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Nokia Q1 2017 Results include Brand-licensing income. EUR 5.4bn sales, 40.8% gross margin. Details inside

Nokia has made it Q1 2017 Earnings report public. Highlights are very strong margin of 39.5% in Networks business, overall gross margin of 40.8% and inclusion of Brand-licensing income for the very first time. If you remember, HMD has started selling Nokia 6 in China already and Nokia gets royalty per phone from HMD for using its brand name.

Nokia Technologies has seen 25% year-on-year net sales increase in Q1 2017, primarily due to higher patent and brand licensing income. Nokia Networks has 6% year-on-year net sales decrease in Q1 2017, but the strong margin of 39.5% steals the show.

Here are the Nokia Q1 2017 results highlights,

FINANCIAL HIGHLIGHTS

  • Non-IFRS net sales in Q1 2017 of EUR 5.4bn (EUR 5.6bn in Q1 2016). Reported net sales in Q1 2017 of EUR 5.4bn (EUR 5.5bn in Q1 2016).
  • Non-IFRS diluted EPS in Q1 2017 of EUR 0.03 (EUR 0.03 in Q1 2016). Reported diluted EPS in Q1 2017 of negative EUR 0.08 (negative EUR 0.11 in Q1 2016).

Nokia’s Networks business

  • 6% year-on-year net sales decrease in Q1 2017 primarily due to IP/Optical Networks and Fixed Networks, with approximately flat net sales in Mobile Networks and Applications & Analytics.
  • Strong Q1 2017 gross margin of 39.5% and solid operating margin of 6.6%, supported by continued focus on operational excellence, with particularly strong performance in Mobile Networks.

Nokia Technologies

  • 25% year-on-year net sales increase in Q1 2017, primarily due to higher patent and brand licensing income and the acquisition of Withings, partially offset by the absence of licensing income related to certain expired agreements. Approximately one third of the net increase was due to non-recurring net sales related to a new license agreement.
  • 9% year-on-year operating profit increase in Q1 2017, primarily related to higher net sales, which were partially offset by higher operating expenses. The year-on-year increase in operating expenses was primarily due to the ramp-up of our digital health and digital media businesses and increased licensing-related litigation costs.

Q1 Results Table:

First quarter 2017 non-IFRS results. Refer to note 1, “Basis of Preparation”, in the Financial statement information section for further details 1

EUR million (except for EPS in EUR)

Q1’17

Q1’16

YoY change

Q4’16

QoQ change

Net sales – constant currency (non-IFRS)

 

 

(6)%

 

(21)%

Net sales (non-IFRS)

5 388

5 615

(4)%

6 731

(20)%

  Nokia’s Networks business

4 902

5 193

(6)%

6 086

(19)%

Ultra Broadband Networks

3 597

3 741

(4)%

4 346

(17)%

IP Networks and Applications

1 304

1 453

(10)%

1 740

(25)%

  Nokia Technologies

247

198

25%

309

(20)%

  Group Common and Other

254

235

8%

340

(25)%

Gross profit (non-IFRS)

2 196

2 228

(1)%

2 842

(23)%

Gross margin % (non-IFRS)

40.8%

39.7%

110bps

42.2%

(140)bps

Operating profit (non-IFRS)

341

345

(1)%

940

(64)%

  Nokia’s Networks business

324

337

(4)%

858

(62)%

Ultra Broadband Networks

301

230

31%

564

(47)%

IP Networks and Applications

23

107

(79)%

294

(92)%

  Nokia Technologies

116

106

9%

158

(27)%

  Group Common and Other

(99)

(99)

0%

(76)

 

Operating margin % (non-IFRS)

6.3%

6.1%

20bps

14.0%

(770)bps

Financial income and expenses (non-IFRS)

(81)

(67)

21%

(72)

13%

Taxes (non-IFRS)

(48)

(140)

(66)%

(204)

(76)%

Profit (non-IFRS)

203

139

46%

676

(70)%

Profit attributable to the equity holders of the parent (non-IFRS)

196

152

29%

672

(71)%

Non-controlling interests (non-IFRS)

6

(13)

 

4

50%

EPS, EUR diluted (non-IFRS)

0.03

0.03

0%

0.12

(75)%

 

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Nayan

Nayan has more than 10 years of experience of covering Technology and innovations. He is a big Nokia fan and Tech disruptions aficionado. He loves to review new cool gadgets and writing about Android, iOS, Gadgets and general Technology stuff. He has been associated with other well-known Tech sites WinCentral and GadgetOx since long.

He currently sports a Lumia 950 XL and Nexus 5X. Other interests include listening to Nu-Metal Hits and Kick-Boxing.
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