Annual Report • Mar 16, 2017
Annual Report
Open in ViewerOpens in native device viewer
The next "big thing" is a trillion small things wirelessly connected to form the Internet of Things.
A key enabler technology of the Internet of Things (or 'IoT' for short) is Bluetooth® low energy (formerly marketed as Bluetooth Smart): The fastest growing wireless technology of all time and on-trend to break all previous adoption rate records. Bluetooth low energy leverages the ubiquity, computing power, and ease-of-use of modern smartphones and apps, and the on-going growth of the Internet generally.
But the IoT will require more than just Bluetooth low energy to operate. To enable reliable, any 'thing' anywhere global wireless connectivity to the cloud and connected services, the IoT will require a range of other complimentary wireless technologies.
At short to medium range distances these include Wi-Fi and IEEE 802.15.4 (used by such wireless technologies as ZigBee and Thread). This is why Nordic has added IEEE 802.15.4 support to its latest nRF52840 multi-protocol System-on-Chip (SoC)
At long-range the IoT will need to leverage the ubiquity and geographical reach of the world's cellular (3G, 4G, 4G LTE, 5G) networks. Just as cellular provided the IT infrastructure that made billions of modern smartphones and apps technologically and commercially feasible for end users, it will now do the same for the IoT to form what is being called 'cellular IoT'.
And sitting right in the middle of this IoT revolution, is Nordic Semiconductor.
Nordic Semiconductor pioneered the development of ultra-low power wireless (a category defined by the ability to operate from small batteries for long periods, and includes Bluetooth low energy) during the early 2000s. Nordic has been a key contributor in the creation and evolution of Bluetooth low energy as a wireless standard within every version of Bluetooth, since Bluetooth v4.0 and all the way up to the latest Bluetooth 5. These efforts culminated in Nordic's latest nRF52 Series that redefine what's possible on a Bluetooth low energy single chip.
In addition, during 2016, Nordic Semiconductor announced development of a low power LTE technology for cellular IoT. This development leverages Nordic Semiconductor's more than 10 years of leadership in ultra-low power wireless that includes Bluetooth low energy, and Nordic's 2014 recruitment of a highly-talented and experienced group of cellular R&D engineers in Finland.
Learn more at www.nordicsemi.com
Nordic Semiconductor (Nordic) experienced a year with low sales growth compared to strong growth in 2015 and operational results that were below our own expectations. This was mainly the result of the loss during 2016 of two large designs (one in wearables, one in gaming). However, the lack of growth in revenue was mitigated during the year by growth in sales to both new and existing customers, particularly in Bluetooth low energy. Indeed, sales momentum as measured by the number of active customers increased significantly in 2016, as did Nordic's exposure to a broader set of customers and industries. Though our financial performance leaves a lot to be desired this year, we are confident that exposure to a broader set of customers and industries strengthens our strategic platform.
While Nordic's revenues of MUSD 197.7 in 2016 represented only a 2% increase compared to 2015, underlying sales growth in Bluetooth low energy revenue was 52% compared to 2015. This performance was supported by sales from new designs outside of the traditionally dominant wearables market. Other positive indicators include a record 36,147 Nordic development kit shipments during 2016, which is up 8% from a previous record of 33,553 shipments in 2015. A high proportion were for Nordic's latest nRF52 Series product offerings, validating the perceived technological and commercial value of these chips to customers around the globe.
During 2016 Nordic unveiled its product roadmap for low power cellular IoT. Designed specifically to address the needs of the emerging low power cellular IoT market, the upcoming Nordic Semiconductor nRF91 Series will include highly integrated chipsets and software for the forthcoming 3GPP Release 13 LTE-M and NB-IoT cellular technologies.
Low power cellular IoT is positioning itself to be widely adopted in numerous markets and applications including, for example, smart utility metering, asset and people (e.g. child) tracking, fleet management, buildings security and safety, remote maintenance, smart vending machines, retail, healthcare and medical monitoring, real-time traffic monitoring, wearables, in-door and out-door GPS navigation, smart home technology and industrial as well as agricultural automation.
On December 8th, Nordic was named 2016's 'Most Respected Public Semiconductor Company' in the segment \$100 to \$500 million in annual sales by the members of the Global Semiconductor Alliance (GSA).
In addition, Nordic Semiconductor's nRF52832 Bluetooth low energy SoC was declared a winner of the China Electronic Market (CEM) Editor's Choice Award 2016 in the "Most Competitive Interface Products in China" category
This major award in China coincided with Nordic opening new sales and technical support offices in mainland China. The new offices in Shanghai and Shenzhen will provide fast, on-site support to Nordic's growing Chinese customer base and China's high-tech wireless design and production sectors.
Svenn-Tore Larsen Chief Executive Officer
Receiving the GSA award affirms Nordic's position in this innovative market
Towards the end of 2016 Nordic launched its latest nRF52840 single-chip Bluetooth low energy SoC that raised the bar for Nordic's high-end nRF52 Series SoC lineup in terms of both performance and feature improvements. In doing so, this Bluetooth 5 ready SoC redefined the scope for smart home, IoT, and wearables by delivering 4x range, 2x bandwidth, and enhanced security with an on-chip ARM® CryptoCell cryptographic accelerator.
Nordic also announced that its nRF52840 and nRF52832 SoCs and supporting software were all Bluetooth 5-ready within a week of Bluetooth 5 being officially launched by the Bluetooth SIG.
Other new products launched during 2016 included:
Device security is increasingly becoming one of the main concerns surrounding the Internet of Things. Nordic is focused on this important issue, and has added an onchip ARM CryptoCell cryptographic accelerator to its latest nRF52840 SoC. During 2016, the company also added secure and signed over-the-air firmware updates to its latest software development kits. This allows firmware updates over-the-air to be accompanied by a secure signature which ensures that the update comes from a verified and trusted source. Nordic will continue to innovate in order to maintain the highest standards of IoT security.
On the education front, the British BBC delivered a million micro:bits free to UK school children. At the heart of the BBC micro:bit is a single Nordic nRF51822 Bluetooth low energy SoC. Nordic Semiconductor chips allow the children's own code to both wirelessly communicate with other micro:bits, and to sync or be updated from smartphones, tablets, and computers via Bluetooth. Nordic is proud to enable the next generation of innovators at their earliest stages, and the success of this program is a testament to the versatility of the company's technology.
Despite all our success in market-building and diversification, we recognize that 2016 was a disappointment in relation to revenue growth and financial results. Nevertheless, significant progress has been made in executing on Nordic Semiconductor's corporate mission, to be the leader within low power wireless connectivity. We recognize that beyond technological and commercial leadership, one of the main reasons for our success to date has been the development of a thriving, highly motivated workforce. This is reflected in a low staff turnover and the long-standing commitment of our senior managers, many of whom have been promoted from within the company ranks. The company's staff is also highly diverse being drawn from 41 countries. We believe that our human capital is unparalleled in its skill and its commitment to our corporate goals.
Nordic Semiconductor confidently expects to continue to lead the world in ultra-low power wireless solutions, including Bluetooth low energy. We look forward to replicating this market leadership into the cellular IoT space.
Our team has demonstrated the vision and competence to design solutions on the leading edge of our industry. With the talent and drive of our organization and the market opportunity ahead, I am confident that we are still just at the beginning of an exciting and innovative journey.
2016 was a year of low sales growth and continued organizational investments, resulting in operational results below expectations. Increased customer and product diversification combined with continued significant growth expectations in the Bluetooth Low Energy market, are expected to result in sales growth and improved profitability in 2017. Investments into the important cellular IoT sector, secure Nordic Semiconductor's place in rapidly evolving global macro-trends.
Nordic Semiconductor's ("Nordic" or "the Company") revenue increased by 2.4% from MUSD 193.1 in 2015 to MUSD 197.7 in 2016. As a result of lower gross margins and higher operating expenses, EBIT totaled MUSD 9.7, down from adjusted EBIT MUSD 28.0 in 2015. The 2016 results were below our expectations. For definition of Alternative Performance Measures (APM, see page 58
The Company has during 2016 continued on its marketstrategy, both in relation to customer-, and segment-diversification. In relation to customers, the company saw a strong growth in number of active customers throughout the year. Nordic is currently positioned to generate revenue from a much broader range of market segments, including verticals within established markets and emerging markets. More importantly, Nordic is well positioned within the "long tail" of products within these industries, defined as all potential new areas where the Company's ultra-low power technology can be deployed.
From being a supplier mainly focusing on the US and European end-used markets, Nordic has during 2016 successfully entered the increasingly important Asian markets, including the Chinese domestic market. Several strategic Tier 1 design wins communicated during 2016 are a testament to this positive development.
At the same time, Nordic continues to invest significantly in the Bluetooth low energy business. During 2016, Nordic commercially launched the nRF52832 as well as released the Bluetooth 5 compatible nRF52840. Both products will be important contributors to Nordic's market leadership within Bluetooth low energy.
Nordic's mission is to be a world-leading supplier of lowpower connectivity. This includes both short-range and long-range capabilities, which we believe makes Nordic unique in the industry. During 2016, Nordic unveiled its product roadmap for low power cellular IoT, designed specifically to address the needs of the emerging low power cellular IoT market. On December 8th 2016 was Nordic awarded the "Most Respected Public Semiconductor Company" by the Global Semiconductor Alliance, a testimony to the strategic development by the Company
2016 also brought significant investments in product development. At the same time, the Company has significantly strengthened its sales and marketing effort, both within key account and technical teams. In close cooperation with distribution partners, these investments form a strong foundation for future growth.
Nordic Semiconductor is a "fabless" semiconductor company, which designs, sells and delivers integrated circuits and related intellectual property for use in short-, and soon to come, also in long-range wireless applications. The Company specializes in ultra-low power wireless solutions, based on its proprietary 2.4 GHz RF and Bluetooth low energy technologies. Nordic Semiconductor is a pioneer and market leader in ultra-low power wireless technology, with close to 300 million units sold last year. Nordic is also developing its long-range low-power cellular chipset, thereby providing customers with a broad portfolio of low-power connectivity solutions.
Nordic Semiconductor's components are manufactured by world-class subcontractors and sold through electronics distributors to manufacturers of branded electronics across a wide range of product categories. These categories include Consumer Electronics, Wearables, Building and Retail, Healthcare, and Other Applications.
The Company is headquartered in Trondheim, Norway, and has offices in Norway, USA, China, Korea, Japan, Taiwan, Poland, Finland and the Philippines.
Total revenue in 2016 was MUSD 197.7, compared with MUSD 193.1 in 2015, representing a growth of 2.4%. Revenue from Bluetooth decreased by 3.3% in 2016 to MUSD 107.2 from MUSD 110.8 in 2015. Although Bluetooth revenue showed a year over year decrease, underlying growth excluding the loss of one design for a wearables customer and one large gaming project was 52%. The Company is continuously increasing its number of customers to reduce its dependency on singel customers. Revenues from the top 10 Bluetooth low energy customers in Q4 2016 represented 40% of total revenues, versus 47% in the prior year period.
Proprietary wireless revenue increased 7.6% from MUSD 76.5 in 2015 to MUSD 82.4 in 2016. This growth is driven by strong revenue from PC accessories market and new design wins within this category.
Gross profit was MUSD 93.0, or 47.1% of revenue, compared with MUSD 95.7, or 49.5% of revenue during 2015. Gross margin decreased in 2016 mainly because of yield issues in connection with the ramp-up of the nRF52 family product line.
Total operating expenses including depreciation and amortization were MUSD 83.3 in 2016, compared with MUSD 60.7 in 2015. However, adjusted for de-recognition of pension liabilities and higher capitalized development expenses, operating expenses excluding depreciation and amortization increased from MUSD 67.6 in 2015 to MUSD 76.9 in 2016. The higher spending is explained by higher R&D headcount and increased marketing/sales activities partly offset by a weaker NOK/USD currency rate. In 2016, Nordic capitalized MUSD 5.3 versus MUSD 8.3 in 2015.
Development of new wireless components is essential to the Company's continued competitiveness in a rapidly evolving market. At the end of 2015, R&D personnel represented 77% of the Group's employees (78% in 2015). During 2016, total R&D spending including capitalized items amounted to 23.5% of revenues compared with 20.1% in 2015. The number of employees related to the cellular investment increased from 114 in 2015 to 132 in 2016, and operating expenses from these activities increased from MUSD 13 in 2015 to MUSD 16,2 in 2016.
The Company's operating profit (EBIT) decreased to MUSD 9.7 in 2016 from adjusted operating profit of MUSD 28.0 in 2015. Lower gross margins and higher operating expenses explain the decrease. Net financial items were a loss of MUSD 1.0 in 2016 and a gain of MUSD 2.0 in 2015. Profit before tax was MUSD 8.8 in 2016, compared with adjusted profit before tax of MUSD 30.0 in 2015. Income tax expense was MUSD 2.3, or 26.6% of profit before tax.
Net profit after tax was MUSD 6.4 in 2016, compared with adjusted net profit MUSD 19.0 in 2015. The Company's basic earnings per share were USD 0.040 in 2016.
Net Cash flow from operations was MUSD 0.1 in 2016, compared to a cash flow of MUSD 4.4 in 2015. The decrease in operating cash flow is explained by reduced operating profits, increased use of working capital due to fulfillment of purchase commitments for nRF52 wafers and higher taxes paid. Cash outflow from investments were MUSD 15.1 (MUSD 20.1), explained by both lower capex and lower capitalization of R&D expenses related to the nRF52 series. Cash flows from financing activities were MUSD 7.5 (MUSD 10.7), mainly related to a MUSD 10 utilization of the revolving credit facility partly offset by purchase of treasury shares for MUSD 2.5.
Nordic Semiconductor's cash balance decreased by MUSD 8.3 during the year to MUSD 21.1 by December 31, 2016. The interest bearing debt at the end of the year was MUSD 20.
The financial statements for 2016 have been prepared and presented in accordance with International Financial Reporting Standards and the Norwegian Accounting Act. A summary of internal controls related to the accounting process can be found in the Corporate Governance section of this annual report.
Demand for Nordic Semiconductor's products is tied to the greater semiconductor and electronics markets and is sensitive to fluctuations in global economic conditions. Long term, the market is expected to grow significantly as wireless solutions are embedded into a growing range of new products. Shorter term, global market conditions may however have certain impacts on the industry and corresponding growth. As demand increases, new competitors are likely to enter the market.
Nordic Semiconductor's success depends on its ability to
anticipate customer needs and address these with competitive technical solutions and outstanding customer support. Furthermore, the Company's outsourcing of manufacturing and direct distribution requires close collaboration with third-party subcontractors and distributors.
Nordic Semiconductor's liquidity risk is limited. By the end of the year the cash balance was MUSD 21.1. The Company has an open revolving credit facility of MUSD 40 with MUSD 20 available for short-term additional borrowing needs. As the Company holds little interest-bearing debt, the exposure to risk associated with interest rate fluctuations is limited.
The Company is exposed to foreign exchange risk in its ordinary business, which can impact profit margins. Nordic Semiconductor's operating expenses are primarily in Norwegian kroner and its sales and direct production costs are nearly entirely in US dollars. The Company does not use financial instruments to hedge this risk.
Finally, the Company is exposed to credit risk, although this has historically not resulted in significant losses. Nordic Semiconductor sells its components to leading international distributors of electronics components, primarily based in Asia. The Company's receivables are not credit insured, but credit monitoring routines are in place for setting up credit lines, providing security (payment guarantees) and demanding advance payments when required. Nordic Semiconductor reported no loss on accounts receivables during 2016.
At the end of 2016, Nordic Semiconductor had 532 (compared to 454 in 2015) employees of whom 225 (185) were employed outside of Norway. A well-functioning cooperation between management and the employee representatives contributes to addressing any challenges faced by the Company.
There were 68 (49) female employees at the end of 2016, corresponding to 13% (11%) of total number of employees. The Group had 304 full-time employees in Norway, including 46 female employees. There were 222 full-time employees in Finland, China, Hong Kong, South Korea, Japan, the Philippines, Taiwan, Switzerland, Poland and the USA, including 23 females. The average salary for female employees was 79% (73% in 2015) of the average salary for male employees excluding executive management. Gender differences in salary levels are driven by both the location and function of the employees, with a larger proportion of female employees in administrative functions and based in the Philippines, where the average salary level is below the average Company level. A comparison of the R&D functions in Norway shows an average salary for females at 96% of the average for a male employee, given differences in seniority.
Gender equality is a fundamental principle of the Company, and efforts are being made to ensure that there is no gender imbalance when recruiting for positions within Nordic Semiconductor. Executive management consists of seven men, and in the Board of Directors there are two female
shareholders elected members.
Absence due to illness was 1.9% in 2016, compared with 2.1% in 2015. No occupational illnesses or injuries were reported in 2016.
Nordic Semiconductor does not own or operate manufacturing facilities. Manufacturing is done through third parties that amongst others comply with the ISO 14001 environmental standard. Consequently, there is little pollution associated with the Company's operations. Nordic Semiconductor seeks to limit resource consumption, prevent unnecessary environmental pollution and manage waste in an environment-friendly and resource-efficient manner, and has established routines to monitor these conditions under its ISO9001,ISO14001 and OHSAS18001 certified management system.
Nordic Semiconductor complies with all current applicable laws and regulations, and all products comply fully with the REACH and RoHS hazardous substance directives. This enables the Company to market itself as a "green" supplier, which also is an advantage towards major customers who have their own stringent environmental standards.
Nordic Semiconductor has established standards for Corporate Social Responsibility (CSR), including policies for supporting human rights, the rights of workers, the environmental and anticorruption practices in its business strategy and daily operations. A description of the Company's CSR policies, results and execution plans is published on the Company's website, in accordance with the Norwegian Accounting Act §3-3a
Nordic Semiconductor's guidelines and practice for Corporate Governance are in accordance with the Norwegian Code of Practice for Corporate Governance, dated 30 October 2014 as required for all listed companies on the Oslo Stock Exchange. Furthermore, the guidelines meet the disclosure requirements of the Norwegian Accounting Act and Securities Trading Act.
