Hello, everyone, and welcome today's Ericsson's Third Quarter 2023 Results. With me today I have here Nyquist; our CFO, Carl Mellander; and direct from New York, I have our CEO, Borje Ekholm. Last week, Thursday, we preannounced our Q3 numbers as we announced impairment of goodwill attributed to our acquisition of Vonage. Today however, we will not only give you more details around the Q3 report and expectations going forward, we will actually also spend some time talking about our GMP strategy. So we'll start with Borje summarizing Q3and then we'll talk more about the GMP strategy and then call will return back and give more details around the Q3 result and expectations going forward. As usual, we will end the presentation with a Q&A session. And in order to ask those questions, you need to join the conference by telephone. Details can be found at today's press release or at our website, ericsson.com/investors. Please be advised that today's conference is being recorded. But before handing over to Borje and Carl, 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 expectations and certain planning assumptions, which are subject to risk and uncertainties. The actual results may differ material due to factors mentioned in today's press release and discussed in this conference call. We encourage you all to read about these risk and uncertainties in the earnings report as well as in the annual report. With that said, I would like to hand over the word to Borje. So please, Borje.

Thanks Peter. First of all, welcome to our report presentation for the third quarter and thanks everyone for joining us. As Peter mentioned, we will spend some more time now on GMP and this presentation. But the first, let me hit on some key takeaways. So Q3 was in line with our previously indicated expectations, with a bit soft, the top-line in North America than we expected, but we bet the margins in the rest of the business. Despite the uncertain macroeconomic backdrop, we continue to execute against our three key priorities, strengthen our leadership in mobile networks built upon technology leadership, grow our enterprise business and drive a continued cultural transformation. We're encouraged by the progress we're making and it's truly a testament to the strength of our team, our strategy, and the excellence of our products and our ability to execute. I would like to use this presentation to describe why we are excited about what we're creating with GMP and the value we believe it'll deliver to our shareholders. Carl will take you through the more financials in detail and outlook in greater detail. So in common with the rest of the industry, rising interest rates and changing demand trends have been headwinds to Vonage current core business and the impairment we took last week is simply a consequence of this. And Vonage in itself remains key to our expansion into enterprise and to the transformation of our business. We believe this is a massive opportunity that can redefine our industry by providing a new source of revenues to the whole industry. But first, let me touch on the market environment. Over the last two decades, we've seen that investments in the mobile infrastructure have had built-in cycles and in aggregate it's been overall flattish. We believe…

Thank you, Borje, and very good morning to everyone. Thanks for joining us here. So, well, as you saw already last week, our Q3 results are in line with the guidance we issued, back in the Q2 report. But I want to address some of the key items around the financials in the quarter. Before commenting on the underlying result, I just want to refer again to the impairment related to Vonage goodwill that we announced also last week. And just to add to what Borje already mentioned, this impairment of SEK31.9 billion corresponds to 50% of the total amount of goodwill and other intangible assets attributed to Vonage, and the total goodwill in the group now post this impairment amounts to SEK56.7 billion, and I can also mention that we have done rigorous impairment testing of all of that and that did not indicate any other impairment needs other than Vonage. Now turning to the underlying business results, and first of all, if we have a look at the market and our top line then, I would say much of the market development, the financial development we saw the first and the second quarter continued into the third quarter. And as Borje outlined before, the telecom market outlook remains uncertain but is expected to recover to more normalized levels over time. And we base this on the fundamentals I mean the operators need to continue to invest to manage data traffic growth, cost energy usage, network quality for their customer experience. But what we see now, the sales mix shift in the networks particularly that we have discussed many times where sales decrease in North America and increase in India with large rollout projects that continued in a similar manner in the third quarter. And I would say we…

Thank you, Carl. So, while near term dynamics are uncertain, our long-term confidence remain undiminished. In the current environment, we focus on what's within our control and executing on our strategy to extend our leadership in mobile networks, grow our enterprise business and drive a lasting cultural transformation. As we look ahead, we see that mobile networks investments intensity is on the lower end as our customers are cautious with investments. And this gives us good confidence, the recovery will come. Until then, we will continue to take actions that position Ericsson in the best way to create value, which with the market recovery of course will create good operating leverage. I'm very confident in our team and the work they do every day. So our goal is to make Ericson a more profitable company, returning to our cash flow target and capturing the next major wave of network innovation with a substantial platform business. With that, I think it's time for some Q&A Peter.

That's correct, Borje. So, we will now then start the Q&A session. [Operator Instructions] So let's look at the queue here. I think I have the first question from Aleksander Peterc at Societe Generale.

