Nordic Semiconductor

Investor Presentation • Oct 20, 2022

Quarterly Presentation Q3 2022

October 20, 2022

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This presentation includes and is based, inter alia, on forward-looking information and contains statements regarding the future in connection with The Company's growth initiatives, profit figures, outlook, strategies and objectives. All forward-looking information and statements in this presentation are based on current expectations, estimates and projections about global economic conditions, the economic conditions of the regions and industries that are major markets for The Company. These expectations, estimates and projections are generally identifiable by statements containing words such as "expects", "believes", "estimates" or similar expressions.

Important factors may lead to actual profits, results and developments deviating substantially from what has been expressed or implied in such statements. Although The Company believes that its expectations and the presentation are based upon reasonable assumptions, it can give no assurance that those expectations will be achieved or that the actual results will be as set out in the presentation.

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This presentation was prepared in connection with the Q3 results released on October 20, 2022. Information contained herein will not be updated. The following slides should also be read and considered in connection with the information given orally during the presentation.

Record results in turbulent environment

• Revenue of USD 202 million (+36%)
• Gross margin 57.3%
• EBITDA of USD 60.1 million
• Q4 outlook continues to be impacted by wafer supply
• Revenue USD 190-210 million
• Gross margin >54%

Revenue, gross profit and EBITDA (USDm)

Order backlog has been trimmed

Backlog (USDm)

• Order backlog better aligned with delivery capabilities
• Actively worked with end-customers and distributors to adjust order volumes through 2022
• Bluetooth orders and forecasts from tier-1s remain firm
• Softening in the long-tail market, particularly from SMEs

Steady and high certification market share Significantly increasing value per design

Bluetooth Low Energy end-product certifications, last 12 months

End-product certifications, Nordic Q3 2022 112 designs 40 % mkt share 58% market share in non-consumer devices

Other

Qualcomm Infineon Dialog TI Telink SiLabs Nordic Mkt share

Nordic trends toward higher ASP devices and higher volume applications

⁵ *Source: DNB Markets/FCC

New customer-product launches in Q3

Elevated to CSA Board & Promoter Member

• 'Matter' will ensure interoperability between smart home devices
• Nordic one of few companies in position to influence the Matter standard
• Nordic ICs will support Matter 1.0 wireless connectivity with its nRF52840 and nRF5340 SoCs and the new nRF7002 Wi-Fi 6 Companion IC
• Offering complete support for developing a 'Matter' device through the nRF Connect SDK

Nordic expands into Wi-Fi nRF70 Series – enabling IoT

• Dual band, 2.4 GHz and 5 GHz
• QFN 6x6mm package
• ~US\$ 2 in high volumes
• In production: Q4 2022
• Low Power Efficient radio power saving schemes
• Robust performance in dense congested environments
• Secure Cutting-edge security protocols

Wi-Fi completes the portfolio

Low-power products across three leading connectivity standards

Strong product and solutions portfolio…		…for short-, medium- and long-range connectivity technologies
+ +	Low-power integrated circuits (ICs) Embedded software	Short-range IoT Bluetooth LE, 802.15.4/Thread, Zigbee and 2.4GHz RF SoCs	Medium-range IoT Acquired leading Wi-Fi team and Wi-Fi assets in 2020	Long-range cIoT Multi-mode cellular LTE-M/NB-IoT Modules
	Advanced development tools

Financials Pål Elstad, CFO

Revenue growth of 36% year-on-year

Quarterly revenue (USDm)

• Bluetooth +44 % to USD 179 million
• Cellular IoT +61 % to USD 9 million
• Proprietary -29 % to USD 13 million

Bluetooth-driven growth

Cellular IoT revenue (USDm) Quarterly

Cellular IoT

Cellular IoT revenue last 12 months (USDm)

• Large base of ~250 projects, with several beginning to gain commercial traction
• Increased uncertainty regarding project timing and customers' financing in current economic climate

