Within the third quarter of 2024, Nordic Semiconductor (ticker: OL:), a number one supplier of wi-fi communication expertise, reported a income enhance of 18% year-over-year to $159 million. This development was pushed by robust client demand and seasonal traits. The corporate’s gross margin remained strong, just below 50%, and achieved a optimistic EBITDA of $16 million. Regardless of a projected seasonal decline within the fourth quarter, with anticipated revenues between $130 million and $150 million, Nordic Semiconductor stays assured in its market place and long-term development prospects, focusing on over 20% common annual income development by means of the last decade.

Key Takeaways

• Nordic Semiconductor’s Q3 2024 income rose to $159 million, an 18% enhance year-over-year.
• Gross margin stood just below 50%, with a optimistic EBITDA of $16 million.
• This fall income is anticipated to be between $130 million and $150 million, reflecting seasonal traits.
• The corporate maintains a 40% market share in finish product certifications with 509 designs licensed up to now 12 months.
• Nordic Semiconductor is evaluating the acquisition of Novelda and plans to launch the nRF54 Sequence on the Electronica Trade Honest.
• Working prices rose by 7.6% year-over-year, and the corporate goals for a 25% EBITDA margin inside 5 years.
• Money circulate was optimistic at $3 million, regardless of an increase in stock ranges to $181 million.

Firm Outlook

• Nordic Semiconductor outlines plans for worthwhile development, with modest development anticipated within the short-range enterprise for 2025 and acceleration in 2026.
• The corporate targets over 20% common annual income development by means of the last decade.
• A 25% EBITDA margin is anticipated inside 5 years.

Bearish Highlights

• This fall income is projected to say no seasonally by 6% to 18% from Q3.
• The corporate downgraded its 2025 development steerage to beneath 17% as a result of provide chain administration changes.
• Stock ranges have elevated, necessitating strategic sourcing changes to help future development.

Bullish Highlights

• The healthcare section continues to indicate robust efficiency with ongoing investments.
• Elevated design exercise is noticed in mobile merchandise, significantly asset trackers and metering.
• The nRF54 sequence is anticipated to contribute to robust future development with ongoing design wins.

Misses

• There was an $8 million enhance in working capital, primarily as a result of increased inventories.
• Whole stock rose by $11 million to $181 million, an $80 million enhance year-over-year.

Q&A Highlights

• Administration stays optimistic concerning the nRF54H product and its future impression on income.
• Prepayment figures don’t totally replicate wafer buying plans, as the corporate is in varied ramp phases with suppliers.
• Nordic Semiconductor will host follow-up Q&A periods on October twenty fifth, 2023, for additional dialogue of outcomes.

Nordic Semiconductor’s third-quarter outcomes show resilience in a aggressive market, with a stable enhance in revenues and a powerful gross margin. The corporate’s strategic concentrate on product innovation, such because the nRF54 Sequence, and potential market growth by means of acquisitions like Novelda, sign ongoing dedication to development. Whereas the corporate faces challenges comparable to stock administration and a revised development outlook for 2025, its long-term targets stay bold, and Nordic Semiconductor is poised to leverage its market place to realize important income development within the coming years.

InvestingPro Insights

Nordic Semiconductor’s latest monetary efficiency aligns with a number of key metrics and insights from InvestingPro. The corporate’s Q3 2024 income development of 18% year-over-year is especially noteworthy when contemplating the InvestingPro knowledge, which reveals a income development of 17.58% for the newest quarter. This demonstrates consistency with the reported figures and underscores the corporate’s potential to take care of development momentum.

Nevertheless, buyers ought to pay attention to potential challenges forward. An InvestingPro Tip signifies that analysts anticipate a gross sales decline within the present 12 months, which may clarify the corporate’s downgraded 2025 development steerage. Moreover, the tip suggesting that web revenue is anticipated to drop this 12 months aligns with the corporate’s projected seasonal decline in This fall revenues.

On a optimistic word, Nordic Semiconductor’s robust steadiness sheet is highlighted by an InvestingPro Tip stating that the corporate holds additional cash than debt. This monetary stability may present a buffer as the corporate navigates potential market headwinds and continues to put money into development initiatives just like the nRF54 Sequence.

