Good morning everyone and welcome to today's presentation covering the Third Quarter in 2022. With me here today I have Ericsson's CEO, Börje Ekholm and our CFO, Carl Mellander. As usual we will end the presentation with a Q&A session and in order to ask questions you will need to join the conference by phone. Detail can be found in today's press release as well as on the website, ericsson.com/investors. Please also be advised that today's conference is being recorded. But before handing over to Börje Ekholm, I would like to say the following. During today's presentation, we will be making forward-looking statements. These statements are based on our current expectation and certain planning assumptions which are subject to risks and uncertainties. The actual results may differ materially due to factors mentioned in today's press release and discussed in this conference call. We encourage you to read about these risks and uncertainties in our earnings release this morning as well as in our annual report. With that said, I would like to hand over the word to Börje. Please, Börje? Börje Ekholm: Thank you, Peter. Good morning everyone and thank you all for joining us. I'm pleased to present another quarter with solid underlying performance, and we continue to see robust performance in our business as well as market momentum. Since 2017, we've been able to increase our RAN market share from about to 33%, up to 39% if we exclude Mainland China. We've taken market share from all competitors, including our European, and we have continued to add to our global footprint during the past quarter. So we're really talking about here of some massive gains in overall footprint for Ericsson. These achievements are really based on our focus on technology leadership, and I would say technology leadership allows…

Thank you, Börje. Thank you and good morning to everyone. So yes, this is the first quarter then that we report in the new structure with the four segments, networks, cloud, software and services, enterprise and other and also the first quarter where we consolidate in Vonage. The acquisition closed on the 21st of July. So we basically have two months and 10 days or so in our numbers this quarter. But before I start to dive into the numbers, I wanted just to say that I will refer to some gross numbers here, and they will all be adjusted for currency and comparable units. I call that organic for short. And when I talk about profitability numbers, those will be excluding restructuring. I just say it now so I don't have to repeat that 16 times through the speech here. But let's start then with the numbers. Net sales came out to SEK 68 billion. Organic growth in three out of five of the market areas and the organic growth then was 3% for the growth -- for the group and that's despite and SEK 1.1 billion less IPR licensing revenues compared to Q3 last year. But reported sales then grew 21%, of course helped by large currency tailwind, and also the fact that we added Vonage which contributed now with SEK 2.9 billion in sales this quarter. So IPR came out at SEK 1.6 billion. This is in line with the guidance that we had provided in the Q2 report where we said between 1 and 1.5, and we do provide the same guidance for IPR now for the fourth quarter as well, between SEK 1 billion and SEK 1.5 billion. Gross income grew by some SEK 3.4 billion in spite of the lower IPR revenues that I…

Thank you, Börje. And so we have now 30 minutes for a question-and-answer session. [Operator Instructions] And I see here that we have our first question from Aleksander Peterc at Societe Generale. Hello, Aleksander.

Yes, good morning. And I hope you can hear me well.

Perfect.

So yes, thank you for the question. So the first question I would have really is on the development in Networks margin. So we see that the footprint acquisition costs are back, so this may be good for your longer-term growth, but near-term that some pressure. So could you just give us an idea of the growth margin decline in Networks sequentially in the third quarter? Is that more down to this footprint acquisition push or is it still higher inflationary cost pressures than those that you saw in your previous quarter? And then obviously in Q4, you have the usual down seasonality in your gross margins in Networks, but from what I understand, this should be now compounded a little bit by these two effects. Could you a little bit develop on that? And then just secondly, very briefly, if you could give us an idea of where the restructuring costs will be directly is at COGS, R&D or SG&A, I mean which division? Thanks. Börje Ekholm: Carl, do you want to start?

Okay. So thanks Aleksander. Regarding the networks gross margin then and you ask as specifically about sequentially. I understand that, but I just wanted to repeat here. The year-over-year comparison is then impacted by the IPR difference. So quite a large amount on total group is SEK 1.1 billion and 82% of that is in Networks. But otherwise, I would say there are a couple of factors impacting networks here. One is the, what we have talked about around the component and supply chain cost where we are investing, but it's also a higher cost, which we absorb in there. And the other part actually comes from something very positive and that's the growth that we see and early stage large scale contracts that we're executing on where the services share is higher and that has an impact on gross margin. And we have seen before that we might have that initially impact, but then of course we recover over time as we roll out. So I would say those are the key impacts there on Networks. Börje Ekholm: I would only add that the, for the, you already saw these effects in the third quarter.

Yes, we should say. Börje Ekholm: The increased service share is visible in the result.

