Q2 2021 results discussion with Nokia CEO By Nokia

Hi everyone and welcome to this introduction to Nokia's second quarter results. My name is Melissa shape, and I'm chief corporate affairs officer for Nokia joining me today is Becca landmark Nokia's president and CEO welcome. Thank you, Melissa, pleasure to be here. Becca. Could you please start us off by highlighting some results from the quarter? Well, obviously, I'm delighted by the second quarter results and actually, overall, the first half year results. We had nine percent constant currency growth in the quarter, and the very important thing is that this was broad-based growth.

It was driven by all our businesses, particularly strong-wear network infrastructure and tech, which both had a really, really good, 20 top line growth, but it was not only all our businesses, it was also six out of seven regions, particularly Latin America and India. Our comparable gross margin was up 270 basis points, 42.3 percent. This was driven by primarily by mobile networks and tech uh in mobile networks. We had a one-time software deal that supported the margin, but it was not only that it was also 5g growth, very good progress in cost competitiveness and overall favorable product mix. So the combination of the top-line growth, uh gross margin, expansion and very good operational uh expense, uh control resulted in this very good uh, 12.8 percent, comparable operating margin, and on top of this, I would like to highlight the fact that this was the fifth consecutive quarter of positive free cash flow Nokia launched its three-phase strategy back in March how's it going well I'm pleased to confirm that we are making very good progress. Uh on our three-phase strategy, and I'd like to highlight three examples, and the first one would be the operational model where, of course, the fundamental principle is that we have now given full financial accountability to our business groups, and that is now really helping.

Uh us drive uh our margins pgs are making very good progress on this. The second highlight would be the very important steps that we are taking to secure full competitiveness uh in mobile networks and uh. One of the key highlights of the entire quarter was actually the launch of the air scale product family in mobile networks and the third example uh is really the importance of technology leadership. As you have seen, we had 20 growth in network infrastructure, which was really driven by uh technology leadership and uh, uh, there's actually more to come. We will have more product launches in the pipeline for the second half of the year, so good progress on our strategy.

Becca, you mentioned the air scale launch what made that so significant? Yes, as I already said, it was a major launch with an objective to make us significantly more competitive. The new product family has more capacity, it's lighter and, very importantly, it's more energy efficient, so it is also supporting our customers sustainability goals. On top of this, it is Oran ready, very important for the upcoming disaggregation of some network architectures and then, as the final point, this pretty much now uh completes our journey where we are implementing the reef, chalk, chipset family across our entire base days in air scale, based in space station portfolio by the end of 2022. Thank you. Could you give us a little more color on some additional feedback that you've received from our customers? The feedback has been really fantastic.

Of course. As we know, air scale allows our customers to continue their 5g network evolution and the capacity evolution in particular. But the very important thing is that now we are able to combine the capacity evolution with increasing energy efficiency, achieving both goals simultaneously, our network infrastructure business has been performing extremely well. Can you give some highlights on that performance and is it sustainable? We had again double-digit growth or actually 20 growth in network infrastructure, uh excellent, uh quarter. It is actually not that complicated.

It just shows that what technology leadership can deliver when you does it right, and the highlight that I would like to mention this time is: is our fixed networks division where the growth is really driven by broad-based appetite for broadband in-homes in 5g base station connectivity in many applications? In some cases? Actually, this demand is driven by the covet pandemic and the resulting lockdowns, which is driving bandwidth demand in many parts of the network. What we should remember, of course, is that when we move to the second half of the year, the year-on-year comparisons will actually get tougher. But having said that, I remain confident on the future prospects of this business cloud and network services continues to rebalance its portfolio. What are their key developments for the quarter? Yes, as you said, there is a pretty big portfolio, rebalancing ongoing in cloud and network services, and that is progressing uh well and while we are doing that, we are making progress on the market.5G core software is, of course, one of the most important products that we have in CNS and the progress is good. We added seven new deals in the second quarter, and we now have over 150 customers for 5g core another important uh product area is private wireless for enterprise customers, where we have also had perfect growth, and we now have over 340 customers.

The technology business had another strong quarter with 20 constant currency growth. What enabled that growth any more details you can provide. Of course, the fundamental part of this business is driven by the run rate of our patent licensing, which is in the ballpark of 1.4 to 1.5 billion euros. But, very importantly, we are now expanding to new segments where automotive is perhaps one of the most important ones, and here's where we signed two new deals with two manufacturers during the quarter, which further kind of demonstrates the strength in our cellular portfolio, which we are now applying in uh new domains. In addition to the traditional mobile phone segment.

Lastly, pukka. We recently updated our financial guidance for the year. Can you explain why? Well, as you have seen, it was really a robust start to the year great q2 and great h1 overall, and as a result, we now expect our full year comparable operating margin to be between 10 and 12. Instead of the previous expectation of between seven uh and ten percent uh, we have actually executed on our strategy a little uh faster than we thought ourselves. Great.

First, half of the year when we look at the overall picture for the full year, we need to, of course remember that there were certain one-off benefits in age one we have also been talking about certain uh market share and pricing related uh headwinds that we still expect to be there in the second half of the year. This all means that uh, the uh typical seasonality in our results that we will that we have often seen will be less pronounced in 2021 than earlier, and we will also continue to invest in r d and, very importantly, since the semiconductor supply situation in the world remains pretty tight, we need to keep on keep a close eye on component availability. All these factors have, of course, now been built into our new guidance of 10 to 12 percent, comparable operating margin. So, overall, I'm extremely happy with our second quarter, and I would like to thank the entire team Nokia for this achievement and, of course, the hard work continues. Thank you Becca, and thank you everyone for joining.

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Source : Nokia