Nokia provides recast comparative segment results for 2020 reflecting new financial reporting structure
Nokia Corporation
Stock Exchange Release
11 March 2021 at 13:10 EET
Nokia today provides recast comparative segment financial information on a quarterly and annual basis for 2020, reflecting the previously announced organizational changes.
Changes in reporting structure, effective from 1 January 2021
On 29 October 2020, Nokia announced the first phase of its new strategy, outlining high-level strategic principles alongside a new operating model designed to better position the company for changing markets and align with customer needs. The new operating model is optimized for better accountability and transparency, increased simplicity and improved cost-efficiency. On 16 December 2020, Nokia provided an update on its new strategic focus areas and operating model together with its assumptions for its four new business groups and Group Common and Other in 2021 and over the longer term.
Accordingly, Nokia has revised its financial reporting structure to reflect its strategy, organizational structure and the way it evaluates operational performance and allocates resources. Reclassifications have been made in order to reflect the new organizational structure of the company.
The new model, effective from 1 January 2021, consists of four discrete business groups responsible for their own P&Ls and aligned with customer buying behavior: (i) Mobile Networks, (ii) Network Infrastructure, (iii) Cloud and Network Services and (iv) Nokia Technologies. As of 1 January 2021, these will also be the four reportable segments. In addition, Nokia will disclose segment-level data for Group Common and Other.
Within the new Network Infrastructure reportable segment, Nokia intends to provide net sales disclosure for the following businesses: (i) Fixed Networks, (ii) IP Networks, (iii) Optical Networks and (iv) Submarine Networks.
Nokia also intends to continue providing separate net sales disclosure for its different customer types: (i) Communication Service Providers, (ii) Enterprises and (iii) Licensees.
Changes from previous financial reporting structure to new financial reporting structure
The following seven product areas were reclassified into new reportable segments:
- Network management was reclassified to Mobile Networks from Nokia Software
- Submarine Networks was reclassified to Network Infrastructure from Group Common and Other
- Packet Core was reclassified to Cloud and Network Services from Networks
- Enterprise Solution Services was reclassified to Cloud and Network Services from Networks
- Managed Services was reclassified to Cloud and Network Services from Networks
- Network Cognitive Services was reclassified to Cloud and Network Services from Networks
- Digital Automation and Analytics & IoT was reclassified to Cloud and Network Services from Group Common and Other
To summarize these changes, the new business groups will be comprised as follows:
Mobile Networks is now comprised of Mobile Access from our previous Networks reportable segment, plus the following reclassifications:
Into Mobile Networks:
- Network management (from Nokia Software)
Out of Mobile Access from our previous Networks reportable segment:
- Enterprise Solution Services (to Cloud and Network Services)
- Managed Services (to Cloud and Network Services)
- Network Cognitive Services (to Cloud and Network Services)
Network Infrastructure is now comprised of Fixed Access, IP Routing, and Optical Networks from our previous Networks reportable segment, plus the following reclassifications:
Into Network Infrastructure:
- Submarine Networks (from Group Common and Other)
Out of IP Routing from our previous Networks reportable segment:
- Packet Core (to Cloud and Network Services)
Cloud and Network Services is now comprised of our previous Nokia Software business group, plus the following reclassifications:
Into Cloud and Network Services:
- Packet Core (from Networks)
- Enterprise Solution Services (from Networks)
- Managed Services (from Networks)
- Network Cognitive Services (from Networks)
- Digital Automation and Analytics & IoT (from Group Common and Other)
Out of our previous Nokia Software business group:
- Network management (to Mobile Networks)
Finally, Group Common and Other continues to include Radio Frequency Systems (RFS), and the following product areas were reclassified into our new business groups:
- Submarine Networks was reclassified to Network Infrastructure
- Digital Automation and Analytics & IoT was reclassified to Cloud and Network Services
Recast comparative segment financial information for 2020
To provide a basis for comparison, the following summarized tables present a recasting of Nokia’s segment financial information on an unaudited basis for all four quarters of 2020 separately, as well as for the full year 2020.