The guidelines are included separately in the annual report
In accordance with Norwegian accounting regulations, the Board of Directors confirms that the prerequisites of a going concern have been met in the presentation of the annual financial statements.
Nordic Semiconductor ASA, the parent Company of the Group, reported a net profit for the year of MUSD 5.7 during 2016. The net profit is proposed transferred to other equity.
The Board believes that the Company is well-positioned for future growth opportunities. In order to pursue its long-term growth strategy in a highly cyclical business environment, the Board wants to preserve a high proportion of equity and liquidity.
Nordic Semiconductor aims to distribute an annual dividend, assuming that the requirements of its growth strategy are addressed. In accordance with the Company's dividend policy and taking into consideration the cash position and funding requirements to pursue Nordic Semiconductor's growth strategy in the coming years, the Board will not propose any dividend distribution for 2016 at its Annual General Meeting in April
Bluetooth low energy is established as a core technology within the Internet of Things (IoT) market space, a market predicted to grow faster and further than any other development within technology. The Bluetooth low energy market, in terms of Integrated Circuit (IC) shipments, according to IHS Research it is expected to grow at 30-40% CAGR from 2017-2020. Nordic's aim is to secure a dominant share of this market.
Nordic's proprietary business will continue to contribute significantly to Nordics financial results, although we expect that more designs will be transferred to the Company's Bluetooth low energy solutions over time.
Nordic has proven its technology leadership with the introduction of the nRF52 Series on top of its existing technology platform. The Company expects to maintain its leading market position in Bluetooth low energy into the future, including its higher value state-of-the-art nRF52 Series Systems-on-Chips (SoCs) and lower cost variants. Nordic Semiconductor will continue to target the most cost-optimized, high-volume applications.
Bluetooth low energy will continue to be the main revenue driver for the next years. At the same time, the Company expects to see complementary growth prospects from its investments in low power cellular technology, where its industry-leading technology architecture is being merged with wireless technology by a team of engineers who have built some of the world's most successful cellular technologies in past professional careers. Nordic expects to start to roll out its cellular IoT solutions during 2017 with sampling to lead customers during 2H 2017, and broad availability following in late 2018.
| GROUP | PARENT | |||||
|---|---|---|---|---|---|---|
| 2016 | 2015 | Amount in USD 1000 | Note | 2016 | 2015 | |
| 197 698 | 193 068 | Total Revenue | 3 | 197 944 | 193 324 | |
| -104 046 -608 |
-97 391 -22 |
Cost of materials Direct project costs |
4 | -104 046 -608 |
-97 391 -22 |
|
| 93 044 | 95 655 | Gross profit | 93 290 | 95 911 | ||
| -49 185 -22 677 -11 473 |
-32 840 -19 404 -8 437 |
Payroll expenses Other operating expenses Depreciation |
9/10/12/18 5/13/21 11/12 |
-32 458 -42 208 -9 946 |
-20 379 -33 601 -7 711 |
|
| 9 708 | 34 975 | Operating profit | 8 677 | 34 219 | ||
| 257 -295 -911 |
130 -145 2 028 |
Financial income Financial expenses Net foreign exchange gains (losses) |
6/22 6/22 6/22 |
257 -295 -911 |
130 -145 2 030 |
|
| 8 758 | 36 988 | Profit before tax | 7 727 | 36 234 | ||
| -2 334 6 424 |
-12 797 24 191 |
Income tax expense Net profit after tax |
7 | -2 015 5 713 |
-12 625 23 609 |
|
| 6 424 0,04 0,04 |
24 191 0,15 0,15 |
Attributable to Equity holders of the parent Earnings per share Ordinary earnings per share (USD) Fully diluted earnings per share (USD) |
8 8 |
0,04 0,04 |
0,15 0,15 |
|
| 2016 | 2015 | Statement of comprehensive income |
2016 | 2015 | ||
| 6 424 | 24 191 | Net profit after tax | 5 713 | 23 609 | ||
| -28 7 |
1 691 -423 |
Other comprehensive income not to be reclassified to profit or loss in subsequent periods: Actuarial gains (losses) on defined benefit plans (before tax) Income tax effect Other comprehensive income that may be reclassified to profit or loss in subsequent periods: |
18 7 |
-28 7 |
1 691 -457 |
|
| -455 | 854 | Currency translation differences | ||||
| 114 | -231 | Income tax effect | ||||
| 6 062 | 26 083 | Total Comprehensive Income | 5 692 | 24 843 |
GROUP PARENT
| 2016 | 2015 | Amount in USD 1000 | Note | 2016 | 2015 |
|---|---|---|---|---|---|
| ASSETS | |||||
| Non-current assets | |||||
| 14 395 | 12 542 | Capitalized development expenses | 12 | 14 395 | 12 542 |
| 12 054 | 9 082 | Software and other intangible assets | 12 | 12 060 | 9 088 |
| 1 973 | 1 250 | Deferred tax assets | 7 | 1 946 | 1 250 |
| 13 367 | 13 054 | Fixed assets | 11/22 | 10 048 | 10 102 |
| Shares in subsidiaries | 1/13 | 10 | 10 | ||
| 2 | 12 | Other long term assets | 11 | 2 | 12 |
| 41 792 | 35 939 | Total non-current assets | 38 462 | 33 004 | |
| Current assets | |||||
| 52 044 | 41 100 | Inventory | 4/22 | 52 044 | 41 100 |
| 54 772 | 48 938 | Accounts receivable | 14/22 | 54 772 | 48 938 |
| 4 941 | 3 177 | Other short-term receivables | 15 | 10 681 | 12 954 |
| 21 135 | 29 293 | Cash and cash equivalents | 16/22 | 20 432 | 27 749 |
| 132 892 | 122 508 | Total current assets | 137 929 | 130 742 | |
| 174 684 | 158 447 | TOTAL ASSETS | 176 391 | 163 746 | |
| EQUITY | |||||
| 283 | 283 | Share capital | 17 | 283 | 283 |
| -2 | -1 | Treasury shares | 17 | -2 | -1 |
| 14 436 | 14 253 | Share Premium | 17 | 14 436 | 14 253 |
| 968 | 406 | Other paid in capital | -366 | -807 | |
| 100 589 | 97 467 | Retained earnings | 100 324 | 97 257 | |
| 116 270 | 112 405 | TOTAL EQUITY | 114 676 | 110 986 | |
| LIABILITIES | |||||
| Non-current assets | |||||
| 293 | 707 | Pension liability | 18 | 293 | 358 |
| 20 000 | 0 | Other long-term loan facility | 22 | 20 000 | 0 |
| 20 293 | 707 | Total non-current liabilities | 20 293 | 358 | |
| Current liabilities | |||||
| 15 295 | 6 389 | Accounts payable | 20/22 | 14 887 | 6 297 |
| 2 786 | 9 931 | Income taxes payable | 7 | 2 609 | 9 905 |
| 2 260 | 2 295 | Public duties | 20 | 1 990 | 2 027 |
| 0 | 10 000 | Short term loan facility | 22 | 0 | 10 000 |
| 17 780 | 16 720 | Other short-term debt | 15/20 | 21 937 | 24 173 |
| 38 121 | 45 335 | Total current liabilities | 41 423 | 52 402 | |
| 58 414 | 46 042 | TOTAL LIABILITIES | 61 715 | 52 760 | |
| 174 684 | 158 447 | TOTAL EQUITY AND LIABILITY | 176 391 | 163 746 |
Beatriz Malo de Molina Tore Valderhaug Lasse Haugnes Olsen Board member Board member Board member, employee
NORDIC SEMICONDUCTOR ANNUAL REPORT / 2016 10
Oslo, 15 March 2017
Terje Rogne Anne-Cecilie Fagerlie Craig Ochikubo Chairman Board member Board member
Joakim Ferm Asbjørn Sæbø Svenn-Tore Larsen Board member, employee Board member, employee Chief Executive Officer
for the year ended 31 December
| Amount in USD 1000 | Share capital |
Treasury shares |
Share premium |
Other paid in capital |
Retained earnings |
Total equity |
|---|---|---|---|---|---|---|
| Equity as of 01.01.2015 | 283 | -2 | 14 253 | 709 | 69 879 | 85 122 |
| Net profit for the period | 24 191 | 24 191 | ||||
| Purchase of treasury shares | -1 | -4 561 | -4 562 | |||
| Sale of treasury shares, option exercise | 2 | 6 062 | 6 064 | |||
| Share based compensation | -303 | -303 | ||||
| Other comprehensive income | 575 | 575 | ||||
| Equity as of 31.12.2015 | 283 | -1 | 14 253 | 406 | 97 465 | 112 405 |
| Net profit for the period | 6 424 | 6 424 | ||||
| Purchase of treasury shares | -1 | -2 660 | -2 661 | |||
| Sale of treasury shares, option exercise | -37 | -37 | ||||
| Share based compensation | 599 | 599 | ||||
| Issue of share capital | 183 | 183 | ||||
| Other comprehensive income | -664 | -664 | ||||
| Equity as of 31.12.2016 | 283 | -2 | 14 436 | 968 | 100 589 | 116 270 |
for the year ended 31 December
| Amount in USD 1000 | Share capital |
Treasury shares |
Share premium |
Other paid in capital |
Retained earnings |
Total equity |
|---|---|---|---|---|---|---|
| Equity as of 01.01.2015 | 283 | -2 | 14 253 | 535 | 69 569 | 84 639 |
| Net profit for the period | 23 609 | 23 609 | ||||
| Purchase of treasury shares | -1 | -2 157 | -2 158 | |||
| Sale of treasury shares, option exercise Share based compensation Cash settlement of options contract Other comprehensive income |
2 | -512 -830 |
6 063 174 |
6 063 -512 -830 174 |
||
| Equity as of 31.12.2015 | 283 | -1 | 14 253 | -807 | 97 257 | 110 986 |
| Net profit for the period Purchase of treasury shares Option exercise Share based compensation Issue of share capital Other comprehensive income |
-1 | 183 | -37 478 |
5 713 -2 660 14 |
5 713 -2 661 -37 478 183 14 |
|
| Equity as of 31.12.2016 | 283 | -2 | 14 436 | -366 | 100 324 | 114 676 |
| GROUP | PARENT | ||||
|---|---|---|---|---|---|
| 2016 | 2015 | Amount in USD 1000 | Note | 2016 | 2015 |
| Cash flows from operating activities | |||||
| 8 758 | 36 988 | Profit before tax | 7 727 | 36 234 | |
| -10 198 | -6 146 | Taxes paid for the period | 7 | -10 198 | -6 146 |
| 11 473 | 8 437 | Depreciation | 11/12 | 9 944 | 7 711 |
| -7 871 | -32 780 | Change in inventories, trade receivables and payables | 4/14/20/22 | -8 280 | -32 872 |
| 599 | -175 | Share-based compensation | 478 | 384 | |
| -414 | -4 944 | Movement in pensions | -414 | -5 293 | |
| -2 039 | 2 986 | Other operations related adjustments | -2 657 | 1 181 | |
| 307 | 4 366 | Net cash flows from operating activities | -3 400 | 432 | |
| Cash flows used in investing activities | |||||
| -9 824 | -11 817 | Capital expenditures (including software) | 11/12 | -6 392 | -8 798 |
| -5 304 | -8 328 | Capitalized development expenses | 12 | -5 304 | -8 328 |
| -15 128 | -20 145 | Net cash flows used in investing activities | -11 696 | -17 126 | |
| Cash flows from financing activities | |||||
| 0 | 6 065 | Sale of treasury stock | 17 | 0 | 6 065 |
| -2 660 | -4 562 | Purchase of treasury stock | 17 | -2 660 | -4 562 |
| 146 | -830 | Cash settlemet of options contract and issue of share capital | 146 | -830 | |
| 10 000 | 10 000 | Interest bearing debt | 10 000 | 10 000 | |
| 7 486 | 10 673 | Net cash flows from financing activities | 7 486 | 10 258 | |
| -457 | 319 | Effects of exchange rate changes on cash and cash equivalents | 659 | -310 | |
| -8 158 | -4 788 | Net change in cash and cash equivalents | -7 317 | -6 331 | |
| 29 293 | 34 080 | Cash and cash equivalents as of 1.1. | 27 749 | 33 527 | |
| 21 135 | 29 293 | Cash and cash equivalents as of 31.12. | 16/22 | 20 432 | 27 749 |
| 1 183 | 1 088 | Restricted cash included in the cash and cash equivalents as of 31.12. | 1 183 | 1 088 |
Nordic Semiconductor ASA is a public limited company whose shares are listed on the Oslo Stock Exchange. The Group's head office is located at Otto Nielsens vei 12, 7052 Trondheim, Norway. The Group includes the parent company Nordic Semiconductor ASA and three wholly-owned subsidiaries, Nordic Semiconductor Inc., Nordic Semiconductor Poland Sp. z o.o. and Nordic Semiconductor Finland OY.
Nordic Semiconductor develops and sells integrated circuits and related solutions for short-range wireless communication. The company specializes in ultra-low power (ULP) components, based on its proprietary 2.4 GHz RF and Bluetooth low energy.
The financial accounts were approved for publication by the Board of Directors on March 15, 2017, and will be presented for approval at the Annual General Meeting on April 24, 2017.
The financial accounts for Nordic Semiconductor ASA "the Parent Company" and its wholly-owned and controlled subsidiaries, together called "the Group", have been prepared in accordance with International Financial Reporting Standards as adopted by the EU (IFRS). relevant interpretations, and the Norwegian Accounting Act.
As the Parent company has USD as its functional currency, the financial accounts are presented in USD, rounded off to the nearest thousand, if nothing else is noted. As a result of rounding differences, it is possible that amounts and percentages do not add up to the total.
Subsidiaries are entities controlled by the Group. The Company controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Subsidiaries are consolidated from the date control is obtained until the date that control ceases.
All subsidiaries are owned 100 percent and there are no non-controlling interests.
Intercompany transactions, balances and unrealized gains on transactions between group companies are eliminated
The consolidated financial statements have been prepared on a historical cost basis.
The preparation of financial statement in accordance with IFRS requires that management use judgement, estimates and assumptions that influence the amount reported in the financial statements and notes. Management bases its estimates and judgement on previous experience and on various other factors deemed to be reasonable and sensible given the specific circumstances. These judgements form the basis for evaluating the accounting value of assets and obligations. The main areas of uncertainty for assessments and estimates on the balance sheet date, which represent a risk for creating significant changes to the value of assets and liabilities recorded in the accounts for the following financial year, are discussed below.
Revenue recognition principles are described in note 2.11.
Nordic Semiconductor predominantly sells to electronic distributors under a distribution agreement. The distributors will hold a given level of Nordic inventory that is subsequently shipped to an end customer. Nordic uses a "sell in" model in connection with revenue recognition to distribution customers. Under a "sell in" model, management needs to make judgements and estimates the amount that can affect the reported amounts of revenues and expenses. The main judgments are described below.
When a distributor sells components to specified customer accounts, the distributor will receive an additional discount after the sale is made, commonly known as a "Ship and Debit" discount. An estimate for this discount is provided in the accounts, reducing the revenue and increasing current liabilities. The ship&debit provision is primarily determined by assessing historical discounts to each distributor, the distributors' inventory level as of 31 December 2016 and assumed sales mix.
If the distributor's pricing to specific end customer accounts changes according to a previous agreement with Nordic Semiconductor, the distributor will receive a price protection credit based on the difference between the old and new price.
In certain cases, distributors have the right to exchange inventory with Nordic Semiconductor with the same value in new products. Stock rotation provisions are made for this if necessary.
Development costs are capitalized in accordance with the principles in Note 2.9. In order to determine the amount to be capitalized, it is necessary for management to make assumptions regarding expected future cash flow, and the expected period of benefits. Capitalized development costs are subject to amortization on a straight-line basis over the period of expected future benefit, normally 3-5 years. Uncertainty exists with respect to the estimated period of expected future benefit, as this depends on the future technological development in the market. During 2016, MUSD 1.853 was capitalized, mainly related to the finalization of the nRF52. The carrying amount of capitalized development costs as of December 31, 2016 and 2015 was USD 14.395.000 and USD 12.542.000 respectively.
Estimates are continually reassessed based on changes in the underlying assumptions. Changes in accounting estimates are recognized in the period in which such changes occur. If such changes also apply to future periods, the effect is distributed between current and future periods.
Certain new standards, amendment to standards, and annual improvements to standards and interpretations are effective for annual periods beginning after January 1, 2016, and have been applied in preparing these consolidated financial statements. None of these have a significant effect on the consolidated financial statements of the Group.
The Group presents its financial statements in USD which also is the functional currency of the parent company. Transactions in currency other than USD, are converted at the exchange rate at the date of the transaction. Any exchange gains or losses arising as a result of changes in the exchange rate between the time of the transaction and the time of payment are recognized in the income statement
Cash includes cash balances and bank deposits. Cash equivalents are short-term liquid investments which do not involve significant risk factors with original maturity of three months or less.
Accounts receivables are recognized initially at fair value and subsequently measured at amortized cost, less impairment. An impairment of a account receivable is recognized when there is objective evidence that the Group will not be able to collect all amounts. Balances are written off when collection efforts have been exhausted and the probability of recovery is unlikely. Accrual made for future ship and debit claims from distributors are presented in other short-term liabilities.
Inventory, components and components under production are valued at the lower of cost and net realizable value after deduction for obsolescence. Net realizable value is estimated as the selling price less cost of completion and the cost necessary to make the sale. Costs are determined using the FIFO method. Work in progress includes variable cost and non-variable cost which can be allocated to items based on normal capacity. Obsolete inventory is written down completely.
Non-current assets are stated at the lowest of cost net of accumulated depreciation and net realizable value. When an asset is sold or discontinued, the gain or loss from the transaction is recognized in the income statement.
The company's property asset is an apartment stated at cost. No depreciation is made since the residual value of the apartment exceeds the cost.
