Nordic Semiconductor

Earnings Release • Apr 17, 2018

Quarterly Presentation Q1 2018 April 17th 2018, Oslo, Norway

Today's presentation

Business update

Financials

Business outlook

Svenn-Tore Larsen CEO

Pål Elstad CFO

Thomas Embla Bonnerud Director of Strategy and IR

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Business update Svenn-Tore Larsen, CEO

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Off to a good start in 2018

MUSD

total revenue. All-time-high for Q1 with $+27.0\%$ y-o-y growth

• +57.6% y-o-y growth in Bluetooth
• -7.7% y-o-y decline in proprietary
• y-o-y growth across all markets
• Customer base growth and diversification

Improved

Profitability

EBITDA +1.0pp y-o-y with continued cost discipline and gross margin expansion

• Continued cost discipline; OPEX -6% q-o-q
• Gross margin of 48.9% due to cost reductions, favorable customer and product mix
• FBIT of MUSD 0.8 ys MUSD -0.1 in 0.1 2017

Financial summary - Q1 2018

Revenue	Revenue Bluetooth	Revenue Proprietary	Gross margin	EBITDA
MUSD 60.1	MUSD 38.4	MUSD 19.9	48.9%	MUSD 4.4
+27.0% $y$ -o-y q-o-q $\vdots$	-6.6% +57.6% -13.0% -7.7% +9.3% +2.2pp +1.3pp +46.6% +11.2% -q-o-q y-o-y q-o-q y-o-y q-o-q y-o-y q-o-q y-o-y q-o-q y-o-y q-o-q

Bluetooth driven growth

Bluetooth revenue diversification

Customer base growth and diversification

Continued growth in number of Active Customers* on Bluetooth

Diversified Bluetooth revenue across consumer and non-consumer*

* Consumer is sum of Wearable and Consumer Electronics, non-consumer is sum of Building/Retail, Healthcare and Others.

*) Definition of "Active" Customer: An end customer which has purchased 10.000 units or more during prior six months (i.e., a customer actively selling product to end customers or preparing a high volume prototype)

Revenue by market

Consumer Electronics	Wearables '	Building /Retail	Healthcare	Others
MUSD 23.6	MUSD 102	MUSD MUSD 12.2 4.7		MUSD 76
$+3.2\%$	-9.6% +22.0% +5.6% +42.4% -23.1% +117.1% -5.4% +90.5% +33.3% $y$ -o-y q-o-q $\frac{1}{2}$ y-o-y q-o-q $\frac{1}{2}$ y-o-y q-o-q $\frac{1}{2}$		у-о-у д-о-д ::: у-о-у д-о-д

New Nordic powered products

Beam Smart Button	Ankorro Smart band	Nofence	Particle Mesh	iDevices Instant Switch
Wearables	Gaming	Agriculture	Industrial IoT	Smart Home
nRF52	nRF52	nRF52	nRF52	nRF52

Industry recognition on cellular and Thingy

Finalists in the Most Innovative IoT/M2M Strategy Vendor category:

• Amazon Web Services -- AWS Greengrass, AWS FreeRTOS, AWS IoT Analytics
• Huawei Technologies -- Huawei full-stack IoT solution $\mathcal{L}_{\mathcal{A}}$
• Nokia -- Nokia Worldwide IoT Network Grid (WING)

Nordic Semiconductor -- nRF91 Series

• Verimatrix -- Vtegrity

China Electronic Market Editor's Choice Awards

Nordic Thingy:52 winner of most competitive development tool in China

Financials Pål Elstad, CFO

Happy Andrew Marshall

Operating model performance Q1 2018

Gross Margin 48.9% R&D short- range 18.4 %		Q1 2018.	01.2017
	Revenue growth $V$ -O-V	+27.0% (MUSD 60.1)		+18.2% (+8.8pp) Bluetooth driven growth with (MUSD 47.3) robust contribution from non-consumer
	Gross margin	48.9%	46.7%	(+2.2pp) Continued positive contribution from cost improvements and favorable customer and product mix
R&D cellular IoT 7.8%	R&D short-range	-18.4%	16.6%	(+1.8pp) Expansion in low power short- range loT
SG&A 15.3 %	R&D cellular IoT	7.8%	9.5%	(-1.7pp) Started capitalization ahead of first production release
	SG&A	15.3%	14.3%	(+1.0pp) Organizational scaling to manage and fuel growth in 2018
EBITDA 7.4 %	EBITDA margin	7.4%	6.4%	(+1.0pp) Continued impact from low power cellular IoT investment

