ERIXF Telefon AB LM Ericsson Sweden (PK)

Net Sales

Gross margin

We are going through unprecedented times with Covid-19 which has impacted everyone around the world either directly or indirectly. Throughout this crisis, we guide our decisions by putting the safety and health of our employees, customers and partners as a first priority. Ericsson delivered a solid result during the first quarter, with limited impact from the Covid-19 pandemic. An important indicator of our strategy execution is the improvement in gross margin. The Q1 gross margin¹ increased to 40.4% (38.5%) YoY, driven by improvements across segments. We expect our industry to show resilience throughout the pandemic and we are well positioned with a competitive 5G product offering and cost structure. There is near-term uncertainty around sales volumes due to Covid-19 and the macroeconomic situation, but with current visibility we have no reason to change our financial targets for 2020 and 2022.

In segment Networks, the gross margin¹ increased to 44.6% (43.2%) reflecting the strong business fundamentals with high activity across multiple regions. A favorable business mix more than compensated for an increased portion of strategic contracts and the expected negative effect from the acquired antenna and filter business. The operating margin¹ reached 16.8%.

We see strong underlying customer momentum in segment Digital Services. We are confident about our offering and market position. Leading operators have awarded us several 5G Core contracts, which are expected to start generating material revenues from 2021. While the rationalization of the legacy portfolio will continue, we are increasing R&D investments in our 5G and cloud-native portfolio to capture the new opportunities. Execution of the turnaround follows the plan, but earnings will vary between quarters. In the first quarter, currency adjusted sales declined by -9% due to fewer project completions and a somewhat negative impact from Covid-19 as access to some customer networks was limited. In addition, legacy hardware sales declined in line with our strategy. However, fundamental to our strategy, sales of software increased and gross margin¹ reached 40%, despite a SEK -0.2 b. negative impact from one of the few remaining critical contracts.

In Managed Services our investments in automation and AI continue to contribute to improving the gross margin. There will be quarterly variations depending on timing of add-on sales and costs, but underlying margins have been established at a higher level.

Our cash position has further strengthened driven by free cash flow before M&A of SEK 2.3 b. in the quarter. This further solidified our resilience which enables us to continue to invest in our technology leadership. At the same time, we will continue our efforts to drive efficiency and cost reductions to further increase competitiveness.

Underlying business fundamentals remain strong. With growth in data in general and with working from home as the new normal in many countries, good connectivity is more important than ever. For 2020 we estimate the RAN² market to grow by 4%, however for Q2 we expect somewhat lower than normal sequential sales growth as there are uncertainties impacting short-term growth negatively. Covid-19 and actions taken by governments to slow down the spread are making our service delivery and supply harder due to lockdowns and travel restrictions in many countries. In addition, while we have seen no material effects so far on our demand situation, it is prudent to believe that the slowdown in the general economy may lead some operators to delay investment programs.

Our 5G equipment is used in 29 live networks across four continents. As a further proofpoint of our technology leadership we were awarded an increased market share from one of the operators in China. The full value and margin impact from the 5G deployments in China will be assessed after market share decisions by all operators.

While we have been successful improving our position in Europe, we are concerned that 5G investments in Europe are delayed. This means that Europe may fall behind on a critical digital infrastructure for the future. The criticality of the digital infrastructure has been further evidenced during the pandemic. We believe governments should encourage 5G investments as a way to restart economies.

The financial targets for 2020 take into account an increasing share of strategic contracts, including 5G in China. We expect a larger share of these contracts to weigh on profitability in Q2 rather than being evenly distributed over the year. Operational improvements will continue and are expected to partly offset the negative impact.

The approved operator merger in North America is expected to build an even stronger 5G momentum and we expect investments to intensify during the second half of the year. However, our managed services contract is expected to be negatively impacted over time, starting in Q2.

We are well positioned with a resilient balance sheet and a solid competitive position based on our 5G portfolio, set to deliver on the promises of 5G. A key factor for our long-term growth is to provide our customers with leading solutions. We are determined to come out of the Covid-19 situation in a stronger competitive position and our investments in R&D is a strategic cornerstone which we will not sacrifice. We also continue investments in digital transformation which is expected to generate competitive advantages.