Yes. Börje Ekholm: Then you asked about the restructuring and I like to think that what we are going to do is to digitalize and actually simplify Ericsson that's really our focus. So it's more of a gradual improvement and we're going to work on taking costs out. I would say it touches both COGS, but also of course the G&A structure in the company and exactly how the split is. Let's discuss that at the Capital Markets Day. But we are going to tackle both of these sides because I think ultimately a leaner company will be a more agile company and will be better at responding. So I would also say, we kind of recognized this earlier and that's why we launched the group function global operations, and you know that from the spring this year. And that the ambition with that function was actually to drive a, call it a better customer experience by simplifying our processes and digitalizing them. And that's something that we will now more or less accelerate in light of the macro uncertainties.

Maybe -- I can add on the cost side as well, if I can add one more thing. It's not only a defensive move because of inflation, it's also about competitiveness, of course. And we constantly work on improving our structural cost base to be really competitive, not only on technology, but also on the cost side, of course in the market.

Thank you, Aleksander for those two questions. So thank you. And now we are ready to move to the next question from the audience. And that one will come from Andreas Joelsson at Danske Bank. Good morning, Andreas.

Good morning, Peter and good morning everyone else. I know that you will come back to this at the CMD, but I need to still ask about Cloud Software and Services. We have seen these deployment costs for a while now, and can you just explain a little bit why there is a delay in the positive impact that we should expect? Has anything changed structurally in this that you see, and also if we now have a weaker macro situation and the pickup of 5G is further delayed, how will that impact the unit going forward? And if I may also on IPR it's SEK 1.1 billion lower is that, there is FX in that of course, but it's the majority of that related to Apple and the litigation process that you're into right now? Thanks. Börje Ekholm: Should I take the first part, the IPR part?

Yes. Börje Ekholm: The reality is we have higher cost for new product introductions. So it has a bigger service content short-term, and that's what you see impacting, call it the margins in Cloud Software and Services. So and we knew that from before, and you've seen that before, that continues to be at a high level. We are still only seeing the early stages of deployment of the 5G Core. So revenue wise, they lag these costs, so they are impacting that's no doubt about that. I think it's also fair to say that we don't really yet see a slowdown in the rollout of 5G, and I really don't expect to see that either, for the simple reason that traffic at the end consumer continues to grow at a healthy rate, so there will be a need to migrate customers over to 5G. So we will see 5G networks increasingly carry traffic in the future. That's at least what we see as of now. Then I would say in order to restore profitability or reach profitability, which is really the, that's the first step, I think we have a much higher potential in this business than that where we can capitalize on our leading position in a good way. But in order to reach that, the first phase here, we need a tighter control on costs. And that's why we put together two earlier business areas into one. So we get a stronger focus on having cost control, but also gets in, this on product development because we had overlapping product portfolios between the two. As you can recognize, this takes some time to take out, but that is what the team is working on to really call it become much leaner and much better cost structure in the combined entity, leveraging the synergies across the different offerings. So that's where we are working. That will of course, take some time to get the full benefit, but we should start to see that coming into next year and be in a much better position. So then we'll get helped by the ramp up of 5G, but also that we're addressing our own call it cost position.

Good. And the last question was around IPR and the delta there. And yes, I can say it's, the biggest thing here is of course, contracts under renewal negotiations. So and as you know, just as a reminder, when such contracts are entered into, we also have the retroactive effect of that in our P&L from the date of expiry. Just so you know that.

Thanks.

François:

François-Xavier Bouvignies: Good morning everyone. Can you hear me okay?

Perfect. François-Xavier Bouvignies: Great, thank you. My two questions were first on the Vonage acquisition. Can you give us a bit some light on the underlying performance of Vonage because you just acquired, so just wanted to reconcile the numbers in the early days of the integration, and how should we think about the enterprise profitability trend going forward after a number of one of maybe this quarter, just trying to understand the profitability trend, that we should take into account in the next few quarters? And my second question is, Börje, you talk about 5G use cases being a driver of the growth and adoption specifically in India for example, for next year you already see some contracts. And we asked you many times, I guess in the past the use cases for 5G that you see that could be a game changer for the adoption. Can you list maybe, some use cases that you see particularly interesting, and how is it evolving there? Because when we talk to two operators, it doesn't seem that obvious, or in terms of use cases, especially like for example, in China when they struggle to see much application or use cases just to have something, to have your perspective here and how is it evolving? Thank you very much. Börje Ekholm: Yes. Why don't you start with the other, I can go first with the 5G use cases and you take the other two.

