Nordic Semiconductor

Earnings Release • Apr 17, 2015

April 17, 2015

Q1 2015 Investor Presentation

Svenn-Tore Larsen, CEO Pål Elstad, CFO

Summary – Q1 2015:

• Revenue of MUSD 40.0 (27% increase from Q1 2014), with growth across all strategic markets
• BT Smart sales of MUSD 17.9, close to doubling compared to Q1 2014
• 35% increase in new large Bluetooth Smart customers during the quarter, improving Nordic's customer mix
• Significant orders from new customers within gaming
• Commenced operations in Finland with 80 employees at March 31, 2015
• Launch date for nRF52 set to June 17th

Financial Highlights

Pål Elstad, CFO

Q1 2015 Financial Highlights

MUSD
Financial objectives	Q1 2015	Q4 2014	Q1 2014	Comments
Growth
Revenue Order Inflow	40,0 53,3	45,2 32,9	31,5 39,7	Revenue from wireless components increased 32% compared to last year Strong order inflow reflecting midlife update
Profitability
Gross Margin %	54,6 %	52,4 %	51,4 %	Favourable product and customer mix
Operating Profit (EBIT)	5,3	6,3	0,8	Higher revenue drives EBIT growth
EBIT Margin %	13,2 %	13,9 %	2,5 %	Capitalization of devl. cost reduces opex
Net Profit after tax	4,1	6,7	0,7
Cash Flow
Free Cash Flow	-14,8	9,7	1,3	Build up of inventories
Cash Balance	25,3	34,1	33,6	Increased WC and capex reduces cash
Accounts Receivable	40,3	39,3	27,1
Inventory	42,0	27,9	24,3	Seasonal build up of inventories

⁵ Group Revenues

• Q1 2015 Revenue of MUSD 40.0 (27% increase from prior year)
• Q1LTM Revenue increase of 34%

Revenue split by technology, 2012 – Q1 2015 (MUSD)

Order inflow / order backlog

• Record high order inflow of MUSD 53.3 in Q1 2015
• Order backlog of MUSD 33.6 at quarter-end
• Order backlog improved after Q4 reduction, although shorter cycle than Q1 2014

Revenue Markets in 2015

Consumer Electronics

Toys, Home Entertainment devices and PC accessories.

Building/Retail

Beacons, RFID and various automation applications.

Wearables

Activity trackers and sport watches.

Others

Consists of products which are being used in other applications not relevant to the 4 main target areas.

Healthcare

Presentation Q4 2014 Investor Blood glucos monitors and blood pressure monitors.

ASIC-Consulting Remains unchanged.

Growth Markets

• Growth of 25.9% compared to Q1 last year.
• Growth of 2.6% compared to last quarter.
• Strong PC Accesories sales drives growth compared to Q1 2014
• Gaming driving near term growth
• High design wins momentum post CES with focus on Wireless Charging

8

• Growth of 53.2% compared to Q1 last year.
• Decline of 16.5% compared to last quarter.
• Strong sales compared to Q1 2014 indicating a large interest in wearable technology.

Emerging Markets

• Decline of 11.1% compared to Q1 last year.
• Decline of 28.1% compared to last quarter.
• The market for beacons and RFID are still in the early stages of adoption, it has been identified by Nordic as a market with large potential.
• Growth of 166.7% compared to Q1 last year.
• Decline of 8.1% compared to last quarter.
• Strong sales compared to Q1 2014. We are seeing a positiv trend in high tech health monitors using bluetooth smart to enable easy monitoring for the user.

Presentation Q1 2015 Investor

¹⁰ Other Markets

• Growth of 14.7% compared to Q1 last year.

• Growth of 4.8% compared to last quarter.

• Decline of 56.5% compared to Q1 last year.

• Decline of 65.6% compared to last quarter.
• Nordic are not investing in this segment anymore. All revenues are from existing projects and will fluctuate based on project deliveries.

Presentation Q1 2015 Investor

¹¹ Gross margin

• Gross margin of 54.6 % in Q1 2015
• Gross margin increases from prior quarters, due to product and customer mix
• Expected to normalize at 50% in Q2

¹² Operating Expenses

Operating expenses (incl. depreciation) of MUSD 16.6 in Q1 2015

• Growth in expenses is driven by higher staffing and activity in R&D and Sales, plus IFRS accounting impact of options
• Currency Adjusted total operating expenses excluding depreciation increased from MUSD 13.7 in Q4 2014 to MUSD 17.2, or MUSD 3.5
• Finland Q1 2015 operating expenses at MUSD 2.2.

					Q P 1 re 2 se 0 1 n 5 ta I ti nv o n e st
Operating expenses (incl. depreciation) of MUSD 16.6 in Q1 2015					o r
Growth in expenses is driven by higher staffing and activity in R&D and Sales, plus IFRS accounting impact of options
Currency Adjusted total operating expenses excluding depreciation increased from MUSD 13.7 in Q4 2014 to MUSD 17.2, or MUSD 3.5
Finland Q1 2015 operating expenses at MUSD 2.2.
USD '000	Q1 2015	Q4 2014	Q1 2014	Growth Y-o-Y
Total Operating Expense (non-IFRS), excluding Depreciation*	15 734	13 673	12 255	28 %
Add: Options expense**	959	2 071	1 704
Less: Capitalized R&D***	(1 998)	(206)	(161)
Total Operating Expense (IFRS), excluding Depreciation	14 696	15 538	13 798	7 %
					* Non-IFRS Operating expense is adjusted for options, capitalized R&D and related depreciation costs ** IFRS accounting expense from grant of options, plus related payroll taxes
					*** Net Opex impact of Capitalized R&D and related depreciation costs

¹³ Operating profit (EBIT)

• Operating profit in Q1 2015 of MUSD 5.3
• Higher revenue offset by increased operating expenses
• Q1LTM EBIT increase of 100%

Operating Profit by quarter 2012 – Q1 2015 (MUSD)

¹⁴ Q1 2015 Financial Summary

Q1 2015 Investor

Business Outlook

Svenn-Tore Larsen, CEO

¹⁶ High Sales of Bluetooth Smart

Seasonal reduction of sales

¹⁷ Bluetooth Smart Active Customers

• Number of active BT Smart customers continues to grow
• Doubling in a year

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

New Large Customers in new Markets

• Customer within gaming placing Q2 order of MUSD 6,7
• Independent company, not part of established giant or conglomerate
• Started designing with Nordic chip in 2013

Establishing Relations for next growth

• Nordic engineering teams working closely with world`s leading tech companies to be part of their next offerings
• These companies are expected to set the standards which will drive revenues the coming decades
• These industrial relations pave the road for the next wave of growth

The Game Changer - The release of nRF52 System-on-Chip

nRF SERIES
n D
Prepare to meet
The Game Changer
JUNE 17, 2015 / 5PM CEST

• Radio Performance
• Compute Power
• Power Consumption
• Advanced Connectivity for IoT
• Advanced 55nm Embedded Flash Process
• Size and level of Integration
• Ease of Use
• Best in class Software and Tools
• Smooth Migration from nRF51

• Simplicity and Flexibility

• Strong growth in revenues, driven by Bluetooth Smart sales

• Gross margin of approximately 50% in 2015
• Higher OPEX in 2015 as a result of higher R&D spending in order to take advantage of upcoming complementary standards

²³ For more information on Nordic

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