For buyers in search of a extra complete evaluation, InvestingPro gives 7 extra ideas that might present additional insights into Nordic Semiconductor’s monetary well being and market place.

Full transcript – Nordic Semiconductor ASA (NDCVF) Q3 2024:

Operator: Welcome to Nordic Semiconductor Q3 2024 Monetary Presentation. Through the presentation, all members are in a listen-only mode. Afterwards, there shall be a question-and-answer session. [Operator Instructions] I’ll now hand it over to Metal. Please start.

Ståle Ytterdal: Thanks, Keld and good morning everybody. This presentation is being recorded and shall be obtainable on our Nordic web site within the Investor Relations’ part. It’s also possible to discover our earnings press launch, quarterly report, and presentation on the IR webpage. Becoming a member of me right this moment are our CEO, Vegard Wollan; and CFO, Pål Elstad. They are going to be discussing our newest monetary outcomes and offering perception into latest enterprise developments. After the presentation, we are going to start the Q&A session. Throughout this time, we are going to settle for reside questions through the Q&A dial-in operate. For dial-in particulars, please confer with the earnings name invitation obtainable on our IR website below Inventory Alternate Discover. Please word the dial-in data is barely essential if you’ll ask questions. As at all times, the presentation comprises forward-looking statements, which contain inherent danger and uncertainties. Precise outcomes might differ materially from these statements, expressed and implied. We strongly encourage you to assessment our detailed Q3 quarterly report and the 2023 annual report for extra all through understanding of the chance and uncertainties that might have an effect on our operation. With out additional delay, I now flip the ground over to our CEO, Vegard Wollan.

Vegard Wollan: Thanks, Metal. My identify is Vegard Wollan and I am the CEO of Nordic. And with me, I’ve our CFO, Pål Elstad. Let’s get proper into the primary takeaways of the third quarter. Income amounted to $159 million within the third quarter, which was near the midpoint of the guiding vary and a rise of 18% from the identical quarter final 12 months. The year-on-year enchancment displays typically elevated demand within the Client section, whereas the rise from earlier quarter was supported by regular seasonal results. Gross margin got here in just under 50% and we report a optimistic EBITDA of $16 million. Wanting forward, we’re guiding for income between $130 million and $150 million for the fourth quarter, reflecting a typical seasonal sample with decrease shipments in fourth quarter than the third. Gross margin is anticipated to stay round 50%. The income break up between the highest 10 prospects and the broad market has stabilized. Whereas we’re sustaining very robust relationship and positions with our key prospects, we now have additionally made it a excessive precedence for Nordic to regain traction within the broad market. Turning to design launches. We stay the clear market chief with about 40% market share when it comes to finish product certifications and 5 occasions as many designs as quantity two. Over the previous 12 months, a complete of 509 designs with Nordic inside have been licensed, presently. As at all times, our overview of buyer product launches present a big selection of merchandise, this time starting from monitoring of coolers and freezers, Wi-Fi modules to sensible locks, audio tv streaming, and to human location and fall monitoring. It is good to see examples of shoppers shopping for a number of merchandise from us just like the Matter over Wi-Fi, SoC and Wi-Fi sensible lock, which deploys each a 5340 Bluetooth SoC and a 7002 Wi-Fi module or the Saluswear tracker utilizing each a 9160 mobile SiP and an nPM30 energy administration IC along with our nRF Cloud software program options. Wanting forward, we at the moment are quick approaching industrial launch of the nRF54 Sequence, with the primary merchandise being launched on the Electronica Trade Honest in Munich in November. Most of our key prospects and plenty of broad market prospects are already growing merchandise with the 54 sequence. Whereas the ramp will take a while, we see stable proof factors of a powerful and really aggressive place for these merchandise. We’re starting to ship each the 54L and the 54H merchandise in first volumes now in This fall. And to repeat, the 54H is a high-end quad CPU SoC for high-performance IoT merchandise and it is manufactured on GlobalFoundries (NASDAQ:)’ 22-nanometer course of expertise. The 54L sequence is a high-performance twin CPU SoC primarily based on TSMC’s 22-nanometer expertise and is a logical successor to the nRF52 Sequence. Each households are delivering full system-on-a-chip integrations of MCU management and compute programs, built-in recollections and safety, and with best-in-class energy consumption and, after all, radio efficiency, in addition to being supported in Nordic’s world-class improvement ecosystems for software program and design instruments. These merchandise are going to turn out to be nice development drivers for us within the years to come back and we’re actually trying ahead to those launches. Lastly, earlier than I depart the microphone to Pål to take you thru the numbers, I simply wish to point out the potential acquisition of Novelda that we’re at the moment evaluating. Novelda has constructed an fascinating expertise place in ultra-wideband, which may complement our main providing inside Bluetooth — multiprotocol Bluetooth. This has fascinating functions inside presence and precision sensing in addition to ranging. We’ve began the due diligence course of, which we plan to finish by the top of November. And till then, we’re not going to enter extra particulars about this potential potential transaction.

