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Nokia Corporation Financial Report for Q2 and Half Year 2020

01/08/2020

Nokia Corporation Financial Report for Q2 and Half Year 2020

Nokia Corporation

Half year report

July 31, 2020 at 08:00 (CET 1)

Nokia Corporation Financial Report for Q2 and Half Year 2020

Continued improved execution drives strong margin and cash performance

Strong margin expansion, primarily driven by Mobile Access

Clear roadmap progress, particularly related to our 5G mid-band portfolio

Confidence in resilient customer base and strong liquidity position

11% decrease in net sales, largely driven by COVID-19 and China

Strong growth in Nokia Enterprise

Positive operating profit, on a reported basis, in both Q2 and half year 2020

Within previously provided Outlook ranges for full year 2020, adjusted the non-IFRS mid-points for EPS to EUR 0.25 and operating margin to 9.5%

Delivered strong free cash flow year-to-date and raised 2020 recurring free cash flow guidance to be clearly positive

This is a summary of the Nokia Corporation financial report for Q2 and half year 2020 published today. The complete financial report for Q2 and half year 2020 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 Q2 2020 RESULTS

Nokia delivered a strong improvement in Q2, with better-than-expected profitability, significant improvement in cash generation, clear indications of a return to strength in mobile radio, and a year-on-year increase in earnings-per-share, despite the challenges of COVID-19. These results show that our execution has improved as planned and that we are well positioned to end the year with a significantly stronger financial position. As a result, we are adjusting upward both the midpoint of our full-year 2020 non-IFRS EPS and operating margin guidance within our previously disclosed outlook ranges.

Profitability gains in the quarter were supported by a 4.5 percentage point year-on-year improvement in Networks gross margin, building on a 3.5 percentage point gain in the first quarter, and driving Nokia non-IFRS gross margin to 39.6%. Nokia Enterprise also grew year-on-year constant currency sales by 18% compared to one year ago and expanded margins.

Nokia-level revenue was down in the quarter, with the majority of that the result of COVID-19 as well as a sharp decline in China based on the prudent approach we have taken in that market. We also saw a reduction driven by our proactive steps to reduce the volume of low margin services business. We expect that the majority of sales missed in the quarter due to COVID-19 will shift to future periods.

At the start of the year, we said we would have a sharp focus on our Mobile Access business and improving cash generation. In both areas we continue to make good progress. Free cash flow in the quarter was positive 265 million, versus negative 1.0 billion one year ago, and Nokia ended Q2 with 1.6 billion of net cash, and 7.5 billion in total cash. Given our strong first-half improvement, we now expect free cash flow for full-year 2020 to be clearly positive compared to our earlier guidance of positive .

In Mobile Access, we saw healthy improvements in our radio portfolio, where roadmaps are strengthening, costs are coming down, and product performance is rising. We have a particularly powerful portfolio in mid-band mobile radio, with proven products deployed with 55 customers, and the first live C-Band network demonstrated in the U.S. during the quarter. Pleasingly, our 5G Powered by ReefShark shipments continue to increase and we believe we remain on track to reach 35% or better by year end. And, we now have 83 5G deals.

Our continued momentum was demonstrated by the progress we announced after the quarter ended. These included the availability of a software upgrade that allows millions of Nokia 4G/LTE radios deployed to more than 350 customers to be migrated seamlessly to 5G; and plans to accelerate leadership in Open RAN. Nokia is the only global supplier fully committed to O-RAN with commercial 5G Cloud-RAN networks. We also announced an expansion of our IP routing business into the data center market and highlighted that Apple was deploying our technology at its data centers.

This is my last quarterly announcement as CEO of Nokia and I want to close with a note of thanks: thanks to our shareholders, thanks to our customers, thanks to our many other stakeholders, and a particular thanks to the great employees of Nokia. You have constantly made me proud and I expect that you will continue to do so in the many years to come. Thank you all. It has been a pleasure and an honor.

NOKIA FINANCIAL RESULTS

EUR million (except for EPS in EUR) Q220 Q219 YoY change Constant currency YoY change Q1-Q220 Q1-Q219 YoY change Constant currency YoY change

Net sales 5 092 5 694 (11)% (11)% 10 005 10 726 (7)% (7)%

Networks 3 955 4 393 (10)% (10)% 7 713 8 336 (7)% (8)%

Nokia Software 597 678 (12)% (12)% 1 210 1 221 (1)% (1)%

Nokia Technologies 341 383 (11)% (11)% 689 753 (8)% (9)%

Group Common and Other 210 263 (20)% (21)% 415 484 (14)% (15)%

Non-IFRS exclusions (1) (2) (1) (27)

Eliminations (11) (21) (20) (41)

Gross profit 2 006 2 065 (3)% 3 784 3 646 4%

Operating profit/(loss) 170 (57) 94 (581)

Networks 249 119 109% 169 (135)

Nokia Software 88 137 (36)% 159 130 22%

Nokia Technologies 282 324 (13)% 572 626 (9)%

Group Common and Other (197) (129) (361) (230)

Non-IFRS exclusions (253) (508) (445) (972)

Operating margin % 3.3% (1.0)% 430bps 0.9% (5.4)% 630bps

Net sales (non-IFRS) 5 093 5 696 (11)% (11)% 10 007 10 753 (7)% (7)
LINK: https://www.nokia.com/about-us/news/releases/2020/07/31/nokia-corporat...
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