wireless living ....
Q2 2013 Investor Presentation
Svenn-Tore Larsen, CEO
Robert Giori, CFO
July 12, 2013
1
2
Strong order inflows reflect increasing demand
Lower shipments to PC accessories and ASIC segments in Q2 2013
Order volumes pick up (82% Q-over-Q growth), based on improving demand
• Revenue of MUSD 28.8
• Order inflows of MUSD 42.5
• Operating profit (EBIT) of MUSD 2.8
• Cash flow from operations of MUSD -6.8
Business Outlook: Revenue expected to accelerate during 2H 2013, as many new products
containing Bluetooth Smart solutions are launched
• Demand for PC accessories is expected to stabilize
• Sales of Bluetooth Smart solutions are expected to generate increasing revenue during the
remainder of the year.
– Bluetooth Smart solutions grow to 12% of revenue in Q2 2013 (1% in Q2 2012)
– Customer demand for Nordic’s development kits continues to grow rapidly, signaling
high product design activity. Many new products are to be launched in 2H 2013.
– Addressable market for Bluetooth Smart will further expand as new devices
(including Android smartphones) implement Bluetooth 4.0.
wireless living ....
FINANCIAL HIGHLIGHTS
Robert Giori, CFO
4
Q2 2013 Financial Highlights (MUSD)
MUSD
Financial objectives
Q2 2013
Q2 2012
Comments
Revenue
28.8
38.7
Lower sales to PC accessory and ASIC segments
Order Inflow
42.5
21.7
Strong order inflows reflects improving demand
Gross Margin %
48%
52%
Operating Profit (EBIT)
2.8
9.4
Higher production costs relative to revenue
on new product launches
EBIT Margin %
10%
24%
Net Profit after tax
2.0
6.5
Free Cash Flow
-12.7
4.5
Cash Balance
18.8
24.2
Accounts Receivable
29.2
32.5
Inventory
19.3
18.8
Growth
Profitability
Cash Flow
Negative cash flow as company prepares for
increased sales from 2H 2013.
Drives investments in production equipment,
higher working capital requirements.
5
Group Revenues
• Q2 2013 Revenue of MUSD 28.8 (26% decline from prior year)
– Slower shipments to PC accessories and ASIC segments
– Sales of Bluetooth Smart solutions grow to 12% of revenue (from 1% in prior year)
Segment revenue by quarter, 2011 – Q2 2013 (MUSD)
45
40
35
Sharp YOY
decline in PC
accessories and
ASIC business
segments in
Q2 2013
30
25
20
Other wireless
segments grow
by 19% from
prior year
15
10
5
0
Q1/11
Q2/11
Q3/11
Q4/11
Q1/12
PC accessories
Other Sensor networks
Mobile devices
ASIC / Consulting
Home electronics devices
Q2/12
Q3/12
Q4/12
Q1/13
Q2/13
6
Segment performance – Q2 2013
PC Accessories
Wireless mouse, keyboard,
presentation tools
Mobile devices
Sports / medical monitors, mobile
accessories, wireless payments
Q2 Revenue: MUSD 18.6 (MUSD 27.3)
Q2 Revenue: MUSD 4.3 (MUSD 4.5)
• Weaker PC market has impacted
sales of accessories.
• Growth in Bluetooth Smart mobile
accessories offsets decline in older
sports monitors
ASICs (application specific IC’s)
Wide sector span
Q2 Revenue: MUSD 1.7 (MUSD 4.1)
• Supporting existing customers only,
not a focus area for growth. Sales
fluctuates based on few designs.
