Nokia Oyj (NOK) Q2 2022 Earnings Call Transcript

For the period ending June 30, 2022

July 21, 2022 4:30 a.m. ET

Prepared Remarks

Questions and Answers

Call Participants

Prepared Remarks:

David Mulholland

Good morning, ladies and gentlemen and welcome to Nokia’s Second Quarter 2022 Results Call. I’m David Mulholland, Head of Nokia Investor Relations, and today with me is Pekka Lundmark, our President and CEO; along with Marco Wiren, our CFO.

You will notice that we switched to an audio-only webcast this quarter. We will continue to use video for events where we see it adding value such as our business group progress updates. For our quarterly updates, considering we’re now on the road meeting many of you in person, we felt it more efficient to return to audio-only. Before we get started, a quick disclaimer.

During this call, we will be making forward-looking statements regarding our future business and financial performance, and these statements are predictions that involve risks and uncertainties. Actual results may therefore differ materially from the results we currently expect. Factors that could cause such differences can be both external, as well as internal operating factors. We have identified such risks in the Risk Factors section of our annual report on Form 20-F, which is available on our Investor Relations website.

Within today’s presentation, references to growth rates will mostly be on a constant currency basis and on margins it will be on our comparable reporting. You can find reconciliation tables in our Q2 report back to our IFRS financials. Please note that our Q2 report and this presentation are published on our website on both the reconciliation is in there.

In terms of the agenda for today, Pekka will give a quick overview on our financial and strategic progress in the quarter; and Marco will then go into a bit more detail of some of the key factors impacting our financial performance and how we see the outlook for 2022.

With that, let me hand over to Pekka.

Pekka Lundmark

Thank you, David and good morning to everybody. I’m pleased to say that we continue to execute well in Q2. As you can see on this slide, net sales grew 3% in constant currency. This was in spite of continuing supply chain challenges and timing issues in two contract renewals in Nokia Technologies.

Gross margin was 40.6% and operating margin, 12.2%, reflecting good progress in both Mobile Networks and Network Infrastructure. The margins declined slightly year-on-year due to the contract renewal timing and technologies and that one-off software deal in Mobile Networks that as you may remember that we highlighted in Q2 2021. If you exclude last year software deal on Nokia Technologies from our results, operating margin would have improved by 330 basis points from 5.6% to 8.9% in Q2, and this does demonstrate the strength of the improvement in our product businesses.