Sure. Yes. Börje Ekholm: Yes, this is an interesting question. The reality is when 4G was introduced, everybody would say, if you ask operators that you don't really need 4G because you had 3G. That proved to be incorrect. And the reality is with 5G, we're starting to see a number of emerging use cases. Maybe the first one is that's actually already today commercial is fixed wireless access. And we see that gaining traction quite fast, for example in North America. But we also see what other operators around the world are doing, like in India. So we see that as a completely untapped revenue pool today will be captured by building out, of course, the 5G network, both in mid-band, but also in millimeter wave in order to capture that. We think that has a massive potential. So that's one thing. But then I think the other, where we're starting to see emerging use cases, for example is the connectivity, simple connectivity to an enterprise where in the 4G world, it was typically fixed access. Today, we are starting to see some SMEs, the fact they are using wireless as the primary connectivity. And that's what we're seeing is benefiting the growth in Cradlepoint for example. And just to give you another case is of course within factories so private networks or dedicated networks, there we see a rather large amount of use cases. For example for self-driving vehicles, self-guided vehicles, factory automation, et cetera used in mines, enterprises and you're already starting to see that market shaping up quite substantially. Part of that market will be captured directly from the enterprises of course, and that's why we're building up an enterprise presence. Part of that will be captured by the operators. And I would say we don't…

I think Börje you basically addressed the other question very well as well on the enterprise side, but maybe a few more words there on enterprise. Of course for Vonage it is early days. Honestly, we have two months and 10 days. And as we said, and I think this is quite important during this period, Vonage underlying, if we include, exclude some of this acquisition accounting and one-offs and so on, they are EBITA positive and also cash flow positive in the quarter. So that's a very good sign. I think very important and Börje described this is about growth here in the Enterprise side. We see great growth in Cradlepoint, and we expect that in Vonage as well. And on Vonage of course, that we're looking at this through three horizons or three lenses, right? The existing Vonage business to boost that and continue growing that; and secondly the synergies from Vonage offerings into Ericsson's global footprint of customers; and then thirdly, of course, what Börje really talked about the network API side of the business where we can create an entirely new market. And of course, all together we see this as very value accretive for the group. At the CMD, I think we will come back for sure to the Enterprise side and describe layout a bit more the strategy and the expectations there.

Thanks Francois. François-Xavier Bouvignies: Thank you, gentlemen.

Thank you, Francois. Hope you're happy with those answers. So we'll move to the next question for today, and we will have that one coming up from I see up here, Pierre Ferragu at New Street. Good morning, Pierre. Can you hear us?

Good morning. This is Ben Harwood standing in for Pierre. He is in a new environment and can't speak?

That's okay as well.

We just had a couple of questions on your Enterprise business. So we just want to know how you view the competitive landscape in the wireless enterprise networks, and then what are your competitive advantages and how do you see yourself competing with companies that are partnering with either hyperscalers or enterprise companies that already have a fairly broad sales reach? Thank you.

Börje? Börje Ekholm: That's a great question. I think this is something that we'll spend a lot more time on in the Capital Markets Day. But to give you a quick couple of comments, yes you're absolutely right. This is a competitive space. We feel though that we're the market leader in the wireless Vonage today through Cradlepoint, so that we're well positioned here already. And we have a very strong and growing presence in dedicated networks built upon some clear product advantages. So we believe, we are going to continue to develop this strongly. Of course this space is going to be having a lot of competition coming in also from hyperscalers. And we see that our solutions will be really run on hyperscalers as well. So I think why should not only think of them as competitors, they're going to be partners for us as well in order to reach the market.

Thanks, Börje.

That's great. Thank you, Börje.

Thank you for that question. So we have still 10 minutes to go, so I'll move to the next question in the call. And that one is from Janardan Menon at Jefferies. Good morning, Janardan.

Hi, good morning, Peter. Thanks for taking the question. Just wanted to go a little bit more into the outlook for gross margin into 2023 and into Q4 arising from the sort of shifting landscape of regions for the Networks division. So you are saying that U.S. or North America will be down next year. Can you give us an idea of how much it will be down? At this point I know that visibility for the full year may be low, but what is your initial feel since you've already said that it will be down? And just from a product mix point of view, I mean, sort of regional mix point of view, what can we assume is a sort of impact on gross margin and is it something that will be sort of a bigger hit in Q4 and maybe first one or two quarters of next year, and then as you go through the initial phase of deployment in places like India the margin will rise into the second half of next year? So what I'm saying is, should the gross margin profile be one of a steady increase from a lower point say in the early part of next year all the way into Q4? Is that how we should look at it? And then I have a brief follow up if I may thanks.

