Nordic Semiconductor

Earnings Release • Jul 11, 2014

Q2 2014 Investor Presentation

JULY 11, 2014

Svenn-Tore Larsen, CEO Robert Giori, CFO

Summary – Q2 2014: Strong performance across all segments

• Revenue increases by 44% to MUSD 41.4, with growth across all segments. EBIT increases by 106% to MUSD 5.7.
• Order inflows grow to MUSD 47.8, and backlog increases to MUSD 37.9.
• Demand for Bluetooth Smart wireless solutions continues to take off. BT Smart sales increase to MUSD 12.2 (vs. MUSD 3.5 in Q2 2013)
• Record high sales of 10,218 development kits in 1H 2014, driven by exploding interest in developing new «Internet of Things» applications

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Q2 2014 Investor Presentation

Financial Highlights

Robert Giori, CFO

Q2 2014 Financial Highlights (MUSD)

MUSD
Financial objectives	Q2 2014	Q2 2013	Comments
Growth
Revenue	41.4	28.8	Strong sales growth across all segments. Exceptionally strong growth within BT Smart.
Order Inflow	47.8	42.5
Profitability
Gross Margin %	48%	48%	Higher revenue drives EBIT growth
Operating Profit (EBIT)	5.7	2.8	Opex increases with higher R&D and
EBIT Margin %	14%	10%	sales activity, plus accounting items
Net Profit after tax	4.1	2.0
Cash Flow
Free Cash Flow	-12.1	-12.7	Seasonal factors drive weak Q2 cash flow.
Cash Balance	19.4	18.8	Very positive free cash flow expected
Accounts Receivable	39.0	29.2	for remainder of 2014
Inventory	24.5	19.3

Group Revenues

• Q2 2014 Revenue of MUSD 41.4 (44% increase from prior year)
• Growth driven by Bluetooth Smart solutions, which represent 30% of revenue

⁶ Market segments – Q2 2014 Presentation Q4 2013 Investor

PC / Tablet Accessories

Wireless PC mouse and keyboard, tablet accessories

Q2 Revenue: MUSD 21.8 (MUSD 18.6)

• Sales of PC accessories stabilize, first major sales of BT Smart for tablets

TV / appliance remotes, game controls,

Q2 Revenue: MUSD 2.7 (MUSD 1.3)

• New Bluetooth Smart toy and home media designs drive growth

Home electronics devices

wireless charging, toys

Mobile / Wearable devices

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

Q2 Revenue: MUSD 10.4 (MUSD 4.3)

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

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

Q2 Revenue: MUSD 3.7 (MUSD 2.8)

• Record high revenue driven by recent RFID design wins

ASICs (application specific IC's) Wide sector span

Q2 Revenue: MUSD 2.9 (MUSD 1.7)

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

Consulting services

Custom electronics design

• Q2 Revenue: MUSD 0.0 (MUSD 0.1)
• Project services for existing ASIC customers

Order inflow / order backlog

• Order inflow of MUSD 47.8 in Q2 2014
• Order backlog of MUSD 37.9 at quarter-end
• Order cycle remains shorter than normal based on new design activity

Gross margin

• Gross margin of 48 % in Q2 2014
• Gross margin falls from prior quarters, as demand shifts to Nordic's 2nd generation BT Smart solution (higher ASP / lower GM%)

Operating profit (EBIT)

• Operating profit in Q2 2014 of MUSD 5.7 (106% growth from prior year)

• Higher revenue partly offset by increased operating expenses

• Operating expenses (incl. depreciation) of MUSD 14.3 in Q2 2014

• ¹⁰ Operating expenses Presentation Q2 2014 Investor Growth in expenses is driven by higher staffing and activity in R&D and Sales, plus IFRS accounting impact of options and capitalized R&D
• Much slower growth in operating expenses is projected from 2015 with reduced impact of accounting items

USD '000	Q2 2014	Q2 2013	Growth
Total Operating Expense (non-IFRS), including Depreciation*	12,987	11,750	11%
Add: Options expense Less: Capitalized R&D*	1,310 2	535 (1,338)
Total Operating Expense (IFRS), including Depreciation	14,298	10,948	31%

* 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

Strong revenue growth across all product segments

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Q2 2014 Investor Presentation

Business Outlook

Svenn -Tore Larsen, CEO

The «Internet of Things» creates a new era of 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 only low power wireless standard compatible with a huge installed base of smartphones, tablets, and other devices.
• Interest in developing «IoT» applications is driving record demand for Nordic's Bluetooth Smart solutions and development kits

Presentation Q2 2014 Investor

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Nordic's first wireless era (2002 – 2013)

Key value proposition:

Eliminating wires between devices Replacing older wireless solutions for controls/sensors

Corporate vision:

"Short-range personal interface devices will soon become entirely wireless.