More detailed tables are available in Excel format attached to this stock exchange release and at www.nokia.com/financials.
| Mobile Networks (reported) | |||||||||
| Q1’20 | Q2’20 | Q3’20 | Q4’20 | Q1-Q4’20 | |||||
| EUR million | Reported | Reported | Reported | Reported | Reported | ||||
| Net sales | 2 345 | 2 424 | 2 448 | 3 180 | 10 397 | ||||
| Gross profit | 706 | 848 | 878 | 1 232 | 3 663 | ||||
| Gross margin % | 30.1% | 35.0% | 35.9% | 38.7% | 35.2% | ||||
| Operating profit/(loss) | (44) | 104 | 182 | 273 | 515 | ||||
| Operating margin % | (1.9)% | 4.3% | 7.4% | 8.6% | 5.0% | ||||
| Other segment items | |||||||||
| Depreciation and amortization | (104) | (105) | (101) | (103) | (413) | ||||
| Share of results of associated companies and joint ventures | (4) | 6 | (2) | 21 | 21 | ||||
| EBITDA | 56 | 215 | 281 | 397 | 949 | ||||
| Mobile Networks (comparable) | |||||||||
| Q1’20 | Q2’20 | Q3’20 | Q4’20 | Q1-Q4’20 | |||||
| EUR million | Comparable | Comparable | Comparable | Comparable | Comparable | ||||
| Net sales | 2 345 | 2 424 | 2 449 | 3 181 | 10 398 | ||||
| Gross profit | 729 | 875 | 871 | 1 256 | 3 732 | ||||
| Gross margin % | 31.1% | 36.1% | 35.6% | 39.5% | 35.9% | ||||
| Operating profit/(loss) | 15 | 183 | 206 | 415 | 818 | ||||
| Operating margin % | 0.6% | 7.5% | 8.4% | 13.0% | 7.9% | ||||
| Other segment items | |||||||||
| Depreciation and amortization | (87) | (88) | (85) | (87) | (347) | ||||
| Share of results of associated companies and joint ventures | (4) | 6 | (2) | 21 | 21 | ||||
| EBITDA | 98 | 277 | 289 | 523 | 1,186 | ||||
| Network Infrastructure (reported) | |||||||||
| Q1’20 | Q2’20 | Q3’20 | Q4’20 | Q1-Q4’20 | |||||
| EUR million | Reported | Reported | Reported | Reported | Reported | ||||
| Net sales(1) | 1 419 | 1 545 | 1 793 | 1 979 | 6 736 | ||||
| Gross profit | 449 | 523 | 635 | 685 | 2 292 | ||||
| Gross margin % | 31.6% | 33.9% | 35.4% | 34.6% | 34.0% | ||||
| Operating profit/(loss) | (125) | (49) | 118 | (102) | (158) | ||||
| Operating margin % | (8.8)% | (3.2)% | 6.6% | (5.2)% | (2.3)% | ||||
| Other segment items | |||||||||
| Depreciation and amortization | (126) | (131) | (126) | (124) | (508) | ||||
| Share of results of associated companies and joint ventures | 0 | 0 | (1) | 1 | (1) | ||||
| EBITDA | 1 | 82 | 243 | 23 | 349 | ||||
| 1Fixed Networks net sales of EUR 350 million in Q1’20, EUR 439 million in Q2’20, EUR 453 million in Q3’20, EUR 517 million in Q4’20 and EUR 1 759 million in Q1-Q4’20. IP Networks net sales of EUR 542 million in Q1’20, EUR 611 million in Q2’20, EUR 670 million in Q3’20, EUR 761 million in Q4’20 and EUR 2 585 million in Q1-Q4’20. Optical Networks net sales of EUR 394 million in Q1’20, EUR 363 million in Q2’20, EUR 463 million in Q3’20, EUR 474 million in Q4’20 and EUR 1 695 million in Q1-Q4’20. Submarine Networks net sales of EUR 132 million in Q1’20, EUR 131 million in Q2’20, EUR 206 million in Q3’20, EUR 227 million in Q4’20 and EUR 697 million in Q1-Q4’20. | |||||||||
