Nordic Semiconductor

Investor Presentation • Jul 13, 2020

Quarterly Presentation Q2 2020

July 13, 2020

Disclaimer

The following presentation is being made only to, and is only directed at, persons to whom such presentation may lawfully be communicated ("relevant persons"). Any person who is not a relevant person should not act or rely on this presentation or any of its contents.

This presentation does not constitute an offering of securities or otherwise constitute an invitation or inducement to any person to underwrite, subscribe for or otherwise acquire securities in Nordic Semiconductor ASA (The Company). The release, publication or distribution of this presentation in certain jurisdictions may be restricted by law, and therefore persons in such jurisdictions into which this presentation is released, published or distributed should inform themselves about, and observe, such restrictions.

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.

The Company is making no representation or warranty, expressed or implied, as to the accuracy, reliability or completeness of the presentation, and neither The Company nor any of its directors, officers or employees will have any liability to you or any other persons resulting from your use.

This presentation was prepared in connection with the Q2 results released on July 13, 2020. 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.

Continued growth through Q2 Revenue and gross margin above guidance

Revenue		Gross margin
USDm 88.5		51.9%
+25.5% y-o-y	+26.2% q-o-q	+0.6%p y-o-y	+0%p q-o-q

• Bluetooth revenue USD 70.1m (+25.1%)
• Proprietary revenue USD 16.4m (+29.8%)
• Cellular IoT revenue USD 1.2m
• Gross margin of 51.9%, with high volumes of advanced SoCs and continuous cost reductions on newly launched products

Increased order backlog

Backlog (USDm) 24 65 80 112 202 0 25 50 75 100 125 150 175 200 225 Q2 2016 Q2 2017 Q2 2018 Q2 2019 Q2 2020

• Order backlog of USD 201.9m, +80% compared to Q2 2019 and 64% above Q1 2020
• Accelerated technology adoption and broad-based demand growth across multiple markets
  • Backlog end-user split relatively consistent with H1 sales and spread evenly over H2
• ~80% of order backlog in Bluetooth Low Energy and multiprotocol solutions
  • Top 10 customers accounting for 40% of backlog
  • Continued high demand for advanced SoCs

Resilient organization and business model Nordic's value chain, illustrative

• Manageable impacts on the supply chain
• Built buffers of critical components to mitigate risk
• Close to normal operation for suppliers, distributors and OEMs/ODMs
• Distributor inventories remaining at moderate levels
• Employees gradually returning to a safe and secure workplace
• Maintained strict travel restrictions and limitations on physical meetings
• No Covid-19 cases

Continued high certification market share

Bluetooth Low Energy end-product certifications, LTM*

Continued strong developer kit shipments

Kit shipments

Total kit shipments +16% in 1H 2020

Shipped >43K kits

Significant contribution from nRF52840 kits

Cellular IoT nRF9160 kits accounting for 13%, compared to 7% in 1H'19 and 11% in 2H'19

H1 H2

New product launches in Q2

'Connected healthcare' high on the agenda

Continuing to expand the product offering

• Expands product offering with nRF52805 to open for new cost-constrained applications
• nRF52820 now in mass-production
• Ongoing strengthening and improvements across nRF52 Series

ICs nRF Connect SDK

• Version 1.3 released with production support for nRF52 Series
• Now also supports Thread, Zigbee and Bluetooth mesh
• Ease of use through updated Toolchain manager

Combining broadmarket and tier-1 customers

• Increased focus on platforms and their large and growing ecosystems
  • Project CHIP source code released using nRF52840 as one of the reference platforms
  • Version 8 of our Apple HomeKit SDK released
  • ZBOSS open initiative for Zigbee PRO Software

Cellular IoT progressing

Regulatory certifications overview:

• Gaining traction with new designs in predictive maintenance, healthcare, agriculture and more
• nRF9160 SiP shortlisted for IoT Awards in IoT Connectivity Solution category
• Launched unified nRF Connect SDK enabling development for Bluetooth LE and cellular IoT on same SDK and toolchain
• Adding Telstra in Australia to the carrier certification portfolio and regulatory certification in China (SRRC)

Case study: cellular IoT in predictive maintenance

• German IoT design house InnBlue and Italian tool manufacturer MT launches predictive maintenance monitoring solution for high-speed toolheads
• Sensors collecting data on toolhead spin speed, temperature, vibration, collisions and GPS location
• Uses Nordic's nRF9160 SiP

Case study: cellular IoT in medical devices

• ClearTrac Carepath® the first remote patient monitoring system for bladder dysfunction
• Uses Nordic's nRF9160 SiP
• 'Before the advent of low power cellular IoT wireless technologies that uses the world's cellular infrastructure 'out of the box', such a device was simply impossible'