Home electronics devices
TV / media remotes, audio streaming,
game controls, toys
Other Sensor networks
Industrial automation, building
sensors, RFID systems, automotive
Consulting services
Custom electronics design
Q2 Revenue: MUSD 1.3 (MUSD 1.3)
Q2 Revenue: MUSD 2.8 (MUSD 1.3)
• Sales driven by wireless toys, with
new design activity underway
• Growth driven by new RFID product
designs
• Project services for existing ASIC
customers
* Reflects Q2 2013 revenue (Q2 2012 in parenthesis)
Q2 Revenue: MUSD 0.1 (MUSD 0.2)
7
Order inflow / order backlog
• Order inflow of MUSD 42.5 in Q2 2013 (96% growth from prior year)
• Order backlog of MUSD 35.5 at quarter-end
– Higher order inflow and backlog reflects increased demand within traditional
market segments and new product designs within Bluetooth Smart
Order Inflow and Backlog 2011 – Q2 2013 (MUSD)
50
40
Order inflows
grow to highest
levels in two
years
30
20
Strong order
backlog
entering Q3
10
0
Q1/11
Q2/11
Order Inflow
Backlog
Q3/11
Q4/11
Q1/12
Q2/12
Q3/12
Q4/12
Q1/13
Q2/13
8
Gross Margin
• Gross margin of 48 % in Q2 2013
– Decline in gross margin from prior year as new products are launched with higher
production costs relative to revenues
– PC accessories market shifting to lower cost category
Gross Margin % of revenue 2011 – Q2 2013
60%
50%
30%
New product
releases lead to
fall in Gross
Margin from
prior year
20%
Gross Margin
stable from Q4 /
2012
40%
10%
0%
Q1/11
Q2/11
Q3/11
Q4/11
Q1/12
Q2/12
Q3/12
Q4/12
Q1/13
Q1/13
9
Operating Profit
• Operating profit (EBIT) in Q2 2013 of MUSD 2.8
– EBIT decline driven by lower revenue and gross margin
– Operating expenses remain stable during period
Operating Profit by quarter 2011 – Q2 2013 (MUSD)
10
8
6
4
2
0
Q1/11
Q2/11
Q3/11
Q4/11
Q1/12
Q2/12
Q3/12
Q4/12
Q1/13
Q2/13
10
Q2 2013 Financial summary
Rapid growth in order inflows, as demand accelerates and new designs are launched
Revenue growth
• Group revenue of MUSD 28.8 (MUSD 38.7)
– Decline in PC accessories and ASIC segments
– 19% growth across other business segments, with
increasing demand for Bluetooth Smart solutions
• Order inflow of MUSD 42.5 (MUSD 21.7)
– Reflects accelerating market demand
– Order backlog of MUSD 35.5
Profitability
Cash Flow
• EBIT of MUSD 2.8 (MUSD 9.4)
– Lower revenue and GM% drive decline in EBIT
• Free Cash Flow of MUSD - 12.7 (MUSD 4.5)
– Capital expenditures and working capital increase
as company prepares for production and sales of
new products
– Large payment of 2012 income taxes (final)
wireless living ....
BUSINESS OUTLOOK
Svenn-Tore Larsen, CEO
12
Revenue expected to accelerate in 2H 2013
Business expected to return to growth from 2H 2013, as many new product designs
containing Nordic’s Bluetooth Smart solutions are released
•
Revenue from PC accessories market is expected to stabilize in 2H 2013
•
New customer designs with Nordic’s Bluetooth Smart solutions are expected to drive
revenue improvement in 2H 2013
– Growing customer interest in developing Bluetooth Smart applications,
especially within smartphone accessories («app-cessories») and other sensor networks
(«the internet of things»)
– Customer demand for Nordic’s development kits continues to grow rapidly, signaling
high product design activity. Many new products due to be launched in 2H 2013.
– Excellent customer feedback on Nordic’s wireless solutions confirms competitive
advantages in Bluetooth Smart market
– Support for Bluetooth Smart within Android smartphones will further expand market
•
Strong growth rates expected at the end of the year, continuing into 2014
13
Bluetooth Smart market is rapidly expanding
Installed base of Bluetooth 4.0 (Smart Ready) devices is now growing rapidly,
driving increased demand for Bluetooth Smart accessories
Specification of
Bluetooth 4.0
Adoption of BT 4.0
“BT Smart Ready”
in hub devices
Sale of “BT Smart”
wireless accessories
July 2010
Started in 2H 2011
Started in 2H 2012
• Bluetooth SIG releases
final specification of
Bluetooth 4.0, with low
energy technology
• Major consumer electronics
categories implement
“host” version of BT 4.0
(incl. PC’s, Mobile devices,
Home Media centers)
• Release and sale of battery
powered sensors /
peripherals to connect with
BT 4.0 hub devices (incl.
remote controls, etc.)
