Stable business performance continues despite challenging circumstances

In Q1 2023, despite a complex macroeconomic situation, Ericsson Nikola Tesla Group's business results show a continuation of stable business performance.

• Sales revenue amounted to EUR 69.4 million, 0.6% lower year-over-year
• Gross profit was EUR 11.5 million, up by 5.0% year-over-year, operating profit amounted to EUR 9.5 million, up by 3.3% year-over-year

Gordana Kovačević, the President of Ericsson Nikola Tesla, commented:

“In Q1 2023, despite a complex macroeconomic situation, Ericsson Nikola Tesla Group's business results show a continuation of stable business performance. Sales revenue recorded a slight decrease compared to Q1 2022 and amounted to EUR 69.4 million. The delivery of services to Ericsson has been continuously growing and has offset lower sales revenue in the domestic and export markets caused by reduced operators’ capital investments.

The domestic market was marked by the continuation of cooperation with the leading operators on the modernization of telecom networks, with an emphasis on the build of 5G and fiber network. The results of an independent measurement of the quality of services in mobile networks in Croatia that was conducted by HAKOM in cooperation with the German company NET CHECK have confirmed high network performance of  our strategic partners, the operators HT and A1 Hrvatska, whose infrastructure, equipment and services we supply.  In the Digital Society segment, among new contracts signed I would like to highlight a contract with the City of Split for the project “Introduction of Intelligent Transport Systems in the Functional Traffic Area of the City of Split”.

In export markets, we have continued a quality cooperation with the operators HT Mostar, Crnogorski Telekom and Ipko Kosovo on the modernization of their networks. The activities were especially intense on the implementation of the contract that was signed at the end of 2022 with the new customer Telekom Kosova, related to the modernization of the core and radio network as well as the network maintenance of this Kosovo operator. We have also continued cooperation with the operator Ucom in Armenia on network modernization and the introduction of new functionalities. In Belarus, we are finalizing the remaining activities in the operator segment according to contracts that were signed before the introduction of sanctions, strictly adhering to the decisions on sanctions introduced by the Republic of Croatia and the authorities of the European Union.

As regards services to Ericsson, our Research and Development (R&D) Center, and other expert centers, have been recording quality results and thus significantly contribute to the company's business results. At the regular half-year meeting R&D Management Business Review, the representatives of all development units with which Ericsson Nikola Tesla’s R&D Center collaborates, evaluated our Center as the best performing partner. The efficient delivery of high-quality software and speed deliveries of key features that ensure technology leadership for Ericsson were especially highlighted. I would also like to highlight the role that our experts from other expert centers have in the modernization of telecom networks for Ericsson’s customers in the European Union, and worldwide.

At Mobile World Congress, the most important event in the mobile communications industry, held end of February / beginning of March in Barcelona, the representatives of Ericsson Nikola Tesla held many meetings with customers and partners and introduced them to Ericsson’s novelties. New radio portfolio for indoor and outdoor coverage, Fixed Wireless Access, as well as digital twins achievable in 6G network attracted special attention. The presented solutions offer faster networks build and new communication possibilities for the operators, as well as 5G monetization. Among many innovative solutions, a solution that enables better energy-efficient operation of the mobile network was presented, in the development of which Ericsson Nikola Tesla's experts had an important role.

Compared to Q1 2022, gross margin increased to 16.6%, as a result of business mix and focus on operational and cost efficiency, while the operating profit was at a similar level and amounted to EUR 9.5 million. A negative cash flow from operating activities was in line with our expectations for Q1, and considering the trends so far, cash flow is subject to quarterly volatility and should be observed at the annual level. We have concluded Q1 with a solid balance sheet, and an equity ratio of 39.7%. At the end of Q1, cash and cash equivalents, including the short-term financial assets, amounted to EUR 66.2 million (39.9% of the total assets).

As a technology leader, we have the potential for further development of the company in new technologies; therefore, we continue to implement our strategy to strengthen our leadership in mobile technologies, growth in the Digital Society segment and in R&D. With more than 3,500 employees, of which more than 1,800 are software designers, and the largest R&D Center in Croatia, we have a great intellectual and innovation potential to make an even more active contribution to the achievement of targets on the EU’s “Path to the Digital Decade”.

Considering the challenges that marked the previous periods, and which continue to impact our operations, in Q1 we continued to monitor and mitigate risks with special focus. Profitability, quick adjustment to market conditions and cost optimization were at the center of our attention. We continued the activities aimed at retaining quality experts by investing in the development of their competencies and providing additional benefits. Moreover, we continued to implement of our own digital transformation project, as well as strengthening the company’s culture with a focus on compliance, ethics and integrity.

With the aim to achieve long-term development and sustainability of the company as well as growth in strategic business segments, we invest and plan significant further investments in the development of strategic competencies, development of new solutions, products and services, possible acquisitions, investment in the equipment for the development and testing of new technologies and digital transformation of Ericsson Nikola Tesla Group, which demands a significant amount of funds to be secured. 

The Management Board and the Supervisory Board have reached a joint decision to propose to the Company’s Annual General Meeting to adopt a decision regarding dividend of EUR 6 per share.”