Nokia Oyj (NOK) Q2 2023 Earnings Call Transcript

For the period ending June 30, 2023

July 20, 2023 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 2023 Results Call. I'm David Mulholland, Head of Investor Relations. And today with me is Pekka Lundmark, our President and CEO; along with Marco Wiren, our CFO.

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, we'll be referring to our comparable reporting. Please note that our Q2 report and the presentation that accompanies this call are published on our website. The report includes both reported and comparable financial results and a reconciliation between the two.

In terms of the agenda for today's call, Pekka will give a quick overview on our financial and strategic progress in the quarter. Marco will then go into a bit more detail of some of the key factors impacting our outlook before Pekka concludes with our outlook 2023.

With that, let me hand over to Pekka.

Pekka Lundmark

Thanks to everybody for dialing in today. We highlighted in Q1 that we were starting to see signs of the economic environment impacting customer spending. And already in the second quarter, we saw some of those signs materializing as it started to impact our sales outlook also in network infrastructure. But we still achieved flat year-on-year sales in the quarter as we continue to benefit from market share growth.

Despite the regional mix headwinds that are impacting our mobile networks business, we achieved a 38.8% gross margin and an 11-point operating margin. Considering the 40% drop in North America and even adjusting for the €80 million catch-up net sales in Nokia Technologies, that was a pretty resilient result. If we look specifically at network infrastructure, you do see some divergence in the trends in the business. In IP Networks, we saw some weakness primarily related to CSP spending in North America which led to the 11% drop in net sales.