Dr. Brent Laing, CareTrac Technologies

Financials Pål Elstad, CFO

Revenue growth of 25.5%

Quarterly revenue (USDm)

• Growth in all technologies
  • Bluetooth accounting for 79% and proprietary for 19% of total revenue
  • Continued strong revenue contribution from tier-1 customers
  • Cellular IoT revenue of USD 1.2 m in Q2, continue to expect volatile quarterly revenue

Revenue growth in all markets

Group	Consumer Electronics	Wearables	Building/ Retail	Healthcare	Others
USDm	USDm	USDm	USDm	USDm	USDm
88.5	29.5	14.1	18.8	14.0	10.1
+25.5%	+8.1%	+11.0%	+45.8%	+157.5%	-2.2%
+26.2%	+20.4%	+24.5%	+43.1%	+155.5%	-16.8%
y-o-y	y-o-y	y-o-y	y-o-y	y-o-y	y-o-y
q-o-q	q-o-q	q-o-q	q-o-q	q-o-q	q-o-q

• Consumer electronics, both Bluetooth and proprietary driven by home office
• Continued strong Wearables, with focus on high-end in China
• Accelerating technology adoption in Healthcare, in particular disease monitoring

Stable high gross margin in Q2

Gross margin (%)

Gross margin at 51.9%

• Mainly driven by continued favorable product mix, with a higher share of more complex high value SoCs
• Gross margin expected at 50-51% in Q3 2020
• Reiterating medium-term gross margin range of 48%-50% for the short-range business

18

Operating model performance Q2 2020

Gross margin 51.9%		Q2 2020	Q2 2019
R&D short range 13.2%	Revenue	USD 88.5m	USD 70.5m	+25.5%	Growth in all technologies
R&D cellular IoT	Gross margin	51.9% USD 45.9	51.2% USD 36.1	+0.6pp	Favorable product mix, lower unit costs
7.9% SG&A	R&D short-range	13.2% USD 11.7m	15.9% USD 11.2m	-2.7pp	Continued investments to capture growth opportunities
12.6%	R&D cellular IoT	7.9% USD 7.0m	7.9% USD 5.6m	+0pp	High activity during commercialization stage
EBITDA 18.1%	SG&A	12.6% USD 11.2m	13.5% USD 9.5m	-0.9pp	Lower activity due to covid-19 offset by equity comp. and more employees
	EBITDA	18.1% USD 16.0m	13.9% USD 9.8m	+4.2pp	Higher revenue and positive operating leverage

Cash operating expenses

• Cash cost increase of 1.0% Cash Opex* (USDm)
• Overall Q2 cost positively impacted by covid-19 and positive FX

Salary:

• Number of employees increased by 14.6% to 822 over the past last 12 months
• Growth in customer facing teams, both within R&D and Sales

Other Opex:

• Varies with pace of product introductions
• Sharpened focus on cost containment
• Reduced travelling

Other Opex Salary

Year-on-year EBITDA improvement

0%

5%

10%

15%

20%

25%

30%

EBITDA (USDm) and margin (%), quarterly EBITDA (USDm) and margin (%), LTM

Capex development

Capex (USDm)

• Capex of USD 5 million, increased test capacity
• Q3 2020 guidance at similar level

Continued strong cash position

Cash Flow Q2 2020 (USDm)

Operating cash flow of USD 5.3m

NWC/LTM Revenue at 26.0%, compared to 25.6% at end of Q2 2019

Continued disciplined cash strategy

Tight cash management and optimized cash conversion

Summary Svenn-Tore Larsen, CEO

Maintaining long-term strategy and targets

Strong strategic pillars

• Lead on connectivity
• Excite developers
• Customer engagement
• Scalability
• Investing early
• High financial ambitions

Solid market position

• Market leader in Bluetooth Low Energy
• Strong ties to vertical tier 1s and platform ecosystems
• Positioned for market leadership in cellular IoT

Ambitious targets

• Aspiring to become a USD 1 billion company within the next five years*
• Long-term ambition for 20% EBITDA margin

Solid Q2 – order backlog supports strong Q3

Q3 2020 guidance

Revenue	Gross margin
USDm 95-105	~50%-51%
16% - 28 % 7% - 19% y-o-y q-o-q

• Growth supported by sharply higher backlog
• Risks and uncertainties remain
  • Supply chain and end-user demand risks due to COVID-19 continues in H2
  • • Upside potential in faster technology adoption
• Longer term drivers in place to support strategy and financial ambitions