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Gross margin expansion

Gross margin 2014 - 2018

Gross margin $48.9\%$ +2.2pp y-o-y

• Continued positive contribution from cost improvements
• Favorable customer and product mix effect $\overline{\phantom{a}}$ during Q1 2018
• Anticipate continued quarter to quarter fluctuation due to product and customer mix

Maintaining 50% target within 2018

• Continued efforts on cost reductions $\blacksquare$
• Continued diversification of customer base and × expanding product offering

Cash Operating Expenses*)

Cash Opex MUSD / % of revenue

$Q1$ Opex $*$

• Q1 cash operating expenses increased 32% y-o-y $\blacksquare$
• The increase is driven by new product releases and $\blacksquare$ headcount growth of 12.0% from 549 in Q1 2017 to 615 in Q1 2018
• Continued cost discipline in Q1 2018 as cash opex has $\overline{\phantom{a}}$ not increased compared to last quarter
• Investments to continue in order to capture future $\blacksquare$ growth

³ Operating expenses, excl. capitalized R&D, depreciation and amort. and option expenses

Cash flow

$2,3$ 5.4 3.9 32. Q1 2018 EBITDA Tax Inventory Q1 2018 AR $AP$ Capex Other Opening $^)$ Closing Balance* Balance

Cash flow Q1 2018

Working capital build up

• Net cash flow of MUSD -4.5
• NWC increased by MUSD 2.5, however there is still a reduction in NWC/LTM from 26.9% to 26.5%
• Low capex in the quarter $\blacksquare$

Disciplined cash strategy

• Tight cash management and optimized cash generating ability
• Financial headroom of MUSD 89.6 including undrawn facilities of MUSD 575

* EBITDA Adjusted for Capitalized Development Costs

Business outlook Thomas Embla Bonnerud, Director of Strategy and IR

Short-term outlook

Improved visibility

All time high backlog

MUSD	$+76.2%$	$+50.9%$
81.0
	$V$ -O-V	a-o-a

• Stretches well into 04 2018
• Backlog indicates slightly less favorable product and customer mix for gross margin in Q2 2018 compared to Q1 2018

H1 2018

Maintaining guidance range

• MUSD 123 133 revenue, 40 50% Bluetooth growth and 47 to 49% gross margin
• Solid backlog coverage
• Continued investments to fuel future growth and supply chain scaling to meet increased demand

Ramping production of the nRF52840

Our flagship nRF52 Series IC

Memory, security, performance and features Advanced multi-protocol Bluetooth / 802.15.4 / 2.4GHz RF

Broad and solid design win base Revenue contribution starting Q2 2018 Premium ASP vs. the other nRF52 Series ICs

Production release of Thread software Revenue contribution starting H2 2018

Launched ZigBee solution

Support for the 3 key open standard lower short-range technologies for smart home and industrial/enterprise applications

Zigbee 3.0 software for nRF52840

First release available now - baseline feature set Advanced multi-protocol support

Further expansion in short-range IoT Addressing a bigger opportunity in smart home Ideal complement to our Bluetooth and Thread offering

Focused go to market strategy

Strategic opportunities to establish bridgeheads Objective is revenue and growth contribution in 2019

Leading and broad position in Bluetooth

Bluetooth low energy end-product certifications*

Steady progress on cellular IoT

$Q12018$ > 10 customer

Lead customer sampling program Working with carefully selected customers Close and direct support

US and Europe

Regions with network support for LTE-M Working with multiple carriers for certification

Continued strong interest and demand Across a diversified set of markets and customer types Rolling in new lead customer in Q2 2018

On track with our ambitions for 2018

Q12018

Solid growth and improved profitability in the seasonally most challenging quarter

• Revenue up $+27.0\%$ y-o-y and seasonally down only $-6.6\%$ q-o-q
• +1.0pp EBITDA margin and EBIT of MUSD 0.8 vs. MUSD -0.1 in Q1 2017
• All time high backlog of MUSD 81.0 providing solid coverage for H1 2018 guidance range

Continued business momentum

Robust market growth - leading and broad position

• Diversifying and growing customer base
• Revenue contribution from Thread H2 2018 $\rightarrow$
• Expanded short-range offering with Zigbee
• Continued broad market and tier-1 design win momentum

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 for the interim results presentation for the first quarter, held on April 15, 2018. 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.

Quarterly Presentation Q1 2018 April 17th 2018, Oslo, Norway