Higher revenue growth in non-consumer

Group			Consumer	Industrial		Healthcare		Others
USDm 202.1		126.2	USDm	USDm 51.8		USDm 14.4		USDm 8.9
+36% y-o-y	+1% q-o-q	+21% y-o-y	+0% q-o-q	+61% y-o-y	+7% q-o-q	+121% y-o-y	-14% q-o-q	+78% y-o-y	+15% q-o-q

5	5	6	8	9
Q3'21	Q4'21	Q1'22	Q2'22	Q3'22

Tier-1s are taking a larger share

Bluetooth revenue composition (USDm)

• Top-10 accounting for 45% of revenue in Q3'22 isolated
• Shift in revenue composition with significantly increased sales to tier-1 customers in the US and Europe
• Relatively lower sales to SMEs in other regions

Strong gross margin

Continued high margin, reflecting positive effects of both product and customer mix

Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022

Operating model performance Q3 2022

Gross margin 57.3%		Q3 2022	Q3 2021	Δ
R&D short-range 11.4%	Revenue	USD 202.1m	USD 148.5m	+36.1%	Volume, price and product mix
R&D cellular IoT 5.7% R&D Wi-Fi 1.8%	Gross margin	57.3% USD 115.7m	53.1% USD 78.8m	+4.2pp	Price, product and customer mix
SG&A 8.6%	R&D short-range	11.4% USD 23.1m	14.1% USD 20.9m	-2.7pp	Continuing to invest:
	R&D cellular IoT	5.7% USD 11.5m	7.7% USD 11.5m	-2.0pp	Total R&D up from USD 35.7m to 38.2m, but down from 24.1% to 18.9% of revenue
EBITDA	R&D Wi-Fi	1.8% USD 3.6m	2.2% USD 3.3m	-0.4pp	helped by favorable fx
29.8%	SG&A	8.6% USD 17.4m	9.9% USD 14.8m	-1.3pp	Operational leverage, favorable fx
	EBITDA	29.8% USD 60.1m	19.1% USD 28.3m	+10.7pp	EBITDA margin >> long-term target

Investing for growth

Cash cost increase mainly due to increased number of employees, partly offset by favorable foreign exchange rates

Salary:

• Number of employees increased by 19.8% to 1,384 over the past last 12 months
• Fx changes reduced payroll cost by USD 6m compared to Q3'21 rates

Other OPEX:

Varying with pace of product introductions

Other Opex Salary

Capex intensity remains low

Capex (USDm)

• Capex of USD 7.2 million in Q3
• Overall capex intensity below 3% for the full year 2022

Continued strong cash position

Cash position and Cash Flow Q3 2022 (USDm)

• Operating cash flow of USD 44.9 m in Q3
• Increasing net working capital mainly due to accounts receivables and inventory
• NWC/Revenue LTM of 24.2%
• Continued disciplined cash strategy
• Solid cash balance at 2.3x last 12 months R&D-spend
• Unused sustainability linked RCF of USD 150 million

Summary and Outlook Svenn-Tore Larsen, CEO

Q4 outlook on par with Q3

Q4 2022 guidance

Revenue	Gross margin
USDm 190-210	>54%
+11% to +23% -6% to +4% y-o-y q-o-q

• Bluetooth demand exceeds supply
• Guidance reflects committed wafer allocations for Q4 2022 – the revenue level will depend on timing of wafer deliveries in Q4

Acknowledging the market uncertainty Trade tensions adding to recession fears

• Market outlook differing across verticals, geographies and customer size
• Booked orders and order indications from our broad base of tier-1 customers remain firm
• Some order cancellations from smaller customers in consumer verticals

Outlook

Revenue (USDm)

• USD 1bn revenue target in 2023
• Requires additional Bluetooth wafer supplies
• Aiming for 25%+ annual growth beyond 2023
• Builds on assumption of continued economic growth and increased demand from both consumers and industrials
• Capital light business model with flexibility to adapt to changing economic conditions

* Based on mid-point of revenue guidance for Q4'22