The massive disruption caused by Covid-19 has demonstrated the criticality of the network in today’s society and we are currently working

closely with our customers to keep their networks running. During this period, our supply and service delivery has worked with limited interruption. We made an early decision to encourage a majority of our workforce to work remotely and are very proud of our people who have relentlessly served our customers during this period. Our business continuity plans have safeguarded operations during Q1 and we will continue to work to further improve our resilience by for example increasing inventories of critical components. At the same time, the longer the lockdown in many countries continue, the more disruptions we will likely see for example of our supply chains.

The current global uncertainty requires a humble attitude towards predicting the near-term future. We remain positive on

the longer-term outlook, but the second quarter is likely to be a tad softer than normal due to timing of strategic contracts and uncertainty induced by Covid-19. Predicting when the restrictions to curb the pandemic will be lifted and how the recovery will look is impossible. However, with current visibility we maintain the targets for 2020 and 2022.

Stay healthy and well.

Börje Ekholm

President and CEO

Reported sales increased by 2% YoY. Sales adjusted for comparable units and currency decreased by -2%. Sales in North America, Saudi Arabia and Japan grew while sales in Latin America, China and India declined.

Networks sales adjusted for comparable units and currency was flat YoY. Growth in North America, Saudi Arabia and Japan was offset by a decline primarily in Latin America, India and North East Asia excluding Japan.

Digital Services sales adjusted for comparable units and currency decreased by -9% YoY due to reduced sales of services and legacy hardware. Services sales declined following fewer project completions in the quarter, and a somewhat negative impact on deliveries from the Covid-19 pandemic.

Managed Services sales adjusted for comparable units and currency declined by -5% YoY due to contract exits.

Sales adjusted for comparable units and currency in Emerging Business and Other decreased by -8% mainly due to reduced legacy sales in media. Sales in Emerging Business increased.

IPR licensing revenues were flat at SEK 2.5 (2.5) b. YoY and QoQ.

Sequentially, sales decreased by -25% following seasonality.

Gross margin

Gross margin was 39.8% (38.4%). Gross margin excluding restructuring charges improved to 40.4% (38.5%) driven by a favorable business mix, including an increased software share, in segment Networks. Digital Services gross margin improved supported by a higher share of software and stronger hardware margins. Managed Services gross margin improved mainly as an effect of efficiency gains and timing of costs.

Sequentially, gross margin increased to 39.8% from 36.8%. Gross margin excluding restructuring charges increased to 40.4% from 37.1% with improvements in all segments. A higher share of IPR licensing revenues had a positive impact QoQ. Networks gross margin improved supported by a more favorable business mix and a lower share of services sales. Digital Services gross margin was supported by a higher share of software sales and stronger hardware margins. Managed Services gross margin improved driven by seasonally lower cost and efficiencies from R&D investments in automation and AI.

Items affecting comparability including restructuring charges

Restructuring charges increased slighty to SEK -0.3 (-0.2) b. YoY. Q1 2019 was impacted by capital gains (SEK 0.8 b.) related to the media businesses, and a reversal of a provision for impairment of trade receivables (SEK 0.7 b.) following customer payment. Q4 2019 was impacted by a provision reversal related to the SEC and DOJ investigations (SEK 0.7 b.) and costs related to wind-down of the ST-Ericsson legal structure (SEK -0.3 b.).

Research and development (R&D) expenses

R&D expenses decreased to SEK -9.1 (-9.2) b. R&D expenses excluding restructuring charges were SEK -9.2 (-9.0) b. The increase is mainly in segment Networks, while Digital Services had a lower net negative impact from capitalized and amortized development expenses.

Selling and administrative (SG&A) expenses

SG&A expenses increased to SEK -6.2 (-6.0) b. YoY, impacted by currency effects and increased investments in digitalization. Revaluation of customer financing was SEK -0.3 (-0.2) b.

Impairment losses on trade receivables

Impairment losses on trade receivables were negative at SEK -0.2 (0.6) b. Q1 2019 was impacted by reversal of a provision following customer payment of SEK 0.7 b.

Other operating income and expenses

Other operating income and expenses was SEK 0.1 (0.8) b. Q1 2019 was impacted by capital gains of SEK 0.8 b. related to the media businesses.

Operating income and margin

Operating income declined YoY to SEK 4.3 (4.9) b. Operating income excluding restructuring charges and items affecting comparability (see “Items affecting comparability” on page 3) improved to SEK 4.6 (3.5) b. with a corresponding operating margin improvement to 9.3% (7.2%). The improvement was driven by a stronger gross margin. Operating income excluding restructuring charges and items affecting comparability improved in all segments YoY.