Cost of non-current assets includes fees/taxes and direct costs associated with commissioning the non-current asset for use. Repair and maintenance costs are expensed when incurred. If repair and maintenance increase the value of the non-current asset, the cost will be added to the asset on the balance sheet
Depreciation is calculated on a straight-line basis over the following periods of time:
| Office and lab equipment | 3-5 years |
|---|---|
| Computer equipment | 3-4 years |
| Installations in buildings | 5 years |
The assets' residual value, useful lives and methods of depreciation are reviewed on an ongoing basis and adjusted prospectively, if necessary.
The Group does not have any significant financial leases.
Leases where the most significant risk rests with the lessor are classified as operational leases. Lease payments are classified as operating costs and are expensed over the contract period.
Research costs are expensed as incurred. Costs associated with development are capitalized if the following criteria are met in full:
Costs expensed in prior accounting periods will not be capitalized.
Capitalized development costs are subject to amortization on a straight-line basis over the expected period of benefits, normally 3-5 years. Depreciation begins when the product is transferred from development to production. Uncertainty exists with respect to the expected period of benefits, as this depends on the future technological development in the market.
Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortization period or method, as appropriate, and are treated as changes in accounting estimates.
Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that economic benefits will be required to settle the obligation and a reliable estimate can be made. Provisions are reviewed each balance sheet date and the level reflects the best estimate of the obligation. When the time value is insignificant, the amount of the provision will be equal to the expenditure required to settle the obligation. When the time effect is significant, the amount of the provision will be equal to the present value of future expenditures to settle the obligation.
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty.
Revenue from sales of components is recognized at the time of delivery to the distributor. The time of delivery is usually the time when the goods are transferred to the transport carrier. Certain provisions have been made for credits to distributors based on the estimates described in note 2.2. In addition, Nordic has accrued for volume related rebates.
Revenue from services is recognized as the services are rendered/delivered. The service consists of working hours, and invoicing of other costs, such as work done by subcontractors. Interest earned is recognized as it is generated
The Group offered a defined benefit pension plan to its employees who were hired before December 31, 2007. The group has also established a similar plan for employees in the Philippines. Pension plan assets are valued at their fair value.
The Board of Nordic Semiconductor ASA decided in December 2015 to change the pension plan for all employees currently on a defined benefit plan effective January 1, 2016. Up until December 31, 2015 Nordic Semiconductor ASA (Norwegian employees) had both a defined benefit plan and a defined contribution plan. The defined benefit plan was closed for new members effective January 1, 2008 and from this point a new defined contribution plan was established.
In connection with the transfer of plans, the employees received a "Paid up benefit" for all earned benefits in the defined benefit plan. As there exist certain obligations related to retirees and employees on sick leave, an actuarial calculation is performed and a liability for these employees is included as of December 31, 2016.
Defined contribution pension. Employees hired after January 1, 2008 have a defined contribution pension plan described in Note 18
Nordic Semiconductor implemented a stock option program for employees on February 18, 2013. This Program was continued for 2014. However, for 2015 the option element of the program was forfeited so all employees returned to a performance-based compensation through an annual cash bonus tied to the achievement of targets for group revenue and operating profits for the year. The stock option program was reintroduced in 2016.
The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using an appropriate valuation model, further details of which are given in Note 18. That cost is recognized in employee benefits expense, together with a corresponding increase in equity (other capital reserves), over the period in which the service and, where applicable, the performance conditions are fulfilled (the vestingperiod). See Note 19
Development costs are capitalized in accordance with the principles in Note 2.9. In order to determine the amount to be capitalized, it is necessary for management to make assumptions regarding expected future cash flow, discount rates and the expected period of benefits. Capitalized development costs are subject to amortization on a straight-line basis over the period of expected future benefit, normally 3-5 years. Uncertainty exists with respect to the estimated period of expected future benefit, as this depends on the future technological development in the market. During 2016, MUSD 1.853 was capitalized, mainly related to the finalization of the nRF52. The carrying amount of capitalized development costs as of December 31, 2016 and 2015 was USD 14.395.000 and USD 12.542.000 respectively.
Grants received are tax refunds and are classified as operating grants. Operating grants are accounted for at the same time as the costs they are intended to cover. Tax refunds are accounted for as a cost reduction. See Note 7
Income tax expenses consist of taxes due and changes to the deferred tax. Deferred tax and tax assets are calculated based on all differences between the financial accounts and the value for tax purposes of assets and liabilities.
Deferred tax assets are recognized to the extent that it is probable that the individual company will have sufficient taxable income in later periods to utilize the tax asset. Similarly, the company will reduce recognition of the deferred tax benefit to the extent the company no longer deems it probable that it will be able to utilize such tax benefits.
Deferred tax liabilities are accounted for at the nominal value and classified as long-term obligations in the balance sheet.
Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss. Deferred tax items are recognized in correlation to the underlying transaction either in OCI or directly in equity. The Parent Company pays its tax obligation in NOK and the fluctuations between the NOK and the USD impact the financial items. The Group's legal entities that do not have their tax base in USD are exposed to changes in the USD/tax basecurrency rates. Effects within the current year are classified as tax expense.
The Group has only one operating segment. The group does not report or monitor profitability on a lower level, but breaks down its revenue into the following end product areas: Consumer Electronics, Wearables, Healthcare, Building and Retail, Others, ASIC components and Consulting Services. The Group also breaks down its revenues in the geographical market areas in which its products are sold. See Note 3.
Information available after the balance sheet date and applicable to conditions existing at the balance sheet date is included in the preparation of the financial statements. Events after the balance sheet date that do not affect the Group's financial position as of the balance sheet date, but that will affect the Group's financial position in the future, are disclosed if they are significant. See Note 23
The cash flow statement is prepared in accordance with the indirect method. Cash and cash equivalents include cash, bank deposits and other short-term liquid investments.
When treasury shares are purchased, the purchase price, including directly attributable costs are recognized as changes in equity. Treasury shares are presented as a reduction of equity. Gains or losses on transactions in treasury shares are not recognized in the income statement.
New standards, amendments to standards, and interpretations have been published, but are not effective at December 31, 2016 and have not been applied in preparing these financial statements. The most relevant of these are: IFRS 15 was issued in May 2014 and establishes a five-step model to account for revenue arising from contracts with customers. Under IFRS 15, revenue is recognized at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer.
The new revenue standard will supersede all current revenue recognition requirements under IFRS. Either a full retrospective application or a modified retrospective application is required for annual periods beginning on or after 1 January 2018. Early adoption is permitted; however, Nordic does not plan an early adoption. Nordic expects to apply IFRS 15 fully retrospectively, but have not reached its final conclusion.
Nordic has performed a preliminary assessment of the new standard's effects on a representative selection of existing revenue contracts and does not expect the impact of the new standard to be significant with respect to how and when revenue is recognized.
Amendments to IAS 12, issued January 2016 and effective January 2017, clarifies the circumstances under which a deferred tax asset can be recognized on an unrealized loss. The amendments also address a broader area of accounting for deferred tax assets in general, including a definition of future taxable profit used for the recognition test. The group is assessing the impact of these new amendments, however, the Group currently expects no material impact to amounts currently recognized in these financial statements and plans to adopt the new standard as of the effective date.
IFRS 16, issued in January 2016, establishes a balance sheet lease accounting model that will increase transparency and comparability beginning in 2019. The group is assessing the impact of IFRS 16 and plans to adopt the new standard on the required effective date.
All figures in USD 1000.
The Group has only one segment which is the semiconductor business. The Group classifies its revenues based on the end product applications in which its products are used.
The Group focuses on the sale of standard components for wireless communication. These wireless components are broken into the following end product areas: Consumer Electronics, Wearables, Building and Retail, Healthcare and Others. In 2016, wireless components accounted for 95.9% of sales versus 97.1% in 2015. In addition to standard components, the Group sells customer-specific ASIC components (Application Specific Integrated Circuits) and related Consulting Services.
| GROUP | PARENT | ||||||
|---|---|---|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | ||||
| Revenue | |||||||
| 96 976 | 96 503 | Consumer Electronics | 96 976 | 96 503 | |||
| 40 738 | 63 279 | Wearables | 40 738 | 63 279 | |||
| 26 921 | 14 115 | Building/Retail | 26 921 | 14 115 | |||
| 11 620 | 7 171 | Healthcare | 11 620 | 7 171 | |||
| 13 268 | 6 319 | Others | 13 267 | 6 319 | |||
| 189 523 | 187 387 | Wireless components | 189 523 | 187 387 | |||
| 6 990 | 5 567 | ASIC components | 6 990 | 5 567 | |||
| 1 185 | 114 | Consulting services | 1 431 | 370 | |||
| 197 698 | 193 068 | Total revenues | 197 944 | 193 324 |
The Group also classifies its revenues on a geographical basis according to its customers' location.
| GROUP | PARENT | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| 19 671 | 11 198 | Europe | 19 834 | 11 361 |
| 19 869 | 16 411 | Americas | 19 951 | 16 503 |
| 158 159 | 165 459 | Asia/Pacific | 158 160 | 165 459 |
| 197 698 | 193 068 | Total revenues | 197 944 | 193 324 |
The Group sells its components to distributors, which then sell components onward to electronics manufacturers which build end products and sell them to customers across the world. Three distributors represented more than 10% of the Group's total revenues in 2016 (in total 50%). These three distributors represented 26%, 13% and 11% of the Group's total revenues respectively. In comparison, 3 distributors represented more than 10% of the Group's total revenues in 2015 (in total 60%), with 24%, 23%, and 13% of revenues respectively. These distributors are based in Asia. Sales to distributors varies based on the number and size of end customers. For example, the reduction for the second largest distributor in 2015 versus 2016 is explained by the loss of one large wearable customer.
All figures in USD 1000.
| GROUP | PARENT 2016 2015 113 982 |
||||||
|---|---|---|---|---|---|---|---|
| 2016 | 2015 | ||||||
| 114 990 | 113 982 | Cost of goods, gross | 114 990 | ||||
| -10 944 | -16 591 | Changes in inventory | -10 944 | -16 591 | |||
| 104 046 | 97 391 | Cost of goods, net | 104 046 | 97 391 | |||
| 27 931 | 17 815 | Raw material | 27 931 | 17 815 | |||
| 10 138 | 2 859 | Work in Progress | 10 138 | 2 859 | |||
| 13 976 | 20 425 | Finished Goods | 13 976 | 20 425 | |||
| 52 044 | 41 100 | Total inventory (net) | 52 044 | 41 100 | |||
| 1 006 | 830 | Amount written down | 1 006 | 830 |
As Nordic Semiconductor is a fabless manufacturerer, all inventories, including raw materials and finished goods are located at sub-contractors.
All figures in USD 1000.
| GROUP | PARENT 2016 2015 |
|||||
|---|---|---|---|---|---|---|
| 2016 | 2015 | |||||
| 6 365 | 5 807 | Service and maintenance | 6 205 | 5 243 | ||
| 4 047 | 3 452 | Other consultancy fees | 3 117 | 3 046 | ||
| 3 585 | 2 791 | Office rental expenses | 2 734 | 2 244 | ||
| 926 | 738 | Office equipment | 797 | 673 | ||
| 2 744 | 2 082 | Material and components | 2 530 | 2 012 | ||
| -936 | -1 712 | Capitalized development expenses | -936 | -1 712 | ||
| 2 263 | 2 594 | Travel and meeting expenses | 1 657 | 1 915 | ||
| 3 683 | 3 652 | Other operating expenses | 3 494 | 3 520 | ||
| 0 | 0 | Other operating expenses intercompany | 22 610 | 16 660 | ||
| 22 677 | 19 404 | Total other operating expenses | 42 208 | 33 601 |
GROUP Fees to the auditor are included in consultancy fees above.
| GROUP | PARENT | ||||||
|---|---|---|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | ||||
| 96 | 49 | Statutory audit servces | 80 | 49 | |||
| 13 | 26 | Tax advisory services | 10 | 26 | |||
| 60 | 95 | Other audit related services | 60 | 95 | |||
| 169 | 170 | Total | 150 | 170 |
All figures in USD 1000.
| GROUP | PARENT | |||||
|---|---|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |||
| 118 | Interest income 82 |
118 | 82 | |||
| 139 | 27 | Other financial income | 139 | 27 | ||
| - | 21 statement |
Changes in money market fund, reported in the income | - | 21 | ||
| 257 130 |
Financial income | 257 | 130 | |||
| 295 145 |
Financial Expence | 295 | 145 | |||
| 911 2 028 |
Foreign exchange loss (net) | 911 | 2 030 | |||
| 1 206 | 2 173 | Financial expenses | 1 206 | 2 175 | ||
All figures in USD 1000.
| GROUP | PARENT | ||||
|---|---|---|---|---|---|
| 2016 | 2015 | Tax expense consists of | 2016 | 2015 | |
| -3 023 | -10 992 | Tax payable | -2 677 | -10 820 | |
| 772 | -1 696 | Change in deferred tax / tax benefit | 745 | -1 696 | |
| -83 | -109 | Changes in tax rate | -83 | -109 | |
| -2 334 | -12 797 | Tax expense | -2 015 | -12 625 | |
| Reconciliation of taxes payable in balance | |||||
| 2016 | 2015 | sheet and income statement | 2016 | 2015 | |
| -2 786 | -9 931 | Taxes payable for year, in the balance sheet | -2 609 | -9 905 | |
| -237 | -1 061 | Currency effect from translation to USD | -68 | -915 | |
| -3 023 | -10 992 | Taxes payable in income statement | -2 677 | -10 820 |
| GROUP | PARENT | ||||||
|---|---|---|---|---|---|---|---|
| 2016 | 2015 | Reconciliation of nominal and actual tax expense | 2016 | 2015 | |||
| 8 759 | 36 988 | Profit before tax | 7 727 | 36 234 | |||
| -2 138 | -9 987 | Tax at nominal rate 25 % (27% 2015) | -1 932 | -9 783 | |||
| 94 | -114 | Tax effect permanent differences | 94 | -114 | |||
| -83 -5 |
-109 457 |
Effect of change in tax rate Actuarial gains |
-83 -5 |
-109 457 |
|||
| -202 | -3 153 | Currency effect from translation to USD | -89 | -3 076 | |||
| -2 334 | -12 797 | Tax expense | -2 015 | -12 625 |
| GROUP | PARENT | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| 8 758 | 36 988 | Earnings before tax | 7 727 | 36 234 |
| -418 | -307 | Government grants | -418 | -307 |
| 1 | - 1 580 | Settlement options | 1 | - 1726 |
| 15 | 19 | Interest on tax | 15 | 19 |
| 292 | 34 | Non-deductible other expenses | 40 | 34 |
| -21 | 1 691 | Actuarial gain/loss pension | -21 | 1 691 |
| 3 220 | -9 603 | Change in temporary differences | 3 036 | -10 491 |
| 205 | 13 469 | Currency effect of translation to USD | 256 | 13 586 |
| 12 052 | 40 711 | Basis for payable tax | 10 708 | 40 074 |
| -3 023 | -10 992 | Payable tax on earnings 25 % (27% 2015) | -2 677 | -10 820 |
| Temporary differences: | Balance Sheet | Income Statement | Other Comp. income | |||
|---|---|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | |
| Deferred tax benefit | ||||||
| Inventory | 377 | 992 | -615 | 529 | ||
| Fixed assets | 5 081 | 1 663 | 3 553 | -335 | ||
| Accounts receivable Options (share based payments) |
3 042 | 3 041 | 1 | -1 720 | ||
| Pension obligation | 293 | 391 | -119 | -12 726 | 28 | -1 691 |
| Deferred tax benefit – gross | 8 793 | 6 087 | 2 800 | -14 252 | 28 | -1 691 |
| Deferred tax obligation | ||||||
| Intangible assets | ||||||
| Gain and loss account | -481 | -626 | 145 | -368 | ||
| Accounts receivable | ||||||
| Deferred tax obligation – gross | -481 | -626 | 145 | -368 | ||
| Currency effect of translation to USD | -1 054 | -461 | 254 | 7 960 | ||
| Total temporary differences | 8 220 | 5 000 | 3 192 | -6 942 | 28 | -1 691 |
| Net deferred tax obligation/benefit Change in deferred tax obligation/benefit |
1 973 | 1 250 | 689 | -1 805 | 7 | -423 |
| Temporary differences: | Balance Sheet | Income Statement | Other Comp. income | |||
|---|---|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | |
| Deferred tax benefit | ||||||
| Inventory | 377 | 992 | -615 | 529 | ||
| Fixed assets | 5 081 | 1 663 | 3 418 | -335 | ||
| Accounts receivable Options(share based payments) |
3 042 | 3 041 | 1 | -1 720 | ||
| Pension obligation | 293 | 391 | -119 | -12 726 | 28 | -1 691 |
| Deferred tax benefit – gross | 8 793 | 6 087 | 2 685 | -14 252 | 28 | -1 691 |
| Deferred tax obligation | ||||||
| Intangible assets | ||||||
| Gain and loss account | -481 | -626 | 145 | -368 | ||
| Accounts receivable | ||||||
| Deferred tax obligation – gross | -481 | -626 | -145 | -368 | ||
| Currency effect of translation to USD | -1 166 | -461 | 256 | 7 960 | ||
| Total temporary differences | 8 108 | 5 000 | 3 008 | -6 942 | 28 | -1 691 |
| Net deferred tax obligation/benefit | 1 946 | 1 250 | ||||
| Change in deferred tax obligation/benefit | 662 | -1 805 | 7 | -423 |
| GROUP | PARENT | |||
|---|---|---|---|---|
| 2016 | 2015 | Reconciliation of net deferred tax liability: | 2016 | 2015 |
| 1 250 | 5 363 | Opening balance as of 1.1 | 1 250 | 5 363 |
| 689 | -1 805 | Tax expense/income recognised in profit and loss | 662 | -1 805 |
| 7 | -423 | Tax expense/income recognised in other comprehensive income | 7 | -423 |
| 27 | -1 885 | Currency effect from translation to USD | 27 | -1 885 |
| 1 973 | 1 250 | Net deferred tax obligation/benefit 31.12 | 1 946 | 1 250 |
| GROUP | PARENT | |||
|---|---|---|---|---|
| 2016 | 2015 | Net deferred tax recogniced in OCI as of 31.12: | 2016 | 2015 |
| 7 | -457 | Net gain/(loss) on actuarial gains and losses | 7 | -457 |
| -2 | 34 | Effect of changes in tax rates | -2 | 34 |
| 5 | -423 | Total tax other comprehencive income | 5 | -423 |
| Note 8: Shares outstanding | ||
|---|---|---|
| 2016 | 2015 | |
| Basis for calculation of basic earnings per share | ||
| Earnings for the year (USD '000) | 6 424 | 24 191 |
| Weighted average number of outstanding shares ('000) | 162 385 | 163 081 |
| Earnings per share (USD) | 0.04 | 0.15 |
| Basis for calculation of fully diluted earnings per share | ||
| Earnings for the year (USD '000) | 6 424 | 24 191 |
| Weighted average number of outstanding shares ('000) | 163 317 | 164 385 |
| Earnings per share (USD) | 0.04 | 0.15 |
| Reconciliation of average number of ordinary shares ('000) | ||
| Weighted average number of outstanding shares | 163 317 | 164 986 |
| Weighted average number of treasury shares | 932 | 1 905 |
| Weighted average number of outstanding shares, corrected for treasury shares | 162 385 | 163 081 |
The number of shares was as follows:
| Date | Number of shares issued | Shares outstanding | |
|---|---|---|---|
| 2016-01-01 | Balance at beginning of period | 163 440 600 | 162 440 600 |
| 2016-12-31 | Balance at end of period | 163 481 600 | 161 384 893 |
All figures in USD 1000.