| Network Infrastructure (comparable) | |||||||||
| Q1’20 | Q2’20 | Q3’20 | Q4’20 | Q1-Q4’20 | |||||
| EUR million | Comparable | Comparable | Comparable | Comparable | Comparable | ||||
| Net sales(1) | 1 419 | 1 545 | 1 793 | 1 980 | 6 736 | ||||
| Gross profit | 461 | 537 | 648 | 715 | 2 361 | ||||
| Gross margin % | 32.5% | 34.8% | 36.1% | 36.1% | 35.1% | ||||
| Operating profit/(loss) | (31) | 66 | 212 | 211 | 457 | ||||
| Operating margin % | (2.2)% | 4.3% | 11.8% | 10.7% | 6.8% | ||||
| Other segment items | |||||||||
| Depreciation and amortization | (50) | (51) | (50) | (50) | (200) | ||||
| Share of results of associated companies and joint ventures | 0 | 0 | (1) | 1 | (1) | ||||
| EBITDA | 19 | 117 | 261 | 262 | 656 | ||||
| 1Fixed Networks net sales of EUR 350 million in Q1’20, EUR 439 million in Q2’20, EUR 453 million in Q3’20, EUR 517 million in Q4’20 and EUR 1 759 million in Q1-Q4’20. IP Networks net sales of EUR 542 million in Q1’20, EUR 611 million in Q2’20, EUR 670 million in Q3’20, EUR 761 million in Q4’20 and EUR 2 585 million in Q1-Q4’20. Optical Networks net sales of EUR 394 million in Q1’20, EUR 363 million in Q2’20, EUR 463 million in Q3’20, EUR 474 million in Q4’20 and EUR 1 695 million in Q1-Q4’20. Submarine Networks net sales of EUR 132 million in Q1’20, EUR 131 million in Q2’20, EUR 206 million in Q3’20, EUR 227 million in Q4’20 and EUR 697 million in Q1-Q4’20. | |||||||||
| Cloud and Network Services (reported) | |||||||||
| Q1’20 | Q2’20 | Q3’20 | Q4’20 | Q1-Q4’20 | |||||
| EUR million | Reported | Reported | Reported | Reported | Reported | ||||
| Net sales | 744 | 718 | 663 | 962 | 3 087 | ||||
| Gross profit | 240 | 229 | 117 | 259 | 845 | ||||
| Gross margin % | 32.3% | 31.9% | 17.6% | 26.9% | 27.4% | ||||
| Operating profit/(loss) | (69) | (54) | (148) | (63) | (334) | ||||
| Operating margin % | (9.3)% | (7.5)% | (22.3)% | (6.5)% | (10.8)% | ||||
| Other segment items | |||||||||
| Depreciation and amortization | (38) | (37) | (35) | (35) | (146) | ||||
| Share of results of associated companies and joint ventures | 1 | 1 | 2 | 2 | 5 | ||||
| EBITDA | (30) | (16) | (111) | (26) | (183) | ||||
| Cloud and Network Services (comparable) | |||||||||
| Q1’20 | Q2’20 | Q3’20 | Q4’20 | Q1-Q4’20 | |||||
| EUR million | Comparable | Comparable | Comparable | Comparable | Comparable | ||||
| Net sales | 744 | 718 | 663 | 962 | 3 087 | ||||
| Gross profit | 255 | 258 | 130 | 374 | 1 016 | ||||
| Gross margin % | 34.3% | 35.9% | 19.6% | 38.9% | 32.9% | ||||
| Operating profit/(loss) | (39) | (6) | (119) | 97 | (67) | ||||
| Operating margin % | (5.2)% | (0.8)% | (17.9)% | 10.1% | (2.2)% | ||||
| Other segment items | |||||||||
| Depreciation and amortization | (30) | (29) | (28) | (28) | (115) | ||||
| Share of results of associated companies and joint ventures | 1 | 1 | 2 | 2 | 5 | ||||
| EBITDA | (8) | 24 | (89) | 127 | 53 | ||||
