Nokia Corporation Financial Report for Q4 and Full Year 2019

Nokia Corporation Financial Report for Q4 and Full Year 2019

Nokia Corporation

Financial Statement Release

February 6, 2020 at 08:00 (CET 1)

Nokia Corporation Financial Report for Q4 and Full Year 2019

Full year 2019 non-IFRS diluted EPS of EUR 0.22 driven by strong net sales and operating margin in Q4

Net cash of EUR 1.7 billion, driven by Q4 free cash flow of EUR 1.4 billion

5G deal momentum continues, with 66 commercial deals and 19 live networks

Strong momentum in strategic focus areas of software and enterprise

Year-on-year operational improvement expected over the course of 2020

This is a summary of the Nokia Corporation financial report for Q4 and full year 2019 published today. The complete financial report for Q4 and full year 2019 with tables is available at www.nokia.com/financials. Investors should not rely on summaries of our financial reports only, but should review the complete financial reports with tables.

RAJEEV SURI, PRESIDENT AND CEO, ON Q4 AND FULL YEAR 2019 RESULTS

Nokia's fourth quarter 2019 results were a strong end to a challenging year. We saw strength in many parts of our business in the quarter, delivered a slightly better operating profit than the same period in 2018, generated solid free cash flow, and increased our net cash balance to EUR 1.7 billion.

When I look at Nokia's full-year 2019 performance, we saw good progress in our strategic focus areas of enterprise and software. Nokia Enterprise delivered exceedingly well on its target of double-digit sales growth, considerably outpacing the market. Nokia Software showed its long-term promise, with exceptional profitability expansion compared to 2018. In addition, IP Routing continued its remarkable momentum, gaining significant share and increasing profitability in a difficult market; and Nokia Technologies continued to generate robust profitability.

We recognize, however, that we have faced challenges in Mobile Access and in cash generation. We will have a sharp focus on these two areas over the course of 2020, which we believe to be a year of progressive improvement as the actions we have underway start to deliver results. In Mobile Access, we expect improvements to be driven by increasing shipments of our 5G Powered by ReefShark portfolio; product cost reductions; better commercial management; and strengthened operational performance in services.

In terms of cash generation, we have extensive operational actions underway to improve performance. As we noted in our third quarter announcement, our Board said it expects to resume dividend distributions after Nokia's net cash position increases to approximately EUR 2 billion. Given typical cash seasonality, we would not expect to reach that level in the first three quarters of this year. Should we exceed the EUR 2 billion level after that point, the Board will assess the possibility of proposing a dividend distribution for financial year 2020.

While I believe that 2020 will present its share of challenges, I am confident that we are taking the right steps to deliver progressive improvement over the course of this year and to position us for a stronger 2021.

Q4 2019 and January-December 2019 reported and non-IFRS results. Refer to note 1, Basis of Preparation , note 2, Non-IFRS to reported reconciliation and note 13, Performance measures, in the Financial statement information section for details.

EUR million (except for EPS in EUR) Q419 Q418 YoY change Constant currency YoY change Q1-Q419 Q1-Q418 YoY change Constant currency YoY change

Net sales 6 903 6 869 0% (1)% 23 315 22 563 3% 1%

Operating profit/(loss) 803 552 45% 485 (59)

Operating margin % 11.6% 8.0% 360bps 2.1% (0.3)% 240bps

EPS, diluted 0.10 0.03 233% 0.00 (0.10)

Operating profit/(loss) (non-IFRS) 1 134 1 120 1% 2 003 2 180 (8)%

Operating margin % (non-IFRS) 16.4% 16.3% 10bps 8.6% 9.7% (110)bps

EPS, diluted (non-IFRS) 0.15 0.13 15% 0.22 0.23 (4)%

Net cash and current financial investments1 1 730 3 053 (43)% 1 730 3 053 (43)%

1Net cash and current financial investments does not include lease liabilities.

Full year 2019 results for non-IFRS diluted EPS, non-IFRS operating margin, and recurring free cash flow were in line with our guidance.

Net sales in Q4 2019 were EUR 6.9 billion, approximately flat compared to Q4 2018. On a constant currency basis, net sales decreased 1%. Excluding one-time licensing net sales in Q4 2019 and Q4 2018, net sales grew 1%, reflecting improved overall industry demand and particularly strong growth with enterprise customers, driven by increased demand for mission-critical networking solutions. In full year 2019, net sales were EUR 23.3 billion, compared to EUR 22.6 billion in full year 2018.

Non-IFRS diluted EPS in Q4 2019 was EUR 0.15, compared to EUR 0.13 in Q4 2018, primarily driven by continued progress related to our cost savings program, which resulted in lower operating expenses across Networks, Nokia Software and Nokia Technologies. This was partially offset by lower gross profit, particularly in Mobile Access within Networks. In full year 2019, Nokia's non-IFRS diluted EPS was EUR 0.22, compared to EUR 0.23 in full year 2018.

Reported diluted EPS in Q4 2019 was EUR 0.10, compared to EUR 0.03 in Q4 2018, primarily driven by continued progress related to our cost savings program, lower transaction and integration costs, a net positive fluctuation in financial income and expenses, lower income taxes and a net positive fluctuation in other income and expenses. This was partially offset by lower gross profit, primarily due to our business performance. In full year 2019, on a reported basis, Nokia generated a profit of EUR 18 million and a diluted EPS of EUR 0.00, compared to a loss of EUR 549 million and a diluted EPS of negative EUR 0.10 in full

LINK:	https://www.nokia.com/about-us/news/releases/2020/02/06/nokia-corporat...
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