The first one will be just in broad terms. I know we don't guide on '24, now that we no longer have this 15% EBITDA margin targets, but could you give us a sense of whether you think network's gross margins will towards plateau around 40% that you hold in the third quarter and also into the fourth quarter despite the adverse developments of the U.S. market? So, would you be able to hold this into next year or maybe improve it given the cost actions you're taking? And then just a very quick follow-up on India is that now leveling off at high levels and may roll off into the decline next year or do you see further expansion there?

Well, yes, I start. Yes, I think, what we say here in the report is really that the tides will turn. The market mix is going to recover at some point. The timing is unclear. But if you look at the lower forecast, for example, North America would grow by 15% next year. And India -- to we weave in, now your last question, India will taper off, that's quite clear from this record year in 2022. So, I think that could support our gross margin development networks. Combined with the other thing that you also mentioned yourself, the cost out, which we have seen a part of the effect so far in the P&L. But of course, as we reach the end of the year, we will have completed all of that 12 billion cost reduction and that will play out also in cost of sales. So those are some of the factors that will support going forward.

And the next question will come from the line of, let's see here. I think it’s Joachim Gunell at DnB.

Two questions from my side starting off a bit where Andrew asked. Based on the positive the customer discussions here, but of course, low visibility. Can you just comment on, to what extent do you have the conservatism into your view of a quarter of 2023 market recovery other than, walking away from the margin targets?

Borje, did you want to start this one?

I can start. I would say, I think what we like to do is basically to say that there will be a recovery in the market. It is going to happen. Timing is unknown. And given that, we think, it is just prudent to plan for the current market conditions to prevail. So that allows us to take the right actions on the cost side, the way we run the Company basically for operational efficiency. And when we set ourselves up that way, so when the market recovery comes, we get the operating leverage. So, we are kind of planning more cautiously in that sense. But rather saying, when the recovery comes, let's talk about it at that point in time.

Perfect, and then one question for, Carl. What in particular does the additional SEK1 billion in cost saving pertaining to? And can you also comment a bit on the timing of identifying this at this stage?

Sure, Joachim, I would say this is also a learning from the last time around, when we had a big cost out effort that once you start this machinery, you find more efficiencies, more possibilities to take out structural costs. That has happened also here, because every manager in the Company is working on this since several quarters. We now see when we sum up the plans that exist that actually we will beat the well, first at 9 billion that we had initially communicated, and then up to 11 billion. Now we see that we can beat that as well and deliver 12 billion of saving. So it is not about singling out a specific area. It is many contributing factors for us and it has been a great momentum actually. As I said, we are slightly ahead of our internal planning as well. And 10.5 billion so far executed on out of the 12 billion. So we clearly see that, the path to 12 billion as well, and we will see the impact in the P&L more, as we continue.

So, we will move further to the next question and have the next question from the line of Francois Bouvignies at UBS.

So I have two quick questions. The first one is more high level, but if we look at the current environment, especially in North America, quite extraordinary correction. We just hit back to 2018 level and seen a significant growth decline. And given the level of macro uncertainty around the recovery, how do you see the pricing evolving going forward? I mean, do you see any pressure from the operators, given the challenge they are facing so it would be very interesting to know the pricing dynamic here, and if you see any pressure? And maybe from a very high level, if we look at the past 10 years and you say in past two decades, you said that, the mobile network market has been flattish. And your top-line is reflecting this dynamic and yet level of investment remains very high when you look at your R&D, SG&A, I mean R&D is 18% of your sales, SG&A double-digit percentage as well, and the network at least. So I'm just wondering, is there any thought process that maybe you can make it structurally much more efficient this investment related to the return you get and you see that you have a couple of cost saving programs and it's not new. We have been doing that for a few years now, but can you go a bit deeper, maybe internally in terms of discussion on the level of investment compared to what you return in terms of revenues, in other words managing the business more for margins or cash flow, if you like, rather than for top-line growth. Is that makes sense?

Should we start Borje?

