Nokia Corporation

Good morning, ladies and gentlemen. Welcome to Nokia's third quarter 2024 results call. I'm David Mulholland, head of Nokia Invest Relations, and today with me is Pekka Lundmark, our president and CEO, along with Marco Varenne, our CFO. Before we get started, a quick disclaimer. During this call, we will be making forward-looking statements regarding our future business, proposed transactions, 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 factor section of our annual report on Form 20F, which is available on our investor relations website. Within today's presentation, references to growth rates will mostly be on a constant currency basis, and we will refer to margins. It will be based on our comparable reporting. Please note that our Q3 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. In terms of the agenda for today's call, Pekka will go through our key messages for the quarter, Marco will then go into more detail on our financial performance, and then Pekka will make a few comments on particular highlights from Q3. We'll then move to Q&A. With that, let me hand over to Pekka.

Thank you, David, and thank you for all joining us today. Overall, the big picture is that the market is turning, but it's turning slowly. We see encouraging signs of market recovery in fixed networks and IP networks, but even if it is a bit slower than we expected earlier this year, and optical networks and mobile networks remain weaker. Fixed networks grew 9% in the quarter, while IP networks grew 6%. Regionally, both saw strong growth in North America, as the inventory digestion is now largely behind us, and operator deployment plans have solidified. Demand trends in NI continue to improve with solid order intake growth and a book to bill above one. We also saw a significant improvement in our gross margin with all business groups contributing. We continue to take quick action on our cost savings program and have now achieved 500 million euros in run rate gross cost savings. The quarter also saw good deal momentum. We signed a number of important deals across all business groups, and I'll touch on some of these later in the presentation. We are making progress expanding to non-CSP customers and are increasing investments to accelerate growth opportunities in areas like the fast-growing data center space in defense and in private wireless. We continue to have a year of strong free cash flow generating over 600 million euros in Q3, and 2 billion euros year to date. Our financial outlook for 2024 is unchanged, and we are currently tracking in the bottom half of the range for comparable operating profit and at the high end of the range for free cash flow conversion. Finally, we have made good progress on the Infinera acquisition, receiving antitrust and CFIUS approval in the US, along with Infinera shareholders approving the deal a couple of weeks ago. We continue to target to close the deal in H1 2025. And then over to you, Marko.

Okay, thank you, Pekka. And hello from my side as well, from the sunny Helsinki. I will start by discussing our overall group performance. And the net sales declined of 7% in quarter three was mainly driven by mobile networks. Importantly, however, we delivered significant improvement across margins, expanding by 490 basis points year-on-year. This was driven by a combination of improved product, regional mix, and action to reduce product costs. Our operating margin was solid at 10.5%. This was supported by a strong gross margin, continued cost control, and benefit from the reversal of gross allowances for certain trade receivables that was recognized in other operating income. We were pleased to report a strong free cash flow of over 600 million euros, which means we ended the quarter with a net cash balance of $5.5 billion. Now, as I turn to discuss each business group performance, it is worth noting that we have lowered the net sales assumption for each of the networks. Considering the slow pace of market recovery that Beck mentioned, we have also slightly adjusted the operating margin ranges. Network infrastructure sales showed modest year-on-year growth in the quarter after five quarters of decline. We were pleased to see growth in both fixed networks at 9% and IT networks at 6%. Optical networks declined by 15%. Optical was the last unit to start seeing the market slowdown and will likely be the last to recover. We were encouraged to see double-digit growth in all three businesses in North America. Gross margins improved mainly driven by favorable mix between businesses and also improvement within IT networks. Operator margin was 11.8%, and this is 100 basis points improvement driven by the higher gross margin, and a reduction in operating expenses. And based on our current view of the market and the slow pace of recovery, we now expect network infrastructure net sales to be down 3% to 6% this year, and operating margins to be between 10% and 12%. Mobile network sales declined by 17%. This was mainly driven by the decrease in India as 5G deployment remained elevated in the year-ago quarter. North America also declined, which reflects the impact of lower market share on customers. Increasingly, gross margin increased by 500 basis points as a result of improved product costs and favorable product and retail. Operating margin was 5.3%, an increase of 70 basis points, driven mainly by the improvement in interest margin, while operating expenses were largely stable. The revised outlook assumption for mobile network net sales is now a decline of 19% to 23%, with an operating margin of 5.7%. Cloud and network services sales declined by 4% in the quarter. This was mainly related to the divestment we did earlier this year. And adjusting for this, net sales would have been stable. Operating margin improved, whereby higher cross margin and lower operating margin. And our updated assumption for cloud and network services net sales is now declining of 47% with an operating margin between 6 to 8%. Moving next to Nokia technology, net sales grew 36% in Q3, mainly as a result of the smartphone licensing agreements signed previously this year. Nokia Technologies also saw higher sales from automotive and IoT, including premium with point-of-sale payment devices. We were also pleased to be able to know that we have now signed with two video streaming companies for use of our technology. This is an important step for us in this new growth area. And Nokia Technologies' annual net sales run rate has been gradually increased in the recent quarter, but continues to round to approximately 1.3 billion euros in the third quarter. Let's look at the net sales per week. You see here that India drove the maturity of the net sales decline in quarter three, as the region still saw the heavy 5G deployment in the Euro quarter, hence the 43% decline. Also worth noting was North America, where strong growth in network infrastructure was offset by mobile networks. Indeed, overall, America's core network infrastructure grew 21% in the quarter. Other regions showed declines with the exception of Europe, which showed 1% growth. However, this was entirely due to Nokia Technologies, which is fully reported in this region. And excluding Nokia Technologies, net sales in Europe would have declined by approximately 7%. And looking at our cash in quarter three, we saw another quarter of strong free cash flow at over 600 million euros. This was driven by solid operating profit and changes in working capital, which benefited from lower receivables. During the quarter, we also returned 360 million euros to shareholders through dividends and share buyback. And we ended the quarter with a net cash position of 5.5 billion euros. With that, let me hand it back over to Petko.