| GROUP | PARENT | |||
|---|---|---|---|---|
| 2016 | 2015 | Combined expenses for salary and other compensation are distributed as follows: |
2016 | 2015 |
| 37 902 | 31 853 | Salary and vacation pay | 25 752 | 22 679 |
| 7 985 | 7 545 | Other compensation | 5 452 | 5 696 |
| 3 822 | 3 680 | Payroll tax | 3 709 | 3 592 |
| -31 | -5 700 | Defined benefit pension | -31 | -5 700 |
| 3 874 | 2 019 | Defined contribution pension | 1 942 | 669 |
| -4 367 | -6 557 | Capitalized development expenses (hourly costs) | -4 367 | -6 557 |
| 49 185 | 32 840 | Total | 32 458 | 20 379 |
| 501 | 397 | Weighted average number of permanent employees | 341 | 280 |
| GROUP | PARENT | |||
|---|---|---|---|---|
| 2016 | 2015 | Company's employees as of December 31, are distrib uted as follows: |
2016 | 2015 |
| 308 | 268 | Norway | 308 | 268 |
| 19 | 14 | China | 19 | 14 |
| 3 | 3 | South Korea | 3 | 3 |
| 21 | 13 | USA | 1 | 1 |
| 10 | 7 | Taiwan | 10 | 7 |
| 3 | 3 | Japan | 3 | 3 |
| 15 | 15 | Philippines | 15 | 15 |
| 1 | 1 | Switzerland | 1 | 1 |
| 20 | 16 | Poland | 0 | 0 |
| 132 | 114 | Finland | 0 | 0 |
| 532 | 454 | Total | 360 | 312 |
| All figures in USD 1000 | ||
|---|---|---|
| Total compensation expensed for Board members | 2016 | 2015 |
| Terje Rogne, Chairman of the Board | 58 | 56 |
| Anne Cecilie Fagerlie, Board member | 38 | 37 |
| Arnhild Schia, Board member | 11 | 34 |
| Karsten Rönner, Board member | 0 | 10 |
| Tore Valderhaug, Board Member | 39 | 38 |
| Craig Ochikubo, Board Member | 55 | 41 |
| Beatriz Malo de Molina, Board Member | 24 | 0 |
| Lasse Olsen, employee representative (Board remuneration only) | 7 | 5 |
| Markus Bakka Hjertø, former employee representative (Board remuneration only) | 0 | 2 |
| Asbjørn Sæbø, employee representative (Board remuneration only) | 5 | 0 |
| Anne Strand, former employee representative (Board remuneration only) | 2 | 7 |
| Joakim Ferm, employee representative (Board remuneration only) | 7 | 7 |
| Other | Pension | |||||
|---|---|---|---|---|---|---|
| 2016 | Salary Bonus | Options* | compensation | expenses | Total | |
| Svenn-Tore Larsen, CEO | 351 | 9 | 76 | 5 | 16 | 457 |
| Pål Elstad, CFO | 204 | 9 | 51 | 1 | 15 | 280 |
| Svein Egil Nielsen, CTO | 190 | 9 | 51 | 1 | 16 | 267 |
| Geir Langeland, Sales & Marketing Director | 197 | 9 | 51 | 1 | 15 | 273 |
| Ebbe Rømcke, Quality Director | 141 | 9 | 25 | 1 | 15 | 192 |
| Ole Fredrik Morken, Supply Chain Director | 245 | 9 | 51 | 1 | 15 | 321 |
| Thomas Embla Bonnerud, Director of Strategy and IR | 133 | 4 | 9 | 1 | 14 | 162 |
| Total | 1 461 | 58 | 313 | 13 | 107 | 1 951 |
| Other | Pension | |||||
| 2015 | Salary Bonus | Options* | compensation | expenses | Total | |
| Svenn-Tore Larsen, CEO | 364 | 0 | 53 | 2 | 30 | 449 |
| Pål Elstad, CFO | 204 | 0 | 0 | 1 | 9 | 214 |
| Svein Egil Nielsen, CTO | 199 | 0 | 32 | 1 | 9 | 241 |
| Geir Langeland, Sales & Marketing Director | 197 | 0 | 32 | 1 | 20 | 251 |
| Ebbe Rømcke, Quality Director | 138 | 0 | 19 | 1 | 32 | 190 |
| Ole Fredrik Morken, Supply Chain Director | 209 | 0 | 12 | 1 | 9 | 230 |
| Total | 1 311 | 0 | 148 | 7 | 109 | 1 575 |
*Salary expenses are in NOK. Exchange rate for 2015 was 8,06 and for 2016 it was 8,40
*Option cost is the expense of fair value of options based on Black Scholes calculation.
The Company has no other obligations to the CEO in the event of resignation over and above the normal resignation time of six (6) months, except that the resignation period increases to twelve (12) months in the event that the Company is acquired or merged with another company.
The Board has appointed a remuneration committee under management of a board member. The remuneration committee monitors decisions regarding remuneration and other terms for the executive management. The CEO's total compensation, and any adjustments thereto, is first reviewed by the remuneration committee and then approved by the Board. The Board considers CEO compensation each year. The compensation of the other members of the executive management, including adjustments of these, are agreed between the CEO and the respective manager.
The Board proposes the following Declaration of the Principles for Compensation of the CEO and other members of the Executive Management according to the Norwegian Public Limited Liability Companies Act § 6-16a:
The main principle in the Company's policy for remuneration and compensation is that the members of the executive management team shall be offered competitive terms, so as to achieve the desired competence and incentives in the Company's executive management team. The Company has established an annual performance bonus program for the executive management team, in which the manager must remain within his position (not resigned) until the start of the following year in order to be eligible. The bonuses may be awarded as a direct cash payment or as share options in the Company. Performance-based compensation will be subject to an absolute limit and fulfilment of performance criteria, both decided by the Board at its discretion.
The Board wishes to continue the scheme of awarding stock options to all full time employees in 2018 in accordance with the principles of the option program for 2016. These principles are described in the minutes of the extraordinary general meeting on 8 December 2015. The Board proposes allocating up to 1.7 million options in 2018, equivalent to approximately 1% of the total number of issued shares. The Company offers pensions plans to all employees, managers included. In addition, the Company provides managers with other limited benefits in kind such as a company telephone. The guidelines for determination of salary and other compensation for leading employees as outlined for the Annual General Meeting in 2016 have been complied.
The Company has granted executives and employee Board members the following options according to the terms
Svenn-Tore Larsen, CEO 575 000 stock options 575 000 stock options Geir Langeland, Sales Director 350 000 stock options 350 000 stock options Svein Egil Nielsen, CTO 350 000 stock options 250 000 stock options Ebbe Rømcke, Quality Director 200 000 stock options 100 000 stock options Ole Fredrik Morken, Supply Chain Director 125 000 stock options 65 000 stock options Thomas Embla Bonnerud, Director of Strategy and IR 75 000 stock options 75 000 stock options Lasse Haugnes Olsen, Employee Board member 20 000 stock options Joakim Ferm, Employee Board member 20 000 stock options 20 000 stock options Asbjørn Sæbø,Employee Board member 21 476 stock options 14 000 stock options
*All 2014 share options expired on February 19, 2017 and as such none of the options listed above were exercised.
Svenn-Tore Larsen, CEO 65 575 stock options Pål Elstad, CFO 43 804 stock options Geir Langeland, Sales Director 43 804 stock options Svein Egil Nielsen, CTO 43 804 stock options Ebbe Rømcke, Quality Director 21 771 stock options Ole Fredrik Morken, Supply Chain Director 43 804 stock options Thomas Embla Bonnerud, Director of Strategy and IR 8 000 stock options Lasse Haugnes Olsen, Employee Board member 3 500 stock options Joakim Ferm, Employee Board member 3 500 stock options Asbjørn Sæbø, Employee Board member 5 600 stock options
Options granted 2016
All figures in USD 1000.
| GROUP | Office and lab |
Computer equipment |
Fixture and |
||
|---|---|---|---|---|---|
| 2016 | equipment | and machinery | fittings | Property | Total |
| Acquisition cost | |||||
| Opening balance | 5 048 | 26 840 | 1 731 | 333 | 33 951 |
| Additions | 1 591 | 2 518 | 345 | 4 453 | |
| Acquisition cost as of 31.12 | 6 638 | 29 358 | 2 075 | 333 | 38 404 |
| Accumulated depreciation | |||||
| Opening balance | 3 274 | 16 866 | 758 | 20 898 | |
| Depreciation expenses | 670 | 3 136 | 333 | 4 140 | |
| Accumulated depreciation as of 31.12 | 3 944 | 20 002 | 1 091 | 0 | 25 037 |
| Net carrying value as of 31.12 | 2 694 | 9 355 | 984 | 333 | 13 367 |
| Office and lab |
Computer equipment |
Fixture and |
|||
|---|---|---|---|---|---|
| 2015 | equipment | and machinery | fittings | Property | Total |
| Acquisition cost | |||||
| Opening balance | 3 973 | 20 566 | 1 013 | 333 | 25 885 |
| Additions | 1 075 | 6 274 | 718 | 8 067 | |
| Acquisition cost as of 31.12 | 5 048 | 26 840 | 1 731 | 333 | 33 952 |
| Accumulated depreciation | |||||
| Opening balance | 2 664 | 13 729 | 573 | 16 966 | |
| Depreciation expenses | 610 | 3 137 | 184 | 3 932 | |
| Accumulated depreciation as of 31.12 | 3 274 | 16 866 | 758 | 0 | 20 898 |
| Net carrying value as of 31.12 | 1 774 | 9 974 | 973 | 333 | 13 054 |
| Office and lab |
Computer equipment |
Fixture and |
|||
|---|---|---|---|---|---|
| 2016 | equipment | and machinery | fittings | Property | Total |
| Acquisition cost | |||||
| Opening balance | 4 729 | 24079 | 1 731 | 333 | 30 872 |
| Additions | 680 | 3 246 | 168 | 4 094 | |
| Acquisition cost as of 31.12 | 5 408 | 27 325 | 1 899 | 333 | 34 966 |
| Accumulated depreciation | |||||
| Opening balance | 3 203 | 16 810 | 758 | 20 770 | |
| Depreciation expenses | 716 | 3 103 | 328 | 4 147 | |
| Accumulated depreciation as of 31.12 | 3 919 | 19 913 | 1 086 | 0 | 24 918 |
| Net carrying value as of 31.12 | 1 490 | 7 412 | 813 | 333 | 10 048 |
| 2015 | Office and lab equipment |
Computer equipment and machinery |
Fixture and fittings |
Property | Total |
|---|---|---|---|---|---|
| Acquisition cost | |||||
| Opening balance | 3 858 | 20 593 | 1 013 | 333 | 25 797 |
| Additions | 871 | 3 486 | 718 | 5 075 | |
| Acquisition cost as of 31.12 | 4 729 | 24 079 | 1 731 | 333 | 30 872 |
| Accumulated depreciation | |||||
| Opening balance | 2 626 | 13 700 | 573 | 16 900 | |
| Depreciation expenses | 577 | 3 109 | 184 | 3 871 | |
| Accumulated depreciation as of 31.12 | 3 203 | 16 810 | 758 | 0 | 20 770 |
| Net carrying value as of 31.12 | 1 526 | 7 270 | 973 | 333 | 10 102 |
| Estimated useful life | 3 – 5 years | 3 - 4 years | 5 years | Not |
|---|---|---|---|---|
| Depreciation method | Straight-line | Straight-line | Straight-line | depreciated |
| Annual lease of non-recognized capital assets | 0 | 32 | 0 | 0 |
Total depreciation expenses consist of depreciation of fixed assets and depreciation of intangible assets (note 13).
The Parent company has an apartment in Trondheim for use by employees in the Oslo office while in Trondheim. The apartment is assessed at acquisition cost. The residual value is expected to be at least equal to the book value.
All capital assets that are ready to be scrapped have been fully depreciated and have no residual book value.
The Group has no capital assets that are temporary out of operation.
The Group does not have any leased equipment.
There are no indicators that assets need to be written off.
There has been no basis for changing depreciation periods on fixed assets.
All figures in USD 1000.
| Purchased | Capitalized | ||
|---|---|---|---|
| 2016 | Software | Development costs | Total |
| Acquisition cost | |||
| Opening balance | 16 436 | 27 835 | 44 271 |
| Additions | 5 318 | 5 304 | 10 622 |
| Accumulated cost as of 31.12 | 21 754 | 33 139 | 54 893 |
| Accumulated depreciation | |||
| Opening balance | 7 354 | 15 294 | 22 647 |
| Depreciation expenses | 2 345 | 3 451 | 5 796 |
| Total accumulated depreciation as of 31.12 | 9 699 | 18 744 | 28 444 |
| Net carrying amount | 12 054 | 14 394 | 26 449 |
| GROUP | Non-capitalized R&D expenses: | PARENT |
|---|---|---|
| 23 843 | Personnel expenses | 19 206 |
| 18 395 | Other operating expenses | 14 110 |
| 42 238 | Total cost recognized in income statement | 33 316 |
| 47 542 | Total expenses for R&D | 38 634 |
| Purchased | Capitalized | ||
|---|---|---|---|
| 2015 | Software | Development costs | Total |
| Acquisition cost | |||
| Opening balance | 10 713 | 19 507 | 30 220 |
| Additions | 5 722 | 8 328 | 14 050 |
| Accumulated cost as of 31.12 | 16 436 | 27 835 | 44 271 |
| Accumulated depreciation | |||
| Opening balance | 6 228 | 12 579 | 18 807 |
| Depreciation expenses | 1 126 | 2 715 | 3 841 |
| Total accumulated depreciation as of 31.12 | 7 354 | 15 294 | 22 647 |
| Net carrying amount | 9 082 | 12 542 | 21 623 |
| GROUP | Non-capitalized R&D expenses: | PARENT |
|---|---|---|
| 24 755 | Personnel expenses | 14 556 |
| 8 483 | Other operating expenses | 6 689 |
| 33 239 | Total cost recognized in income statement | 21 246 |
| 41 567 | Total expenses for R&D | 29 574 |
Total depreciation expenses consist of depreciation of intangible assets and depreciation of fixed assets (note 11).
| Economic lifetime | 10 years | 1 - 5 years |
|---|---|---|
| Depreciation plan | Straight-line | Straight-line |
Expensed research and development activities relate to new technologies and new services and products.
The folowing subsidiaries have been included in the financial statements
| Subsidiaries consolidated in the group accounts company |
Location | Share Ownership |
Voting Rights |
|
|---|---|---|---|---|
| Nordic Semiconductor Inc | 2006 | USA | 100% | 100% |
| Nordic Semiconductor Poland S.P z o.o. | 2013 | Poland | 100% | 100% |
| Nordic Semiconductor Finland OY | 2014 | Finland | 100% | 100% |
| Subsidiaries as of 31 December 2016 | Ownership | Share of votes |
Net profit 2016 |
Equity 31. Dec 2016 |
|---|---|---|---|---|
| Nordic Semiconductor Inc, USA | 100% | 100% | 195 | 872 |
| Nordic Semiconductor Poland S.p Z o.o. | 100% | 100% | 51 | 133 |
| Nordic Semiconductor Finland OY | 100% | 100% | 835 | 1334 |
All intellectual property (IP) is owned by Nordic Semiconductor ASA. All subsidiaries operate as contract research and development centers and invoice Nordic Semiconductor ASA at arms length pricing.
Nordic Semiconductor Inc, is manly a sales company, but in 2016 a small R&D department was also started. All sales conducted is on behalf of the parent company.
Nordic Semiconductor Poland S.p Z o.o. Is an extention of the software development team in the parent company.
Nordic Semiconductor Finland OY, is a development company. This R&D team works closely alongside the rest of the R&D teams in the group.
| Note 14: Accounts Receivable | ||||
|---|---|---|---|---|
| All figures in USD 1000. | ||||
| GROUP | PARENT | |||
| 2016 | 2015 | 2016 | 2015 | |
| 54 772 | 48 938 | Gross receivables | 54 772 | 48 938 |
0 0 Provision for doubtful accounts 0 0 54 772 48 938 Accounts Receivable, net 54 772 48 938
| Receivables | 2016 | 2015 |
|---|---|---|
| Loan to group Companies | 6 094 | 1 766 |
| Current receivables towards group | 16 | 37 |
| Total | 6 110 | 1 803 |
| Payables | 2016 | 2015 |
| Trade creditors towards group companies | 6 695 | -374 |
| Total | 6 695 | -374 |
| Note 16: Cash and cash equivalents | ||||
|---|---|---|---|---|
| All figures in USD 1000. | ||||
| GROUP | PARENT | |||
| 2016 | 2015 | Cash and cash equivalents as of the balance sheet date were as follows: |
2016 | 2015 |
| 19 952 | 28 205 | Cash holdings | 19 249 | 26 661 |
| 1 183 | 1 088 | Tax deduction account (restricted funds) | 1 183 | 1 088 |
| 21 135 | 29 293 | Cash and cash equivalents in statement of financial position |
20 432 | 27 749 |
All figures in USD 1000.
