Nordic Semiconductor

Earnings Release • Feb 10, 2017

Investor Presentation Q4 2016 February 10th 2017, Oslo, Norway

Today's presentation

CEO

Pål Elstad CFO

Thomas Embla Bonnerud Director of Strategy and IR

Business update Svenn-Tore Larsen, CEO

Financial summary - Q4 2016

Revenue	. Revenue Bluetooth	. Revenue Proprietary	. Gross margin	. Adjusted $FBIT*$
MUSD 52.6	MUSD 30.6	MUSD 19.5	46.2%	MUSD 1.5
$+1\%$ +13% у-о-у $Q$ - $O$ - $Q$		$\frac{1}{2}$ +7% -2% +26% -1% $\frac{1}{2}$ +7% -2% +26% -1%	-4pp	$Q-O-Q$

* Q4 2015 EBIT is adjusted for MUSD 7 in pension income

Growing and diversifying customer base

Continued strong growth in number of active customers*: 45% year-on-year

Continued diversification of Bluetooth revenue

*) Definition of "Active" Customer: An end customer which has purchased 10.000 units or more during prior six months (i.e., a customer actively selling product to end customers or preparing a high volume prototype)

New products powered by Nordic

-Xiaomi-vik Headset -	ROUG S HK	KWIKSET QOOF IOCK	Parking LOCK	- Withings Steel I
Gaming	Activity tracker	Smart lock	Smart City	Smart Watch
nRF52	nRF52	nRF52	nRF51	nRF52

Market leadership in Bluetooth

Bluetooth low energy end-product certifications*

Technology leadership in Bluetooth

Extending our nRF52 Series line-up with a new higher end SoC

• Higher value solutions for more demanding applications
• Memory, interfaces, power management and advanced security

Nordic first to market with Bluetooth 5 -Strong statement on technology leadership

• Biggest update to Bluetooth low energy 4x range, 2x data throughput, 8x broadcast
• Software upgrade for our nRF52 Series ICs

Proud to receive industry recognition

GSA award for 'Most Respected Public Semiconductor Company' with \$100 - \$500 million in annual sales

A strong recognition from our industry peers and partners on our products, vision and future opportunities

Global Semiconductor Alliance (GSA) is a 400+ member strong, non-profit, international trade organization

Continued momentum with developers

2016 was another record year for development kits sales

Total kit sales 2013 - 2016

Off to a good start with our new higherend Bluetooth 5 SoC

$>15(10)$

nRF52840 Development Kits sold in December 2016

Financials Pål Elstad, CFO

Revenue by technology

Revenue by market

Consumer Electronics	Wearables	Building/Retail Healthcare		Others
MUSD 25.4	MUSD 102	MUSD 8.4	MUSD 2.8	MUSD $\overline{3}4$
		$+17\%$ $\pm 0\%$ $-27\%$ $-8\%$ $+141\%$ $+11\%$ $+7\%$ $-21\%$ $+33\%$ $y$ -o-y q-o-q $y = y$ q-o-q $y = y$ q-o-y q-o-q	$y$ -o-y q-o-q $y$ -o-y q-o-q	$-2\%$

Gross Margin

Ramp of new products impacts Gross Margins

• GM of 46.2% in Q4 2016 (50.1% in Q4 2015)
• Gross Margins in the lower end as a result of lower yields during the volume ramp of the nRF52

Gradual improvement of Gross Margins in 2017

• Issue with nRF52 solved during Q3/Q4, however depletion of nRF52 inventory manufactured in Q3/Q4 will impact gross margins also in 1H 2017.
• Increased customer diversification will improve nRF52 Gross Margins

Cash Operating Expenses*)

Continued growth in OPEX

• Cash operating expenses increased 10,4%, of which $\blacksquare$ 3.7% relates to cellular
• The increase is driven by headcount growth of 17.2% $\overline{\phantom{a}}$ from 454 in Q4 2015 to 532 in Q4 2016
• Compared to Q3 2016 cash OPEX increased 11.4%

Investing for future growth

• Investments made for the next 2-5 years C
• Q4 2016 includes project expenses (consultants/tape $\blacksquare$ outs not capitalized)