Okay. Yes, exactly. So what we talk about in the report is that U.S. will hold up with things so North America that is but with on a lower level, exactly how, what the amounts we we're not providing data alone. But we think it's very key to realize that we also win business in other parts of the globe, across the globe, and that that will compensate how the gross margin will develop. We comment that by talking about some of these footprint wins where it tends to have a dilutive impact in the beginning, but that over time, then that comes back. So of course, it on your question, how it would develop during next year is a function of when these projects are ramping up and volumes in big roll up projects and so on and come in. But again, we focus a lot on this of course and even more so on the gross margin or the gross income sorry, delivery here, because in absolute money, that is what drives our ability to invest in technology. So I think that's what we can say now. Börje Ekholm: Yes and remember the, you're asking a question on a quarterly basis. Our contracts are rather long and it has a long rollout cycle. So how it exactly hits each quarter will always be a bit subject to kind of what happens. So we are trying more to give the overall sense where these type of developments will be next year. So I would encourage you more to think about what is it we're trying to do. Yes, it's actually to strengthen our market position and based on that we will manage gross margins following a bit this guidance that Carl went through. But it's all way, and I understand your desire to have this on a quarterly basis, but it's a bit in these large contracts. That's why they are a bit swings between quarters are not inconsequential, let's call it that.

It's very true. And I think on the big picture also, I think it's good to remember the 15% to 20% EBITA that captures all of this actually and as you know, we said in fourth quarter 2021 that we will reach that point, that range within two to three years. Now we specify that we're talking 2024, that's our ambition. That's what we're going for as a company. And of course we will manage quarterly swings and so on to get to that longer term position.

Thank you, Carl.

Understood.

You had to just follow up as well, Janardan?

Yes, just very quickly. So on that 2024 target, so what would be the key factor in that jump? I mean, can we have, is there an increasing amount of confidence that the previous sort of Digital Services business so the current Cloud and Software business will reach that critical mass and be a bigger jump into 2024 or is it more coming from the Enterprise business where those profit margins including on Cradlepoint and Vonage will become bigger? I agree that you'll probably give us more color on that at your Capital Markets Day, but just as an initial view what would be the moving parts on that would be very useful? Börje Ekholm: Clearly we think we sit with a very good business in Cloud Software and Services, and that clearly will be a big part of the contribution to reaching these long-term targets, that's for sure and especially swinging from a loss into profitability. So that's one part, but of course, the rest is what we see is really on the Enterprise side where we're going to continue to grow and strengthen our position. So it's all about the mix of those two contributing, but we'll go into this in greater detail when we meet in December.

Understood, thank you very much.

Thanks, Janardan. We will now actually move into the last question for today's session. And we will have the last question coming up from Sandeep Deshpande at JP Morgan. Good morning, Sandeep.

Yes hi, good morning. Sorry, I might have missed a question. So if this was asked Pete excuse me. My question is on the Cloud Software and Services. I mean, this business in its previous incarnations always was underperforming as well. As part of this restructuring what will be done in this business to make it better performing? And what has changed in the business this year that the guidance is now given to be flat with last year in EBIT something has deteriorated here. So we'd like to understand that. Thank you.

You know Sandeep, if we start with the business promise or if we look at it from a, you're absolutely right. We have underperformed in this area for a long time, but we have also seen a relatively strong improvement compared to 2017 when losses were running much bigger than today. So it's always a journey. So of course, we go to this level and we're not happy at this level. We need to fix this. It should be a profitable business. With our market position and the technology we offer, this has all the potential to be profitable. So if you look at improvements over the past couple of years, a lot of it comes from basically turning around parts of the business, like our BSS offering, for example. But where we now have or have challenges I would say is of course on our 5G Core, and that has taken a bit longer to get to market than we expected a year ago. And it has carried a lot more system integration costs and early, call it service costs than we anticipated a year ago. But we have also a lot of geopolitical developments that you are well familiar with and that also impacts the business volume in Cloud Software and Services, very detrimentally so and that has also hurt the business this year. So it's a multitude of factors. So what we said here is that given that backdrop, that's why we also felt we need to get more synergies out in the investments we make for the future. And that's why we combined Managed Services and Digital Services, so we can start to create those type of offerings that leverages the synergies between the two. Of course, there is a G&A synergy by removing one business area, but there are other synergies on the R&D side as we invest in AI and machine learning and actually the distribution of those software to our customers, that's where we get the big benefit. That will take some time to get out, but that's where the team is really focused on getting the benefits out.

Thanks Sandeep and thanks Börje and thanks Carl for good answers in this session. But before concluding, I just want to repeat what Börje said, that we will have the Capital Market Day in New York, December 15 and there will be possibilities to register upcoming week here for all of you that want to participate. So by that, thank you all for participating in today’s call. Börje: Thank you.

Thank you.

Thank you.