43,411

¹⁾Of which in Sweden		341			192			2,315			1,940			1,511			915
²⁾Of which in EU		16,342			7,957			35,941			25,622			17,141			8,522

	2019						2018
Year to date, year-over-year change, percent	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
South East Asia, Oceania and India		-2	%		-4	%		-6	%		-9	%		-15	%		-24	%
North East Asia		27	%		13	%		-5	%		-19	%		-29	%		-39	%
North America		32	%		43	%		13	%		9	%		3	%		-6	%
Europe and Latin America ¹⁾²⁾		1	%		1	%		7	%		6	%		4	%		8	%
Middle East and Africa		-5	%		-8	%		-6	%		-3	%		0	%		6	%
Other ¹⁾²⁾		9	%		21	%		-1	%		-2	%		-12	%		-17	%

Total		11	%		13	%		3	%		0	%		-5	%		-9	%

¹⁾Of which in Sweden		-77	%		-79	%		-31	%		-21	%		-16	%		-10	%
²⁾Of which in EU		-5	%		-7	%		-1	%		0	%		1	%		2	%

³⁾	2018 has been restated to reflect the move of Morocco from market area Europe and Latin America to Middle East and Africa. Please refer to “Changes applied in Q1 2019”.



32 Ericsson \| Second Quarter Report 2019		Additional information

Top 5 countries in sales


	Q2						Jan-Jun
Country Percentage of Net sales	2019			2018			2019			2018
United States		33	%		30	%		34	%		29	%
China		7	%		6	%		6	%		5	%
India		4	%		5	%		4	%		5	%
South Korea		4	%		2	%		3	%		2	%
Australia		3	%		3	%		3	%		3	%

Net sales by market area by segment


	Q2 2019															Jan-Jun 2019
SEK million	Networks			Digital Services			Managed Services			Emerging Business and Other			Total			Networks			Digital Services			Managed Services			Emerging Business and Other			Total
South East Asia, Oceania and India		4,995			918			1,037			15			6,965			9,530			1,737			1,819			27			13,113
North East Asia		5,357			925			204			30			6,516			8,176			1,625			469			70			10,340
North America		14,243			2,225			1,199			32			17,699			27,513			4,034			2,269			54			33,870
Europe and Latin America		8,129			2,940			2,925			91			14,085			15,691			5,533			5,801			184			27,209
Middle East and Africa		3,104			1,579			957			1			5,641			6,209			3,021			1,820			3			11,053
Other		1,991			404			1			1,508			3,904			4,181			858			1			3,091			8,131

Total		37,819			8,991			6,323			1,677			54,810			71,300			16,808			12,179			3,429			103,716

Share of total		69	%		16	%		12	%		3	%		100	%		69	%		16	%		12	%		3	%		100	%


	Q2 2019
Sequential change, percent	Networks			Digital Services			Managed Services			Emerging Business and Other			Total
South East Asia, Oceania and India		10	%		12	%		33	%		25	%		13	%
North East Asia		90	%		32	%		-23	%		-25	%		70	%
North America		7	%		23	%		12	%		45	%		9	%
Europe and Latin America		7	%		13	%		2	%		-2	%		7	%
Middle East and Africa		0	%		10	%		11	%		-50	%		4	%
Other		-9	%		-11	%		—			-5	%		-8	%

Total		13	%		15	%		8	%		-4	%		12	%


	Q2 2019															Jan-Jun 2019
Year over year change, percent	Networks			Digital Services			Managed Services			Emerging Business and Other			Total			Networks			Digital Services			Managed Services			Emerging Business and Other			Total
South East Asia, Oceania and India		0	%		-15	%		13	%		650	%		0	%		1	%		-25	%		11	%		170	%		-2	%
North East Asia		49	%		17	%		-45	%		275	%		37	%		40	%		7	%		-38	%		119	%		27	%
North America		25	%		4	%		46	%		52	%		23	%		33	%		16	%		60	%		10	%		32	%
Europe and Latin America		7	%		2	%		-15	%		15	%		1	%		5	%		8	%		-13	%		25	%		1	%
Middle East and Africa		-2	%		-3	%		-4	%		-88	%		-3	%		-8	%		1	%		-6	%		-75	%		-5	%
Other		20	%		24	%		-200	%		-22	%		-1	%		26	%		29	%		—			-11	%		9	%

Total		17	%		2	%		-3	%		-18	%		10	%		17	%		4	%		-2	%		-7	%		11	%



33 Ericsson \| Second Quarter Report 2019		Additional information

IPR licensing revenues by segment by quarter


	2019				2018
Isolated quarters, SEK million	Q2		Q1		Q4		Q3		Q2		Q1
Networks		1,845		2,066		1,759		1,755		1,486		1,522
Digital Services		404		454		387		385		326		334

