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Nordic Semiconductor

Investor Presentation • Jul 13, 2017

3680_rns_2017-07-13_33e58674-ceb6-4f32-b411-08b94fbc7a63.pdf

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Quarterly Presentation Q2 2017

July 13th 2017, Oslo, Norway

Today's presentation

Svenn-Tore Larsen

CEO

Pål ElstadCFO

Business update Financials Business outlook

Thomas Embla BonnerudDirector of Strategy and IR

Business updateSvenn-Tore Larsen, CEO

Financial summary – Q2 2017

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Financial summary – H1 2017

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New record quarter for Bluetooth

Diversified and growing customer base

*) 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)

7

Steady progress with tier-1 players

Multiple agreement with tier-1's signed

  • Tier-1 players in in their respective fields
  • Credit to out competitive product line-up and roadmap

Important foundation for longer term growth

  • No "game changing" projects as of today
  • Multiple project with good growth potential
  • Better position to compete for new projects

Revenue by market

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New Nordic powered products

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Market leader in Bluetooth

Bluetooth low energy end-product certifications*

*Source: DNB Markets

Operating model performance

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Gross Margin

Unchanged at 46.7% Q1 to Q2 2017

  • Continued positive contribution from cost improvements
  • Offset this quarter by write-offs of phased out products and shift in product and customer mix
  • 47.5% underlying gross margin for Q2 2017 excluding the write-offs

Maintaining 50% target for 2018

  • Continued efforts on cost reductions
  • Continued diversification of customer base and volume ramp of higher-end nRF52

Cash Operating Expenses*)

Operational leverage

  • Cash operating expenses increased 9.3%, mainly on short-range R&D and SG&A. Revenue up 11.3%
  • The increase is driven by headcount growth of 13.7% from 496 in Q2 2016 to 564 in Q2 2017
  • Compared to Q1 2017 cash OPEX was unchanged

OPEX to increase in H2 2017

  • Employees, salary increase and product development
  • Closely tracking guided revenue growth

16*) Operating expenses, excl. capitalized R&D, depreciation and amort. and option expenses**)% of cash OPEX over revenue in Quarter

Operating Profits (EBIT)

EBIT and underlying EBIT Q2 2017

EBIT of MUSD 4.8

  • +2.7%y-o-y growth
  • Driven by operational leverage

Underlying EBIT of MUSD 9.8

  • Excluding OPEX R&D Cellular IoT, including depreciation
  • +7.7% y-o-y growth
  • Revenue growing faster than OPEX for R&D cellular IoT

Improved cash flow

Cash flow Q2 2017

* EBITDA Adjusted for Capitalized Development Costs

Seasonal increase in accounts receivable

  • Net cash outflow of MUSD 4.6
  • NWC increased by MUSD 6.6, from 31.9% of LTM to 34.1%
  • Improved cash collection with DSO improvements

Disciplined cash strategy

  • Tight cash management and optimized cash generating ability
  • Financial headroom of MUSD 53.3 including undrawn facilities of MUSD 30

Business outlook

Thomas Embla Bonnerud, Director of Strategy and IR

Short term outlook - guidance for H2 2017

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Short term outlook - comments

Guidance

  • Accelerating volume growth of "mainstream" nRF52
  • Continued volume growth of "baseline" nRF51

  • Overall Bluetooth volume still dominated by nRF51

  • Binary opportunities excluded

  • Back to more normal Q3 Q4 seasonality
  • Gross margin range to account for fluctuation in customer and product mix
  • Total revenue growth of +14% to +19% for 2017 as a whole*

Products

  • Continued growth contribution from a handful of non-consumer customers
  • Continued q-o-q growth in Wearables and Healthcare

  • Proprietary to remain soft due to shift to nRF51 and nRF52

  • Healthy balance over Q3 and Q4

*) Based on current guidance

Medium term market outlook - 2020> 100%40%30%20%10%-10%-20%← Lower ASP Higher ASP →Bluetooth® low energy(Including multi-protocol 2.4GHz/802.15.4)~ 1 billion units#1 positionProprietary 2.4GHz RF~ 300 million units#1 positionCAGR 2017 - 2020 Low power Cellular IoT(LTE-M and NB-IoT)~ 100 million unitsMarket entry H2 2017DiversificationConsumerIndustrialEnterpriseAutomotiveHealthcareSmart CityAgricultureUtilities

Source: Nordic management and industry reports

Launched the nRF52810

Optimized subset of nRF52832

  • Single chip SoC for less complex applications
  • Network co-processor for more complex applications

Sampling to customers now

  • Multiple design wins already secured
  • Production ramp H2 2017

Diverse design-win base with the nRF52840

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Our new Thingy is about driving innovation

An IoT development kit for everyone

  • No firmware development required
  • Mobile app and (beta) cloud service
  • IFTTT web service support
  • Affordable ~ USD 40

Packed with sensors

  • Motion, sound, environment
  • Speaker and multi-color LED

Powered by nRF52

  • Bluetooth 5 connectivity
  • Processor and memory

The world's most popular Bluetooth solution

2000 Thingy:52 shipped in June

Android Authority video review and feature of Thingy.52

Full LTE-M coverage in the US

LTE-M deployments ahead of schedule

  • AT&T and Verizon with nationwide coverage
  • Full suite of new rate plans and bundles with modules
  • Plans for Mexico later in 2017

Significant milestone for cellular IoT market

  • US is one of the largest markets
  • Drives awareness and interest in LTE-M
  • Drives more interest and demand for our upcoming nRF91 series solutions

Nordic Cellular IoT market entry H2 2017

Small sizeVery high level of integration

Ultra low power& high performance

Ease-of-use

Complete and flexible solution

On-track for sampling H2 2017

  • Limited set of lead customers
  • Executing on our US and LTE-M first strategy
  • Strong interest and positive feedback on our solution

Certification testing in parallel

  • Infrastructure interoperability
  • Carrier certification

Summary – first half 2017

  • Met our guidance given at the Q4 2016 presentation
  • Back to growth in Bluetooth (+32.9% y-o-y)
  • Growth contribution from the first "new" 10MU+/y non-consumer customer
  • Gross margin and Bluetooth growth still below our ambitions

Back to growth Delivering on our roadmap

  • Delivered on our nRF52 roadmap ahead of schedule – "baseline" and "high-end" SoCs
  • First production release of Bluetooth 5 software for nRF52
  • nRF91 Series Cellular IoT testing and development

Summary – outlook

Short term outlook – H2 2017 Medium term outlook - 2020

  • Continued strong Bluetooth market
  • Continued Bluetooth driven revenue growth; +14% to +19% y-o-y for 2017 as a whole*
  • Soft proprietary due to shift to nRF51 and nRF52

  • Market entry in Cellular IoT – sampling of lead customers

  • Key player in high growth markets; Bluetooth low energy and low power Cellular IoT

  • Leading position in Bluetooth low energy and Proprietary 2.4GHz
  • Large and diversified customer base and fine tuned broad market engagement model
  • Strong product roadmap

Changes in reporting moving forward

Aligning with rest of the semiconductor Protecting customer confidentialityindustry

No mid-quarter updates No break down on top 10 Bluetooth customers

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 second quarter, held on July 13, 2017. 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 Q2 2017

July 13th 2017, Oslo, Norway

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