Nokia Corporation Financial Report for Q4 and full year 2024

Nokia CorporationFinancial Statement Release30 January 2025 at 08:00 EET Nokia Corporation Financial Report for Q4 and full year 2024 Strong Q4 growth and profitability as market trends improve Q4 net sales increased 9% y-o-y in constant currency (10% reported). Network Infrastructure net sales grew strongly with all units contributing, Nokia Technologies grew significantly and Cloud and Network Services also grew in Q4.Comparable gross margin in Q4 increased by 250bps y-o-y to 47.2% (reported increased 280bps to 46.1%), with a strong contribution from Nokia Technologies along with smaller contributions from other businesses.Q4 comparable operating margin increased 380bps y-o-y to 19.1% (reported up 540bps to 15.3%), mainly due to higher gross margin, continued cost control and higher contribution from Nokia Technologies.Q4 comparable diluted EPS for the period of EUR 0.18; reported diluted EPS for the period of EUR 0.15.Q4 free cash flow of EUR 0.05 billion, net cash balance of EUR 4.9 billion.Full year 2024 net sales declined 9% in both reported and constant currency, of which 7 percentage points was related to India. Comparable operating profit was EUR 2.6 billion (reported EUR 2.0 billion).Full year comparable diluted EPS of EUR 0.39; reported diluted EPS of 0.23.Board proposes dividend authorization of EUR 0.14 per share.Nokia issues full year 2025 outlook on an organic basis. Nokia expects comparable operating profit of between EUR 1.9 billion and 2.4 billion and free cash flow conversion from comparable operating profit of between 50% and 80%. This is a summary of the Nokia Corporation Financial report for Q4 and full year 2024 published today. Nokia only publishes a summary of its financial reports in stock exchange releases. The summary focuses on Nokia Group's financial information as well as on Nokia's outlook. The detailed, segment-level discussion will be available in the complete financial report hosted at www.nokia.com/financials. A video interview summarizing the key points of our Q4 results will also be published on the website. Investors should not solely rely on summaries of Nokia's financial reports and should also review the complete reports with tables. PEKKA LUNDMARK, PRESIDENT AND CEO, ON Q4 AND FULL YEAR 2024 RESULTS In the following quote, net sales growth rates are on a constant currency basisWe saw a strong finish to 2024 with 9% net sales growth year-on-year in Q4. I am optimistic that the improving market trends we are now seeing will persist into 2025. Alongside the net sales growth, we saw excellent profitability in Q4 with a comparable operating margin of 19.1%. This meant our full year comparable operating profit was EUR 2.6 billion, at the mid-point of our guidance of EUR 2.3 to 2.9 billion. All business groups delivered a strong operational performance in the quarter. Net sales growth in Network Infrastructure accelerated to 17%, with IP Networks growing 24%, Fixed Networks 16% and Optical Networks 7%. This reflected a strong recovery in demand from communication service providers, notably in North America. Mobile Networks net sales stabilized with continued resilience in gross margin. We also secured many important deals, winning 18 000 additional base station sites, since the start of 2024 on a net basis. This was achieved while maintaining our commercial and pricing discipline to protect our gross margins. Cloud and Network Services returned to 7% net sales growth in the quarter, despite a headwind of 4 percentage points from a prior business disposal, and its operating margin improved over the full year. Both Core Networks and Enterprise Campus Edge grew strongly. The fourth quarter saw the acquisition of Rapid’s technology assets. This will bolster our R&D capacity in Network as Code and increase our developer access. Taken together with our autonomous networks application suite, we are accelerating our efforts to help operators fully automate and monetize their networks. Nokia Technologies had an extremely active quarter. We signed a deal with Transsion, a previously unlicensed mobile devices vendor, along with multimedia deals with HP and Samsung, as well as many other smaller deals. Our annual net sales run-rate increased to approximately between EUR 1.3 and 1.4 billion in Q4, progressing towards our mid-term EUR 1.4 to 1.5 billion target. We delivered a strong cash performance throughout 2024, ending with full year free cash flow of EUR 2.0 billion. This means we continue to have a strong balance sheet supporting our business with net cash of EUR 4.9 billion at the end of the year, even after returning EUR 1.4 billion to shareholders through dividend and share buybacks. The Board is proposing an increase in the dividend