It's a highly relevant question you're asking. This is one of the areas we are looking at. We do believe and not focusing on the North American market here, but we actually face competitors in all other markets or most other markets that actually where we will be evaluated based on technology leadership, on what type of solutions we provide. And therefore, we need to provide leading edge solutions so that drives a bit of the R&D intensity in the industry, which then is very high. Having said that, there are areas where we can leverage much more or improve R&D efficiency in many ways. And one of the things we are working on is actually to get the more efficient R&D. We've been take for example this year sales where we have gone from almost a hardware centric model into a software model, and we see now that we can improve the software development efficiency and we are working on that. And the same thing on the news side, so I do think there are opportunities, but I would also say that given that we compete for global scale with vendors that are investing very heavily, we need to match that. So it's really a bit of a tricky question. If you would only have a market where technology would not matter, you could actually slow down a bit of the investments, but that would make us uncompetitive in most parts of the world. So I do think we should expect R&D intensity to be high, but we need to be more efficient in the way we develop our solutions. And that is, you actually see part of the cost savings now come out of a bit of a reduction in R&D as well, and you will see that continue.

Borje, you want to take the first question about pricing discussions with customers as well, if you?

Yes, it's actually a global industry. So when we think about prices, it's set in competition with the other vendors and that's kind of where the market environment is. So, that's why, I would say it used to be very competitive, it continues to be very competitive.

We will then move to the next question and we have the next question coming from Daniel Djurberg at Handelsbanken.

My question would be a little bit on the giving CapEx constraints. I obviously understand its tricky forecast CSPs around spending in 2024, but if we see an improvement or in the visibility, I should say, for example, mobile or congress or whatever, is it your ambition to return to guidance with regards to the '24 adjusted EBITDA range? Or is it, should we forget about that also in a later stage?

Daniel, I think it's fair to say that let's take that discussion when we see the change in market sentiment. Right now, I feel we need to be prudent and plan for the current conditions to prevail because then we take the right operating decisions, so when that change, let's see where we are.

And I know you don't want to speak on specific customers, but recently the Mobile World Congress Las Vegas that we heard from Verizon Executive Vice Presidents talking about that they have deployed 7,000 mobile sites with the vRAN mainly with Samsung in last five months, but that they have started to deploy Ericson year-end right now. My question is, have you seen this kind of changes that sounds that it project goes to someone else, and then it's your turn back and forth and there should we expect to see an improvement coming from the U.S. given this statement from Verizon for example?

We would never comment on specific customers, but our investments for example into Cloud RAN has continued and you'll see us launch or signed MOUs here together with Telefonica for example to actually deploy Cloud RAN and Open RAN on an industrial scale. We believe networks in the future are going to be much more open and we're always better off leading that. And that's what we invest for. We see that to work with leading customers including the U.S. operators as well. I don't want to go into specific customers because I think they ought to comment on that, themselves.

Yes, I understand. And just super quick to call, the extra 1 billion cost savings. Is that the cost for that included in the 6 billion, 7 billion that can charges or will it come in 2024?

It's included. So we maintain the 7 billion restructuring charges as the full year number. So, we have done five so far, a bit more than coming in the fourth quarter. And with that, we will deliver the 12 billion run rate survey.

I have the next question coming from Erik Lindholm-Röjestål from SEB. Erik Lindholm-Röjestål: So parting on the guidance for networks seasonality here in Q4, you mentioned that you see India flat sequentially. But can you talk a bit what, this means for North America and what you assume there? And is there any other market sort of standing out into Q4? And I'll follow up with another question. Thank you.

I would say, overall, we see that the average seasonality is representative on markets excluding India, where we have a flat development. And of course, given the size now, the magnitude of India, the proportion of India on total sales, it matters for the full seasonality calculation or development, you could say. So all other markets, I would say, no specific guidance other than normal India flat. Erik Lindholm-Röjestål: And just to follow-up on that. I guess, key topic has been, the inventory levels in the U.S. market, I mean, what are you seeing now in terms of inventory levels at the top telcos in the U.S. market? And do you see that inventory adjustments being done now in Q4, is this still the case?

Yes. So, we saw continuation in the third quarter, but it is starting to flatten out and even more so in fourth. It is basically done. On the part of inventory that mattresses that has the larger value, we are really flattening out, Harry, in the fourth quarter. So that's of course a helpful fact for us as well.

And we will have the next question from Andreas Joelsson at Danske Bank.

Just a question on a reference that you made Borje in the beginning that you need a catalyst to see investments coming through from the operators over time. Just curious to understand, if you are a little bit surprised by the 5G business models from the operators so far because it hasn't really kicked off in terms of ARPU growth, et cetera. And what do you see that they are missing from a 5G business model so far?

