Nokia Oyj (NYSE:NOK) Q1 2024 Earnings Call Transcript April 18, 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 First Quarter 2024 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 Web site.
Within today’s presentation, references to growth rates will mainly be on a constant currency basis. On margins, we’ll be referring to our comparable reporting. Please note that our Q4 report and the presentation that accompanies the call are published on our Web site. This report includes both reported and comparable financial results, and a reconciliation between the two. In terms of the agenda for today, Pekka will go through the key messages from the quarter, Marco will go through the financial performance in a bit more detail, and then Pekka will make a few comments on a couple of particular highlights in the quarter. And we’ll then move to Q&A. With that, let me hand over to Pekka.
Pekka Lundmark: Thanks, David, and thank you all for dialing in today. We said, back in January, that we expected a challenging environment in the first-half of this year, and that’s what we saw in Q1. Our net sales declined 19% year-on-year in constant currency as the weak spending environment, that started to take hold in Q2, last year, remained with us. This impacted the profitability of our three networks businesses, but was offset by the benefit of deals signed in Nokia Technologies, and the ongoing cost reductions. Marco will go into more detail shortly about our financial performance in the quarter. You may also recall that we started to talk about improved order intake trends in Q4, particularly in our Network Infrastructure business.
I’m pleased to say that this has continued in Q1. We have seen good growth in order intake year-on-year, and the book-to-bill in Network Infrastructure was above one. The outlook for Fixed Networks has improved over the past three months, which is important as this is often the market that recovers first in our business. However, it might take somewhat longer for our Optical Networks business to recover. With the continued order intake strength, I remain confident that we will see a stronger second-half performance and that, for the full-year, our Network Infrastructure business will return to growth. We have also been executing quickly on our cost reduction program, where we target to achieve between €800 million and €1.2 billion in cost savings by 2026.
We are well on track with many actions already taken in Q4 and Q1 to achieve the total €500 million of in-year savings in 2024. €400 million of this relates to the new program we announced in October. One of the biggest highlights from Q1 is the three smartphone licensing deals that we signed. I’m delighted we have now concluded our smartphone licensing renewal cycle, and we’ll have no more major renewals for a number of years. With these deals, we now have an annual net sales run rate of approximately €1.3 billion in Nokia Technologies. We have also benefited from over €400 million of catch-up net sales in the quarter related to these deals. Nokia Technologies’ team will now focus their efforts on expanding in new growth areas, and we have a promising pipeline to help us deliver on our next target to increase our run rate to €1.4 billion to €1.5 billion in the mid-term.
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