to EUR 0.14 per share in respect of the financial year 2024. We also continue to execute against our outstanding share buyback program to offset any dilution from the equity component of our pending Infinera acquisition. Going forward, our target remains to maintain a net cash position of between 10-15% of annual net sales. Q4 also saw further progress in efforts to expand our presence in the data center market. We signed important deals with Microsoft and Nscale for our data center switching products, along with announcing partnerships with both Kyndryl and Lenovo. We are now stepping up our investments to broaden our addressable market in data center IP networking. We will invest up to an additional EUR 100 million in annual operating expenses with a view to driving incremental net sales of EUR 1 billion by 2028. In the short-term this will moderate the pace of operating margin expansion in Network Infrastructure, but we anticipate a strong return on investment considering the momentum we already have today in the market. Looking further ahead into 2025, we expect the improved trends we have seen in Network Infrastructure in the second half of this year, to sustain and drive strong growth. Cloud and Network Services is also expected to grow with strong 5G Core momentum and growth in our Enterprise Campus Edge business. End markets in Mobile Networks are improving and we currently assume largely stable net sales. Nokia Technologies is expected to deliver approximately EUR 1.1 billion of operating profit. At the Nokia level, we currently estimate we will deliver comparable operating profit of between EUR 1.9 and 2.4 billion in 2025. We also target free cash flow conversion from comparable operating profit of between 50% and 80%. Excluding the one-time items that benefited 2024 by over EUR 700 million which were mostly in the first half of the year, this guidance would imply a strong improvement in our comparable operating profit in 2025 despite select increased investments. Given the market volatility in 2024, our results demonstrate the responsiveness and capacity of the Nokia team to execute in all market conditions. I thank the whole Nokia team for their commitment, hard work and drive which made these results possible. FINANCIAL RESULTS EUR million (except for EPS in EUR)Q4'24Q4'23YoY changeConstant currency YoY changeQ1-Q4'24Q1-Q4'23YoY changeConstant currency YoY changeReported results Net sales5 9835 41610%9%19 22021 138(9)%(9)%Gross margin %46.1%43.3%280bps 46.1%40.4%570bps Research and development expenses(1 136)(1 080)5% (4 512)(4 277)5% Selling, general and administrative expenses(789)(774)2% (2 890)(2 878)0% Operating profit91753472% 1 9991 66120% Operating margin %15.3%9.9%540bps 10.4%7.9%250bps Profit/(loss) from continuing operations746(51) 1 711649164% Profit/(loss) from discontinued operations6718272% (427)30 Profit/(loss) for the period813(33) 1 28467989% EPS for the period, diluted0.15(0.01) 0.230.1292% Net cash and interest-bearing financial investments4 8544 32312% 4 8544 32312% Comparable results Net sales5 9835 41610%9%19 22021 138(9)%(9)%Gross margin %47.2%44.7%250bps 47.1%41.1%600bps Research and development expenses(1 129)(1 023)10% (4 298)(4 143)4% Selling, general and administrative expenses(638)(615)4% (2 423)(2 448)(1)% Operating profit1 14283038% 2 6192 33712% Operating margin %19.1%15.3%380bps 13.6%11.1%250bps Profit for the period97755576% 2 1751 59037% EPS for the period, diluted0.180.1080% 0.390.2839% ROIC(1)13.0%9.9%310bps 13.0%9.9%310bps 1 Comparable ROIC = Comparable operating profit after tax, last four quarters / invested capital, average of last five quarters’ ending balances. Refer to the Alternative performance measures section in Nokia Corporation Financial Report for Q4 and full year 2024 for details. Business group resultsNetwork InfrastructureMobileNetworksCloud and Network ServicesNokia TechnologiesGroup Common and OtherEUR millionQ4'24Q4'23Q4'24Q4'23Q4'24Q4'23Q4'24Q4'23Q4'24Q4'23Net sales2 0311 7122 4312 4501 054977463251625YoY change19% (1)% 8% 84% (76)% Constant currency YoY change17% (2)% 7% 85% (76)% Gross margin %45.4%44.7%38.1%38.3%48.1%47.6%99.8%100.0% Operating profit/(loss)398264187281236223356169(35)(106)Operating margin %19.6%15.4%7.7%11.5%22.4%22.8%76.9%67.3% SHAREHOLDER DISTRIBUTION Dividend The Board of Directors proposes that the Annual General Meeting 2025 authorizes the Board to resolve on the distribution of an aggregate maximum of EUR 0.14 per share to be paid in respect of the financial year 2024. The authorization would be used to distribute dividend and/or assets from the reserve for invested unrestricted equity in four installments during the authorization period, in connection with the quarterly results, unless the Board decides otherwise for a justified