Total		2,249		2,520		2,146		2,140		1,812		1,856


	2019				2018
Year to date, SEK million	Jan-Jun		Jan-Mar		Jan-Dec		Jan-Sep		Jan-Jun		Jan-Mar
Networks		3,911		2,066		6,522		4,763		3,008		1,522
Digital Services		858		454		1,432		1,045		660		334

Total		4,769		2,520		7,954		5,808		3,668		1,856


Provisions

	2019				2018
Isolated quarters, SEK million	Q2		Q1		Q4		Q3		Q2		Q1
Opening balance		12,033		16,008		8,695		9,534		9,030		9,879
Additions		1,423		1,401		8,930		1,491		1,974		1,315
Utilization/Cash out		-2,084		-1,676		-1,436		-1,774		-1,486		-2,216
Of which restructuring		-378		-557		-656		-1,236		-832		-1,424
Reversal of excess amounts		-88		-125		-290		-127		-191		-117
Reclassification, translation difference and other		74		-3,575		109		-429		207		169

Closing balance		11,358		12,033		16,008		8,695		9,534		9,030

Of which restructuring		1,743		2,059		6,438		2,960		4,029		3,524

	2019				2018
Year to date, SEK million	Jan-Jun		Jan-Mar		Jan-Dec		Jan-Sep		Jan-Jun		Jan-Mar
Opening balance		16,008		16,008		9,879		9,879		9,879		9,879
Additions		2,824		1,401		13,710		4,780		3,289		1,315
Utilization/Cash out		-3,760		-1,676		-6,912		-5,476		-3,702		-2,216
Of which restructuring		-935		-557		-4,148		-3,492		-2,256		-1,424
Reversal of excess amounts		-213		-125		-725		-435		-308		-117
Reclassification, translation difference and other		-3,501		-3,575		56		-53		376		169

Closing balance		11,358		12,033		16,008		8,695		9,534		9,030

Of which restructuring		1,743		2,059		6,438		2,960		4,029		3,524



34 Ericsson \| Second Quarter Report 2019		Additional information

Information on investments

Investments in assets subject to depreciation, amortization, impairment and write-downs


	2019				2018
Isolated quarters, SEK million	Q2		Q1		Q4		Q3		Q2		Q1
Additions
Property, plant and equipment		1,098		1,314		1,080		1,088		951		856
Capitalized development expenses		446		457		195		151		325		254
IPR, brands and other intangible assets		—		1		27		—		1		—

Total		1,544		1,772		1,302		1,239		1,277		1,100

Depreciation, amortization and impairment losses
Property, plant and equipment		919		880		965		870		1,080		928
Capitalized development expenses		449		520		884		678		635		616
Goodwill, IPR, brands and other intangible assets		226		314		620		345		350		347

Total		1,594		1,714		2,469		1,893		2,065		1,891


	2019				2018
Year to date, SEK million	Jan-Jun		Jan-Mar		Jan-Dec		Jan-Sep		Jan-Jun		Jan-Mar
Additions
Property, plant and equipment		2,412		1,314		3,975		2,895		1,807		856
Capitalized development expenses		903		457		925		730		579		254
IPR, brands and other intangible assets		1		1		28		1		1		—

Total		3,316		1,772		4,928		3,626		2,387		1,110

Depreciation, amortization and impairment losses
Property, plant and equipment		1,799		880		3,843		2,878		2,008		928
Capitalized development expenses		969		520		2,813		1,929		1,251		616
Goodwill, IPR, brands and other intangible assets		540		314		1,662		1,042		697		347

Total		3,308		1,714		8,318		5,849		3,956		1,891



35 Ericsson \| Second Quarter Report 2019		Additional information

Other information


	Apr-Jun						Jan-Jun						Jan-Dec
SEK million	2019			2018			2019			2018			2018
Number of shares and earnings per share
Number of shares, end of period (million)		3,334			3,334			3,334			3,334			3,334
Of which class A-shares (million)		262			262			262			262			262
Of which class B-shares (million)		3,072			3,072			3,072			3,072			3,072
Number of treasury shares, end of period (million)		29			43			29			43			37
Number of shares outstanding, basic, end of period (million)		3,305			3,291			3,305			3,291			3,297
Numbers of shares outstanding, diluted, end of period (million)		3,327			3,323			3,327			3,323			3,323
Average number of treasury shares (million)		30			44			32			46			43
Average number of shares outstanding, basic (million)		3,304			3,290			3,302			3,288			3,291
Average number of shares outstanding, diluted (million) ¹⁾		3,325			3,322			3,324			3,321			3,318
Earnings (loss) per share, basic (SEK)		0.52			-0.58			1.22			-0.83			-1.98
Earnings (loss) per share, diluted (SEK) ¹⁾		0.51			-0.58			1.21			-0.83			-1.98
Earnings (loss) per share (Non-IFRS), diluted (SEK) ²⁾		0.59			-0.09			1.39			0.02			0.27
Ratios
Days sales outstanding		—			—			95			99			91
Inventory turnover days		91			83			92			83			70
Payable days		82			77			86			82			72
Alternative Performance Measures (APMs)
Equity ratio (%)		—			—			30.1	%		35.3	%		32.7	%
Return on equity (%)		8.1	%		-8.1	%		9.4	%		-5.8	%		-7.1	%
Return on capital employed (%)		9.2	%		0.4	%		11.0	%		-0.2	%		0.8	%
Capital turnover (times)		1.4			1.3			1.3			1.2			1.4
Free cash flow		2,230			-611			6,590			-313			2,968
Cash conversion (%)		73.2	%		-556.8	%		90.0	%		-238.5	%		601.2	%
Exchange rates used in the consolidation
SEK/EUR- closing rate		—			—			10.55			10.44			10.25
SEK/USD- closing rate		—			—			9.27			8.97			8.94