• “Bluetooth Smart Ready”
label indicates ability of hub
device to connect with low
power peripherals
• “Bluetooth Smart” label
indicates ability of battery
powered peripherals to
connect with BT 4.0 hub
14
Major operating systems support Bluetooth Smart
By 2015, sales of Bluetooth 4.0 (Smart Ready) devices is expected to reach 2.2 billion*.
Support for Bluetooth Smart accessories is progressing across PC’s, tablets, smartphones.
Apple
• First to support for Bluetooth Smart accessories across its major product lines
(smartphones, tablets, PC’s)
• Dominant market position in tablets (over 80% market share)
• Smartphone customers (approx. 20% market share) are leading consumers
of accessories and app content
Microsoft
• Windows 8 operating system supports Bluetooth Smart accessories
• Windows is dominant platform within PC market (over 90% market share),
with customer base transitioning to Windows 8
• Growing market share within tablets, with focus on office applications
(target users for wireless mouse / keyboard)
Google Android
• Android is dominant platform in smartphone market (over 70% market share),
and has growing market share in tablets
• Google has announced that Android support for Bluetooth Smart accessories
will be available in the coming months
• Android support will be major market driver for Bluetooth Smart accessories
*
Source: IMS Research (now part of IHS), October 2012
15
Nordic’s sales of Bluetooth Smart are taking off
• Bluetooth Smart represented over 12% of Nordic’s revenue in Q2 2013, up from 1% in the
previous year
– Revenue growth from Bluetooth Smart expected to accelerate in 2H 2013, as many
new products are launched featuring Nordic’s solutions
Nordic % of revenue from Bluetooth Smart (2012 – Q2 2013)
15%
10%
5%
0%
Q1/12
Q2/12
Q3/12
Q4/12
Q1/13
Q2/13
16
Dramatic growth in demand for development kits
Growing interest in developing Bluetooth Smart applications is driving record demand
for Nordic’s development kits
Unit sales of development kits
– Driven by new nRF51 product for
Bluetooth Smart applications
5823
6000
• 3127 developer kits distributed in 1H 2013,
a 50% increase from 1H 2012
– Design activity is positive leading
indicator of new product releases
4000
3415
3127
2812
• Nordic’s Bluetooth Smart solutions receive
24%
excellent feedback from design teams
– Industry leading technical specifications
and ease of development
2000
0
2010
First Half
Second Half
2011
2012
1H 2013
– Many new products due to be released in
2H 2013, particularly within smartphone
accessories
17
News from Apple WWDC
Strong support for Bluetooth Smart devices at Apple developers conference
• Bluetooth Smart / robotics application takes
center stage at Apple CEO’s keynote address
– Anki demonstrates how smartphone can
interact wirelessly with intelligent robotics
systems via Bluetooth Smart
– Shows opportunities for developers to
create innovative new wireless applications
• Apple iOS 7 greatly expands support for
Bluetooth Smart
– HID profile (wireless keyboard, etc.)
– Apple Notification Center Services (e.g.,
smartphone alerts to nearby devices)
– Preservation and Restoration Service
(hold connection without opening app)
– Core technology within AirDrop (file sharing)
18
New application: Indoor location with Bluetooth Smart
Nordic partners with Korean Indoor GPS specialists DIO Interactive Co. Ltd. to develop
Bluetooth Smart based indoor location systems
•
Nordic Bluetooth Smart wireless solution will be positioned every 15 – 30 sq. meters in
indoor environment to connect location beacon with smartphones
•
Provides indoor navigation support and targeted information / advertising
•
Both companies are members of In Location alliance with Samsung, Nokia, LG, Sony, etc.
19
Strong competitive position in a high growth market
Nordic’s competitive advantages
Market forces
Growth of wireless technology
Growth of sensor networks
Eliminate wires between devices
Ultra-low power wireless
pioneer and market leader
• Clear market leader - over 800M IC’s sold
• Key contributor to BT low energy standard
• Board member of Bluetooth from 2011
• Bluetooth Chairman from 2012
Best-in-class technology platforms
Adoption of Bluetooth Smart
Greatly expands the market opportunity
Enables connection to phones, etc.
New wireless applications
New controllers, “App-cessories”,
“Internet of things”
• High performance connectivity
• Lowest power consumption
• SoC’s, protocol stacks, application
software and reference designs
Key account relations
• Leader in major segments
• Strong entry position in new segments
• Application / market knowhow
Competitive cost structure
• High volumes on product platforms
20
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