reason. Under the current authorization by the Annual General Meeting held on 3 April 2024, the Board of Directors may resolve on the distribution of an aggregate maximum of EUR 0.13 per share to be paid in respect of financial year 2023. The authorization will be used to distribute dividend and/or assets from the reserve for invested unrestricted equity in four installments during the authorization period, in connection with the quarterly results, unless the Board decides otherwise for a justified reason. On 30 January 2025, the Board resolved to distribute a dividend of EUR 0.03 per share. The dividend record date is 4 February 2025 and the dividend will be paid on 13 February 2025. The actual dividend payment date outside Finland will be determined by the practices of the intermediary banks transferring the dividend payments. Following this announced distribution of the fourth installment and executed payments of the previous installments, the Board has no remaining distribution authorization. Share buyback programs In January 2024, Nokia’s Board of Directors initiated a share buyback program to repurchase shares to return up to EUR 600 million of cash to shareholders in tranches over a period of two years. The share buyback execution started on 20 March 2024. On 19 July 2024, Nokia's Board of Directors decided to accelerate the timeframe for the share buyback program with the aim of completing the full EUR 600 million program by the end of the year instead of the initial two year timeframe. The program was completed on 21 November 2024 and the repurchased 157 646 220 shares were canceled on 4 December 2024. On 27 June 2024, Nokia announced its intention to acquire Infinera in a transaction that valued Infinera at US$1.7 billion equity value with up to 30% of the consideration to be paid in Nokia American depositary shares ("ADSs"), depending on the elections of Infinera shareholders. To offset the dilution from the transaction to Nokia shareholders, on 22 November 2024 Nokia announced a new share buyback program targeting to repurchase 150 million shares for an aggregate purchase price not exceeding EUR 900 million. Under this share buyback program, by 31 December 2024, Nokia had repurchased 19 186 046 of its own shares at an average price per share of approximately EUR 4.14. OUTLOOK Full Year 2025Comparable operating profit(1)EUR 1.9 billion to EUR 2.4 billion (excluding any impact from pending Infinera acquisition)Free cash flow(1)50% to 80% conversion from comparable operating profit (excluding any impact from pending Infinera acquisition) 1Please refer to Alternative performance measures section in Nokia Corporation Financial Report for Q4 and full year 2024 for a full explanation of how these terms are defined. The outlook, long-term targets and all of the underlying outlook assumptions described below are forward-looking statements subject to a number of risks and uncertainties as described or referred to in the Risk Factors section later in this report. release. Along with Nokia's official outlook targets provided above, Nokia provides the below additional assumptions that support the group level financial outlook. Considering the pending Infinera acquisition along with the transfer of Managed Services from Cloud and Network Services to Mobile Networks (further details of this transfer are included in the Additional Topics section), Nokia is not currently providing assumptions by business group as it did previously. Full year 2025Group Common and Other operating expensesapproximatelyEUR 400 millionComparable financial income and expensesPositive EUR 50 to 150 millionComparable income tax rate~25%Cash outflows related to income taxesEUR 450 millionCapital ExpendituresEUR 550 million 2026 TARGETS Nokia's current targets for its existing perimeter of the business for 2026 are outlined below. This does not consider pending acquisitions. Nokia sees further opportunities to increase margins beyond 2026 and believes an operating margin of 14% remains achievable over the longer term. Net salesGrow faster than the market Comparable operating margin(1)≥ 13%Free cash flow(1)55% to 85% conversion from comparable operating profit 1 Please refer to Alternative Performance measures section in Nokia Corporation Financial Report for Q4 and full year 2024 for a full explanation of how these terms are defined. The comparable operating margin target for Nokia group is built on the following assumptions by business group for 2026: Network Infrastructure13 - 16% operating marginMobile Networks 6 - 9% operating marginCloud and Network Services7 - 10% operating marginNokia TechnologiesOperating profit more than EUR 1.1 billionGroup common and otherApproximately EUR 300 million of operating expenses ADDITIONAL TOPICS Progress on Infinera