Sales adjusted for comparable units and currency increased by 7% YoY mainly driven by 5G sales in Mainland China.
Reported sales were
Gross margin excluding restructuring charges improved to 43.2% (37.8%) with margin improvement in all segments. Reported gross margin improved to 43.1% (37.7%).
Operating income excluding restructuring charges and items affecting comparability in Q3 2019, improved to
Networks reported sales increased by 6% YoY, with an increase of 13% adjusted for comparable units and currency. Operating margin excluding restructuring charges was 22.7% (18.4%).
Net income was
Free cash flow before M&A was
[1] Q3 2019 was impacted by cost provisions of
Planning assumptions highlights (please see the quarterly report for complete planning assumptions)
The YTD results strengthen the Company's confidence in delivering the Group targets for 2020. The financial targets for 2022 remain.
SEK b. Q3
2020 Q3
2019 YoY
change Q2
2020 QoQ
change Jan-Sep
2020 Jan-Sep
2019
Net sales 57.5 57.1 1% 55.6 3% 162.8 160.8
Sales growth adj. for comparable units and currency - - 7% - - - -
Gross margin 43.1% 37.7% - 37.6% - 40.2% 37.5%
Operating income (loss) 8.6 -4.2 - 3.9 124% 16.8 4.4
Operating margin 15.0% -7.3% - 6.9% - 10.3% 2.8%
Net income (loss) 5.6 -6.9 - 2.6 115% 10.4 -2.6
EPS diluted,SEK 1.61 -1.89 - 0.74 118% 3.00 -0.67
Measures excl. restructuring charges and other items affecting comparability[1]
Gross margin excluding restructuring charges 43.2% 37.8% - 38.2% - 40.7% 37.6%
Operating income excl. restr. charges & items affecting comparability in 2019[2] 9.0 6.5 38% 4.5 98% 18.1 13.9
Operating margin excl. restr. charges & items affecting comparability in 2019[2] 15.6% 11.4% - 8.2% - 11.1% 8.6%
Free cash flow before M&A 3.9 4.5 -12% 3.2 22% 9.5 9.5
Net cash, end of period 41.5 37.4 11% 37.5 11% 41.5 37.4
[1] Non-IFRS financial measures are reconciled at the end of this report to the most directly reconcilable line items in the financial statements.
[2] Excludes restructuring charges in all periods. No other adjustments made in 2020. Q1 2019 excludes a capital gain related to the divestment of 51% of MediaKind (
Comments from
Amid the continuing global Covid-19 pandemic and with more than 80% of our people working from home, we keep on executing on our focused strategy. We continue to win footprint in several markets leveraging our competitive 5G portfolio. The gross margin[1] improved in all segments in the third quarter and reached 43.2% (37.8%), the highest since 2006. With the acquisition of
Networks grew organically[2] by 13% and reported a gross margin[1] of 46.7% (41.6%). This reflects high activity levels in North East Asia and
Digital Services continued to make good progress on the execution of the turnaround plan, transforming the business and increasing software sales. The gross margin[1] improved to 43.5% (38.3%), supported by increased software sales and improvements in the underlying business. Our cloud-native 5G core portfolio shows very positive momentum with a high win-ratio and a significant number of new customer contracts. We are selectively increasing R&D investments to accelerate our growth portfolio to capture market opportunities. However, sales in our legacy portfolio is declining faster than earlier predicted. In the short term, this shortfall will not be compensated by the growth in new offerings and therefore our sales volume is lower than expected. With weaker sales in combination with higher R&D investments, there is a risk of further delay in reaching the 2020 operating margin target for Digital Services.
Managed Services delivered a gross margin[1] of 20.1% (17.9%). The 4Q rolling operating margin[1] is 7.4%. Sales declined mainly due to the US operator consolidation. We expect our investments in automation and AI to create future business opportunities, which are anticipated to gradually improve the margin profile as this new portfolio grows.
Emerging Business and Other reported a gross margin[1] of 30.5% (20.5%). Our IoT platform sales grew by more than 40% despite an impact on demand from Covid-19. In the quarter we announced our plans to acquire
Patent licensing continues to perform well based on our strong IPR portfolio, even though revenues decreased in the third quarter as one of our licensees experienced lower sales volumes. We are approaching several important contract renewals. We are confident in the value of our broad patent portfolio, including a strong position in 5G and will seek to maximize the net present value of our patent estate that has been built over time through our large R&D investments. Depending on timing of the agreement renewals, we may see gaps in IPR revenues in 2021 and 2022.
Free cash flow before M&A amounted to
We are committed to continue improving our Ethics and Compliance program. Through driving stronger management ownership and accountability for compliance, we are also reinforcing our commitment to responsible business practices and a stronger corporate culture. Our people should always be able to speak up and we expect
Open RAN is a hot topic in our industry today and
We remain positive on the longer-term outlook for the industry and
Stay healthy and well.
President and CEO
[1] Excluding restructuring charges
[2] Sales adjusted for comparable units and currency
[3] Free cash flow before M&A rolling 4Q includes; Q4 2019 (SEK -1.9 b.), Q1 2020 (SEK 2.3 b.), Q2 2020 (SEK 3.2 b.) and Q3 2020 (SEK 3.9 b.) adjusted for
NOTES TO EDITORS
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