Nordic Semiconductor shall be the preferred global vendor of low power radio solutions that enable wireless personal interface devices."

Primary competitive advantages:

Power consumption, radio performance, cost

2002 - 2013

Nordic sells 1 billion wireless units

The new wireless era for Nordic (2014+)

Key value proposition:

Connecting devices to the internet to drive new and enhanced products and services ("Internet of Things")

Corporate vision:

"Wireless computing transforms the products and services we use everyday by making things connected and smarter. We believe smarter things will improve our living environments, health and quality of life.

Nordic Semiconductor provides innovative wireless and embedded processing solutions which enable our customers to create smarter things."

Primary competitive advantages:

Software, application coverage and ease of development, PLUS power consumption, radio performance, cost

Presentation Q2 2014 Investor

¹⁶ Smarter Things, Smarter Services – Driving the next era of market growth

The "Internet of Things" is being driven by demand for products and services which are smarter, more useful and more convenient

Smarter Things with cloud services

New products which integrate local sensors and controls with data services provided from the cloud

Smarter Services with Things

New services based on information collected in sensor networks and processed in the cloud

¹⁷ Recent technology trends enable the «IoT»

Key technology trends enable the implementation of wireless solutions into a growing range of products and sensors

• Huge growth of smartphones and tablets, enabling instant access to wireless and software apps
• Smart sensors / accessories ("nodes"):
• Very low power and low cost microcontrollers, sensors and MEMS to capture and process data

Connectivity technology:

• Ultra-low power wireless solutions to transfer data
• Rapid adoption of new Bluetooth Smart standard for connecting billions of devices

"App" ecosystem:

Enormous popularity of smartphone apps – users enjoy engaging and interacting via their phones

Cloud Computing:

Cloud / Big Data services can manage end applications, and store and process data captured at the nodes

Major radio technologies within the «IoT» today

Bluetooth Smart is a core technology for the IoT, as the only low power standard compatible with a huge installed base of smartphones and other devices.

Three primary radio technologies within the «IoT»:

* WiFi approaching throughput of 1Gbps (802.11ac with MIMO) Cellular approaching several hundred Mbps throughput Bluetooth Smart approaching a few hundred kbps throughput

¹⁹ Exploding interest in the «IoT» is driving record sales of Nordic's development kits

• Record high 10218 development kits sold in 1H 2014, with strong acceleration in Q2 2014
• Significantly more than all of the development kits sold last year
• Huge growth in demand for Bluetooth Smart development kits

Presentation Q2 2014 Investor

²⁰ Record sales of Bluetooth Smart solutions

Sales of Bluetooth Smart solutions increase to MUSD 12.2 in Q2 2014, as demand for «Internet of Things» applications grows

Market opportunities for Nordic to innovate and grow Opportunities for differentiation and growth Presentation Q2 2014 Investor

• Still early days for the IoT
• Years away from commoditization
• Need for continued innovation
• Features, power, performance
• More advanced SoCs and software
• IPV6 over Bluetooth Smart headless routers
• Even lower power and energy harvesting
• Complementary wireless technologies

Business Outlook

• Strong growth in revenues, driven by Bluetooth Smart sales
• Sales of BT Smart expected to more than 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
• Gross margin of approximately 50% in 2014
• Operating expenses including depreciation projected to grow to approximately MUSD 60 - 64 in 2014*
• 2014 Opex growth driven heavily by accounting items (options / capitalized R&D), which are expected to diminish in 2015

²³ For more information on Nordic

Sign up for a Nordic MyPage account on our website www.nordicsemi.com

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