acquisitionOn 27 June 2024, Nokia announced a definitive agreement under which Nokia will acquire Infinera, a global supplier of innovative open optical networking solutions and advanced optical semiconductors. The acquisition process continues to proceed as expected. On 13 September 2024, the applicable waiting period under the US pre-merger review expired and the Department of Justice decided not to investigate the planned transaction. On 1 October 2024, Infinera shareholders approved the planned acquisition. On 7 October 2024, Nokia and Infinera received approval from the Committee on Foreign Investment in the United States (CFIUS). During the fourth quarter Nokia received many of the outstanding required approvals for the deal. At this point approval from the European Union and Taiwan, along with contractual closing conditions, are the major items outstanding to proceed to closing. Assuming the current target timelines, Nokia and Infinera now expect the deal to close during the first quarter of 2025. Nokia exercised NSB call option to simplify ownership structure in China Nokia and its joint venture partner China Huaxin have been together reviewing the future ownership structure of Nokia Shanghai Bell (NSB). Following those discussions, Nokia exercised its call option, outlined in NSB’s shareholders' agreement, to initiate the process to become the sole shareholder by purchasing China Huaxin's approximately 50% share in NSB. This will allow Nokia to simplify its ownership structure in China while Nokia remains committed to continue serving the local market.Since the creation of the joint venture Nokia has recorded a liability on its balance sheet based on the estimated future cash settlement to acquire China Huaxin's ownership interest. The execution of the call option is subject to completing required steps under the shareholders' agreement. Managed Services business transferred from Cloud and Network Services into Mobile Networks in 2025Nokia has moved its Managed Services business into Mobile Networks (MN), effective 1 January 2025. The Managed Services business provides outsourced network management of multi-vendor RAN networks for operators and since 2021 has been part of our Cloud and Network Services (CNS) business group. Considering CNS is increasingly transitioning towards cloud-native software sales, 'as-a-service' product offerings and helping customers to monetize networks through API's, Nokia believes that this business is more aligned and fits better with its MN business. Based on 2024 results, this change is expected to lead to a transfer of approximately EUR 430 million of net sales and approximately EUR 40 million of comparable operating profit from CNS to MN. Nokia will provide recast financial information for 2024 for MN and CNS reflecting this change prior to Nokia's Q1 financial results. RISK FACTORS Nokia and its businesses are exposed to a number of risks and uncertainties which include but are not limited to: Competitive intensity, which is expected to continue at a high level as some competitors seek to take share;Changes in customer network investments related to their ability to monetize the network;Our ability to ensure competitiveness of our product roadmaps and costs through additional R&D investments;Our ability to procure certain standard components and the costs thereof, such as semiconductors;Disturbance in the global supply chain;Impact of inflation, increased global macro-uncertainty, major currency fluctuations, changes in tariffs and higher interest rates;Potential economic impact and disruption of global pandemics;War or other geopolitical conflicts, disruptions and potential costs thereof;Other macroeconomic, industry and competitive developments;Timing and value of new, renewed and existing patent licensing agreements with licensees;Results in brand and technology licensing; costs to protect and enforce our intellectual property rights; on-going litigation with respect to licensing and regulatory landscape for patent licensing;The outcomes of on-going and potential disputes and litigation;Our ability to execute, complete, successfully integrate and realize the expected benefits from our ongoing transactions;Timing of completions and acceptances of certain projects;Our product and regional mix;Uncertainty in forecasting income tax expenses and cash outflows, over the long-term, as they are also subject to possible changes due to business mix, the timing of patent licensing cash flow and changes in tax legislation, including potential tax reforms in various countries and OECD initiatives;Our ability to utilize our Finnish deferred tax assets and their recognition on our balance sheet;Our ability to meet our sustainability and other ESG targets, including our targets relating to