Sequentially, operating income declined to SEK 4.3 b. from SEK 6.1 b. due to seasonally lower sales, partly offset by an improved gross margin and seasonally lower operating expenses. Operating margin adjusted for items affecting comparability increased to 9.3% from 9.0%.

Financial net

Financial net decreased to SEK -0.9 (-0.6) b. YoY and from SEK -0.1 b. QoQ, mainly due to negative currency hedge effects following the weakened SEK to USD. The currency hedge effect was SEK -0.5 b. compared with SEK -0.2 b. in Q1 2019 and SEK 0.2 b. in Q4 2019. The SEK weakened against the USD between December 31, 2019 (SEK/USD rate 9.32) and March 31, 2020 (SEK/USD rate 10.13).

Taxes

Taxes were SEK -1.1 (-1.9) b. corresponding to a tax rate of 33% (44%). The rate is derived from forecasted geographical distribution of profits for 2020.

Net Income

Net income declined to SEK 2.3 (2.4) b. and EPS diluted declined to SEK 0.65 (0.70) YoY due to items affecting comparability in Q1 2019 which had a positive impact. Adjusted for this impact, both net income and EPS diluted improved YoY.

Employees

The number of employees on March 31, 2020, was 99,095, a net decrease of 322 employees in the first quarter.

Planning assumptions

Market related

Ericsson related

Net sales

Gross margin

R&D and SG&A expenses

Restructuring charges

Currency exposure

South East Asia, Oceania and India

Sales decreased YoY across both Networks and Digital Services due to timing of project deliveries and milestones. The situation in India remains challenging, and sales declined YoY.

North East Asia

Sales increased YoY. Digital Services sales grew, mainly driven by strong sales in Japan. Network sales declined as a result of slowdown of 4G deployment in Mainland China. The decline was, however, partly compensated by increased business volumes in Japan.

North America

Sales increased YoY. Networks sales increased, driven by continued 5G momentum. Digital Services sales decreased due to lower software sales after a strong Q4. Managed Services sales were flat.

Europe and Latin America

Sales decreased YoY primarily due to reduced network investments in Latin America as well as lower sales in Managed Services due to contract exits. Networks sales increased in Europe driven by earlier announced contract wins.

Middle East and Africa

Sales increased YoY. Network sales were supported by ongoing 4G/5G deployment in key markets. Digital Services sales declined due to timing of project milestones.

Other

Sales decreased YoY due to the divestment of 51% of MediaKind in 2019. IPR licensing revenues remained stable at SEK 2.5 (2.5) b.

Net sales

Reported sales increased by 5% YoY, while sales adjusted for comparable units and currency was flat. Strong growth in North America, Saudi Arabia and Japan was offset by a decline YoY primarily in Latin America, India and North East Asia excl. Japan.

Sales declined by -21% QoQ due to seasonally lower sales.

Gross margin

Gross margin increased to 44.4% (43.2%) YoY. Gross margin excluding restructuring charges increased to 44.6% (43.2%), supported by a favorable business mix, including a higher share of software sales. Operational leverage compensated for an increased share of strategic contracts demonstrating the strong underlying business fundamentals. The strategic contracts are taken to strengthen the market position and their negative impact on gross margin may vary between quarters.

Gross margin increased to 44.4% from 41.1% QoQ driven by a more favorable business mix including a higher share of IPR licensing revenues as well as a lower share of services sales.

Operating income and margin

Operating income increased to SEK 5.8 (5.5) b. YoY while operating margin increased to 16.6% (16.3%). Excluding restructuring charges, the operating margin increased to 16.8% (16.4%), with a continued negative impact of the acquired antenna and filter business of SEK -0.3 b. The higher gross margin compensated for accelerated R&D investments in 5G and antenna products as well as an increase in SG&A expenses partly driven by the increased group investments in digital transformation.

Operating income excluding restructuring charges declined by SEK -0.5 b. QoQ, due to seasonally lower sales, while operating margin excluding restructuring charges increased to 16.8% from 14.5% QoQ as a result of a positive impact from the higher gross margin. The negative impact from the acquired antenna and filter business declined QoQ to SEK -0.3 b. from SEK -0.5 b.

Net sales rolling four quarters were SEK 156.7 b. and operating margin excluding restructuring charges was 16.1%.

Breakdown of sales into products, services and IPR licensing is available in the back-end tables.