That's a great question. What we see so far with the 5G networks launched, it is kind of a little bit better mobile broadband. But to really get kind of deliver on the promise of 5G, we need to tap into new revenue pools. And that's where enterprises come in and enterprise digitalization. So, we need to basically -- and there is an opportunity, I would say to leverage wireless for enterprise digitization, just because of the way know, think about the flexibility of a wireless network, think about the global availability of the network, and actually that it has a very high level of security as well. So when you start to put that, we can actually digitalize so many more enterprise processes using 5G. That is an area that naturally lens itself or we should enter enterprises with 5G. We see that, of course, on enterprise networks or dedicated networks, for example. We see that to be a very early market, but that's happening. We are using wireless networks to digitalize enterprises. And we see that some large automotive OEMs, for example, are deploying them now on their sites to drive new type of automation, but we also see this as the major. This is the kind of starting point for our global network platform. So, if we can create the network into a horizontal platform, that can make the features of the network easy-to-expose, consume, and pay for. We have actually created something for developer to drive and we start to see this, we're launching some new network APIs with great interest from the developer community. And of course, this is a market where we don't want to talk about it until we have launched basically for competitive reasons. But we think it's actually a major opportunity to create this new type of revenue pool that the industry-need to drive more investments into the network. Otherwise, the network investments will just continue to be flat. If the service revenues for the operators are largely flat or very low growth, there is not going to be growth for network investments either. So, we need to create this new type of monetization pool in order to drive investments.

We have the next question from the line of Janardan Menon at Jefferies.

I just want to follow up on the GMP business and Vonage. Can you give us some kind of an indication of timing, when you'll have developed the required number of 5G network APIs? Clearly, you have been on that process since the acquisition. Is that something that we can say by the end of 2024, you will have the required number and by then you would've signed up enough agreements like the Deutsche Telecom agreement with operators worldwide and with developers. And so at least we can start seeing that revenue inflecting more sharply upwards. Is there some kind of a timing that you can give on when you expect that process to happen? And secondly just on the India side, you're saying that the revenues are beginning to flatten out. You had said that the network rollout initial portion has lower margins, because of, and of course, higher cash intensity. Are we reaching the second phase of India from Q1 next year? And will that result in average India margins being higher in 2024 compared to 2023?

If I take the GMP and you take the India question Carl. So if you look at GMP, we actually started already in 2019, we customer trials of speed on demand. So that was really the trigger point when we could see the customer interest and we're thinking about application developers here, both in the gaming side as well as in collaborative softwares. So, there was a great interest, we saw that. Of course to launch quality of service APIs, you need some network investments, we need a network exposure layer, et cetera. So it takes some time to get there. There are some other simpler network APIs that still rely on the network, but they can be presented over CPaaS. Those will be the first ones will come back to tell you, what we're launching. But we expect to see some early revenues this year, small in scale. We're talking tens of millions of kroner this year. But they will start to grow into next year. Really to be meaningful, I think the fair thing is to expect that during 2025, in reality, because it will really need to get not only several operators involved. We need to get the industry and the developers to start using the APIs as well for this to scale. And it's hard for them or actually impossible for them to use it before we've gotten the operator community signed on to a similar type of solution. We're not going to be alone with our GMP, there are going to be other platforms as well, but we are at least the front runner. So we should be able to run as long as we can run fast, we are going to be rather attractive to sign up with, but we'll face competition here as well. But I'm convinced we can outgrow where we are today, but don't expect this to be really meaningful until a '25 timeframe.

Thank you, Janardan. Thanks for the India question. I'll take that. So, I mean, I won't comment on specific margin profiles in for different customers or for obvious reasons, but of course it's our job to deliver customer value and make sure that we make decent margins out of that. And I think that that has been the case already. Now, the big rollout projects or the pace of rollout, I should say, will be coming down. Maybe more interesting fact is on the cash flow side because we tie up significant working capital because of the nature of this business with rollout, but that tide will turn as volumes come down. We will start to collect more and get a positive cash flow impact from that, so that we should see in 2024. Margin is an everyday job for us, of course, to make sure that we have the right margins and that we will continue with.

So, we'll move further in the queue here and we have the next question coming from the line of Sandeep Deshpande at JPMorgan.

My question is on the margin going into '24. I mean clearly, you seem to be seeing some positive impact from the restructuring in CSS and possibly in the networks business itself. If you say India is potentially flattish into Q4 and then potentially rolling off in 2024. U.S. should increase as the percentage of business as well as your restructuring should kick in. So theoretically, we should be assuming that your networks margin and your CSS margin should be improving in '24. Is this the correct contention? And my second question is, are there any signs of any revival in demand in Europe? Europe has had very little 5G rollout. I mean they have invested very little this year as well compared to where India has invested, which is a much, historically a much further behind market compared to Europe. So what are you hearing from your European customers at this point and regard to '24?

