Nordic Semiconductor

Earnings Release • Oct 16, 2014

October 16, 2014

Q3 2014 Investor Presentation

Svenn-Tore Larsen, CEO Pål Elstad, CFO

Summary – Q3 2014: Record High Revenue

• Revenue increases by 38% to a record high MUSD 49.0, with growth across all focus segments. EBIT increases by 79% to MUSD 9.8.
• Order inflows grow to MUSD 43.7. Backlog at MUSD 32.6.
• Demand for Bluetooth Smart wireless solutions accelerates
• BT Smart sales increases to MUSD 18.4 (vs. MUSD 5.9 in Q3 2013 and MUSD 12.2 in Q2 2014)
• New design wins enables tripling of Bluetooth sales in 2014.

Q3 2014 Investor Presentation

Financial Highlights

Pål Elstad, CFO

Q3 2014 Financial Highlights (MUSD)

MUSD
Financial objectives	Q3 2014	Q2 2014	Q3 2013	Comments
Growth
Revenue	49,0	41,4	35,4	Strong sales growth across all targeted segments.
Order Inflow	43,7	47,8	31,0	Exceptionally strong growth within BT Smart.
Profitability
Gross Margin %	51 %	48 %	49 %	Higher BT Smart revenue increase gross margin.
Operating Profit (EBIT)	9,8	5,7	5,5	Higher revenue drives EBIT growth
EBIT Margin %	20 %	14 %	16 %	Opex increases with higher R&D and sales activity
Net Profit after tax	7,0	4,1	4,0
Cash Flow
Free Cash Flow	13,9	-12,1	9,6	Seasonal factors drives strong Q3 cash flow.
Cash Balance	24,4	19,4	28,5	Cash impacted by options and share buyback
Accounts Receivable	41,1	39,0	24,2	Strong sales in Q3
Inventory	20,6	24,5	19,3	Increased production capacity reduces inventory

Group Revenues

Q3 2014 Revenue of MUSD 49.0 (38% increase from prior year)

⁶ Market segments – Q3 2014 Presentation Q4 2013 Investor

PC / Tablet Accessories Wireless PC mouse and keyboard, tablet accessories

Q3 Revenue: MUSD 21.5 (MUSD 19.1)

• Sales of PC accessories stabilize/grows

Home electronics devices

wireless charging, toys

TV / appliance remotes, game controls,

Q3 Revenue: MUSD 2.4 (MUSD 1.9)

• New Bluetooth Smart toy and home media designs drive growth

Mobile / Wearable devices

Sports, medical monitors, mobile accessories, proximity tags, watches

Q3 Revenue: MUSD 19.0 (MUSD 7.5)

• Rapid revenue growth driven by demand for Bluetooth Smart in wearable electronics

Installed Sensor networks RFID systems, building sensors, industrial automation, automotive

Q3 Revenue: MUSD 3.3 (MUSD 3.6)

• Driven by slower rollout from one of our customers

ASICs (application specific IC's) Wide sector span

Q3 Revenue: MUSD 2.5 (MUSD 3.2)

• Supporting existing customers only, not a focus area for growth. Sales fluctuates based on few designs.

Consulting services

Custom electronics design

• Q3 Revenue: MUSD 0.2 (MUSD 0.0)
• Project services for existing ASIC customers

Order inflow / order backlog

• Order inflow of MUSD 43.7 in Q3 2014
• Order backlog of MUSD 32.6 at quarter-end
• Order cycle remains short as BLE Revenue drives new revenue streams

7

Presentation Q3 2014 Investor

Gross margin

• Gross margin of 51 % in Q3 2014
• Gross margin increases from prior quarters, due to product mix within BT Smart

Operating profit (EBIT)

• Operating profit in Q3 2014 of MUSD 9.8 (79% growth from prior year)
• Higher revenue muted by increased operating expenses

Strong revenue growth across all targeted product segments

Q3 2014 Investor Presentation

Business Outlook

Svenn -Tore Larsen, CEO

The «Internet of Things» creates an era of vast growth opportunities for Nordic

• The «Internet of Things» transforms the market for low power wireless solutions, and creates new room to innovate and grow
• Bluetooth Smart is a core technology for the «IoT», as the leading low power wireless standard compatible with a huge installed base of smartphones, tablets, and other devices.
• New "Machine to Machine" standards are emerging, further accelerating growth
• Interest in developing «IoT» applications are driving record growth for Nordic's Bluetooth Smart components.