Net sales

Reported sales decreased by -6% YoY. Sales adjusted for comparable units and currency decreased by -9% YoY due to reduced sales of services and legacy hardware. Services sales declined following fewer project completions, and a somewhat negative impact on deliveries from the Covid-19 pandemic as access to customer networks have been limited in certain countries. Legacy hardware sales declined in line with strategy to focus on cloud-native software.

The business momentum is strong for the new portfolio of 5G and cloud-native products. Sales of the new portfolio increased by 10% in the quarter and by 7% rolling 12 months. Important 5G Core contracts have been signed with several tier 1 operators in 2020.

Gross margin

Gross margin increased to 39.9% (36.8%) YoY. Gross margin excluding restructuring charges increased to 40.1% (37.6%)

supported by a higher share of software sales and by improved hardware margins. One of the remaining critical contracts had a negative impact of SEK -0.2 b. in the quarter.

Gross margin excluding restructuring charges increased to 40.1% from 38.1% QoQ, supported by a higher share of software sales and by stronger hardware margins. A higher share of IPR licensing revenues had a positive impact on gross margin QoQ.

Operating income (loss)

Operating income was SEK -1.4 (-1.8) b. Operating income excluding restructuring charges was SEK -1.4 (-1.6) b. The negative impact from lower sales was offset by a stronger gross margin. Operating expenses excluding restructuring charges declined by SEK -0.2 b. YoY due to a lower negative impact from capitalized and amortized development expenses (SEK 0.0 b. Q1 2020 compared with SEK -0.3 b. Q1 2019). While rationalization of the legacy portfolio continues, R&D investments are made in the new portfolio of 5G and cloud-native products.

Operating income excluding restructuring charges declined QoQ mainly due to sales seasonality.

Net sales rolling four quarters were SEK 39.4 b. and operating margin excluding restructuring charges was -8.2%.

Net sales

Reported sales declined by -2%. Sales adjusted for comparable units and currency decreased by -5% YoY, driven by non-strategic contract exits. Sales in Optimization (project business) showed growth.

Gross margin

Gross margin declined to 16.3% (17.7%) YoY. Gross margin excluding restructuring charges increased to 20.6% (17.7%) mainly as a result of efficiency gains and timing of costs.

Gross margin increased to 16.3% from 14.8% QoQ. Gross margin excluding restructuring charges increased to 20.6% from 15.4% driven by seasonally lower cost and efficiencies from R&D investments in automation and AI.

Gross margin rolling four quarters was 16.4%, excluding restructuring charges.

Operating income and margin

Operating income excluding restructuring charges was SEK 0.7 b. (Q1 2019 SEK 0.5 b., adjusted for a provision reversal of SEK 0.7 b.). The improvement was driven by higher gross margin.

Restructuring charges in the quarter amounted to SEK -0.2 b., mainly related to exiting a non-strategic contract.

Net sales rolling four quarters were SEK 25.4 b, and operating margin excluding restructuring charges was 6.9%.

Net sales

Reported sales decreased by -11% YoY, due to the 51% divestment of MediaKind in Q1 2019 and lower sales related to legacy media business. Sales adjusted for comparable units and currency decreased by -8% mainly due to lower sales in the legacy media business. Sales in Emerging Business increased.

Gross margin

Gross margin declined to 21.7% (23.4%) YoY. Gross margin excluding restructuring charges declined to 21.9% (23.5%). The decline was mainly due to the divestment of 51% of MediaKind and legacy project costs, partly offset by improvements in Red Bee Media.

Gross margin increased QoQ to 21.7% from 13.4% with improvements in Emerging Business. Q4 2019 was negatively impacted by project losses in the legacy media business.

Operating income (loss)

Operating income excluding restructuring charges was SEK -0.5 (0.0) b.

Media Solutions operating income was SEK -0.1 (0.4) b. The operating income includes Ericsson’s 49% share in earnings of the MediaKind business. Q1 2019 income was positively impacted by a capital gain of SEK 0.7 b.

Red Bee Media operating income, excluding a capital gain of SEK 0.1 b. in Q1 2019, improved as a result of higher gross margin.

Operating income in Emerging Business, iconectiv and common costs was SEK -0.4 (-0.5) b.