Other
Market area inventory, end of period		21,205			19,739			21,205			19,739			16,505
Export sales from Sweden		28,356			24,978			50,842			45,657			109,969

¹⁾	Potential ordinary shares are not considered when their conversion to ordinary shares would increase earnings per share.

²⁾	Excluding amortizations and write-downs of acquired intangibles and restructuring charges.

Number of employees


	2019				2018 ²⁾
End of period	Jun 30		Mar 31		Dec 31		Sep 30		Jun 30		Mar 31
South East Asia, Oceania and India		23,942		24,051		23,959		23,607		23,516		23,623
North East Asia		13,334		13,169		12,788		12,495		12,303		12,321
North America		9,342		9,246		9,727		9,459		9,510		9,798
Europe and Latin America ¹⁾		43,846		43,833		44,522		44,594		45,643		47,437
Middle East and Africa		4,292		4,281		4,363		4,344		4,288		4,402

Total		94,756		94,580		95,359		94,499		95,260		97,581

¹⁾Of which in Sweden		12,549		12,455		12,502		12,679		13,431		13,763

²⁾	2018 has been restated to reflect the move of Morocco from market area Europe and Latin America to Middle East and Africa. Please refer to “Changes applied in Q1 2019”.



36 Ericsson \| Second Quarter Report 2019		Additional information

Items excluding restructuring charges

Restructuring charges by function


	2019				2018
Isolated quarters, SEK million	Q2		Q1		Q4		Q3		Q2		Q1
Cost of sales		-26		-65		-4,054		-204		-937		-743
Research and development expenses		-49		-118		-251		-214		-502		-326
Selling and administrative expenses		-43		-23		-106		-134		-441		-103

Total		-118		-206		-4,411		-552		-1,880		-1,172


	2019				2018
Year to date, SEK million	Jan-Jun		Jan-Mar		Jan-Dec		Jan-Sep		Jan-Jun		Jan-Mar
Cost of sales		-91		-65		-5,938		-1,884		-1,680		-743
Research and development expenses		-167		-118		-1,293		-1,042		-828		-326
Selling and administrative expenses		-66		-23		-784		-678		-544		-103

