Nordic Semiconductor Asa · OSL:NOD
Nordic Semiconductor Asa — Q3 2016 Earnings Presentation
35 slides from Nordic Semiconductor Asa's earnings presentation, Oct 18, 2016
Slide 1: Investor Presentation Q3 2016
Investor Presentation QS 2016 October 18% 2016, Oslo, Norway
Slide 2: Introducing our new Director of Strategy and IR
Introducing our new Director of Strategy and IR Business update Financials Business outlook Leila: || BEE iain Svenn-Tore Larsen Pal Elstad Thomas Embla Bonnerud CEO CFO Director Strategy and IR
Slide 3: Business update
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Slide 4: Q3 2016 headlines
—_eHoRcIC SEMICON QS 2016 headlines #1 #2 #S #4 #5 QS 2016 revenue at 52.3, down 3.0% compared to MUSD 53.9 in Q3 2015 Bluetooth revenue at MUSD 311, down 8.9% compared to MUSD 34.2 in Q3 2015 QS 2016 EBIT of MUSD 3.9, compared to MUSD 10.0 in Q3 2015 Bluetooth momentum with underlying growth of 45%
Slide 5: Late incoming supply hits Q3 revenue
Late incoming supply hits Q3 revenue MUSD -4 Minimum MUSD +4 for Q3 2016 customer impact for Q4 2016 Late incoming supply Safety stock used to meet Rebuild of safety stock customer demand Product mix in progress
Slide 6: Sales funnel is a leading indicator
Sales funnel is a leading indicator Visibility on trends . Kit sale Design win . Certification Volume . . Opportunities : | : ‘ Customer base Sales activity [-—— Development —— 2-5y /}--__._ 9- 18m +, ——__________| . Our competitive position The overall market > Q3 2016 Outlook on 2017 - 2018 Design
Slide 7: Record high development activity
Record high development activity Development Kits sales 2011 - 1H 2016 stot 5628 20M 2012-2013. 1H 2014 2H 2014 TH 2015 2H 2015 IH 2016 On track for a record year 40% is nRF52 kits (H1 2016) nRF51 still going strong Developer Zone posts 2013 - Q3 2016 27% growth in posts YTD Diversified type of cust
Slide 8: Strong tier design win momentum
Strong tier 1 design win momentum Medical Logistics Remote controls Wearables => . (| Ld Tier 1 company — Tier 1 company Tier 1 company Tier 1 company Drug delivery Asset tracking Voice remote for TV Wristband NRFS1 NRFS1 NRFS1 NRF5S2 Payment/|D Leading player Payments nRF51
Slide 9: All time high and #1 on product certifications
All time high and #1 on product certifications Bluetooth/FCC certification 140 50,0 % ° HE vicoeoh u rufrsy U 45,0 % . 120 Proneer ©" — Fibioworld 40,0 % innoWear WS Huawer LINK A ae UU actxa 100 35,0 % rarer 30,0 % 25,0 % muyore = (te NUL 20% BM @ & SKY 15,0 % 40 — DAL Score eS Gl 2 | | | | | | | |
Slide 10: Selected Nordic powered products in Q3
Selected Nordic powered products in Q3 Star Wars Force Band EnOcean Light switch Kontakt.io Beacon Pro Furby connect Toys / Robotics Smart Home / Lighting Beacon Toys / doll Powered by nRF52 Powered by nRF51 Powered by nRF52 Powered by nRF51
Slide 11: Growth and diversification of customer base
Growth and diversification of customer base Number of active customers* Bluetooth revenue distribution Q114- Q3 2016 willl DOB ahh aK a at xe as SMO AS POH % share of top 10 customer Ley 9 50% y-y growth 50% Q3 2015 > 36% Q3 2016 *) Definition of “Active” Customer: An end customer which has purchase
Slide 12: Unique market position across verticals
Unique market position across verticals Wearables 0a ¢ Broad coverage of the verticals Nordic Bluetooth Established, emerging and Remote controls customer base 2016 Healthcare & long-tail c “se eg | 7 ‘4 " Mix of leading players and u aeacons - | PC/phone/tablet HID g play Pp and coming players ~eoe
Slide 13: Momentum in Medical
Momentum in Medical Broader range of applications 48% y-y growth in healthcare segment Monitoring Lm 16 @A Drug delivery systems yA » + _-_ ‘o..:| ; Lots of hard work over the last years 4 ” z Diabetes Product offering, customer engagements al Wi Asthma Design wins, certifications, volume production
Slide 14: Strong underlying growth for Bluetooth
© 280 SECON Strong underlying growth for Bluetooth AS % Regained Z30MUSD Bluetooth revenue in less than a year Adjusted y-y Bluetooth revenue growth Built a diversified robust position Loss of tier 1 wearable customer Large gaming product stopped in 2015
Slide 15: Pål Elstad, CFO
eae te Pal Elstad, CFO
Slide 16: Q3 2016 financial highlights
QS 2016 financial highlights Revenue Gross Margin EBIT CF from Operations 602 60% 12 50 an 10 15 50% 40 = Se 8 10 30 nee 40% Bue 6 ° Bal 30% See ‘ il : ‘ Oo : See Cee 0 206 : G G2 63 G4 Ol G2 93 ° = 2618. 2018 2015 201 2016 2016 2016 2015 2016 2015 2015 2016 2016 2016 -2. 205 20i8. 26%. 2018 208 208
Slide 17: Revenue by technology 2012-2016
© 280 SECON Revenue by technology 2012-2016 60,00 50,00 40,00 30,00 — 20,00 = 10,00 = 0,00 Ql Q3 @4 Qi Q3 @4 Qi Q3 G4 Ql @Q2 Qs G4 QI Q2 Qs 2012 oo 2012 2012 2013 gos 2013 2013 2014 oo 2014 2014 2015 2015 2015 2015 2016 2016 2016 Bluetooth mw Proprietary BASIC