The share capital in Nordic Semiconductor as of December 31, 2016 consists of one share class with a total of 163,481,600 shares with a face value of NOK 0.01, with a total share capital of NOK 1,634,816. Each share grants the same rights in the company, and in the event of any increase in capital, existing shareholders have pre-emptive rights for any new shares.
During the year the following changes have been made in the number of shares, share capital and share premium:
| GROUP | Number of shares | Share capital | Treasury shares | Share premium | ||||
|---|---|---|---|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | |
| Ordinary shares, issued and paid | ||||||||
| Holdings as of 1.1 | 163 440 600 | 163 440 600 | 283 | 283 | -1 | -2 | 14 253 | 14 253 |
| Issue of share capital | 41 000 | 183 | ||||||
| Purchase of treasury shares | -1 | -1 | ||||||
| Sale of treasury shares | 2 | |||||||
| Holdings as of 31.12 | 163 481 600 | 163 440 600 | 283 | 283 | -2 | -1 | 14 436 | 14 253 |
No dividend was paid during 2016.
The Board of the Parent company, based on a resolution from the annual general meeting on April 19, 2016, has the authority to increase the company's share capital by issuing up to 16,300,000 shares with a par value of NOK 163,000. The shareholders' pre-emptive right may be waived according to the Norwegian Private Limited Companies Act §10-4. This authority is valid until the company's annual general meeting in 2017, and by June 30, 2017 the latest. The resolution covers both cash and non-cash contributions and the issue of shares in connection with a merger.
The Company owned 1,685,819 treasury shares on December 31, 2016. At January 1, 2016, the Company owned 1,000,000 treasury shares. Based on a resolution of the annual general meeting of April 19, 2016, the Board has authority to purchase the company's own shares with a limit of a face value of NOK 163,000 through one or more transactions. This authority is limited to 9.97% of the company's share capital, and the price per share that the company may pay for shares shall not be lower than the face value and not higher than NOK 200. This authority applies until the company's regular general meeting in 2017, and by June 30, 2017 the latest. Under this approval, the company purchased during Q3 and Q4 2016 a total of 685,819 shares.
On February 18, 2014, the Board approved a grant of 5,843,712 share options to employees. The options vest after one year if the employee is in an unresigned position at the vesting date, and expire after three years. The options were granted at a strike price of NOK 38.43. On the exercise date, Nordic can determine whether they wish to settle the options contract in cash or through the issue of shares. If the company's share price exceeds a cap of NOK 150.00, the company may settle the option grant by compensating the employee the difference between the cap and the strike price. As of December 31, 2016, the remaining 3,730,702 options have vested and can be exercised prior to expiration on February 18, 2017.
With reference to the Extraordinary General Meeting on December 8 2015, Nordic Semiconductor granted on February 26, 2016, 1,590,000 share options to employees and primary insiders. On the EGM the Company was given the approval to issue up to 1% of the outstanding share capital in options to all employees.
According to the approval, the option scheme has a longterm element as options are exercisable over a threeyear period and expire after five years. The options were granted at a strike price of NOK 47,72 (10% above volume weighted average share price the week following Q4 2015 results). If the company's share price exceeds a cap of NOK 143.16, the company may settle the option grant by compensating the employee the difference between the cap and the strike price.
The largest shareholders in Nordic Semiconductor ASA were as follows as of December 31, 2016:
| Shareholder | Shares | Percentage |
|---|---|---|
| FOLKETRYGDFONDET | 21 049 847 | 12,88 % |
| ACCELERATOR LTD | 17 482 950 | 10,69 % |
| PASSESTA AS | 4 860 000 | 2,97 % |
| VERDIPAPIRFONDET DNB NORGE (IV) | 4 604 374 | 2,82 % |
| KLP AKSJENORGE | 4 462 058 | 2,73 % |
| ALDEN AS | 4 450 602 | 2,72 % |
| DNB LIVSFORSIKRING ASA | 3 123 692 | 1,91 % |
| TORSTEIN TVENGE | 3 000 000 | 1,84 % |
| DANSKE INVEST NORSKE INSTIT. II. | 2 917 100 | 1,78 % |
| VERDIPAPIRFONDET DNB NORGE SELEKTI | 2 884 849 | 1,76 % |
| KOMMUNAL LANDSPENSJONSKASSE | 2 808 039 | 1,72 % |
| MP PENSJON PK | 2 517 434 | 1,54 % |
| VERDIPAPIRFONDET PARETO INVESTMENT | 2 399 000 | 1,47 % |
| SPENCER TRADING INC | 2 100 000 | 1,28 % |
| SONGA AS | 2 000 000 | 1,22 % |
| FOUGNER INVEST AS | 1 914 992 | 1,17 % |
| TTC INVEST AS | 1 750 000 | 1,07 % |
| NORDIC SEMICONDUCTOR ASA | 1 685 819 | 1,03 % |
| SCAN CHEMICALS AS | 1 625 000 | 0,99 % |
| INAK 3 AS | 1 600 000 | 0,98 % |
| Total for the 20 largest shareholders | 89 235 756 | 54,58 % |
| Other shareholders | 74 245 844 | 45,42 % |
| Total shares outstanding | 163 481 600 | 100,00 % |
Shares held by the Board of directors and Executive management were as follows as of December 31, 2016.
| Name | Shares |
|---|---|
| Board of directors | |
| Terje Rogne | 1 250 000 |
| Anne Cecilie Fagerlie | 0 |
| Craig Ochikubo | 0 |
| Beatriz Malo de Molina | 0 |
| Tore Valderhaug | 5 769 |
| Joakim Ferm | 0 |
| Lasse Haugnes Olsen | 0 |
| Asbjørn Sæbø | 10 000 |
| Management | |
| Svenn-Tore Larsen* | 1 890 400 |
| Pål Elstad | 3 846 |
| Geir Langeland | 177 700 |
| Svein Egil Nielsen | 15 000 |
| Thomas Embla Bonnerud | 3 420 |
| Ebbe Rømcke | 68 900 |
| Ole Fredrik Morken | 160 000 |
| Total | 3 585 035 |
*Svenn-Tore Larsen holds shares personally and through a limited liability company
The pension liability for the group consists of liabilities in Norway and The Philippines
The company has set up a pension plan for the Philippine office as of January 2014. The retirement plan is unfunded and of the defined benefit type which provides a retirement benefit calculated based on number of years of credited service. At the end of 2016 the pension liability was USD 84 000.
For the Company in Finland pensions are financed by contributions from the insured employees and employers. The Norwegian company in the Group is required to have mandatory employment pension for employees in Norway, according to the Mandatory Employment Pension Act.
The Board of Nordic Semiconductor ASA decided in December 2015 to change the pension plan for all employees currently on a defined benefit plan effective January 1, 2016. Up until December 31, 2015 Nordic Semiconductor ASA (Norwegian employees) had both a defined benefit plan and a defined contribution plan. The defined benefit plan was closed for new members effective January 1, 2008 and from this point a new defined contribution plan was established. The two different types of pensions are described below:
| 2016 | 2015 | |
|---|---|---|
| Current service cost | 0 | 1 067 |
| Interest expense | 34 | 390 |
| Expected return on plan assets | -28 | -194 |
| Change liability | 0 | -14 801 |
| Change assets | 0 | 8 128 |
| Administration fee | 1 | 13 |
| Total pension expense excl. social security tax | 7 | -5 397 |
| Social security tax | 1 | -761 |
| Total pension expense incl. social security tax | 8 | -6 158 |
| 2016 | 2015 | |
|---|---|---|
| Pension obligations | 1 014 | 1 226 |
| Plan assets | 828 | 968 |
| Estimated net pension obligations | 186 | 258 |
| Social security tax | 23 | 36 |
| Total actual net obligation incl. social security tax | 209 | 295 |
| Total pension liability for the Group | 2016 | 2015 |
|---|---|---|
| Employees in Norway | 209 | 295 |
| Employees in Philippines | 84 | 63 |
| Employees in Finland | 0 | 349 |
| Total | 293 | 707 |
All employees in Norway have a defined contribution pension plan from 01.01.2016. The main benefit is a contribution of 7% of salary up to 7.1 basis points (G) and 18% of salary between 7.1 and 12 basis points. Along with this the company has a disability pension of approximately 66% of salary including estimated social security based on 40 years of full employment. In 2016, the cost of the defined contribution pension was USD 1 942 000, and the plan had 317 members.
| GROUP | Total pension cost | PARENT |
|---|---|---|
| 293 | Defined Benefit plan | 293 |
| 3 874 | Defined Conrtibution plan | 1 942 |
On February 18, 2014, Nordic Semiconductor granted 5,843,712 share options to 177 employees. The options are exercisable after one year, and expire after three years. The options were granted at a strike price of NOK 38.43
If the company's share price exceeds a cap of NOK 150.00 the company may settle the option grant by compensating the employee the difference between the cap and the strike price.
On February 26, 2016, Nordic Semiconductor granted 1,590,000 share options to 320 employees.
The options were granted at a strike price of NOK 47.72 (10% above volume weighted average share price the week following Q4 2015 results). If the company's share price exceeds a cap of NOK 143.16, the company may settle the option grant by compensating the employee the difference between the cap and the strike price.
| A summary of share option transactions during 2016 and 2015 is below. | ||
|---|---|---|
| 2016 | 2015 | |
| Outstanding options 1.1 | 3 844 970 | 5 432 245 |
| Options granted | 1 579 712 | 0 |
| Options forfeited | 57 501 | 0 |
| Options exercised | 79 467 | 1 587 275 |
| Options expired | 0 | 0 |
| Outstanding options 31.12 | 5 287 714 | 3 844 970 |
| Of which exercisable | 3 730 702 | 3 844 970 |
The fair value of the options is set on the grant date and expensed over the vesting period. USD 477.956 was expensed during 2016 and USD 551.129 in 2015.
The fair value of options granted in 2016 was NOK 11.35 per option. The value has been estimated using the Black & Scholes model, subject to the following assumptions:
The share price is set to the value weighted average price of shares traded on the grant date, which was USD NOK 43.40 on the date of grant in 2016.
The strike price is the share price on the grant date +10%.
The cap price on the options granted is NOK 143.16. At this price, the company may settle the option grant by compensating the employee the difference between the cap and the strike price. When calculating the value of the stock option, the value of the cap is calculated through the Black Scholes model, and deducted from the uncapped value of the option to the employee.
It is assumed that historic volatility is an indication of future volatility. The expected volatility is therefore stipulated to be the same as the historic volatility, which equaled 43.84% on the date of grant in 2016.
The options are expected to have an average term of 4 years (between the minimum vesting period of one year and the maximum exercise period of five years).
The company does not forecast a dividend payout in the Black-Scholes model.
Risk-free interest rate. The risk-free interest rate is set equal to the relevant interest rate on government bonds on the date of grant in 2016, i.e. 0.78 %.
All figures in USD 1000.
| GROUP | PARENT | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| 15 295 | 6 389 | Accounts payable | 14 887 | 6 297 |
| 2 786 | 9 931 | Taxes payable | 2 609 | 9 905 |
| 2 260 | 2 295 | Social security tax | 1 990 | 2 027 |
| 4 169 | 3 130 | Holiday pay | 3 035 | 2 413 |
| 0 | 10 000 | Short-term loan facility | 0 | 10 000 |
| 9 125 | 6 508 | Provision of Ship and debit | 9 125 | 6 508 |
| 4 486 | 7 081 | Accrued expenses | 9 777 | 14 963 |
| 38 121 | 45 335 | Total Current liabilities | 41 423 | 52 402 |
All figures in USD 1000.
The company has several operating leases for machinery and office space.
The lease expenses consist of the following:
| GROUP | PARENT | ||||
|---|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | ||
| 2 591 | 2 066 | Office lease | 1 880 | 1 621 | |
| 42 | 25 | Lease of machinery | 19 13 |
||
| 2 633 | 2 091 | Total lease expense | 1 899 | 1 634 |
As of December 31, 2016, the Group leased offices in Trondheim, Oslo, Hong Kong, Shenzhen, Shanghai, Seoul, Tokyo, Manila and Taiwan. The lease amounts are fixed with index regulation based on Statistics Norway's consumer price index.
| GROUP | PARENT | |
|---|---|---|
| 2 569 | Within 1 year | 1 855 |
| 10 085 | 1 to 5 years | 9 457 |
| 10 487 | After 5 years | 10 487 |
| 23 142 | Total non-cancellable leases | 21 799 |
All figures in USD 1000.
Nordic Semiconductor's strategy relating to its capital structure is to maintain sufficient cash and cash equivalents to meet the Group's requirements for ongoing operations and for new investments. Management believes that it is especially important for a relatively small company to retain a strong credit rating and significant liquidity as the Group competes in a global market against larger companies.
Nordic Semiconductor manages its capital structure and makes revisions in light of changes in the overall economy and its operating assumptions. In order to maintain or amend the capital structure, the company may purchase its own shares on the market, pay dividends to shareholders, pay back capital to shareholders or issue new shares. No changes were made in procedures or processes in the course of 2016.
Nordic Semiconductor manages its capital structure based on an equity ratio. This relationship is calculated as total equity divided by total assets. In this phase of the company's development, the goal is to keep the equity ratio above 50%.
| GROUP | PARENT | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| 116 270 | 112 405 | Total equity | 114 676 | 110 986 |
| 174 684 | 158 447 | Total assets | 176 391 | 163 746 |
| 67% | 71% | Equity share | 65% | 68% |
The Company has a credit agreement with a bank, which enables it to borrow up to MUSD 40 at any time with an interest rate equal to LIBOR + 1 %. The line of credit agreement expires in September 2019 As of December 31, 2016, the company has drawn MUSD 20 on the line of credit. The security is provided by inventory, receivables and operating equipment with book values as follows: inventories MUSD 52, accounts receivable USD 55, and operating equipment MUSD 12. The remainder of the company's financing is made through short-term, non-interest-bearing debt. This financing typically consists of debt to suppliers, the public sector, employees or others.
The company has enterd into a Tenancy Guarantee with Danske Bank as unconditional guarantor for 40 MNOK (USD4,5) The warranty is given to secure payment of upto 24 months of rent for the new office in Trondheim.
| GROUP | Amortized cost | Total | |
|---|---|---|---|
| Receivables and loans | Other financial obligations |
||
| Cash and cash equivalents | 21 135 | 21 135 | |
| Receivables and other short-term receivables | 59 713 | 59 713 | |
| Long-term receivables | 2 | 2 | |
| Total financial assets | 80 850 | 80 850 | |
| Accounts payable and other short-term debt | 38 121 | 38 121 | |
| Other long term liabilities | 20 000 | ||
| Total financial liabilities | 20 000 | 38 121 | 68 121 |
| PARENT Amortized cost |
Total | ||
|---|---|---|---|
| Receivables and loans | Other financial obligations |
||
| Cash and cash equivalents | 20 432 | 29 293 | |
| Receivables and other short-term receivables | 65 453 | 48 938 | |
| Long-term receivables | 2 | 12 | |
| Total financial assets | 85 887 | 78 243 | |
| Accounts payable and other short-term debt | 41 423 | 41 423 | |
| Other long term liabilities | 20 000 | ||
| Total financial liabilities | 20 000 | 41 423 | 61 423 |
| GROUP | Amortized cost | Total | |
|---|---|---|---|
| Receivables and loans | Other financial obligations |
||
| Cash and cash equivalents | 29 293 | 29 293 | |
| Receivables and other short-term receivables | 48 938 | 48 938 | |
| Long-term receivables | 12 | 12 | |
| Total financial assets | 78 243 | 78 243 | |
| Accounts payable and other short-term debt | 10 000 | 35 335 | 35 335 |
| Total financial liabilities | 10 000 | 35 335 | 45 335 |
| PARENT Amortized cost |
Total | ||
|---|---|---|---|
| Receivables and loans | Other financial obligations |
||
| Cash and cash equivalents | 27 749 | 27 749 | |
| Receivables and other short-term receivables | 61 892 | 61 892 | |
| Long-term receivables | 12 | 12 | |
| Total financial assets | 89 653 | 89 653 | |
| Accounts payable and other short-term debt | 10 000 | 42 402 | 52 402 |
| Total financial liabilities | 10 000 | 42 402 | 52 402 |
Cash equivalents at fair value are assets held as shortterm deposits in interest-bearing funds invested within high-quality issuers, with floating earnings and no set maturity date (Valuation category 1, prices in active markets for identical assets or liabilities).
As Nordic Semiconductor manages an international operation, the company is subject to financial risk, primarily credit risk and foreign currency risk. Procedures for control of financial risk have been adopted by the Board and are carried out by its finance department.
Age distribution of customer receivables was:
Based on its experience, it is not deemed necessary for the company to make a provision for accounts receivable. (92% of receivables are within terms).
The book value of financial assets represents the maximum credit exposure.
The maximum exposure to credit risk on the balance sheet date was:
| GROUP | ||||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| 59 714 | 52 115 | Accounts receivable and other short-term receivables | 65 453 | 61 892 |
| 21 135 | 29 293 | Cash and cash equivalents | 20 432 | 27 749 |
| 80 849 | 81 408 | Total | 85 885 | 89 641 |
The company's sale of components takes place through its distribution partners within defined geographic regions. The number of invoice recipients is thereby significantly lower than the end customer base, which increases the credit risk on customer receivables. In order to manage credit risk, the company has established guidelines to ensure that each customer's outstanding receivables do not exceed established credit limits.
Overall, the Company seeks to minimize risk when investing its cash balance. Investments can only be made in securities which have been approved by the Board.