Total		-324		-206		-8,015		-3,604		-3,052		-1,172

Restructuring charges by segment

2019

2018

Isolated quarters, SEK million

Networks

-5

-10

-425

-128

-749

-479

of which cost of sales

-3

-439

-63

-469

-415

of which operating expenses

-14

-7

-65

-280

-64

Digital Services

-93

-187

-3,545

-358

-882

-581

of which cost of sales

-27

-60

-3,369

-111

-303

-226

of which operating expenses

-66

-127

-176

-247

-579

-355

Managed Services

-2

-70

-32

-123

-51

of which cost of sales

-1

-69

-28

-103

-48

of which operating expenses

-2

-1

-4

-20

-3

Emerging Business and Other

-21

-7

-371

-34

-126

-61

of which cost of sales

-11

-1

-177

-2

-62

-54

of which operating expenses

-10

-6

-194

-32

-64

-7

Total

-118

-206

-4,411

-552

-1,880

-1,172

2019

2018

Year to date, SEK million

Jan-Jun

Jan-Mar

Jan-Dec

Jan-Sep

Jan-Jun

Jan-Mar

Networks

-15

-10

-1,781

-1,356

-1,228

-479

of which cost of sales

-3

-1,386

-947

-884

-415

of which operating expenses

-21

-7

-395

-409

-344

-64

Digital Services

-280

-187

-5,366

-1,821

-1,463

-581

of which cost of sales

-87

-60

-4,009

-640

-529

-226

of which operating expenses

-193

-127

-1,357

-1,181

-934

-355

Managed Services

-1

-2

-276

-206

-174

-51

of which cost of sales

-1

-248

-179

-151

-48

of which operating expenses

-3

-1

-28

-27

-23

-3

Emerging Business and Other

-28

-7

-592

-221

-187

-61

of which cost of sales

-12

-1

-295

-118

-116

-54

of which operating expenses

-16

-6

-297

-103

-71

-7

Total

-324

-206

-8,015

-3,604

-3,052

-1,172



37 Ericsson \| Second Quarter Report 2019		Items excluding restructuring charges

Gross income (loss) and gross margin excluding restructuring charges by segment


	2019						2018
Isolated quarters, SEK million	Q2			Q1			Q4			Q3			Q2			Q1
Networks		15,661			14,458			17,065			14,898			13,034			11,542
Digital Services		3,338			2,938			2,129			3,319			3,761			3,118
Managed Services		776			1,037			850			833			912			539
Emerging Business and Other		322			411			389			784			563			402

Total		20,097			18,844			20,433			19,834			18,270			15,601


	2019						2018
Isolated quarters, As percentage of net sales	Q2			Q1			Q4			Q3			Q2			Q1
Networks		41.4	%		43.2	%		41.0	%		41.5	%		40.2	%		40.4	%
Digital Services		37.1	%		37.6	%		16.4	%		36.9	%		42.6	%		42.9	%
Managed Services		12.3	%		17.7	%		12.4	%		12.9	%		14.0	%		9.1	%
Emerging Business and Other		19.2	%		23.5	%		17.1	%		32.3	%		27.4	%		24.3	%

Total		36.7	%		38.5	%		32.0	%		36.9	%		36.7	%		35.9	%


	2019						2018
Year to date, SEK million	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Networks		30,119			14,458			56,539			39,474			24,576			11,542
Digital Services		6,276			2,938			12,327			10,198			6,879			3,118
Managed Services		1,813			1,037			3,134			2,284			1,451			539
Emerging Business and Other		733			411			2,138			1,749			965			402

Total		38,941			18,844			74,138			53,705			33,871			15,601


	2019						2018
Year to date, As percentage of net sales	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Networks		42.2	%		43.2	%		40.8	%		40.7	%		40.3	%		40.4	%
Digital Services		37.3	%		37.6	%		32.4	%		40.7	%		42.7	%		42.9	%
Managed Services		14.9	%		17.7	%		12.2	%		12.1	%		11.7	%		9.1	%
Emerging Business and Other		21.4	%		23.5	%		25.4	%		28.5	%		26.0	%		24.3	%

Total		37.5	%		38.5	%		35.2	%		36.5	%		36.3	%		35.9	%



38 Ericsson \| Second Quarter Report 2019		Items excluding restructuring charges

Operating income (loss) and operating margin excluding restructuring charges by segment


	2019						2018
Isolated quarters, SEK million	Q2			Q1			Q4			Q3			Q2			Q1
Networks		5,685			5,482			7,275			5,784			4,293			3,850
Digital Services		-1,312			-1,611			-3,542			-1,426			-1,492			-2,026
Managed Services		202			1,254			355			441			422			151
Emerging Business and Other		-718			-23			-1,529			-1,006			-1,178			-1,115

Total		3,857			5,102			2,559			3,793			2,045			860


	2019						2018
Isolated quarters, As percentage of net sales	Q2			Q1			Q4			Q3			Q2			Q1
Networks		15.0	%		16.4	%		17.5	%		16.1	%		13.3	%		13.5	%
Digital Services		-14.6	%		-20.6	%		-27.2	%		-15.9	%		-16.9	%		-27.9	%
Managed Services		3.2	%		21.4	%		5.2	%		6.8	%		6.5	%		2.6	%
Emerging Business and Other		-42.8	%		-1.3	%		-67.1	%		-41.5	%		-57.4	%		-67.5	%

Total		7.0	%		10.4	%		4.0	%		7.0	%		4.1	%		2.0	%


	2019						2018
Year to date, SEK million	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Networks		11,167			5,482			21,202			13,927			8,143			3,850
Digital Services		-2,923			-1,611			-8,486			-4,944			-3,518			-2,026
Managed Services		1,456			1,254			1,369			1,014			573			151
Emerging Business and Other		-741			-23			-4,828			-3,299			-2,293			-1,115

Total		8,959			5,102			9,257			6,698			2,905			860


	2019						2018
Year to date, As percentage of net sales	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Networks		15.7	%		16.4	%		15.3	%		14.4	%		13.4	%		13.5	%
Digital Services		-17.4	%		-20.6	%		-22.3	%		-19.7	%		-21.9	%		-27.9	%
Managed Services		12.0	%		21.4	%		5.3	%		5.4	%		4.6	%		2.6	%
Emerging Business and Other		-21.6	%		-1.3	%		-57.4	%		-53.8	%		-61.9	%		-67.5	%

Total		8.6	%		10.4	%		4.4	%		4.6	%		3.1	%		2.0	%



39 Ericsson \| Second Quarter Report 2019		Items excluding restructuring charges

Alternative performance measures

This section includes a reconciliation of certain Alternative Performance Measures (APMs) to the most directly reconcilable line items in the financial statements. The presentation of APMs has limitations as analytical tools and should not be considered in isolation or as a substitute for related financial measures prepared in accordance with IFRS.