Cash flow from operating activities

Cash flow from operating activities was SEK 4.3 (5.8) b. A reversal of a provision for impairment of trade receivables of SEK 0.7 b. following customer payment impacted Q1 2019. Reduced trade payables and somewhat higher inventories were offset by lower trade receivables following a seasonally strong Q4. Provisions of SEK 0.7 b. were utilized in the quarter of which SEK 0.2 b. was related to restructuring.

Free cash flow

Free cash flow before M&A was SEK 2.3 (3.5) b. Investments in property, plant and equipment were SEK -1.1 (-1.3) b. and capitalized development expenses were SEK -0.3 (-0.5) b.

Free cash flow after M&A amounted to SEK 2.1 (3.8) b. M&A (acquisitions/divestments net) was SEK -0.2 (0.3) b. Genaker, a provider of Mission Critical Push-to-talk solutions, was acquired in the quarter while M&A was positive in Q1 2019 mainly as a result of the divestment of 51% of MediaKind.

Cash flow from investing and financing activities

Cash flow from investing activities was SEK -5.0 (3.3) b. mainly due to purchase of interest-bearing securities.

Cash flow from financing activities was SEK 1.4 (-2.6) b. due to increased external borrowings.

Financial position

Gross and net cash increased QoQ supported by free cash flow. Liabilities for post-employment benefits increased in the quarter, to SEK 43.0 b. from SEK 35.8 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 16.9 b. lower. As reported in the 2019 Annual Report there is a funding need for the Swedish pension plan in 2020 which will be met in the second quarter by a combination of contributing cash and providing additional business mortgages as guarantee. The funding need is now estimated to be SEK 3-4 b. compared with previous estimate of SEK 1-2 b. due to Covid-19 impact on financial markets.

The financial strategy is to secure financial resilience and to enhance profit and cash generation abilities. The execution on this strategy has secured a strong financial position, with SEK 79.5 (71.7) b. in gross cash and SEK 38.4 (36.1) b. in net cash. The average maturity of long-term borrowings as of March 31, 2020, was 2.4 years, a decrease from 3.1 years 12 months earlier.

The funding strategy relies on a variety of funding sources with bonds in both the US and European market as well as bilateral loans. In addition, the Company has an undrawn committed credit facility of EUR 250 million with the European Investment Bank (EIB). Finally, the Company has a long-term committed multi-currency revolving credit facility of USD 2 billion. The main increase in current borrowings this quarter compared with a year ago is due to non-current borrowings being moved to current borrowing as they mature within 12 months. These are the EIB loan of USD 684 million and the loan of USD 170 million with Swedish Export Credit Corporation (SEK) which both mature in the fourth quarter of 2020 and the EUR 500 million bond maturing in the first quarter of 2021. The capital ambitions remain unchanged from those communicated at the Investor Update 2019; strong free cash flow, positive net cash, and investment grade rating.

Income after financial items was SEK 1.0 (-0.1) b.

At the end of the quarter, gross cash (cash, cash equivalents, short-term investments and interest-bearing securities, non-current) amounted to SEK 65.1 (60.6) b.

There was an increase in intercompany lending of SEK 4.6 b. and no change in intercompany borrowing in the quarter.

In the quarter, a dividend of SEK 5.0 b. was recognized, as anticipated, after decision by the Annual General Meeting on March 31. The first of two equal dividend payouts was made in the second week of April. The second payout will be in October.

In accordance with the conditions of the long-term variable compensation program (LTV) for Ericsson employees, 4,396,831 shares from treasury stock were distributed or sold to employees during the first quarter. The holding of treasury stock at March 31, 2020 was 15,456,416 Class B shares.

Ericsson resolves litigation with Sol IP

Ericsson has after the year-end 2019 resolved the previously communicated litigation with Sol IP, concerning alleged infringement of 20 patents declared to the LTE standard. The patents originated from Electronics and Telecommunications Research Institute (ETRI), a Korean government-funded research institution. The settlement resolves the litigation with Sol IP and involves a patent license agreement between Ericsson, Sol IP and ETRI. The settlement will have a negative impact for 2020 of approximately USD 13 million on operating income within Segment Networks of which USD 10 million was recorded in Q1 2020 and the balance spread equally over the remaining quarters. This quarterly license fee amortization will continue in subsequent periods. The exact terms of the agreement are confidential.

Update on Ericsson’s AGM 2020 addressing the Corona virus

On March 17, 2020, Ericsson announced that it would hold its Annual General Meeting of shareholders 2020 as scheduled on March 31, however, with a limited scope, due to the Corona virus. Euroclear Sweden AB would offer shareholders who are individuals the option to vote via proxy.

