Nokia Corporation (NYSE:NOK) Q2 2020 Earnings Conference Call - Final Transcript

Jul 31, 2020 • 08:00 am ET

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Nokia Corporation (NYSE:NOK) Q2 2020 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Hello and welcome to the Nokia's Second Quarter 2020 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to -- Mr. Shimao, you may begin.

Executive
Matt Shimao

Okay. Wonderful. Ladies and gentlemen, welcome to Nokia's second quarter conference call. I'm Matt Shimao, Head of Nokia Investor Relations. Rajeev Suri, President and CEO of Nokia; and Kristian Pullola, CFO of Nokia are here with me via conference call today.

During this call, we'll be making forward-looking statements regarding the future business and financial performance of Nokia and its industry. 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 such as general economic and industry conditions as well as internal operating factors. We have identified such risks in more detail in the section titled operating and financial review and prospects, risk factors of our 2019 Annual Report on Form 20-F, our financial report for Q1, published on April 30th on Form 6-K as well as our other filings with the US Securities and Exchange Commission.

Please note that our results release, the complete interim report with tables and the presentation on our website include non-IFRS results information, in addition to the reported results information. Our complete financial report with tables available on our website includes a detailed explanation of the content of the non-IFRS information and a reconciliation between the non-IFRS and the reported information.

With that, Rajeev, over to you.

Executive
Rajeev Suri

Thanks, Matt, and thanks to all of you for joining today. I hope you are continuing to stay well and safe amid the COVID-19 pandemic. I'm pleased to say that our second quarter is another proof point that we continue to make strong and meaningful improvements in our business performance.

We have been consistent in saying that we are taking the right steps to deliver progressive improvement over the course of this year and in my view we remain on the right path to deliver on that promise. In fact we went into the second quarter with some concern given the ongoing pandemic, but we ended being quite pleased with where we landed.

Consider the following highlights. First year-on-year profitability was up, non-IFRS diluted earnings per share was EUR0.06 up EUR0.01. Nokia level non-IFRS operating margin was up 40 basis points. Nokia level gross margin was back to around 40%. Networks gross margin was up 450 basis points, following a 350 basis point gain in Q1 and Mobile Access gross margin was up significantly.

Second, we saw significant improvement in cash generation. We ended Q2 with EUR1.6 billion in net cash up from EUR1.3 billion in the previous quarter and total cash was EUR7.5 billion. Free cash flow in the quarter was positive EUR265 million versus negative EUR1 billion in Q2, 2019.

Given our strong first half improvement, we now expect free cash flow for full year 2020 to be