APMs are presented to enhance an investor’s evaluation of ongoing operating results, to aid in forecasting future periods and to facilitate meaningful comparison of results between periods.

Management uses these APMs to, among other things, evaluate ongoing operations in relation to historical results, for internal planning and forecasting purposes and in the calculation of certain performance-based compensation.

The APMs presented in this report may differ from similarly titled measures used by other companies.

The implementation of IFRS 16 “Leasing” as of January 1, 2019, has had an impact on many of the APMs for 2019. For more information, see “Accounting polices” in this report. The APMs for 2018 has not changed. The definition of the APM Net cash has been clarified.

The Company has decided to change the definition of Return on capital employed (ROCE) and no longer include Financial income in the calculation from Q2 2019. The Company believes the updated definition is a better way of reflecting the underlying results of the operation of the Company. The prior periods have been restated to reflect the change.

For additional information, see Alternative Performance Measures in the Ericsson Annual Report 2018.

Sales growth adjusted for comparable units and currency

Sales growth adjusted for the impact of acquisitions and divestments as well as the effects of foreign currency fluctuations.


	2019						2018
Isolated quarter, year over year change	Q2			Q1			Q4			Q3			Q2			Q1
Reported net sales		54,810			48,906			63,809			53,810			49,808			43,411
Acquired business		—			—			—			—			—			—
Net FX impact		-2,538			-2,932			-3,549			-3,748			-263			3,328
Comparable net sales, excluding FX impact		52,272			45,974			60,260			50,062			49,545			46,739
Comparable quarter net sales adjusted for divested business ¹⁾		49,055			42,961			—			—			—			—
Sales growth adjusted for comparable units and currency (%)		7	%		7	%		4	%		1	%		-1	%		-2	%

	2019						2018
Year to date, year over year change	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Reported net sales		103,716			48,906			210,838			147,029			93,219			43,411
Acquired business		—			—			—			—			—			—
Net FX impact		-5,470			-2,932			-4,232			-683			3,065			3,328
Comparable net sales, excluding FX impact		98,246			45,974			206,606			146,346			96,284			46,739
Comparable quarter net sales adjusted for divested business ¹⁾		92,016			42,961			—			—			—			—
Sales growth adjusted for comparable units and currency (%)		7	%		7	%		1	%		-1	%		-2	%		-2	%

¹⁾	Adjusted for MediaKind divestment.



40 Ericsson \| Second Quarter Report 2019		Alternative performance measures

Items excluding restructuring charges

Gross income, operating expenses, and operating income (loss) are presented excluding restructuring charges and, for certain measures, as a percentage of net sales.


	2019						2018
Isolated quarters, SEK million	Q2			Q1			Q4			Q3			Q2			Q1
Gross income		20,071			18,779			16,379			19,630			17,333			14,858
Net sales		54,810			48,906			63,809			53,810			49,808			43,411
Gross margin (%)		36.6	%		38.4	%		25.7	%		36.5	%		34.8	%		34.2	%

Gross income		20,071			18,779			16,379			19,630			17,333			14,858
Restructuring charges included in cost of sales		26			65			4,054			204			937			743
Gross income, excluding restructuring charges		20,097			18,844			20,433			19,834			18,270			15,601
Net sales		54,810			48,906			63,809			53,810			49,808			43,411
Gross margin, excluding restructuring charges (%)		36.7	%		38.5	%		32.0	%		36.9	%		36.7	%		35.9	%

Operating expenses		-16,331			-14,639			-17,964			-16,422			-17,205			-15,257
Restructuring charges included in R&D expenses		49			118			251			214			502			326
Restructuring charges included in selling and administrative expenses		43			23			106			134			441			103
Operating expenses, excluding restructuring charges		-16,239			-14,498			-17,607			-16,074			-16,262			-14,828

Operating income (loss)		3,739			4,896			-1,852			3,241			165			-312
Net sales		54,810			48,906			63,809			53,810			49,808			43,411
Operating margin (%)		6.8	%		10.0	%		-2.9	%		6.0	%		0.3	%		-0.7	%

Operating income (loss)		3,739			4,896			-1,852			3,241			165			-312
Total restructuring charges		118			206			4,411			552			1,880			1,172
Operating income (loss), excluding restructuring charges		3,857			5,102			2,559			3,793			2,045			860
Net sales		54,810			48,906			63,809			53,810			49,808			43,411
Operating margin, excluding restructuring charges (%)		7.0	%		10.4	%		4.0	%		7.0	%		4.1	%		2.0	%