Ericsson takes further precautionary measures for its AGM 2020 and the Nomination Committee proposes unchanged Board fees

On March 26, 2020, Ericsson announced further precautionary measures for its AGM in order to limit the scope and duration of its AGM 2020. The scope of the meeting would be further reduced to focus on legal requirements only. Shareholders were encouraged to use the opportunity to vote by proxy and to follow the meeting via webcast.

The Nomination Committee proposed that current Board fees remain unchanged.

Resolutions at the AGM

On March 31, 2020, Ericsson held its AGM in Kista, Stockholm.

The proposed dividend of SEK 1.50 per share was approved by the AGM. The dividend will be paid in two equal installments; SEK 0.75 per share with the record date Thursday, April 2, 2020, and SEK 0.75 per share with the record date Friday, October 2, 2020.

The AGM elected Board members in accordance with the proposal of the Nomination Committee. Ronnie Leten was re-elected as Chair of the Board and Jon Fredrik Baksaas, Jan Carlson, Nora Denzel, Börje Ekholm, Eric A. Elzvik, Kurt Jofs, Ronnie Leten, Kristin S. Rinne, Helena Stjernholm and Jacob Wallenberg were re-elected as Board members. The unions have appointed Torbjörn Nyman, Kjell-Åke Soting and Roger Svensson employee representatives in the Board with Per Holmberg, Anders Ripa and Loredana Roslund as deputies.

The AGM resolved on fees to the Board of Directors, in accordance with the Nomination Committee’s proposal.

The AGM elected Deloitte AB as new auditor for the period up until the end of the AGM 2021.

The AGM resolved to approve the guidelines for remuneration to Group Management, in accordance with the Board of Directors’ proposal.

In accordance with the Board of Directors’ proposals, the AGM resolved on implementation of LTV 2020 for the members of the Executive Team (currently 15 individuals), comprising a maximum of 2.5 million B-shares in Ericsson.

Ericsson Covid-19 actions

Ericsson Global Crisis Management Council and task forces in each country have been activated throughout the course of the quarter. Decisions are taken based on facts and guidance from WHO as well as local government guidelines with the primary aim to keep employees, partners, customers and other stakeholders safe and healthy.

In January restrictions were put in place for travel to and from China; in February global travel restrictions were implemented which remain in place.

On February 7, Ericsson withdrew from Mobile World Congress ahead of the conference being cancelled; in March all attendance and sponsorship of global events was suspended for 3 months; during April this suspension was further extended until end August 2020.

On March 13, all employees were encouraged to work from home wherever possible and appr. 85,000 of the total workforce are working from home using collaboration tools. Remote access capability across the globe has been scaled up and existing mobile ways of working have ensured that remote teams are able to continue to perform their roles effectively.

Ericsson is taking a proactive approach to risk management and scenario planning along with driving actions to support the execution of business continuity plans.

With countries in lockdown network traffic patterns are changing from public places to residential sites as millions of people are working and studying from home. It has been possible to manage increased network demands with only minor disruptions.

Supply: Ericsson´s global supply chain ensures that the company works closely with customers through its European, Asian and American operations. Ericsson’s production site in China was closed until February 9, in line with recommendations from the Chinese authorities. The company’s strategy since long has been to secure a dual mode production. This structure and many other precautionary actions have kept the supply chain operational. Ericsson conducts active business continuity assessments and

takes pre-emptive and mitigative actions to secure the continuity of supply chain operations and to minimize risks for customers. These include securing multi-source components and geographically spread multi-site production plants. The situation is continuously monitored.

Service Delivery: Ericsson is working proactively with its customers to ensure the consistent performance of their networks. With global Service Delivery Units located in seven different countries, Ericsson is able to leverage skill and scale to manage changes in demand by flexibly allocating resources. In doing so the Company has maintained full-service continuity 24x7 for customers and their networks.

Buffer stocks have been proactively increased and stock has been moved to local warehouses, closer to the customers, minimizing impact from logistics disturbances. This ensures delivery of vital equipment to maintain customer networks.

R&D: Where possible, R&D teams are working from home and are deploying routines to minimize the impact on hardware and software development. Ericsson has a multi-site strategy for interoperability testing and can optimize activities based on availability of testing resources at a given location. New routines to perform testing remotely have been implemented.