Borje, do you want to take the Europe and I take the first one afterwards.

Yes, I'll tell you can tell you the start part.

I go, okay. Hi Sandeep. Now, the factors that you point to, they are relevant and as you see in the report, we are not guiding for specific margins beyond Q4 where we say 39 to 41 in the networks segment, on gross margin. But the factors that you point, of course, are the positive ones that could support gross margin. We have the cost out that will be fully executed by year-end, on the current 12 billion that we have communicated. We are talking also about the market mix recovery, which is needed for us to improve margins going forward. And to the extent that that happens, that should support the gross margins, of course. And I mean, again, we are fully committed to the 15% to 18% EBITDA margin target for the long-term. And of course, we will work very hard in Ericsson to reach that as soon as possible. I mean, that's a key message as well and we are dependent on this market mix to improve. At some point, it will come. So, I just want to repeat that again. That is what will drive the margins upwards when that happens.

So tie into your question about the global rollout of 5G, it varies a bit by region, but in average, it's about one in four that's upgraded for mid-band, 5G mid-band. And so, it is really, compared to previous generations, we are still relatively early in the cycle. Investments in Europe have been slower than that, in average, depending, it varies a bit by market. But overall, the rollout of 5G especially mid-band have been very, very slow and much slower than India. India basically have nationwide 5G coverage now or at least of the metropolitan areas. In a way, kind of just second to China today, very strong, have also a nationwide 5G stand alone network. So, we are likely to start to see applications now coming out of India as well, leveraging the very strong digital infrastructure. Europe is not on that map today. We see very limited build out as several of the European operators are under pressure, and you know that in the capital markets as well. So, it is a challenge. Personally, I worry a bit about Europe's future competitiveness. Infrastructures tend to be something that drives a nation’s long-term competitiveness. And without the digital infrastructure in Europe, it is going to be a bit of a challenge. So, I do think that or I hope that, we will start to see investments come up because it is going to be needed for future and long-term competitiveness of our industry in Europe.

Thanks, Borje. And thanks Sandeep. We are then moving to the last question of this call. And that question will come from -- see here, Sebastien Sztabowicz from Kepler Chevreux.

One question on Vonage. You did this big bigger write off on Vonage because the business seems to be slowing down, which part of Vonage business is really slowing down? And what kind of a growth trajectory do you expect for the Global Communication platform segment for the next few years? Can you give us a little bit tougher in addition there? And the second one is linked to Cloud Software and Services, which has been growing nicely over the last four quarters. Do you see finally 5G core deployments picking up? Or is there any different reason for this business to restart to grow? And what is the outlook for the next few years for Cloud Software and Services?

Borje?

So, if we look at start with Vonage, we see basically it's a couple of reasons for the goodwill impairment that we took. There are, of course a slowdown in the market that we've seen for kind of the demand trends have been softer and we see a much higher interest rates as well. When you put those two together, the impairment is the right thing to do to take that. And by the way, it also led to a lot of the peers trade is significantly lower in the market. So that's no doubt about that and those trends have come down. We have so far grown in line or faster than competitors. But I would say, it's fair to say that the market expectation is somewhat lower today than it was, if you look a few years back. The growth trajectory -- and we believe, we'll be in line or slightly better the market going forward as well. But really what we are investing for is not the core business in Vonage that we really did. The impairment testing on, it is the global network platform, which will provide ample growth opportunities in the future and position Ericsson to be a completely different company in a few years time. That's the really the underlying strategy behind the Vonage acquisition. So in a way, the reason for taking the impairment relates to the core business, but that was not really our investment this is when we acquired Vonage. So, our strategy stands firm on developing global network platform. The traction we have with customers is very strong today and the inbound interest we get from basically all operators are very exciting and I think positions as well for the future. It's up to us to deliver, it's up to us to execute on that, and that's what we're focusing on a 100%. Missed your second question.

On Cloud Software and Services, the growth expected 5G core, not least.

Yes, I would say we're still early in the 5G core deployments. It really needs to be 5G standalone to be widely deployed. And that's so far, call it, it's maybe some 40 and 50 networks around the world, very few. So, we are not seeing the big ramp until that happens. So, I would not hang it on there. We've seen some good developments in other areas of the business that actually has started to grow and that's encouraging as well, but I would say the 5G core the future is ahead of us.

That concludes today's call. So, I thank you all for listening to this Q3 earnings call in 2023. So, I'm looking forward to the next call here in January. With that, have a great day. Goodbye.

Thank you.

Thank you.

Thank you.