	2019						2018
Year to date, SEK million	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Gross income		38,850			18,779			68,200			51,821			32,191			14,858
Net sales		103,716			48,906			210,838			147,029			93,219			43,411
Gross margin (%)		37.5	%		38.4	%		32.3	%		35.2	%		34.5	%		34.2	%

Gross income		38,850			18,779			68,200			51,821			32,191			14,858
Restructuring charges included in cost of sales		91			65			5,938			1,884			1,680			743
Gross income, excluding restructuring charges		38,941			18,844			74,138			53,705			33,871			15,601
Net sales		103,716			48,906			210,838			147,029			93,219			43,411
Gross margin, excluding restructuring charges (%)		37.5	%		38.5	%		35.2	%		36.5	%		36.3	%		35.9	%

Operating expenses		-30,970			-14,639			-66,848			-48,884			-32,462			-15,257
Restructuring charges included in R&D expenses		167			118			1,293			1,042			828			326
Restructuring charges included in selling and administrative expenses		66			23			784			678			544			103
Operating expenses, excluding restructuring charges		-30,737			-14,498			-64,771			-47,164			-31,090			-14,828

Operating income (loss)		8,635			4,896			1,242			3,094			-147			-312
Net sales		103,716			48,906			210,838			147,029			93,219			43,411
Operating margin (%)		8.3	%		10.0	%		0.6	%		2.1	%		-0.2	%		-0.7	%

Operating income (loss)		8,635			4,896			1,242			3,094			-147			-312
Total restructuring charges		324			206			8,015			3,604			3,052			1,172
Operating income (loss), excluding restructuring charges		8,959			5,102			9,257			6,698			2,905			860
Net sales		103,716			48,906			210,838			147,029			93,219			43,411
Operating margin, excluding restructuring charges (%)		8.6	%		10.4	%		4.4	%		4.6	%		3.1	%		2.0	%



41 Ericsson \| Second Quarter Report 2019		Alternative performance measures

EBITA and EBITA margin

Earnings (loss) before interest, taxes, amortization and write-downs of acquired intangibles, also expressed as a percentage of net sales.


	2019						2018
Isolated quarters, SEK million	Q2			Q1			Q4			Q3			Q2			Q1
Net income (loss)		1,847			2,403			-6,497			2,748			-1,802			-725
Taxes		1,451			1,888			3,930			-146			1,157			-128
Financial income and expenses, net		441			605			715			639			810			541
Amortization and write-downs of acquired intangibles		226			314			621			344			350			347
EBITA		3,965			5,210			-1,231			3,585			515			35
Net sales		54,810			48,906			63,809			53,810			49,808			43,411
EBITA margin (%)		7.2	%		10.7	%		-1.9	%		6.7	%		1.0	%		0.1	%

	2019						2018
Year to date, SEK million	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Net income (loss)		4,250			2,403			-6,276			221			-2,527			-725
Taxes		3,339			1,888			4,813			883			1,029			-128
Financial income and expenses, net		1,046			605			2,705			1,990			1,351			541
Amortization and write-downs of acquired intangibles		540			314			1,662			1,041			697			347
EBITA		9,175			5,210			2,904			4,135			550			35
Net sales		103,716			48,906			210,838			147,029			93,219			43,411
EBITA margin (%)		8.8	%		10.7	%		1.4	%		2.8	%		0.6	%		0.1	%

Cash conversion

Cash flow from operating activities divided by the sum of net income (loss) and adjustments to reconcile net income to cash, expressed as a percentage.


	2019						2018
Isolated quarters, SEK million	Q2			Q1			Q4			Q3			Q2			Q1
Net income (loss)		1,847			2,403			-6,497			2,748			-1,802			-725
Net income reconciled to cash		4,952			5,481			-98			2,916			-259			-1,005
Cash flow from operating activities		3,623			5,765			4,287			2,040			1,442			1,573
Cash conversion (%)		73.2	%		105.2	%		-4374.5	%		70.0	%		-556.8	%		-156.5	%

	2019						2018
Year to date, SEK million	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Net income (loss)		4,250			2,403			-6,276			221			-2,527			-725
Net income reconciled to cash		10,433			5,481			1,554			1,652			-1,264			-1,005
Cash flow from operating activities		9,388			5,765			9,342			5,055			3,015			1,573
Cash conversion (%)		90.0	%		105.2	%		601.2	%		306.0	%		-238.5	%		-156.5	%



42 Ericsson \| Second Quarter Report 2019		Alternative performance measures

Gross cash and net cash, end of period

Gross cash: Cash and cash equivalents plus interest-bearing securities (current and non-current).

Net cash: Cash and cash equivalents plus interest-bearing securities (current and non-current) less borrowings (current and non-current).