Network Operation Centers: Business continuity plans with managed services customers are tested in regular cycles. These plans include the ability to shift workload between global and regional Network Operation Centers. This is supported by built-in redundancy and resilience within the IT systems and tools. Network Operations Centre employees have been able to shift to remote working. Ericsson has four Global Service Delivery Centers – India, Romania, China and Mexico. Global skill and scale enable services to be moved to alternative locations.

By continuing to maintain close relationships with the governments and regulatory agencies in countries with critical delivery centers, Ericsson has been able to swiftly obtain the necessary documentation to ensure continuity of services to all customers.

Ericsson remains close to customers, building customized plans to address their specific business needs and to maintain service continuity.

POST-CLOSING EVENTS

U.S. class action lawsuit against Ericsson dismissed by court

In April 2018, Telefonaktiebolaget LM Ericsson, the present President and CEO and the Chief Financial Officer of Ericsson as well as three former executives were named defendants in a putative class action filed in the United States District Court for the Southern District of New York. The complaint alleged violations of United States securities laws, principally in connection with service revenues and recognition of expenses on long-term service projects. Ericsson filed motion to dismiss the complaint. On January 11, 2020 the court granted Ericsson’s motion to dismiss. The decision became final and binding on April 15, 2020.

The acquired antenna and filter business – efficiency program

On Oct 2, 2019 Ericsson acquired the Kathrein antenna and filter business. For the acquired and filter business a focused business strategy is being implemented, expanding the technology platform and investing in the product portfolio. Focus will be on offering a broad portfolio, demonstrating the strength of offering combined antenna and radio solutions. Improving profitability and cost control are key to achieve a competitive offering and an internal efficiency program was launched on April 21. During 2020 a number of activities are planned to take place, including downsizing and re-organizing across all functions and geographies. As a result, Ericsson is anticipating a total head count reduction of around 400 persons until Q1 2021, for the acquired antenna and filter business globally. Discussions with representatives of the respective employee organizations have started. Restructuring charges of SEK 0.5 b. are expected for 2020, with anticipated annual run rate savings of SEK 0.3 b.

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, includ-ing 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 2019. 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:

Pandemics, such as for example the one caused by the novel Coronavirus, Covid-19, could severely impact our local and global operations

Pandemics, such as for example the one caused by the novel Coronavirus, could severely impact our local and global operations related to e.g. Service Delivery, Research & Development, Sales and Supply, as well as our customers and suppliers, with significant financial and other consequences. As an example, the Coronavirus pandemic has caused challenges and risks relating to travel and lockdowns limiting access to sites, transportation and logistics and impacting the flow of goods. Although we work to put in place business continuity measures to be able to continue to support our customers’ needs and mitigate any impact to our business, disruptions to the global economy and to the operations and business of our customers, suppliers, and partners could cause disturbances in our operations and may have a material adverse effects on our business and financial position.

Stockholm, April 22, 2020

Telefonaktiebolaget LM Ericsson

Börje Ekholm, President and CEO

Org. no. 556016-0680

This report has not been reviewed by Telefonaktiebolaget LM

Ericsson’s auditors.

Date for next report: July 17, 2020

Press briefing and live webcast

Ericsson invites media, investors and analysts to a conference call on April 22, 2020 starting at 9:00 am CET.

Live audio webcast of the conference call as well as supporting slides will be available at:

www.ericsson.com/investors and

www.ericsson.com/press

Replay of the conference call will be available approximately one hour after the 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: investor.relations@ericsson.com or

media.relations@ericsson.com

Stella Medlicott, Senior Vice President, Chief Marketing and Communications Officer Phone: +46 10 713 65 39

E-mail: investor.relations@ericsson.com or

media.relations@ericsson.com

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: peter.nyquist@ericsson.com

Lena Häggblom, Director,

Investor Relations

Phone: +46 10 713 27 78, +46 72 593 27 78

E-mail: lena.haggblom@ericsson.com

Stefan Jelvin, Director,

Investor Relations

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

E-mail: stefan.jelvin@ericsson.com

Rikard Tunedal, Director,

Investor Relations

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

E-mail: rikard.tunedal@ericsson.com

Media

Peter Olofsson, Head of Corporate Communication

Phone: +46 10 719 18 80

E-mail: media.relations@ericsson.com

Corporate Communications

Phone: +46 10 719 69 92

E-mail: media.relations@ericsson.com

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:

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 2019.

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.