Nokia Oyj (NYSE:NOK) Q4 2023 Earnings Call Transcript January 25, 2024
Nokia Oyj isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
David Mulholland: Good morning, ladies and gentlemen. Welcome to Nokia’s Fourth Quarter 2023 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. 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 growth rate basis and where we refer to margins, it will be based on our comparable reporting. Please note that our Q4 report and a 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. With that complete, in terms of the agenda for today, Pekka will give an overview on the quarter and then Marco will give into a bit more detail on some of the key factors impacting our financial performance before Pekka gives a brief conclusion when we move to Q&A. With that, let me hand over to Pekka.
Pekka Lundmark: Thank you, David and thank you to everyone for joining us today. So, let me start with an update on some of the strategic and operational changes we announced with our Q3 results in October. We are evolving our operational model to give our business groups increased autonomy and have now embedded our sales teams into the business groups. This announcement has been well received by our customers. We have hit the ground running in 2024 to embed sales teams into the business groups happened at the start of the year. We have appointed customer account executives and the country manager role has also been reinforced. The customer account executives are there to ensure that we still offer one point of contact and person responsible for overall relationship management with customers without detracting from the accountability of the business groups.
Some corporate functions have also moved to the business groups as we move to a leaner corporate center. During first half of 2024, we will begin reporting business group regional sales and cash flow metrics to further enhance transparency. And we already commenced the process of resetting our cost base during 2023. We expect this program will generate EUR 400 million of gross savings during 2024. If we then turn to Q4 and 2023 full year we, of course, saw a meaningful shift in customer behavior impacting our industry. This was driven by macroeconomic environment and high interest rates along with customer inventory digestion especially in North America. This led to our fourth quarter sales declined by 21% and full year sales declined by 8% in constant currency.
Proactive action across our organization meant we were able to protect our profitability, while continuing to invest in R&D, and we delivered a comparable operating margin of 14.8% in Q4 and 10.7% for the full year. This was a resilient performance considering the challenging environment and lower contribution from our high-margin patent licensing business as some renewals remained outstanding. We were pleased with our cash performance in the quarter where we generated €1.7 billion of free cash flow and we ended the year with a net cash balance of €4.3 billion. Positively, we also ended the year with improving order intake. Our fourth quarter book-to-bill was above one, particularly supported by our network infrastructure business, indicating at least some improvement in the overall spending environment.
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