	2019				2018
SEK million	Q2		Q1		Q4		Q3		Q2		Q1
Cash and cash equivalents		45,498		45,453		38,389		36,058		37,049		36,697
+ Interest-bearing securities, current		6,367		3,183		6,625		6,591		8,304		5,453
+ Interest-bearing securities, non-current		17,091		23,022		23,982		23,014		21,501		27,104
Gross cash, end of period		68,956		71,658		68,996		65,663		66,854		69,254
- Borrowings, current		2,160		3,015		2,255		2,463		2,642		2,554
- Borrowings, non-current		33,040		32,533		30,870		31,187		31,131		31,134
Net cash, end of period		33,756		36,110		35,871		32,013		33,081		35,566

Capital employed

Total assets less non-interest-bearing provisions and liabilities.


	2019				2018
SEK million	Q2		Q1		Q4		Q3		Q2		Q1
Total assets		280,447		283,958		268,761		264,848		265,322		260,681

Non-interest-bearing provisions and liabilities
Provisions, non-current		2,646		2,670		5,471		3,420		2,819		2,597
Deferred tax liabilities		1,178		792		670		1,274		1,332		1,325
Other non-current liabilities		2,160		2,118		4,346		4,456		4,549		2,792
Provisions, current		8,712		9,363		10,537		5,275		6,715		6,435
Contract liabilities		37,264		38,605		29,348		30,108		30,959		30,391
Trade payables		31,388		30,842		29,883		28,914		28,563		26,453
Other current liabilities		33,351		38,528		38,891		36,323		35,746		37,888
Capital employed		163,748		161,040		149,615		155,078		154,639		152,800

Capital turnover

Annualized net sales divided by average capital employed.


	2019				2018
Isolated quarters, SEK million	Q2		Q1		Q4		Q3		Q2		Q1
Net sales		54,810		48,906		63,809		53,810		49,808		43,411
Annualized net sales		219,240		195,624		255,236		215,240		199,232		173,644
Average capital employed
Capital employed at beginning of period		161,040		149,615		155,078		154,639		152,800		155,625
Capital employed at end of period		163,748		161,040		149,615		155,078		154,639		152,800
Average capital employed		162,394		155,328		152,347		154,859		153,720		154,213
Capital turnover (times)		1.4		1.3		1.7		1.4		1.3		1.1

	2019				2018
Year to date, SEK million	Jan-Jun		Jan-Mar		Jan-Dec		Jan-Sep		Jan-Jun		Jan-Mar
Net sales		103,716		48,906		210,838		147,029		93,219		43,411
Annualized net sales		207,432		195,624		210,838		196,039		186,438		173,644
Average capital employed
Capital employed at beginning of period		149,615		149,615		155,625		155,625		155,625		155,625
Capital employed at end of period		163,748		161,040		149,615		155,078		154,639		152,800
Average capital employed		156,682		155,328		152,620		155,352		155,132		154,213
Capital turnover (times)		1.3		1.3		1.4		1.3		1.2		1.1



43 Ericsson \| Second Quarter Report 2019		Alternative performance measures

Return on capital employed

The annualized total of operating income (loss) as a percentage of average capital employed.

The definition is updated. Refer to the clarification provided at the beginning of the APM section.


	2019						2018
Isolated quarters, SEK million	Q2			Q1			Q4			Q3			Q2			Q1
Operating income (loss)		3,739			4,896			-1,852			3,241			165			-312
Annualized operating income (loss)		14,956			19,584			-7,408			12,964			660			-1,248
Average capital employed
Capital employed at beginning of period		161,040			149,615			155,078			154,639			152,800			155,625
Capital employed at end of period		163,748			161,040			149,615			155,078			154,639			152,800
Average capital employed		162,394			155,328			152,347			154,859			153,720			154,213
Return on capital employed (%)		9.2	%		12.6	%		-4.9	%		8.4	%		0.4	%		-0.8	%

	2019						2018
Year to date, SEK million	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Operating income (loss)		8,635			4,896			1,242			3,094			-147			-312
Annualized operating income (loss)		17,270			19,584			1,242			4,125			-294			-1,248
Average capital employed
Capital employed at beginning of period		149,615			149,615			155,625			155,625			155,625			155,625
Capital employed at end of period		163,748			161,040			149,615			155,078			154,639			152,800
Average capital employed		156,682			155,328			152,620			155,352			155,132			154,213
Return on capital employed (%)		11.0	%		12.6	%		0.8	%		2.7	%		-0.2	%		-0.8	%

Equity ratio

Equity, expressed as a percentage of total assets.


	2019						2018
SEK million	Q2			Q1			Q4			Q3			Q2			Q1
Total equity		84,533			84,532			87,770			95,953			93,560			93,466
Total assets		280,447			283,958			268,761			264,848			265,322			260,681
Equity ratio (%)		30.1	%		29.8	%		32.7	%		36.2	%		35.3	%		35.9	%

Return on equity

Annualized net income (loss) attributable to stockholders of the Parent Company as a percentage of average Stockholders’ equity.