¹³ Record sales of Bluetooth Smart solutions

Sales of Bluetooth Smart solutions increase to MUSD 18.4 in Q3 2014, as demand for «Internet of Things» applications grows

Diversified Revenue Streams in BT Smart

Reducing Dependency on Sports Segment

Interactive Toys

• First large shipment of more than 1 million units/quarter to producer of interactive toys connected to the internet
• In total close to 2 million units shipped in Q3

BTLE HID (Human Interface Device)

• Contributed with more than 1 million units in Q3 mainly to tablets and PC
• Expect significant growth in TVs, set top boxes and game consoles

BTLE Modules

• BTLE modules created for the first time significant revenue and solid growth potential
• Modules are used for various applications as part of prototyping or volume production of end products

Presentation Q3 2014 Investor

15

APPLICATION: REMOTE CONTROL

SMK improves battery life and accelerates response of 'voice' capable remote control using Nordic Semiconductor Bluetooth Smart technology

On October 9, Nordic announced SMK has specified Nordic's nRF51822 System-on-Chip (SoC) to provide the Bluetooth® Smart wireless connectivity for its "voice" navigation capable remote control.

Industrial market expected to outgrow personal area sensors

• Several technologies will co-exist in industrial internet, such as Bluetooth Smart, Wifi, Zigbee, LTE and Radio Frequency Identification
• We believe Bluetooth Smart is the wireless standard of choice for the Internet of Things, especially for personal applications (Morgan Stanley Research September 2013)
• Industrial internet will contribute USD 70 trillion to world GDP (General Electric)
• Smart factories, smart buildings and smart grid will be the most prominent (Cisco, 2013)

Logistics

Production and manufacturing

Indoor location

Payment systems

Agriculture

Preparing for the next billion(s) of units

The «Internet of Things» presents a vast long-term growth opportunity

• Current growth wave will be driven by Bluetooth Smart technology, where Nordic has been investing since 2006
• Future growth wave will be driven by Bluetooth Smart and complementary technologies within the «Internet of Things»
• M2M
• Nordic creating new programs for the next generation of opportunities
• Technology portfolio
• Strategic partnerships / acquisitions
• Intellectual property
• Staffing
• Incentive programs

Nordic Opens R&D Office in Oulu, Finland

• Nordic announced on September 26, 2014 that it will open a R&D office in Oulu, Finland
• Nordic take advantage of the layoffs recently announced by several large technology companies in Oulu
• The size of the company will depend on the availability talents identified in Oulu
• Team in Oulu will work closely with R&D teams in Trondheim, Oslo and Krakow to Strengthen Nordic's leadership position as a "The leading Connectivity Company" in the next decade

Market leadership with nRF51

Nordic partners with TSMC for The Leading IOT Wafer Process

"We have been collaborating closely with TSMC on the selection of process technology for our upcoming nRF52 Series of ultra-low power RF SoCs. I am happy to announce that we have selected the TSMC 55ULP platform. This process is a key enabler for us to push the envelope on power consumption, performance and level of integration of the nRF52 Series to meet the future requirements of Wearable and Internet of Things applications." : Svenn-Tore Larsen

TSMC Press Release 2014/09/29

• TSMC 55nm ULP platform, ideal choice for Bluetooth Smart solution
• Superior feature set
• Embedded Flash availability
• Perfect balance of cost and performance

Business Outlook

• Strong growth in revenues, driven by Bluetooth Smart sales
• Sales of BT Smart to triple in 2014 (i.e., MUSD 63+ in Bluetooth Smart sales)
• Continued growth in wearable fitness monitors, plus many new designs in emerging product categories
• Stabilized/improved PC accessories revenue
• Gross margin of approximately 50% in 2014
• Higher OPEX in 2015 as a result of higher R&D spending in order to take advantage of upcoming complementary standards

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