The Company has no externally imposed capital requirements or agreements, and has no contracts or legal requirements which are not being upheld. The Company has the following due dates with regard to contracts for financial obligations as of December 31, 2016:
| GROUP | Entered amount |
Contractual cash flow |
0-3 months |
3-6 months |
6-12 months |
1-2 years |
2-5 years |
5-10 years |
|---|---|---|---|---|---|---|---|---|
| Supplier and other short-term debt | 38 121 | 38 121 | 15 295 | 5 046 | 17 780 | |||
| Other contractual obligations | 0 | 23 142 | 642 | 642 | 1 285 | 5 520 | 7 135 | 10 487 |
| Loan facility | 20 000 | 20 000 |
| PARENT | Entered | Contractual | 0-3 | 3-6 | 6-12 | 1-2 | 2-5 | 5-10 |
|---|---|---|---|---|---|---|---|---|
| amount | cash flow | months | months | months | years | years | years | |
| Supplier and other short-term debt | 41 423 | 41 423 | 14 887 | 4 599 | 21 937 | |||
| Other contractual obligations | 0 | 21 799 | 464 | 464 | 927 | 4 372 | 6 941 | 10 487 |
| Loan facility | 20 000 | 20 000 |
*Other contractual obligations is mainly office facility rent in Oslo and Trondheim
The Company's liquidity requirements and risk assessment determine its investment strategy and interest rate exposure. The Company's policy is to maintain a shortterm investment horizon for its surplus cash. The investment portfolio should not have an average duration longer than six (6) months.
The Group has a line of credit agreement with its bank, which allows it to borrow up to MUSD 40 at an interest rate of LIBOR + 1%. The line of credit agreement expires in September 2019.
If interest rates increase 1 basis point, the negative effect on profit before tax given current utilization of the RCF is USD 200 per year.
| USD, while approximately 85% of the company's operating |
|---|
| expenses excluding depreciation are in NOK. The compa |
| ny does not hedge its exposure to foreign currency risk. |
(iv) Foreign currency risk
The table below shows sales in the most significant currencies:
The company is subject to foreign currency risk as it has its development and commercial activities in different countries. Nearly all revenues and cost of goods are in
| 2016 | 2015 | |||||
|---|---|---|---|---|---|---|
| Local currency |
USD (1000) | Share of total revenues in % |
Local currency |
USD (1000) | Share of total revenues in % |
|
| USD | 196 167 | 196 167 | 99.2% | 191 044 | 191 044 | 98.9% |
| EUR | 73 | 82 | 0.8% | 1 817 | 1 999 | 1.1% |
| Total | 197 697 | 100.0% | 193 068 | 100.0% |
| 2016 | 2015 | |||||
|---|---|---|---|---|---|---|
| Local currency |
USD (1000) | Share of total revenues in % |
Local currency |
USD (1000) | Share of total revenues in % |
|
| USD | 196 351 | 196 351 | 99.2% | 191 202 | 191 202 | 98.9% |
| EUR | 1 437 | 1 593 | 0.8% | 1 929 | 2 122 | 1.1% |
| Total | 197 944 | 100.0% | 167 196 | 100.0% |
Below is a sensitivity analysis of changes in the NOK exchange rate on balance sheet items, and their impact on Profit before tax:
| Profit before tax | |
|---|---|
| NOK exchange rate +/- 10% | +/- 2 950 |
As of December 31, 2016 the company had no financial assets or financial liabilities where there is considered to be a difference between book value and fair value.
Below is an overview of the Company's financial instruments:
| 2016 | 2015 | ||||
|---|---|---|---|---|---|
| Book value | Fair market value | Book value | Fair market value | ||
| Financial assets | |||||
| Cash and bank deposits | 21 135 | 21 135 | 29 293 | 29 293 | |
| Accounts receivable | 54 772 | 54 772 | 48 938 | 48 938 | |
| Financial liabilities | |||||
| Other long-term liabilities | 20 000 | 20 000 | |||
| Accounts payable | 15 295 | 15 295 | 6 389 | 6 389 |
| 2016 | 2015 | ||||
|---|---|---|---|---|---|
| Book value | Fair market value | Book value | Fair market value | ||
| Financial assets | |||||
| Cash and bank deposits | 20 432 | 20 432 | 27 749 | 27 749 | |
| Accounts receivable | 54 772 | 54 772 | 48 938 | 48 938 | |
| Financial liabilities | |||||
| Other long-term liabilities | 20 000 | 20 000 | |||
| Accounts payable | 14 887 | 14 887 | 6 297 | 6 297 |
With reference to the Annual General Meeting on April 19, 2016, Nordic Semiconductor has on February 22, 2017, granted 1,625,412 share options to employees and primary insiders. On the AGM the Company was given the approval to issue up to 1.7 million options in 2017, equivalent to approximately 1% of the outstanding share capital in options to all employees.
According to the approval, the option scheme has a long-term element as options are exercisable over a three-year period and expire after five years. The options were granted at a strike price of NOK 35,77 (10% above volume weighted average share price the week following Q4 2016 results). If the company's share price exceeds a cap of NOK 107.31, the company may settle the option grant by compensating the employee the difference between the cap and the strike price.
Otherwise, no events have occurred since the end of the fiscal year which are expected to materially affect the financial statements.
Nordic Semiconductor Group is listed on Oslo Stock exchange. The Groups parent company is Nordic Semiconductor ASA. The group has no material transactions with related parties.
Beatriz Malo de Molina Tore Valderhaug Lasse Haugnes Olsen Board member Board member Board member, employee
Board member, employee Board member, employee Chief Executive Officer
Oslo, 15 March 2017
Terje Rogne Anne-Cecilie Fagerlie Craig Ochikubo Chairman Board member Board member
Joakim Ferm Asbjørn Sæbø Svenn-Tore Larsen
The Board of Directors and management of Nordic Semiconductor aim to execute their respective tasks in accordance with the highest standards for corporate governance.
Nordic Semiconductor's standards for corporate governance provide a critical foundation for the company's management. These principles must be viewed in conjunction with the company's efforts to constantly promote a sound corporate culture throughout the organization. The company's core values of respect, trust, accountability and equal treatment are central to the Board's and management's efforts to build confidence in the company, both internally and externally. Nordic Semiconductor is a UN Global Compact (UNGC) signatory and is committed to the Ten Principles as set forth by the UNGC in the areas of Human Rights, Labor, Environment and Anti-corruption. Nordic Semiconductor has adopted the Electronics Industry Citizenship Coalition (EICC) Code of Conduct, which specifically focuses on topics relevant for the electronics industry, and promotes this to ensure sustainable business operations and supply chain. Additional information on this work can be read in the annual Corporate Social Responsibility report, as published on Nordic Semiconductor's website.
Nordic Semiconductor's principles for corporate governance are based on Norwegian law, regulations by the Oslo Stock Exchange and the Norwegian Code of Practice for corporate governance published on October 30, 2014. The company's policy on corporate governance are published each year in the annual report, and described in detail below.
Nordic Semiconductor's Articles of Association states, "The object for which the company is established is the development and sale of electronic components, integrated circuits, design tools and related solutions."
Nordic Semiconductor designs, sells and delivers integrated circuits and related intellectual property for use in short and long-range wireless applications. The company specializes in ultra-low power components, based on its proprietary 2.4 GHz RF and Bluetooth low energy. All manufacturing and direct distribution of components are outsourced to specialist subcontractors. The company is headquartered in Trondheim and Oslo, Norway, and has offices in Finland, USA, Poland, Hong Kong, China, Korea, Japan, Taiwan and the Philippines.
The company's growth philosophy, as well as the cyclicality of its business, means that the company will undertake to maintain a high equity ratio and considerable liquidity.
The company aims primarily to provide shareholders with returns in the form of appreciation of the shares and has a long term goal to pay dividends based on surplus cash generated by the company. This assumes that the company's needs for financial strength relative to operational requirements and new investments are addressed. The company's dividend policy is reviewed each year by the Board of Directors. The Annual General Meeting can mandate the Board the authorization to pay dividends based on the latest approved Annual Report. The justification for this authorization needs to be explained and should reflect the company's dividend policy.
The Board of Directors, in accordance with the resolution of the Annual General Meeting held April 19. 2016, has been authorized to buy back up to 16,300,000 own shares for a total par value of NOK 163,000.00 in one or more transactions. The authorization is limited to 10 percent of the company's share capital, and the price per share which the company may pay for shares acquired in this manner shall not be less than the par value nor greater than NOK 200. This power of attorney will remain in effect until the company's ordinary annual general meeting in 2017.
In accordance with the decision passed at the general meeting held April 19. 2016, the Board of Directors has the authority to increase the company's share capital by issuing up to 16,300,000 shares with a total par value of NOK 163,000. The authority is to be used for purposes defined in the Notice of the Annual General Meeting, including strengthening the company's shareholder's equity, to execute share capital increases with one or more strategic partners, or to complete a merger or acquisition using shares or cash. This power of attorney will remain in effect until the company's annual general meeting in 2017, and can be implemented through a private placement, rights issue or public offering.
Nordic Semiconductor has one class of shares, where each share has one vote at the company's shareholders' meeting. Nordic Semiconductor strictly adheres to the principle of equal treatment of all shareholders. The company's transactions in its own shares are conducted in accordance with good stock exchange practice in Norway.
If the Board wishes to quickly raise capital, the Board has been authorized to direct a share capital increase to selected investors chosen by the Board, up to the limits quantified above. In this event, the company will notify the stock exchange of its reasons for implementing a directed share placement. Existing shareholders' preemptive subscription rights under §10-4 in the Norwegian Companies Act can be waived under these circumstances.
Such capital increases shall be executed at or near the current stock price listed on the Oslo Stock Exchange. This authorization remains valid until the company's ordinary annual general meeting in 2017.
The company is generally cautious in regards to transactions with shareholders, members of the Board of Directors, senior employees or related parties to the above. To ensure that the best code of conduct applies, the company requires notification and review of any process or transaction in which both the company and a senior employee or member of the Board of Directors may have interests.
Nordic Semiconductor will seek to comply to the principles of equal treatment of related parties and possible transactions with related parties that are laid down in the Norwegian Code of Practice for Corporate Governance.
Nordic Semiconductor's shares are freely tradable and there are no restrictions on the sale and purchase of the company's shares beyond those pursuant to Norwegian law.
The Annual General Meeting is the company's highest body and the shareholders exert their authority in the company through the Annual General Meeting. Nordic Semiconductor encourages all shareholders to participate and exercise their rights at the Annual General Meeting.
Nordic Semiconductor has an ambition to hold the Annual General Meeting in accordance with the Norwegian Code of Practice for Corporate Governance. The notice of the Annual General Meeting, including relevant information shall be announced and distributed at least 21 days in advance of the Annual General Meeting, and the final date for notification of attendance is three working days prior to the Annual General Meeting.
Shareholders who are unable to attend may vote by proxy. Members of the Board of Directors and the auditor attend the Annual General Meeting. The Annual General Meeting is chaired by a person independent of the company's Board of Directors and management.
Pursuant to the Articles of Association the following issues shall be discussed and decided at the Annual General Meeting
Nordic Semiconductor has a Nomination Committee which is elected with a defined mandate during the Annual General Meeting. The Nomination Committee's duties are to represent the interests of the shareholders in general, and to propose qualified candidates for the Annual General Meeting's election of the Board of Directors as well as to propose the remuneration to the Board of Directors. The Nomination Committee will provide reasons for its recommendation in the notice for the AGM, including information on the candidates' competence, capacity and independence. The nomination committee holds regular meetings with major shareholders as well as management and the induvidual shareholder elected Board member. In addition, all shareholders can submit suggestions to the nomination committee through a link on Nordic's webpage.
The Nomination Committee consists of three members who are shareholders or who represent the shareholders. The company's executive personnel are not represented on the Nomination Committee. The deadline for submitting proposals to the Nomination Committee is one month before the Annual General Meeting
The members of the Nomination Committee are:
The Board of Directors and the Chairman of the Board of Directors are elected by the shareholders at the Annual General Meeting on the basis of proposals from the Election Committee.
Both the Chairman and the shareholder-elected members of the Board of Directors are elected for a term of up to two years. A more detailed description of the background, qualifications, and term of service of each member of the Board of Directors and the number of Nordic Semiconductor shares they own are provided in the annual report. Members of the Board are encouraged to hold shares in the company.
The composition of the Board of Directors meets the requirements of the Norwegian Code of Practice for Corporate Governance with respect to members' independence of the executive management and with respect to important business relationships. The independence of the members of the Board of Directors is also evident in the fact that there are few instances of disqualification in connection with matters dealt with at Board meetings. Representatives of the executive personnel are not members of the Board of Directors.
The conduct of the Board of Directors is in accordance with the Board instructions of Nordic Semiconductor ASA. In accordance with the said instructions, the Board is responsible, to the degree necessary, for approving business strategies and budgets for the company. The Board is also responsible for ensuring that the company has a competent management with clear internal distribution of responsibility and work.
Each year, the Board of Directors adopts a specific meeting and activity plan for the following year. This plan covers strategic planning, monitoring of the business, and other relevant business issues. The Board's activity plan for 2017 stipulates eight meetings, two of which are scheduled for all day meetings to discuss and explore strategy and technology-specific issues.
The Board of Directors carries out an evaluation of its activities each year and on this basis discusses improvements in the organization and implementation of its work.
The Board has established a Compensation Committee to discuss and decide the remuneration principles for the CEO and executive management.
In 2014, the Board established an Audit Committee. The Audit Committee consists of two members of the Board both of which are independent of Group Management. The Committee has collectively the competence required in the Public Limited Liability Companies Act § 6-42. Both members are independent according to § 6-42 Public Limited Liability Companies Act, and both member has the required qualifications within accounting or auditing.
The Committee supports the Board with respect to the assessment and control of financial risk, financial reporting, auditing, control, and prepares discussions and resolutions for Board meetings. It has no decision-making authority.
The Audit Committee held 6 meetings in 2016 and has been in regular contact with the Company's auditor regarding audits of the statutory accounts and it also assesses and monitors the auditor's independence, including non-audit services provided by the auditor.
The Board and management are committed to ensuring that the company maintains sound and effective internal controls to safeguard the value of the enterprise, as well as its principles of ethical conduct and corporate social responsibility. Nordic Semiconductor's risk management system is fundamental to the achievement of its financial goals.
The company's primary internal control routines related to financial reporting are as follows:
The finance team prepares a monthly financial report which is distributed to and reviewed by CEO and the Board of Directors. In preparing the monthly financial report, the accounting team conducts reconciliations of all major balance sheet items, which are independently reviewed by a second member of the team. Balance sheet items subject to accounting estimates are regularly analyzed to ensure that all assumptions relating to the accounting estimate remain valid. As part of the monthly financial report, the financial results are compared with the company's budget and prior forecast to analyze variances and ensure that they are not the result of incorrect reporting.
Each year, the external auditor performs tests of the company's internal control routines. The quarterly and annual financial reports are also subject to review and approval by the Board. In addition, the Board of Directors performs biannual reviews of the company's business strategy focusing on market development, technology updates, competitive positioning and risk factors.
The Board presents an in depth description and analysis of the company's financial status in the Report of the Board of Directors in the company's annual report. The report also describes the main drivers and risks related to the operation of the business.
All remuneration to the Board of Directors is disclosed in Note 10 of the Nordic Semiconductor Group annual accounts.
Members of the Board of Directors receives remuneration for work related to Board committees. The remuneration to Board members is not performance based, and the company does not provide share options to Board members.
The Board of Directors discusses and approves the terms and conditions for the CEO once a year and monitors the general terms and conditions for other senior employees of the group.
The main principle in the Company's policy for remuneration and compensation is that the leading employees shall be offered competitive terms, so as to achieve the desired competence and incentives in the Company's executive management team. Salary and other benefits for executive management will in the current year be established in accordance with the above-mentioned main principle.
The Company has established an annual performance bonus for the executive management team, in which the manager must remain within his position until the start of the following year in order to be eligible. The bonuses are awarded through a direct cash payment. Performancebased compensation will be subject to an absolute limit and fulfillment of performance criteria, both decided by the Board at its discretion.
Nordic Semiconductor strives to communicate actively and openly with the market. Nordic Semiconductor's accounting procedures are highly transparent and its financial statements are prepared and presented in accordance with the International Financial Reporting Standards (IFRS). The Board of Directors monitors the company's reporting.
Nordic Semiconductor's financial reporting calendar for 2017 has been announced to the Oslo Stock Exchange and can be found on the company's website. The company's annual and quarterly reports contain extensive information about the various aspects of the company's activities. The company's quarterly presentations are transmitted directly on the internet and may be found on Nordic Semiconductor's websites together with the quarterly and annual reports. A comprehensive and detailed presentation of other information, reports and documents may also be found on Nordic Semiconductor's websites. The company always ensures that all shareholders are treated equally as regards access to financial information.
Nordic Semiconductor's Chief Financial Officer is responsible for contact with shareholders apart from the General Meeting. The Chief Financial Officer reports regularly to the Board about the company's investor relations activities.
The Board of Directors will not seek to hinder or obstruct any takeover bid for the company's activities or shares. In the event of a takeover bid, as discussed in item 14 of the Norwegian Code of Practice for Corporate Governance, the Board of Directors will seek to comply with the recommendations therein as well as complying with relevant legislation and regulations.
If the Company is acquired, the CEO's resignation period extends to 12 months, and any remaining retention bonus to the CEO will be paid in its entirety following the closing of the acquisition, as described in Note 10 of the Group financial statements. There are otherwise no material obligations expected by the company as a result of an acquisition, aside from normal legal and advisory fees.
EY has been elected by the Annual General Meeting to act as auditor to confirm to the Annual General Meeting that Nordic Semiconductor's annual accounts have been prepared and presented in accordance with current laws and regulations. Fees paid to the auditor are approved at the Annual General Meeting.
In the fall, the external auditor presents to the Audit Committee an evaluation of risk, internal control and the quality of reporting at Nordic Semiconductor, and the audit plan for the current year. The external auditor also takes part in the Board's discussions on the annual financial statements. On both occasions, the Board of Directors ensures that the Board and the external auditor are able to discuss relevant matters at a meeting at which the executive management is not present.