	2019						2018
Isolated quarters, SEK million	Q2			Q1			Q4			Q3			Q2			Q1
Net income (loss) attributable to stockholders of the parent company		1,705			2,317			-6,553			2,745			-1,885			-837
Annualized		6,820			9,268			-26,212			10,980			-7,540			-3,348
Average stockholders’ equity
Stockholders’ equity, beginning of period		84,619			86,978			95,087			92,689			92,703			95,952
Stockholders’ equity, end of period		84,488			84,619			86,978			95,087			92,689			92,703
Average stockholders’ equity		84,554			85,799			91,033			93,888			92,696			94,328
Return on equity (%)		8.1	%		10.8	%		-28.8	%		11.7	%		-8.1	%		-3.5	%

	2019						2018
Year to date, SEK million	Jan-Jun			Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar
Net income (loss) attributable to stockholders of the parent company		4,022			2,317			-6,530			23			-2,722			-837
Annualized		8,044			9,268			-6,530			31			-5,444			-3,348
Average stockholders’ equity
Stockholders’ equity, beginning of period		86,978			86,978			95,952			95,952			95,952			95,952
Stockholders’ equity, end of period		84,488			84,619			86,978			95,087			92,689			92,703
Average stockholders’ equity		85,733			85,799			91,465			95,520			94,321			94,328
Return on equity (%)		9.4	%		10.8	%		-7.1	%		0.0	%		-5.8	%		-3.5	%



44 Ericsson \| Second Quarter Report 2019		Alternative performance measures

Earnings (loss) per share (non-IFRS)

Earnings (loss) per share, diluted, excluding amortizations and write-down of acquired intangible assets and excluding restructuring charges.


	2019				2018
Isolated quarters, SEK	Q2		Q1		Q4		Q3		Q2		Q1
Earnings (loss) per share, diluted		0.51		0.70		-1.99		0.83		-0.58		-0.25
Restructuring charges		0.02		0.05		1.06		0.12		0.41		0.30
Amortization and write-downs of acquired intangibles		0.06		0.05		0.16		0.08		0.08		0.06
Earnings (loss) per share (non-IFRS)		0.59		0.80		-0.77		1.03		-0.09		0.11

	2019				2018
Year to date, SEK	Jan-Jun		Jan-Mar		Jan-Dec		Jan-Sep		Jan-Jun		Jan-Mar
Earnings (loss) per share, diluted		1.21		0.70		-1.98		0.01		-0.83		-0.25
Restructuring charges		0.07		0.05		1.88		0.82		0.71		0.30
Amortization and write-downs of acquired intangibles		0.11		0.05		0.37		0.21		0.14		0.06
Earnings (loss) per share (non-IFRS)		1.39		0.80		0.27		1.04		0.02		0.11

Free cash flow and free cash flow excluding M&A

Free cash flow: Cash flow from operating activities less net capital expenditures and other investments.

Free cash flow excluding M&A: Cash flow from operating activities less net capital expenditures and other investments (excluding M&A).


	2019				2018
Isolated quarters, SEK million	Q2		Q1		Q4		Q3		Q2		Q1
Cash flow from operating activities		3,623		5,765		4,287		2,040		1,442		1,573
Net capital expenditures and other investments (excluding M&A)
Investments in property, plant and equipment		-1,098		-1,314		-1,080		-1,088		-951		-856
Sales of property, plant and equipment		184		232		57		102		52		123
Product development		-446		-457		-195		-151		-325		-254
Other investing activities		-36		-165		-96		-190		-398		161
Free cash flow excluding M&A		2,227		4,061		2,973		713		-180		747
Acquisitions/divestments of subsidiaries and other operations, net		3		299		20		-425		-431		-449
Free cash flow		2,230		4,360		2,993		288		-611		298

	2019				2018
Year to date, SEK million	Jan-Jun		Jan-Mar		Jan-Dec		Jan-Sep		Jan-Jun		Jan-Mar
Cash flow from operating activities		9,388		5,765		9,342		5,055		3,015		1,573
Net capital expenditures and other investments (excluding M&A)
Investments in property, plant and equipment		-2,412		-1,314		-3,975		-2,895		-1,807		-856
Sales of property, plant and equipment		416		232		334		277		175		123
Product development		-903		-457		-925		-730		-579		-254
Other investing activities		-201		-165		-523		-427		-237		161
Free cash flow excluding M&A		6,288		4,061		4,253		1,280		567		747
Acquisitions/divestments of subsidiaries and other operations, net		302		299		-1,285		-1,305		-880		-449
Free cash flow		6,590		4,360		2,968		-25		-313		298



45 Ericsson \| Second Quarter Report 2019		Alternative performance measures