greenhouse gas emissions; as well the risk factors specified under Forward-looking statements of this release, and our 2023 annual report on Form 20-F published on 29 February 2024 under Operating and financial review and prospects-Risk factors. FORWARD-LOOKING STATEMENTS Certain statements herein that are not historical facts are forward-looking statements. These forward-looking statements reflect Nokia's current expectations and views of future developments and include statements regarding: A) expectations, plans, benefits or outlook related to our strategies, projects, programs, product launches, growth management, licenses, sustainability and other ESG targets, operational key performance indicators and decisions on market exits; B) expectations, plans or benefits related to future performance of our businesses (including the expected impact, timing and duration of potential global pandemics, geopolitical conflicts and the general or regional macroeconomic conditions on our businesses, our supply chain, the timing of market changes or turning points in demand and our customers’ businesses) and any future dividends and other distributions of profit; C) expectations and targets regarding financial performance and results of operations, including market share, prices, net sales, income, margins, cash flows, cost savings, the timing of receivables, operating expenses, provisions, impairments, taxes, currency exchange rates, hedging, investment funds, inflation, product cost reductions, competitiveness, revenue generation in any specific region, and licensing income and payments; D) ability to execute, expectations, plans or benefits related to our ongoing transactions, investments and changes in organizational structure and operating model; E) impact on revenue with respect to litigation/renewal discussions; and F) any statements preceded by or including "anticipate", “continue”, “believe”, “envisage”, “expect”, “aim”, “will”, “target”, “may”, “would”, "see", “plan” or similar expressions. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control, which could cause our actual results to differ materially from such statements. These statements are based on management’s best assumptions and beliefs in light of the information currently available to them. These forward-looking statements are only predictions based upon our current expectations and views of future events and developments and are subject to risks and uncertainties that are difficult to predict because they relate to events and depend on circumstances that will occur in the future. Factors, including risks and uncertainties that could cause these differences, include those risks and uncertainties identified in the Risk Factors above. ANALYST WEBCAST Nokia's webcast will begin on 30 January 2025 at 11.30 a.m. Finnish time (EET). The webcast will last approximately 60 minutes.The webcast will be a presentation followed by a Q&A session. Presentation slides will be available for download at www.nokia.com/financials.A link to the webcast will be available at www.nokia.com/financials.Media representatives can listen in via the link, or alternatively call +1-412-317-5619. FINANCIAL CALENDAR Nokia plans to publish its "Nokia in 2024" annual report, which includes the review by the Board of Directors and the audited annual accounts, during the week starting on 10 March 2025.Nokia plans to publish its first quarter 2025 results on 24 April 2025.Nokia's Annual General Meeting 2025 is planned to be held on 29 April 2025.Nokia plans to publish its second quarter and half year 2025 results on 24 July 2025.Nokia plans to publish its third quarter and January-September 2025 results on 23 October 2025. About Nokia At Nokia, we create technology that helps the world act together. As a B2B technology innovation leader, we are pioneering networks that sense, think and act by leveraging our work across mobile, fixed and cloud networks. In addition, we create value with intellectual property and long-term research, led by the award-winning Nokia Bell Labs. With truly open architectures that seamlessly integrate into any ecosystem, our high-performance networks create new opportunities for monetization and scale. Service providers, enterprises and partners worldwide trust Nokia to deliver secure, reliable and sustainable networks today – and work with us to create the digital services and applications of the future. Inquiries: NokiaCommunicationsPhone: +358 10 448 4900Email: press.services@nokia.comMaria Vaismaa, Global Head of External Communications NokiaInvestor RelationsPhone: +358 931 580 507Email: investor.relations@nokia.com 2024_Q4_Nokia_Earnings_release_English

Nokia Corporation Financial Report for Q4 and full year 2024

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