The auditor shall be independent of the company. As a consequence, Nordic Semiconductor does not engage the elected auditor for tasks other than the financial audit required by law. Nevertheless, the auditor is used for tasks that are naturally related to the audit, such as technical assistance with tax returns, annual accounts, understanding of accounting and tax rules and confirmation of financial information in various contexts.
One of the defining features of Nordic Semiconductor's global sales organization is how well it successfully builds long-term relationships with Nordic's customers and distribution partners.
From start-ups to global blue chip giants, customers come to not only respect Nordic, but to also enjoy working with the company, trust the company, and feel they can rely on the company to support them if they run into technical difficulties.
Nordic's technical support proved outstanding and the company's technical engineers were always very responsive. DAVID TUNNELL, NXT-ID
This ultimately develops a loyalty and closeness of relationship between Nordic and its customers that is extremely rare within the global semiconductor industry, and supports a wide and diverse customer base.
This positions Nordic extremely well to take advantage of the "long-tail" nature of emerging Internet of Things (IoT) industries that are likely to be initially categorized by many small to medium-sized customers, instead of a small number of giants.
This is our first time working with Nordic and we have been extremely impressed with the support the company has provided NEERAJ LAL, PURILLUME
The 'Nordic quality' of customer relationship is built and maintained via careful recruitment and a very flat, tight-knit sales team organizational structure.
This includes holding regular – local and global – sales seminars and meetings where the entire Nordic sales team is encouraged to come together, report on progress, and compare their latest customer learnings and insights. This ensures every member of the sales team stays in regular contact with each other and senior management. In this way Nordic feels it maintains its "finger on the pulse" of what its customers are doing.
Beyond that, each member of the sales team is fully empowered to work in whatever way they find is most effective for them.
This culture produces both highly motivated, informed, and happy employees as well as customers, and is at the heart of Nordic's strong sales results and growth rate over the years.
Structurally, Nordic Semiconductor's sales organization is headquartered in Oslo, Norway, with regional sales offices in the U.S, China, Hong Kong, Japan, Korea, and Taiwan.
In operation, this organization is run by a single global sales & marketing director (Geir Langeland); three regional sales directors (Ståle "Steel" Ytterdal in Asia; J. Darren O'Donnell in the Americas; and Magnus Pedersen in Europe);
Geir Langeland Sales and Marketing Director
with local technical regional sales managers (RSMs); local field applications engineers (FAEs); and distribution partners located worldwide.
The support we received from Nordic's local distributor, and the Nordic Developer Zone, really helped us in development. SHEN AO, BEIJING TONG YU DAO
Nordic's largest high-volume customers are also assigned dedicated RSMs. These will spend a significant proportion of their time focusing on that customer, all the latest developments within the customer's products and key markets, and on keeping that customer fully up-dated on the latest relevant product developments within Nordic. Indeed, all of Nordic's largest customers have some influence over which features and tools are included in next-generation Nordic product Series.
Nordic has also just successfully completed yet another Nordic Tech Tour (this year – and for the very first time – in Australia and New Zealand) where it takes its top internal engineers on the road around the world to meet customers new and old, introduce the latest developments in Nordic's ultra-low power "ULP" wireless technology, and train customers hands-on in how to use it. This has proved a powerfully effective promotional sales tool in Asia, the Americas, and Europe.
Nordic outsources responsibility for all direct component distribution to its distribution partners, including all warehousing, end-customer invoicing, and logistics within each global region.
The company also invests heavily in targeting its website towards engineering and developer customers, while generating significant of publicity within the world's leading relevant press publications. During 2016, Nordic published on its website over 90 unique news stories and each quarter produced a 24-page customer technology magazine, ULP Wireless Q available in print, electronic PDF, iPad, Android, and iPhone versions.
All this helps build the right perception of Nordic as a company at the critical first evaluation stage (see next section). This is particularly important for new customers that may be unfamiliar with the company: an increasingly common scenario in emerging IoT markets and the brand-new market segments for ULP wireless technology that this is creating.
The sales process generally runs through a number of well-defined phases before a component can begin to be shipped.
Nordic Semiconductor's components are typically compared with those of up to three or four competing suppliers. This can run from a simple web-based search and comparison of technical specifications; through the customer meeting a Nordic RSM or FAE; and all the way up to the customer running its own in-depth, in-house trials.
Nordic performs well in all these scenarios.
The next stage in the sales process will be where a customer makes a first product prototype with components from Nordic Semiconductor, often based on a Nordic chip-based 'drop-in' module or an evaluation kit. In both instances the majority of RF engineering and qualification has already been done to minimize development time.
A small series product run is produced to test the end product from a marketing perspective and/or with key customers.
All end products must be approved in accordance with national and/or regional regulation for sales of electronics and RF products.
This is achieved after the steps above have been completed and after the project has passed the internal product release criteria of a customer.
The above introductory sales and development phase usually takes 12-18 months, from the start of the evaluation phase until the shipping of the finished product.
Once a product is released with a Nordic Semiconductor wireless solution, customers are generally interested in building a platform for future releases of related products. This approach is advantageous to the customer as it speeds up time-to-market and lowers the development cost of subsequent products.
Nordic Semiconductor expects demand for its wireless solutions to grow dramatically in the coming years, as the IoT market continues to expand and as wireless connectivity becomes a standard feature in many new products, new product categories, and new vertical markets (such as disposable medical). The company believes that its Bluetooth low energy wireless technology – and its latest Bluetooth 5 offerings that extend the range of Bluetooth low energy by up to 4x to offer "whole house" coverage for the first time while offering best-in-class security features – will be a core building block behind an on-going wave of new wireless products. These products will all be capable of being controlled, monitored, and configured wirelessly. In particular, the company expects the following growth opportunities to emerge across all its major target business segments:
Nordic Semiconductor was the first company in the world to launch a Bluetooth 5 ready SoC, development kit, and software solution in 2016. This allowed its customers to immediately start taking advantage of the 4x extended range and 2x bandwidth offered by Bluetooth 5 and help them be first-to-market with their own product applications.
PC accessories have traditionally been Nordic's largest business segment. The company estimates that only a minority of PC buyers purchase a wireless mouse/keyboard with a new PC (including aftermarket purchases), leaving a large unaddressed market for such wireless accessories among PC users.
In addition to PC accessories, Bluetooth low energy wireless technology also creates new opportunities for Nordic to address the tablet wireless accessory market. Tablets are beginning to encroach on the traditional portable / laptop PC markets, and sales of tablet-targeted wireless keyboards (that typically double up as a tablet screen protector or cover) are rising rapidly. By employing Bluetooth low energy ULP wireless technology, maximum product compatibility and battery life is assured, plus the ability to support very low profile and light-weight designs because Bluetooth low energy accessories can run off small coin cell ('watch') batteries for many months or years. One prime example is tablet pens, whose wireless connectivity is commonly enabled by Bluetooth low energy.
Mobile and wearables is a rapidly-growing ultra-low power wireless market and includes sensors for sports & fitness, health & medical monitoring, smart clothes, smart jewelry and fashion, hearing aids, wearables for payments, smartphone accessories, and smart watches.
The Smartphone is an ideal device to connect with mobile and wearable wireless accessories due to its huge market volumes, portability, compatibility with wireless standards, large user-friendly touch-screen interface, and ease of downloading new apps for interacting with a wireless accessory of choice.
That said a new generation of mobile devices and wearables is under development that employ the latest version of Bluetooth low energy wireless technology and will be able to connect to the Internet and cloud services directly without need of a smartphone. This is a major new and exciting market for ultra-low power wireless technology that Nordic already offers targeted product solutions for, including IPv6 over Bluetooth low energy.
The healthcare industry is a particularly good example. Here Bluetooth low energy technology will enable cost-effective monitoring of a growing elderly population (e.g. falldetection) as well as patients with chronic illness whose condition needs to be carefully managed. Prime examples include high blood pressure, diabetes, and heart ailments that can be continuously monitored through a body-worn wireless health sensor, and when connected to a cloud server can also transfer medical data to healthcare providers.
This category includes wireless solutions for smart home and home automation appliances (including Apple HomeKit and Google Nest), wireless charging solutions, plus more familiar smart TVs and set-top boxes, gaming controllers, and wireless/smart toys.
Wireless solutions are currently being implemented in a broad range of smart home and consumer electronics appliances to enable appliances throughout the home to wirelessly connect with users via a smartphone or another wireless remote control unit, as well as each other. Bluetooth low energy is an ideal wireless solution for many of these embedded applications.
Wireless battery charging is also a potential growth industry and one that could employ Bluetooth low energy wireless technology to wirelessly transfer key information such as battery type and charge status from the electronic device to the charger. This enables the wireless charger to manage the charge session between the charger and the device.
This category, which is the leading edge of the forthcoming IoT revolution and remained one of Nordic's fastest growing sales segments during 2016, includes: building sensors for energy management; industrial automation; automotive infotainment; asset tracking; maps and location services; access and security control; beacon-based promotional campaigns and enhanced multimedia experiences for theme parks and stadiums; and customer information, behavioral pattern analysis, and public services in transport.
In addition, wireless sensor networks can provide information about a device or item of machinery's internal operating conditions and external environment to ensure that problems are quickly identified and maintenance routines optimized.
Bluetooth low energy provides a very attractive standard for building wireless IoT sensor networks, based on its compatibility with a huge existing installed base of smartphones, computers, and other devices that can be used to configure and monitor such networks with ease.
With the U.K.'s deployment complete, the newly-formed micro:bit Educational Foundation is working on rolling out the Nordic Semiconductor-based device to the whole-ofthe-word. Iceland, Singapore, China, the Netherlands, and Norway are already adopting their own micro:bit schemes.
Nordic Semiconductor's Research and Development (R&D) department comprises of highly-qualified teams of engineers developing world-leading technology for wireless connectivity applications. The company's focus is ultralow power (ULP) solutions based on proprietary 2.4 GHz, ANT, and Bluetooth low energy wireless technologies, plus Low Power LTE.
The number of people working within the Nordic R&D organization grew during 2016 from 357 to 406. The organization also added a new "IoT Labs" R&D office based in the U.S. at Portland, Oregon.
Since opening Nordic's low power LTE R&D offices in Finland two years ago, we are seeing further successful integration, inter-office collaboration and cross-fertilization of experience, and synergies between our product lines,
A key success factor has been Nordic's ability to scale its existing infrastructure in such key R&D areas as:
With the increase in size of the R&D organization Nordic continues to increase its R&D output. In 2016 the R&D department delivered a record number of new ICs, software solutions (protocol stacks, SDKs (software development kits), programming tools, and application examples. It also delivered more world-leading customer technical support to more customers than ever before.
The Nordic R&D department organizes its products and services organized into four main categories:
Svein-Egil Nielsen Chief Technology Officer
We recruit only the best engineers, ensuring a vibrant innovative environment.
2016 began with the Nordic nRF52832 System-on-Chip (SoC), launched in June 2015, going into full volume production. This was the culmination of a very large, multi-year development project to develop the world's leading Bluetooth low energy SoC. It was also Nordic Semiconductor's first new device in the TSMC 55nm ULP process. Earlier generations of ICs from Nordic have been in older 0.18µm processes. Moving our new products into 55nm is a significant technology milestone for the company.
In the six months between its launch and the nRF52832 going into volume production, many customers began developing new product designs based upon it. This strong interest allied with Nordic's ability to support customers early with development kits and software, led to a production volume ramp-up quicker than at any time in the company's history. This success left Nordic with the challenge of producing high volume, high quality products, in a brand new process node to a high yield, a challenge the R&D department has focused a considerable amount of resource towards achieving.
With the Nordic nRF52832 SoC moving into volume production, we put the development of Nordic's latest nRF52840 SoC into a high gear. We aimed to provide our customers, yet again, with the best Bluetooth low energy single-chip SoC device on the market. A device with even more features than the nRF52832 and with full support for the latest Bluetooth 5 specification. We proudly launched the nRF52840 at the beginning of December to coincide with the official launch of Bluetooth 5 from the Bluetooth SIG. Launching a new chip at Nordic Semiconductor involves much more than drafting a press release: it also means (unlike most of our competitors) launching all the tools a developer will need to start immediately developing a new product based on that SoC.
This typically includes having all required SDKs and software programming tools available in volume (including the necessary Bluetooth software stacks), and making technical training available for customers. As with the launch of nRF52832, we believe our successful launch of the nRF52840 will enable Nordic to quickly ramp-up volumes when this device is ready for production towards the end of 2017.
The nRF52840 SoC, and subsequent devices in the Nordic nRF52 Series, will enable Nordic to capitalize on the large R&D investments made into new process technologies, architecture, and RF design that went into the original nRF52832 SoC.
Further, by streamlining our chip development teams with added staff during 2016, Nordic is now able to concurrently develop multiple product families. This means that while the company extends its nRF52 Series range of SoCs, we are already hard-at-work (and progressing rapidly with) developing our next-generation nRF53 Series of devices.
During 2016 there has also been a lot of progress in the development of Nordic's Low Power LTE products. The efforts to develop our Low Power LTE chip-set is done by a cross-office team, from Finland and Norway, where the Finnish team provides key cellular wireless technology experience and the Norwegian team adds their ultra-low power wireless expertise. We believe that pairing these two core skills will enable us to develop truly unique devices.
During 2016, Nordic completed its second RF prototype chip and a full SoC prototype tape-out which we expect back early 2017. Nordic is also building strong industry partnerships with key LTE technology providers, infrastructure vendors, and telecom operators. The company has also completed an extensive laboratory setup built for optimized pre-silicon RF modelling and power measurement using automated protocol testing and RF shielded chambers.
Software development is a crucially important part of Nordic Semiconductor's on-going commercial success and a core capability in R&D. The software group regularly delivers updated SoftDevices (protocol stacks for Bluetooth low energy and ANT) to our customers, enabling them to take advantage of the latest features and specifications. In addition to the SoftDevices, we provide our customers with robust SDKs, complete with sample code (enabling our customers to go to market quicker) and development tools to enable rapid development.
We released a number of production, alpha, and beta SoftDevices last year. The majority of these were general releases for Nordic's entire customer base, but some releases were targeted at specific customers with very special needs. With our flexible software architecture and ability to do OTA (Over-The-Air) wireless firmware updates, we offer customers the ability to update and add functionality to their products as well as fix any bugs and problems. The reason this is important is that flexible and upgradeable solutions allow designers to reach the market more quickly by giving them the confidence that any problems that arise later, such as interoperability issues, can be addressed when the product is in the field avoiding a costly product recall or warranty repair process.
A significant effort is now ongoing into building our LTE-M and NB-IoT protocol stacks for our Low Power LTE products. These are large, extensive systems but we are making strong progress reflected by a current codebase of more than 1.5 million lines of code.
Approximately every quarter we have a major refresh of our nRF SDK. This involves adding support for new profiles and making updates that incorporate both internal and customer feedback. We also release specialized SDKs, such as the one we provide for Apple HomeKit. This SDK provides developers with a unique solution for HomeKit products that meets all requirements on size, power consumption, and performance.
The application group creates development kits, reference designs, demo designs, and apps for all three major mobile operating systems: iOS, Android, and Windows Mobile. A couple of highlights from the long list of solutions in 2016 include:
Nordic Semiconductor prides itself on providing world-leading technical support to all its customers via a large team of highly skilled, trained, and motivated technical support engineers. Every customer, whether startup, SME, or blue chip is treated as equally as possible by Nordic Semiconductor. We guarantee rapid response and well-prepared solutions (i.e. tested by us to make sure they work).
The majority of Nordic technical support has traditionally been handled by our technical support ticket system; but the Nordic Developer Zone is increasing in both traffic (and therefore) importance and as a fast-track way for customers to solve many common issues themselves. In 2016, we reached 15,000 questions/posts on the forum, which is now represents a formidable searchable archive of knowledge in its own right.
Beyond the development work with which our staff is engaged, we also contribute to standardization work. Nordic has for many years been an active contributor to the Bluetooth specification through its engagement in the Bluetooth Special Interest Group's (SIG) working group and committees. We have been particularly active in the development of Bluetooth core technology providing our insight into ultra-low power wireless technology and customer needs. We are involved in many other standards bodies, developing and influencing specifications. For example, we are active in the Rezence wireless charging standard developed by A4WP, NFC Forum and 3GPP.
Nordic's R&D organization thrives on being an environment where everyone's contribution matters, everyone has a voice, and everyone is involved. We are a lean organization that strives to sustainably meet even the toughest on-going challenges through close collaboration. Employees are empowered to make decisions even at lower levels of the organization to enable rapid decision making. We recruit only the best engineers, ensuring a vibrant innovative environment, and we do not compromise on our high standards.
Nordic Semiconductor's R&D department employs a customer-focused approach and is committed to providing off-the-shelf solutions to thousands of customers, while at the same time retaining the flexibility to be able to develop targeted solutions for key application segments and customers with more specialized needs. With our flexible IC and software architecture, robust solutions, willingness to support customers, and "whatever it takes, cando" attitude, we provide the ultimate peace-of-mind for any engineer, and indeed, company, employing Nordic's world-leading ultra-low power wireless connectivity chips and solutions.
Nordic Semiconductor outsources the capital intensive processing of silicon wafers as well as packaging and test, to highly specialized subcontractors, mainly located in South-East Asia.
Subcontractors are selected based on a combined assessment of a range of qualities, hereunder
Deep relations to key suppliers built over many years gives access to capacity and ability to adapt to seasonal variations.
The company's subcontractors are all qualified to relevant quality- and operations standards of the industry, including ISO 9001 and TS 16949.
The development of leading edge semiconductor devices requires sophisticated and complex interaction between the design company and the manufacturing service provider. The cornerstones of the Nordic Semiconductor's supply chain strategy can be outlined as follows:
The Nordic Semiconductor's manufacturing cycle starts with demand projections made by the Sales organization, and ends with the delivery of finished products to the warehouse, where Sales and the distribution channel take charge again. Thus, in short, the task of the Supply Chain department is to produce products according to demand, at cost, at quality, and in time.