Pål Elstad: Thanks, Vegard. I am going to now undergo the financials for Q3 2024. In Q3, our income was the very best we now have had for the reason that peaks throughout 2022 and we’re lastly again to each year-over-year and quarter-over-quarter development. our income for the third quarter, we total see an 18% year-on-year enhance from $135 million in Q3 2023 to $159 million in Q3 2024. As communicated at our Q2 presentation, the development comes on account of elevated underlying demand pushed by robust key buyer numbers in addition to the results of the continued excessive design win ratio that we now have had over the past years. As well as, Q3 can also be the seasonally strongest quarter and income elevated by 24% sequentially from $128 million final quarter. The year-on-year enhance primarily displays increased Bluetooth income, which elevated by 19% to $143 million. Proprietary grew 18% to $12 million, which is the very best degree since This fall 2022, pushed by robust PC accent and gaming markets. Nordic sees elevated design exercise and traction in mobile IoT, particularly inside industrial asset trackers and sensible metering as mentioned on the Capital Markets Day. Nevertheless, there was a discount in distributor inventories in Q3 and reported long-range income was low at $2.5 million. The underlying income is on par with earlier stories reported. Turning to the top consumer markets, we see the strongest development within the client with 35% enhance versus final 12 months and 31% versus final quarter. Client is by far the most important end-user market, accounting for 69% of our complete. That is up from 65% final quarter. The stable numbers replicate enhancements throughout many of the client buyer base, however particularly with a few of our key prospects on this market. Income from industrial market was comparatively secure with an 8% enhance from final 12 months and a slight lower of three% versus final quarter. Industrial is the market the place the stock ranges have taken the longest to normalize. Whereas demand from the commercial sector is choosing up considerably within the U.S. and in Asia, it nonetheless stays sluggish in, amongst others, Europe. Healthcare is exhibiting robust income of $21 million in Q3 and though we noticed a decline of 21% from the extraordinary excessive ranges in 2023, it was 41% above the earlier quarter. As commented earlier this 12 months, we anticipated increased ranges in Q3 in comparison with earlier in 2024. This market represents a key development alternative for Nordic going ahead. However as we acknowledged within the report, this section relies on a comparatively small variety of prospects and therefore susceptible to extensive quarterly variations. Coming to — turning to gross margin. There’s not a lot to say about this within the quarter. The gross margin was roughly consistent with the steerage, though it slipped barely beneath 50% within the quarter. And as at all times, the variations primarily replicate modifications in buyer and product combine. We, nevertheless, keep our long-term ambition to maintain gross margins above 50%. Now, turning to the working mannequin efficiency in Q3. As communicated on our Capital Markets Day, our working mannequin is ready up with an ambition to maneuver in the direction of an EBITDA margin of round 25% over the following 5 years. Nevertheless, our group and working mannequin is clearly geared in the direction of a considerably increased income degree than what we have seen over the past 12 months. Regardless of enhancing income, we’re nonetheless spending greater than 26% of income on R&D in comparison with our working mannequin goal of 15% to twenty% and 13% on SG&A in comparison with a mannequin goal of lower than 10%. However, the EBITDA margin in Q3 is a major enchancment in comparison with the last few quarters, however keep in mind that Q3 remains to be our seasonally strongest quarter. To attain our long run EBITDA margin targets, we’re working alongside three axes. First, we have to undoubtedly develop our income; secondly, we have to help our gross margins; and third, — and include prices to learn from operational leverage as our income grows. We’re going to ship on all of those accounts over time to come back. Now, turning to money value improvement. prices from a money perspective, we noticed a year-over-year enhance of seven.6% within the third quarter, a rise of 5% in comparison with the earlier quarter. Payroll elevated 13% year-over-year regardless of the ten% discount within the variety of workers over the previous 12 months to 1,383 on the finish of Q3. That is down from 1,550 on the finish of Q3 2023. The rise in wage is defined partly by excessive wage enhance in 2024 after a wage freeze in 2023, indicating a comparatively regular improvement over the previous two years. The 2024 figures additionally embody increased accrual for variable pay in comparison with 2023. And in addition a reminder that in 2023, we truly had a reversal of the accrual for variable pay, leading to a double impression versus this 12 months. Different prices are comparatively secure, reflecting that we now have managed value financial savings in an inflationary setting. We are going to proceed to concentrate on adjusting our spending degree to help margins additionally going ahead. As communicated on the CMD, we goal flat OpEx additionally in 2025. The underlying CapEx stays low. We noticed a continued low spending degree additionally within the third quarter of 2024 with $3 million in CapEx or solely 2% of income. This was up from $2 million a 12 months in the past and in comparison with $2.5 million final quarter. The low CapEx displays that we’re nonetheless using the excessive investments in check capability made in 2022 after we have been geared for considerably increased income ranges. Present CapEx is subsequently primarily IT tools and smaller R&D investments in lab, et cetera. Lastly, I am going to flip to our money circulate. You may see that we generated a complete money circulate of roughly $3 million in Q3. That is complete money circulate. The working money circulate was $14 million in the course of the quarter, which compares to an outflow of $14 million in the identical quarter final 12 months. The working money circulate was generated regardless of the continued enhance in working capital of $8 million, primarily on account of increased inventories. Inventories elevated $11 million within the quarter to $181 million, which is up $80 million versus final 12 months. We commented earlier that we anticipated a decline in inventories in the course of the 12 months. Nevertheless, we proceed to strategically supply supplies to have capability for future development. The worth of stock at quarter finish will fluctuate some as a result of lagging timeline of arrival of wafers and buyer shipments. Nevertheless, we nonetheless consider that the stock ranges will scale back going ahead, however stay above pre-pandemic ranges. Web working capital in comparison with income stays excessive at 45%, however we’re shifting in the direction of the 25% degree after we attain increased income. With that, I am going to depart the mic again to Vegard for his closing remarks.