*) Operating expenses, excl. capitalized R&D, depreciation and amort. and option expenses 15 **) % of Normalized quarterly revenue over the LTM

Operating Profits (EBIT)

Adjusted EBIT *)

Investments impacts EBIT Margins

• EBIT margin of 2.9%. Adjusted for Cellular $\blacksquare$ Investment EBIT margin of 11.8%.
• Continuous R&D investments for future $\mathcal{L}_{\mathcal{A}}$ growth reduces EBIT

Cash flow

Q4 2016

• Net cash out flow in $Q4$ MUSD -8.3 (adjusted for financing MUSD -18.3)
• Mainly driven by increase in raw material inventory. NWC increased by MUSD 12.0, or from 33% of LTM to 39%

Full year 2016

Opening $\rightarrow$ Paid Buyback RCF closing Balance balance

• Overall increase in working capital ٠
• Financial headroom with MUSD 40 RCF buffer to secure future growth

* EBITDA Adjusted for Capitalized Development Costs

Business outlook Thomas Embla Bonnerud, Director of Strategy and IR

Short term outlook - guidance for H1 2017

Revenue	MUSD ) – $\bigcap$
---------	------------------------------

Based on our current visibility, we anticipate revenue for 1H 2017 to be in the range of MUSD 100 to 107.

: Bluetooth i growth	$\zeta( ) = 4( )\%$

We except Bluetooth to be the growth driver for 2017. The 1H 2017 guidance range is based on 30% growth in Bluetooth revenue for the lower-end and 40% for the upper-end.

: Gross $\pm$ margins	46 - 47%

We expect gross margins to be in the range of $46 - 47\%$ for 1H 2017, in line with the previous half year but below our target of 50%

Continuous investments for future growth

Exciting emerging and future verticals

AirFuel™ magnetic resonance wireless charging

• Attractive next generation wireless charging technology for mobile devices
• Binary smart phone adoption is key trigger $\blacksquare$
• Potential upside for overall market growth

Audio streaming over Bluetooth® low energy

• To be enabled by the Bluetooth SIG
• Better user experience and battery lifetime ٠
• Potential volume opportunity and market growth driver 2019 $\rightarrow$

Continued strong design win momentum

Industries strongest SoC line-up

• Baseline to high-end SoCs $\blacksquare$
• Range of price-feature-performance points
• Covering a broad range of application

Cutting edge connectivity

• $\blacksquare$ Bluetooth 5, 15.4 / Thread and NFC
• Advanced software stack features

Highly differentiated solution

• Power, performance, size and solution cost
• Quality, robustness and interoperability
• Overall solution IC, software and tools

Ambitious objectives for cellular in 2017

Successful major chipset tape-out in Q4 2016

• Our first fully integrated chipset suitable for sampling to customers
• Expect at least another tape-out before production

On-track to sample selected lead customers in 2H 2017

• Engineering samples, software, kits and $\blacksquare$ development tools
• Increasingly confident in our timing and ability to compete

Positive end to a overall disappointing year

• Back to growth year-on-year $\blacksquare$
• Underlying Bluetooth growth of 48%

• Record Q4, even adjusted for MUSD 4 $\blacksquare$ transferred from Q3

• Strong backlog of MUSD 28 (+25% y-o-y)

• Record pipeline of certified end-products with Nordic
• Strong product line-up to fuel continued design win momentum

Disclaimer

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Important factors may lead to actual profits, results and developments deviating substantially from what has been expressed or implied in such statements. Although The Company believes that its expectations and the presentation are based upon reasonable assumptions, it can give no assurance that those expectations will be achieved or that the actual results will be as set out in the presentation.

The Company is making no representation or warranty, expressed or implied, as to the accuracy, reliability or completeness of the presentation, and neither The Company nor any of its directors, officers or employees will have any liability to you or any other persons resulting from your use.

This presentation was prepared for the interim results presentation for the fourth quarter, held on February 10, 2017. Information contained herein will not be updated. The following slides should also be read and considered in connection with the information given orally during the presentation.

Investor Presentation Q4 2016 February 10th 2017, Oslo, Norway