Management of operations takes place out of offices in Taiwan and the Philippines, respectively staffed with seven and fifteen persons. In addition, two key liaison personnel for product development as well as planning are located in Oslo.
The Supply Chain group seeks to develop relations and communications channels to its vendors at multiple lev-
Ole Fredrik Morken Supply Chain Director
We seek to develop relations and communications channels to vendors at multiple levels.
els. Audits are conducted at regular intervals, and quarterly business reviews are undertaken with critical suppliers, often with involvement at CEO level.
In addition to Supply Chain management, the group also maintains responsibility for development of the hardware and software related to automated test of the company's devices.
Nordic Semiconductor considers capacity to test its devices to be a critical success factor, and consequently has decided to own most of the automated test equipment employed in its operations. The actual operation of the testers takes place on a consigned basis at the company's subcontractor facilities. The company is fully committed to making necessary investments in automated semiconductor test equipment
For products representing a significant portion of the company's revenue, Nordic Semiconductor strives to run manufacturing through at least two sources that ideally are geographically and politically dispersed
Multiple sourcing is implemented both for wafer manufacturing and back-end operations and serves not only as a means to ensure uninterrupted supply but also allows direct gage of performance among suppliers.
One notable supply disruption was recorded for 2016, wherein a technical concern related to a new product prevented meeting the original expectations to volume ramp.
The main objectives of the shareholder policy of Nordic Semiconductor are the following:
Nordic Semiconductor will publish financial reports for 2017 as follows:
| Interim Report Q1 2017 | April 24, 2017 |
|---|---|
| Interim Report Q2 2017 | July 13, 2017 |
| Interim Report Q3 2017 | October 17, 2017 |
| Interim Report Q4 2017 | February 15, 2018 |
The Annual General Meeting of Shareholders of the Company is planned to be held following the Q1 financial presentation in Oslo, at 9:00 am, on Monday April 24, 2017.
Pål Elstad Chief Financial Officer
As Nordic's reach escalates and the shareholder base expands - open communication across channels is recognised as being vital for maximising shareholder value.
Presentations will be held for shareholders, brokers, analysts and the press in connection with the publication of the annual and interim reports. The Company prioritizes open communication with investors and financial markets.
The intention is to increase knowledge about Nordic Semiconductor ASA through openness and adequate information, thereby encouraging interest in the Company and ensuring that the price of the Company's shares will reflect the fair value of the Company.
The Company will provide up-todate information about events of significance for the determination of the fair value of the Company through announcements on the Oslo Stock Exchange, press releases and information on Nordic Semiconductor's website www. nordicsemi.com. The annual and quarterly reports of the Company will be available on the Company's website: www.nordicsemi.com, as well as through the Oslo Stock Exchange.
The registered share capital in Nordic Semiconductor as of December 31, 2016 consists of one share class with a total of 163,481,600 shares with a face value of NOK 0.01, so that the total share capital is NOK 1,634,816. Each share grants the same rights in the company. The Company's shares are registered in the Norwegian Central Securities Depository (VPS) under VPS No. ISIN NO 000 3055501. The evolution of the share capital is as shown in the table below.
| Changes | Date | Change in | Par value (NOK) |
Changes in share capital (NOK) |
New share capital (NOK) |
Share issued |
|---|---|---|---|---|---|---|
| number of shares | Par value (NOK) |
Changes in share capital (NOK) |
New share capital (NOK) |
Share issued | 1 000 000 | 1 000 000 |
| Status | Jan 1996 | - | 1.00 | - | 1 000 000 | 1 000 000 |
| New share issue | Mar 1996 | 175 000 | 1.00 | 175 000 | 1 175 000 | 1 175 000 |
| New share issue | Feb 1997 | 117 000 | 1.00 | 117 000 | 1 292 000 | 1 292 000 |
| Share split (1:4) | Apr 1997 | 3 876 000 | 0.25 | - | 1 292 000 | 5 168 000 |
| Conversion | Sep 1997 | 141 119 | 0.25 | 35 280 | 1 327 280 | 5 309 119 |
| Conversion | Sep 1998 | 127 461 | 0.25 | 31 865 | 1 359 145 | 5 436 580 |
| Conversion | Jun 1999 | 30 791 | 0.25 | 7 698 | 1 366 843 | 5 467 371 |
| Conversion | Apr 2000 | 32 957 | 0.25 | 8 239 | 1 375 082 | 5 500 328 |
| Option exercise | Jun 2000 | 16 666 | 0.25 | 4 167 | 1 379 249 | 5 516 994 |
| New share issue | Oct 2000 | 550 000 | 0.25 | 137 500 | 1 516 749 | 6 066 994 |
| Conversion | Apr 2001 | 28 127 | 0.25 | 7 032 | 1 523 780 | 6 095 121 |
| Option exercise | Jun 2001 | 6 834 | 0.25 | 1 709 | 1 525 489 | 6 101 955 |
| Option exercise | Jun 2002 | 4 270 | 0.05 | 1 068 | 1 526 556 | 6 106 225 |
| Share split (1:5) | Apr 2004 | 24 424 900 | 0.05 | - | 1 526 556 | 30 531 125 |
| Option exercise | May 2004 | 601 938 | 0.05 | 30 097 | 1 556 653 | 31 133 063 |
| Option exercise | Jul 2004 | 600 000 | 0.05 | 30 000 | 1 586 653 | 31 733 063 |
| Option exercise | Apr 2005 | 200 000 | 0.05 | 10 000 | 1 596 653 | 31 933 063 |
| Option exercise | Apr 2005 | 400 000 | 0.05 | 20 000 | 1 616 653 | 32 333 063 |
| Option exercise | May 2005 | 756 837 | 0.05 | 37 842 | 1 654 495 | 33 089 900 |
| Option exercise | Feb 2006 | 2 044 220 | 0.05 | 102 211 | 1 756 706 | 35 134 120 |
| Cancellation of shares | Sep 2009 | (1 386 800) | 0.05 | (69 340) | 1 687 366 | 33 747 320 |
| Share split (1:5) | Jun 2010 | 134 989 280 | 0.01 | - | 1 687 366 | 168 736 600 |
| Cancellation of shares | Oct 2012 | (5 296 000) | 0.01 | (52 960) | 1 634 406 | 163 440 600 |
| New share issue | May 2016 | 41 000 | 0.01 | 410 | 1 634 816 | 163 481 600 |
As of December 31, 2016, Nordic Semiconductor had 3,610 shareholders. The company had 262 foreign shareholders, which owned a total of 24,6% of the Company's shares, in comparison to December 31, 2015 were foreign shareholders owned a total of 30,8% of the company`s shares. Nordic Semiconductor also owned 1,03% of its own shares remaining after repurchases during 2016. Based on the number of shares, the composition of shareholders is as follows:
| Top 20 shareholders | Holding per 31.12.2016 | Percent | Holding per 31.12.2015 | Percent |
|---|---|---|---|---|
| FOLKETRYGDFONDET | 21 049 847 | 12,88 % | 19 257 007 | 11,78 % |
| ACCELERATOR LTD | 17 482 950 | 10,69 % | 17 482 950 | 10,70 % |
| PASSESTA AS | 4 860 000 | 2,97 % | 5 663 680 | 3,47 % |
| VERDIPAPIRFONDET DNB NORGE (IV) | 4 604 374 | 2,82 % | 2 734 335 | 1,67 % |
| KLP AKSJENORGE | 4 462 058 | 2,73 % | 3 921 466 | 2,40 % |
| ALDEN AS | 4 450 602 | 2,72 % | 4 594 599 | 2,81 % |
| DNB LIVSFORSIKRING ASA | 3 123 692 | 1,91 % | 1 000 124 | 0,61 % |
| TORSTEIN TVENGE | 3 000 000 | 1,84 % | 2 500 000 | 1,53 % |
| DANSKE INVEST NORSKE INSTIT. II. | 2 917 100 | 1,78 % | 1 278 300 | 0,78 % |
| VERDIPAPIRFONDET DNB NORGE SELEKTI | 2 884 849 | 1,76 % | 856 099 | 0,52 % |
| KOMMUNAL LANDSPENSJONSKASSE | 2 808 039 | 1,72 % | 2 424 920 | 1,48 % |
| MP PENSJON PK | 2 517 434 | 1,54 % | 2 517 434 | 1,54 % |
| VERDIPAPIRFONDET PARETO INVESTMENT | 2 399 000 | 1,47 % | 715 000 | 0,44 % |
| SPENCER TRADING INC | 2 100 000 | 1,28 % | 2 100 000 | 1,28 % |
| SONGA AS | 2 000 000 | 1,22 % | 2 000 000 | 1,22 % |
| FOUGNER INVEST AS | 1 914 992 | 1,17 % | 1 020 000 | 0,62 % |
| TTC INVEST AS | 1 750 000 | 1,07 % | 1 750 000 | 1,07 % |
| NORDIC SEMICONDUCTOR ASA | 1 685 819 | 1,03 % | 1 000 000 | 0,61 % |
| SCAN CHEMICALS AS | 1 625 000 | 0,99 % | 1 740 000 | 1,06 % |
| INAK 3 AS | 1 600 000 | 0,98 % | 1 600 000 | 0,98 % |
| Total for the 20 largest shareholders | 89 235 756 | 54,58 % | 76 155 914 | 46,60 % |
| Other shareholders | 74 245 844 | 45,42 % | 87 284 686 | 53,40 % |
| Total shares outstanding | 163 481 600 | 100,00 % | 163 440 600 | 100,00 % |
* Reflects total shareholding of the 20 largest shareholders as of 31.12.16 and 31.12.15. Several of the largest shareholders as of 31.12.15 do not appear on the list of the 20 largest shareholders as of 31.12.16.
Terje Rogne is currently Chairman of Nokas AS and a Board member of Apptix ASA. From 1994 until 2004, Rogne was Chief Financial Officer of Tandberg ASA. Afterward, he then served as the Head of Operations and Investor Relations for Tandberg until 2008. Before his career in Tandberg, Rogne was Finance Director in Kværner AS. He has an MBA from the University of San Diego and a Bachelor of Business degree from the Oslo School of Business Administration. Holdings in the company: 1 250 000 shares.
Craig Ochikubo has a Master of Science degree in Electrical Engineering from the University of Southern California in Los Angeles and has more than 30 years experience in the wireless semiconductor and electronics industries at both start-up and Fortune 500 companies including, Broadcom Corporation, Innovent Systems, RF-Link Technology, Cadence, and TRW. He has led global engineering
and business teams in Europe, Asia, and North America and successfully drove long-term business at top-tier consumer electronics companies. He spent 14 years at Broadcom where he held senior executive positions running their global wireless personal area networking business unit, and LTE cellular development teams.
Tore Valderhaug is a Norwegian State Authorized Public Accountant with ten years of audit experience mainly from Arthur Andersen & Co. He has held positions as finance director and CFO in several publicly listed companies, including Cermaq ASA, EDB Business Partner, ASK Proxima/InFocus, Ocean Rig and Unitor. Mr. Valderhaug has also worked within corporate finance and private equity firms. Tore Valderhaug is currently working as a consultant and is
also a board member of the publicly listed company XXL ASA and Q-Free ASA as well as the non-listed inApril AS. Holdings in the company: 5 769 shares.
Joakim Ferm has a Master of Science degree in Electrical engineering from Chalmers, Gothenburg. Joakim has been employed at Nordic Semiconductor in Trondheim since 2008, he is a Senior Project Manager with experience from application design and digital design. Holdings in the company: 22 500 share options.
Anne-Cecilie Fagerlie is Vice President Global Infrastructure Services at CGI. She has a Master degree in Computer Science from NTH (now NTNU). Afterward, she began working at Arthur Andersen/ Andersen Consulting/Accenture where she became partner in 1993. In 2002, Fagerlie joined Aker Kværner as Senior Vice President of Group IT. From 2006 to 2012 she was General Manager of Nordics in Avanade, an international consultancy owned by Accenture and Microsoft.
Recently she was Executive Vice President in Evry.
Shareholder elected
Mergers & Acquisitions at Orkla ASA, Investment Director at Kistefos AS, Associate Principal at McKinsey & Company, and Executive Director in the Investment Banking Division of Goldman Sachs & Co. where she spent
10 years focused on corporate finance, M&A, and equity capital markets. She began her career in New York in 1994, and has since worked in Mexico City, Frankfurt, London. Beatriz is also a member of the board of Investinor and of Energy Nest.
Asbjørn Sæbø has a Ph.D. degree in Telecommunications from NTNU in Trondheim. He has been with Nordic since 2006, working with development of firmware for Bluetooth Low Energy in various roles. Currently, as a project leader, he is responsible for the Bluetooth Low Energy protocol stack firmware. Previously, he has worked as a development engineer in a startup company on active noise control and as a Post.Doc. at the Centre
for Quantifiable Quality of Service in Communication Systems (a Centre of Excellence at NTNU). Holdings in the company: 10 000 shares and 19 600 share options.
Lasse Haugnes Olsen has a Master of Science degree in Electrical Engineering from NTNU in Trondheim. He has been employed at Nordic Semiconductor since 2006, where he has gained experience in application development, software design and project management. He is currently working as a Senior System Architect in Nordic Semiconductor. Holdings in the company 3 500 share options.
Svenn-Tore Larsen is an Electronic Engineer from the University of Strathclyde, UK. He was appointed Chief Executive Officer of Nordic Semiconductor in February 2002. Mr. Larsen has broad international experience in the semiconductor business, previously as Director for the Nordic region for Xilinx Inc. He has also been working at Philips Semiconductor. Larsen was member of the Board of Nordic Semiconductor from 2000– 2002. Holdings in the company: 1 890 400 shares and 575 000 share options.
Geir Langeland has a B.eng Honours degree in Electronics from University of Manchester Institute of Science and Technology (UMIST). He was appointed Product Manager Standard Components at Nordic Semiconductor in October 1999, before being appointed to Director Sales and Marketing September 2005. Before joining Nordic, Mr. Langeland worked as Field Sales/ Applications Engineer in Memec Norway, a leading global electronic components distribution company. Holdings in the company: 177 700 shares and 350 000 share options.
Pål Elstad has held several senior financial positions, most recently as investor relations responsible for REC Silicon ASA and Head of Finance for REC Solar in Singapore. In addition, he has extensive manufacturing and supply-chain experience from General Electric Healthcare. Mr. Elstad holds a Bachelor of Economics degree from the Norwegian Business School (BI) and is a State Authorized Public Accountant (CPA). Holdings in the company: 3 846 shares and 0 share options.
Svein-Egil Nielsen holds MBA from the Haas School of Business at the University of California, Berkeley and Bachelor of Engineering honors degree in Computer and Electronics Systems from University of Stathclyde. He joined nordic in 2001 as Director of Sales and Marketing. He also held a position as R&D director from 2005 to 2006 and Director of Emerging Technoligies and Strategic Partnerships from 2010 to 2012. Additionally, he served Innovation Norway as their Director of San Francisco and Houston offices where
he was in charge of promoting Norwegian technology from 2007 to 2010. Prior to Nordic, he worked for Boston Consulting Group as a consultant. Holdings in the company: 15 000 shares and 250 000 share options.
Ebbe Rømcke has a M.Sc. degree in Electronics Engineering from Norwegian University of Science and Technology (NTNU). He was appointed Quality Director of Nordic Semiconductor in 2002. Prior to this Mr. Rømcke worked eight years in the company as Digital Designer, Project Manager and Group Manager. He has also experience from Digital Design and Project Management in Normarc AS (now Indra Navia), a leading manufacturer of aviation systems. Holdings in the company: 68 900 shares and 100 000 share options.
Director of Strategy and Investor Relations
Thomas Bonnerud has an M.Sc. degree in Electrical Engineering from the Norwegian University of Science and Technology (NTNU). He joined the company in 2001 as a High-Speed Data Converter Design Engineer, and has since held various positions within Product Management. He is currently responsible for Nordic's overall product roadmap. Holdings in the company: 3 420 shares and 83 000 share options.
Ole Fredrik Morken joined the company as an Analog IC designer in 1994 and has since held numerous positions related to Project- and Supply Chain Management, including a brief employment for SensoNor ASA in 1999. He was appointed Supply Chain Director in 2010 and is currently based in Taipei. Mr. Morken holds a Master's degree in Electronics Engineering from Norwegian University of Science and Technology (NTNU). Holdings in the company: 160 000 shares and 65 000 share options.
An Alternative Performance Measure (APM) is a measure of historical or future financial performance, financial position, or cash flows other than a financial measure defined or specified in the applicable financial reporting framework.
Otto Nielsens veg 12 7004 Trondheim Norway Telephone: +47 72 89 89 00
Karenslyst Allé 5 0213 Oslo Norway Telephone: +47 22 51 10 50
HONG KONG 66/F, The Center 99 Queen's Road Central, Central Hong Kong Telephone: +852 3965 3230
KOREA - SEOUL 30F, Asem tower, 159-1 Samsung-dong Kangnam-ku, Seoul 135-798 Korea Telephone: +82 2 6001 3056
Taiwan Representative Office Shi Dong Rd. Lane 91, No 18, 7F Taipei 111, Shih Lin District TW - Taiwan Telephone: +886-2-7707-4751
Bureau Shinagawa 4-1-6 Konan Minato-ku, Tokyo 108-0075 Japan Telephone: +81 3 6807 8580
21F Asian Star Building ASEAN Drive Filinvest Corporate City Alabang Muntinlupa City Philippines 1781 PH - Philippines
Unit 2341 23/F, New World Center No. 6009 Yitian Road-Futian District Shenzhen 518035 China
Telephone: + 86 755 2397 9064
Unit 4306, 43/F, Maxdo Center No.8 Xingyi Road-Changning District Shanghai 200336 China
Telephone: + 86 21 2231 3007
Yrttipellontie 1D 90230 Oulu Finland
Lemminkäisenkatu 20 B 9 20520 Turku Finland
ul. Szlak 67 31-153 Kraków Poland
1250 Oakmead Pkwy Suite 210 Sunnyvale, CA 94085-4037 USA Telephone: + 1 (408) 437 7751
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.