Nokia Corp Q4 and 2022-A solid end to a year of acceleration
A solid end to a year of acceleration.
- Q4 net sales grew 11% y-o-y in constant currency (16% reported). Full year net sales grew 6% (12% reported).
- In Q4 Network Infrastructure grew net sales 14% in constant currency with all units contributing. Mobile Networks grew 3% with a meaningful shift in regional mix in the quarter while Cloud and Network Services grew 5%. Nokia Technologies grew 82% as a long-term licensee exercised an option leading to higher revenue recognition in Q4.
- Enterprise net sales grew 49% y-o-y in constant currency in Q4 (55% reported); 21% in full year 2022 (27% reported).
- Q4 comparable gross margin +340bps y-o-y to 43.5% (reported +330bps to 42.8%), with 240bps of expansion related to the Nokia Technologies option exercise. Comparable operating margin +130bps to 15.5% (reported +30bps to 11.8%).
- Q4 operating margin improved y-o-y due to the combination of the exercised option in Nokia Technologies and stronger margin in Network Infrastructure offsetting declines in Mobile Networks (regional mix shift) and greater losses in Group Common and Other primarily related to the strong venture fund performance in the prior year.
- Re-recognized deferred tax asset of EUR 2.5bn in Q4 which boosted reported net profit and EPS.
- Q4 comparable diluted EPS of EUR 0.16; reported diluted EPS of EUR 0.56. Full year EUR 0.44 and EUR 0.75 respectively.
- Q4 free cash flow positive EUR 0.4bn, net cash balance of EUR 4.8bn. Full year free cash flow EUR 0.8bn.
- Board proposes dividend authorization of EUR 0.12 per share.
- Nokia expects 2023 full year net sales of between EUR 24.9bn to 26.5bn, comparable operating margin between 11.5 to 14.0% and Free Cash Flow conversion from comparable operating profit of 20 to 50%.
This is a summary of the Nokia Corporation Financial Report for Q4 and full year 2022 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 report with tables.
Pekka Lundmark, President and CEO, on q4 and full year 2022 results
“We said at the start of 2022 that it would be a year of acceleration and we delivered what we promised. The Nokia team did a great job navigating geopolitical, economic and supply challenges, successfully executed our strategy and delivered a strong full year performance. Our constant currency full year net sales growth accelerated to 6% and we maintained a stable comparable operating margin of 12.5% which is a good result considering one-off benefits we had in 2021.
One of our strategic priorities is to broaden our customer base and grow in Enterprise and I’m delighted we achieved 21% net sales growth in constant currency for the full year with 49% growth in Q4. There were important webscale wins in 2022 with momentum also continuing to build in our private wireless business where we added 45 customers in Q4.
The highlight of the fourth quarter was our stellar Network Infrastructure performance, which grew net sales 14% in constant currency with significant operating margin expansion. Notably, we saw a strong acceleration in both our Optical Networks and IP Networks businesses with net sales growing 21% and 11% respectively in constant currency. Mobile Networks delivered 3% constant currency growth in Q4 with operating margin declining year-on-year, as expected due to changes in regional mix. On a full year basis, Mobile Networks’ 3% net sales growth and 90bps higher operating margin is encouraging after a successful reset the previous year. We continue to see solid demand trends in Network Infrastructure and Mobile Networks as we look ahead into 2023.
In Cloud and Network Services, we saw good Q4 net sales growth of 5% in constant currency and continued improvement in gross margin, which increased 200bps year-on-year. Increased investments into private wireless and Software-as-a-Service meant operating margin was largely stable. This is evidence that the ongoing optimization of our portfolio is bearing fruit and positioning us for continued profitable growth in the future.
In Nokia Technologies, we remain in two litigation/renewal discussions. Several court rulings have validated our position giving us confidence in our approach to prioritize the value of our portfolio over achieving specific timelines. At the end of the year, a long-term licensee exercised an option to extend its license in effect into perpetuity. This meant we recognized all outstanding revenue for this license in the fourth quarter. More recently, I was pleased to see us enter into a new multi-year patent license agreement with Samsung, which underscores Nokia Technologies’ strong patent portfolio and supports its ability to deliver stable operating profit over the long-term.
Looking forward to 2023, while we are mindful of the uncertain economic outlook, demand remains robust. We expect another year of growth and we are targeting full year net sales of between EUR 24.9bn and EUR 26.5bn which implies between 2% and 8% growth in constant currency. We are also targeting a comparable operating margin in the range of 11.5% to 14.0%. Whilst this growth means we have another year of working capital build constraining our free cash flow conversion from comparable operating profit to a range of 20% to 50%, we expect significantly stronger cash flow in 2024. Due to our confidence in our long-term outlook and strong balance sheet position the Board is proposing an increase in the dividend to EUR 0.12 per share.”
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