Slide 18: Gross Margin
DS Se Gross Margin 70% oo "= GM of 46.2% in Q3 2016 (48.5%) oe = Gross Margins in the lower end as a oe result of lower yields during the 20% SO volume ramp of the nRF52 we * Issue with nRF52 solved during Q3, 40% however depletion of nRF52 inventory a manufactured in Q3 will impact gross 50% margin
Slide 19: Cash Operating Expenses
Cash Operating Exoenses 38,6%** 35,5%** Q3 2015 | Salary Q3 2016 || Other Opex = Cash operating expenses increased 9%, of which 3.5% relates to Finland = The increase driven by headcount growth of 21.2% from 430 in Q3 2015 to 521 in Q3 2016 = Target to have 3 R&D facilities in order to get the best
Slide 20: Operating Profits (EBIT)
Operating Profits (EBIT) Reported EBIT f 24.8% * EBIT margin of 7.4%. Adjusted for Finland EBIT margin of 15.1%. -41.0% 18.5% mh = Continuous R&D investments for : future growth reduces EBIT 7A% | | ; 3 2015 3 2015 (ex. Fl) 3 2016 3 2016 (ex. Fl)
Slide 21: Cash flow
Cash flow Cash flow Q3 2016 1016 EBITDA Inventory AccountsAccounts Capex ning ReceivablesPayable = Net cash flow in Q3 MUSD 5.7 = Seasonally strong in Q3. NWC reduced by MUSD 4.7, or from 36% of LTM to 33% = Capex mainly related to purchase of new test capacity Cash flow 2016 = Positive net profits
Slide 22: Short term outlook
Short term outlook Revenue Given the delays in certain Q3 2016 deliveries we expect Q4 2016 to be strong and in the range MUSD 54-57. Gross Although solution for the nRF52 yield issue rectified, depletion of Q3 inventory will Margins continue to negatively impact gross margins in Q4, Q4 gross margin
Slide 23: Thomas Embla Bonnerud, Director Strategy and IR
Thomas Embal Bonnerud, Director Strategy and IR
Slide 24: Continued Bluetooth market growth
Continued Bluetooth market growth Strong volume growth Wearables : Bluetooth low energy 0 a ¢@ ' ™ Growth in existing verticals IC Market 2016 - 2018 | Remotalllmenele = New verticals/applications Healthcare By - yp , * Fast paced and innovative , as 4% ° Beacons | PC/phone/tablet HID = ~Emergence o
Slide 25: We see strong growth indicators
We see strong growth indicators Record number of The total volume Record number of opportunities opportunity 1OMU+/y opportunities Diversified over the verticals Short term, medium Across the verticals and long term Outside of wearables and wireless charging
Slide 26: Competitive outlook - Bluetooth 2017-2018
© 280 SECON Competitive outlook - Bluetooth 2017-2018 Maintaining our Hl Regain market Opportunities shares in 2017 position and risks 2017 roadmap for nRF52 Positive trajectory in 2016 Lower and higher-end categories Vertical specific upsides More robust position Barriers of entry getting high Deli
Slide 27: Extended nRF52 line-up on track for 2017
© 280 SECON Extended nRF52 line-up on track for 2017 Nordic IC roadmap and strategy Technology leadership NRF24L Series NRF51 Series NRF52 Series First IC in Series Broad range of verticals Scalable and cost effective Higher Higher Higher latform value ICs | value ICs | value ICs | ep a First |C mf
Slide 28: Growth outlook - Bluetooth 2017-2018
—_eHoRcIC SEMICON Growth outlook - Bluetooth 2017-2018 Growing with ASP and the market Opportunities Margin and risks Leading and dominant position Broader range of IC Expecting speed bumps Short/medium term vertical price points and margins specific upsides Customer and product mix
Slide 29: Cellular IoT
Slide 30: Low power cellular - the next big thing for IoT
Low power cellular- the next big thing for loT High speed cellular has Low power cellular will shaped mobile computing shape the future of loT e000 a AG > On 15 @ ey , oe Messages Calendar Camera High-speed connectivity Low power, secure, reliable .. anywhere connectivity .. anywhere ... for anythin
Slide 31: Cellular IoT status and outlook
Cellular loT status and outlook Advancements in product Momentum lead partners Gearing up for a high development and customers impact market entry Complete RF prototype in lab Very positive reception Lead customer 2H 2017 Fully integrated IC ready for TO Infrastructure, carriers and modules Broad av
Slide 32: Upcoming events
Slide 33: Upcoming events
Upcoming events Investor + analyst Product Capital Markets brief on Cellular loT launch event Day 2017 New York, 14 November 2016 Oslo, December 2016 February 2017
Slide 34: Q3 2016
Investor Presentation QS 2016 October 18% 2016, Oslo, Norway
Slide 35: Disclaimer
Disclaimer The following presentation is being made only to, and is only directed at, persons to whom such presentation may lawfully be communicated (“relevant persons”). Any person who is not a relevant person should not act or rely on this presentation or any of its contents. This presentation doe