During Q1 2024, Ericsson NT recorded a revenue decrease of 25% YoY, an EBITDA decline of 21%, and a net income of EUR 6.39m, a decrease of 18% YoY. At the same time, the Company also published its dividend payment policy, according to which it aims to pay out between 30% and 100% of distributable profit from the previous year if business operations permit in the form of dividends.
Starting off with the sales revenue, it amounted to EUR 52m during Q1 2024, decreasing by 25% YoY. Ericsson NT noted that while they did start the year by contracting new business deals in the operator segment in the Croatian and export markets, as well as in the Digital Society segment, the non-renewal of the contract with HT regarding managed services resulted in the decline of sales revenue. The decrease was further exacerbated by the operators’ cautious investments in network modernization and the dynamics of the implementation of contracted activities. This was partially offset by growth in other segments.
Breaking the revenue down by segments, in the domestic market, revenue amounted to EUR 11.9m, down 54% YoY, due to the mentioned non-renewal of the contract with HT, as well as the cautious investments by operators in the network optimization. Ericsson NT does note that at the beginning of 2024, they signed a cooperation agreement with HT, according to which Ericsson NT will be the exclusive supplier of the radio part of HT’s mobile network until 2027. The Company has been further working with A1 Hrvatska, in accordance with its multi-year framework contracts, to further expand the coverage and capacity of the 5G radio network, as well as on the modernization and construction of the convergent core network, among other things.
Lastly, in the Digital Society segment, the Company has been working with the Croatian Employment Service (CES) related to the delivery of a system to support the basic processes of CES, the e-Advisor system, and improved user profiling. Ericsson NT also continued cooperation with the Ministry of Health, the Ministry of Justice, the Public Administration, and the State Geodetic Administration, along with a few others.
In the export markets (excl. services to Ericsson), revenue amounted to EUR 4m, down 34% YoY, as a result of project execution dynamics. The Company notes that it signed a multi-year framework contract with Telekom Kosova for the complete modernization and maintenance of the radio network. With Kosovo operator IPKO, several projects for the modernization and maintenance of the core network were contracted. With HT Mostar, the implementation of the latest technological version of Ericsson Evolved Packet Core (EPC) and Diameter Signaling Controller (DSC) solutions was contracted. Projects were also contracts with Crnogorski Telekom and Ucom Armenia, for the modernization and maintenance of mobile networks.
In the Ericsson market, revenue amounted to EUR 36.1m, down 3% YoY, due to the higher engagement of the Services and Solutions Center’s experts on projects for customers of Ericsson Nikola Tesla Growth. This was offset by higher revenue from R&D activities.
Ericsson NT sales breakdown by market (Q1 2017 – Q1 2024, EURm)
Source: Ericsson NT, InterCapital Research
Moving on, EBITDA amounted to EUR 8.8m during Q1, decreasing by 21% YoY. This would imply an EBITDA margin of 16.9%, an increase of 0.92 p.p. YoY. To understand this, we have to look at the operating expenses. In Q1 2024, OPEX decreased by 24% YoY, to EUR 46m, with material expenses decreasing by 45% YoY to EUR 17.2m, while employee expenses declined by 10% YoY, to EUR 30.2m. This would imply that the situation regarding inflationary pressures, especially for material costs has largely dissipated. Due to the faster revenue than OPEX decline, however, we get an EBITDA margin that is slightly higher YoY.
In terms of the net financial result, it was positive at EUR 468.5k (Q1 2023: EUR 2.1k), leading to a slightly better net income dynamic as compared to EBITDA. Still, net income decreased by 18% YoY to EUR 6.39m. As with the EBITDA margin, however, the net income margin improved, this time by 1.01 p.p. to 12.3%.
Ericsson NT key financials (Q1 2024 vs. Q1 2023, EURm)
Source: Ericsson NT, InterCapital Research
Ericsson NT also recently proposed a dividend of EUR 15 DPS, DY of 7.6%, more on which you can read here. Furthermore, Ericsson NT also published a document detailing its dividend payment policy. Going forward, the Company aims to pay out 30% to 100% of the distributable profit from the previous year in the form of dividends. This is of course subject to the business operations and results of the Company, the situation on the capital market, the financial position of the Company, working capital requirements, as well as other factors and developments which might influence this policy.