| Nokia Technologies (reported) | |||||||||
| Q1’20 | Q2’20 | Q3’20 | Q4’20 | Q1-Q4’20 | |||||
| EUR million | Reported | Reported | Reported | Reported | Reported | ||||
| Net sales | 347 | 341 | 331 | 382 | 1 402 | ||||
| Gross profit | 345 | 339 | 327 | 380 | 1 392 | ||||
| Gross margin % | 99.4% | 99.4% | 98.8% | 99.5% | 99.3% | ||||
| Operating profit/(loss) | 280 | 271 | 263 | 306 | 1 120 | ||||
| Operating margin % | 80.7% | 79.5% | 79.5% | 80.1% | 79.9% | ||||
| Other segment items | |||||||||
| Depreciation and amortization | (10) | (10) | (10) | (10) | (39) | ||||
| Share of results of associated companies and joint ventures | 0 | 0 | 1 | 0 | 1 | ||||
| EBITDA | 290 | 281 | 274 | 316 | 1,160 | ||||
| Nokia Technologies (comparable) | |||||||||
| Q1’20 | Q2’20 | Q3’20 | Q4’20 | Q1-Q4’20 | |||||
| EUR million | Comparable | Comparable | Comparable | Comparable | Comparable | ||||
| Net sales | 347 | 341 | 331 | 382 | 1 402 | ||||
| Gross profit | 345 | 339 | 328 | 380 | 1 393 | ||||
| Gross margin % | 99.4% | 99.4% | 99.1% | 99.5% | 99.4% | ||||
| Operating profit/(loss) | 280 | 272 | 264 | 307 | 1 123 | ||||
| Operating margin % | 80.7% | 79.8% | 79.8% | 80.4% | 80.1% | ||||
| Other segment items | |||||||||
| Depreciation and amortization | (10) | (10) | (10) | (10) | (39) | ||||
| Share of results of associated companies and joint ventures | 0 | 0 | 1 | 0 | 1 | ||||
| EBITDA | 290 | 282 | 275 | 317 | 1 163 | ||||
| Group Common and Other (reported) | |||||||||
| Q1’20 | Q2’20 | Q3’20 | Q4’20 | Q1-Q4’20 | |||||
| EUR million | Reported | Reported | Reported | Reported | Reported | ||||
| Net sales | 68 | 75 | 67 | 59 | 269 | ||||
| Gross profit | (4) | 2 | 5 | (5) | (1) | ||||
| Gross margin % | (5.9)% | 2.7% | 7.5% | (8.5)% | (0.4)% | ||||
| Operating profit/(loss) | (118) | (103) | (65) | 28 | (258) | ||||
| Operating margin % | (173.5)% | (137.3)% | (97.0)% | 47.5% | (95.9)% | ||||
| Other segment items | |||||||||
| Depreciation and amortization | (7) | (7) | (6) | (6) | (26) | ||||
| Share of results of associated companies and joint ventures | (1) | 0 | 0 | (4) | (5) | ||||
| EBITDA | (112) | (96) | (59) | 30 | (237) | ||||
| Group Common and Other (comparable) | |||||||||
| Q1’20 | Q2’20 | Q3’20 | Q4’20 | Q1-Q4’20 | |||||
| EUR million | Comparable | Comparable | Comparable | Comparable | Comparable | ||||
| Net sales | 68 | 75 | 67 | 59 | 269 | ||||
| Gross profit | (2) | 6 | 5 | (2) | 7 | ||||
| Gross margin % | (2.9)% | 8.0% | 7.5% | (3.4)% | 2.6% | ||||
| Operating profit/(loss) | (108) | (91) | (77) | 26 | (251) | ||||
| Operating margin % | (158.8)% | (121.3)% | (114.9)% | 44.1% | (93.3)% | ||||
| Other segment items | |||||||||
| Depreciation and amortization | (6) | (6) | (6) | (6) | (24) | ||||
| Share of results of associated companies and joint ventures | (1) | 0 | 0 | (4) | (5) | ||||
| EBITDA | (103) | (85) | (71) | 28 | (232) | ||||
| Nokia Group (reported) | |||||||||
| Q1’20 | Q2’20 | Q3’20 | Q4’20 | Q1-Q4’20 | |||||
| EUR million | Reported | Reported | Reported | Reported | Reported | ||||
| Net sales | 4 913 | 5 092 | 5 294 | 6 553 | 21 852 | ||||
| Gross profit | 1 736 | 1 942 | 1 962 | 2 553 | 8 193 | ||||
| Gross margin % | 35.3% | 38.1% | 37.1% | 39.0% | 37.5% | ||||
| Operating profit/(loss) | (76) | 170 | 350 | 441 | 885 | ||||
| Operating margin % | (1.5)% | 3.3% | 6.6% | 6.7% | 4.0% | ||||
| Other segment items | |||||||||
| Depreciation and amortization | (285) | (290) | (279) | (279) | (1 132) | ||||
| Share of results of associated companies and joint ventures | (4) | 6 | 0 | 20 | 22 | ||||
| EBITDA | 205 | 466 | 629 | 740 | 2 039 | ||||
| Nokia Group (comparable) | |||||||||
| Q1’20 | Q2’20 | Q3’20 | Q4’20 | Q1-Q4’20 | |||||
| EUR million | Comparable | Comparable | Comparable | Comparable | Comparable | ||||
| Net sales | 4 914 | 5 093 | 5 294 | 6 554 | 21 854 | ||||
| Gross profit | 1 787 | 2 017 | 1 981 | 2 724 | 8 509 | ||||
| Gross margin % | 36.4% | 39.6% | 37.4% | 41.6% | 38.9% | ||||
| Operating profit/(loss) | 116 | 423 | 486 | 1 056 | 2 081 | ||||
| Operating margin % | 2.4% | 8.3% | 9.2% | 16.1% | 9.5% | ||||
| Other segment items | |||||||||
| Depreciation and amortization | (183) | (184) | (178) | (180) | (725) | ||||
| Share of results of associated companies and joint ventures | (4) | 6 | 0 | 20 | 22 | ||||
| EBITDA | 295 | 613 | 664 | 1 256 | 2 828 | ||||
Illustrative recast of Nokia Software to Cloud and Network Services
The reclassifications affected our new Cloud and Network Services business group particularly significantly, and therefore we are providing an illustrative bridge. The comparable operating margin for our previous Nokia Software reportable segment was 19.2% in 2020, whereas the comparable operating margin for Cloud and Network Services was -2.2% in 2020. This was attributable to reclassifying Packet Core, Enterprise Solution Services, Managed Services, and Network Cognitive Services to Cloud and Network Services from our previous Networks reportable segment, as well as reclassifying Digital Automation and Analytics & IoT to Cloud and Network Services from Group Common and Other. In addition, Network Management was reclassified to Mobile Networks from our previous Nokia Software reportable segment.
Please refer to the PDF attached to this release.
About Nokia
We create the critical networks and technologies to bring together the world’s intelligence, across businesses, cities, supply chains and societies.
With our commitment to innovation and technology leadership, driven by the award-winning Nokia Bell Labs, we deliver networks at the limits of science across mobile, infrastructure, cloud, and enabling technologies.
Adhering to the highest standards of integrity and security, we help build the capabilities we need for a more productive, sustainable and inclusive world.
For our latest updates, please visit us online www.nokia.com and follow us on Twitter @nokia.
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Forward-looking statements
It should be noted that Nokia and its businesses are exposed to various risks and uncertainties and 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 or benefits related to our strategies, growth management and operational key performance indicators; B) expectations, plans or benefits related to future performance of our businesses (including the expected impact, timing and duration of that impact of COVID-19 on our businesses, our supply chain and our customers’ businesses) and any future dividends including timing and qualitative and quantitative thresholds associated therewith; C) expectations and targets regarding financial performance, cash generation, results, the timing of receivables, operating expenses, taxes, currency exchange rates, hedging, cost savings, product cost reductions and competitiveness, as well as results of operations including targeted synergies, better commercial management and those results related to market share, prices, net sales, income and margins; D) expectations, plans or benefits related to changes in organizational and operational structure; E) expectations regarding competition within our market, market developments, general economic conditions and structural and legal change globally and in national and regional markets, such as China; F) timing of the deliveries of our products and services, including our short term and longer term expectations around the rollout of 5G, investment requirements with such rollout, and our ability to capitalize on such rollout; G) expectations regarding restructurings, investments, capital structure optimization efforts, uses of proceeds from transactions, acquisitions and divestments and our ability to achieve the financial and operational targets set in connection with any such restructurings, investments, capital structure optimization efforts, divestments and acquisitions, including our current cost savings program; H) expectations, plans or benefits related to future capital expenditures, reduction of support function costs, temporary incremental expenditures or other R&D expenditures to develop or rollout software and other new products, including 5G, ReefShark and increased digitalization; I) expectations regarding our customers’ future actions, including our customers’ capital expenditure constraints and our ability to satisfy customer’s needs and retain their business; and J) statements preceded by or including “believe”, “expect”, “expectations”, “deliver”, “maintain”, “strengthen”, “target”, “estimate”, “plan”, “intend”, “assumption”, “focus”, “continue”, “should”, “will” 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, but are not limited to: 1) our strategy is subject to various risks and uncertainties and we may be unable to successfully implement our strategic plans, sustain or improve the operational and financial performance of our business groups, correctly identify or successfully pursue business opportunities or otherwise grow our business; 2) general economic and market conditions, general public health conditions (including its impact on our supply chains) and other developments in the economies where we operate, including the timeline for the deployment of 5G and our ability to successfully capitalize on that deployment; 3) competition and our ability to effectively and profitably invest in existing and new high-quality products, services, upgrades and technologies and bring them to market in a timely manner; 4) our dependence on the development of the industries in which we operate, including the cyclicality and variability of the information technology and telecommunications industries and our own R&D capabilities and investments; 5) our dependence on a limited number of customers and large multi-year agreements, as well as external events impacting our customers including mergers and acquisitions and the possibility of our customers awarding business to our competitors; 6) our ability to manage and improve our financial and operating performance, cost savings, competitiveness and synergies generally, expectations and timing around our ability to recognize any net sales and our ability to implement changes to our organizational and operational structure efficiently; 7) our global business and exposure to regulatory, political or other developments in various countries or regions, including emerging markets and the associated risks in relation to tax matters and exchange controls, among others; 8) our ability to successfully realize the expectations, plans or benefits related to any future collaboration or business collaboration agreements and patent license agreements or arbitration awards, including income to be received under any collaboration, partnership, agreement or arbitration award; 9) our exposure to direct and indirect regulation, including economic or trade policies, and the reliability of our governance, internal controls and compliance processes to prevent regulatory penalties in our business or in our joint ventures; 10) our ability to successfully complete and capitalize on our order backlogs and continue converting our sales pipeline into net sales; and 11) the scope and duration of the COVID-19 impact on the global economy and financial markets as well as our customers, supply chain, product development, service delivery, other operations and our financial, tax, pension and other assets, and the shape of the economic recovery following the pandemic as well as the risk factors specified in our 2020 annual report on Form 20-F published on March 4, 2021 under “Operating and financial review and prospects-Risk factors” and in our other filings or documents furnished with the U.S. Securities and Exchange Commission. Other unknown or unpredictable factors or underlying assumptions subsequently proven to be incorrect could cause actual results to differ materially from those in the forward-looking statements. We do not undertake any obligation to publicly update or revise forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent legally required.
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