Vegard Wollan: Thanks, Pål. At Nordic’s Capital Markets Day in September, we introduced our plan for driving worthwhile development all through the last decade. I wish to repeat among the key messages right here. Within the established short-range enterprise, we’re a transparent market chief, and our aim is to outpace the expansion of our serviceable market, which is supported by the upcoming launches of our groundbreaking 54 Sequence expertise and a really robust design exercise with our key prospects and our efforts to regain traction within the broad market. Once we introduced that bold long-term outlook, it was necessary for us on the identical time to sign that we at the moment see modest development within the short-range enterprise in 2025 and accelerating development from 2026 onward. That expression, modest development in 2025 was used within the context of our long-term development ambitions for the short-range enterprise. Firstly, the 54 Sequence shall be a key development driver, nevertheless it additionally takes a while for 54 merchandise to be designed into our buyer merchandise and ramped up in manufacturing. Secondly, the markets have stabilized, and we see a gradual restoration, however some segments are nonetheless sluggish and want extra time to completely get better. Our figures present right this moment that industrial is lagging client, and we additionally see Europe lagging the U.S. and Asia. We’ll must see how the market develops going ahead, however we now have no indications that we’re dropping market share. What we do know is that our design exercise with our key prospects may be very stable and our Bluetooth SIG certification fee is secure at 40%. Our development ambitions within the scale-up and early-stage companies are even increased and — with upcoming product launches and rising design exercise with our prospects. So, summing up, this kinds the idea of our long-term ambition to ship common annual development — income development above 20% on the group degree by means of the last decade and to maneuver in the direction of an EBITDA margin of 25% inside 5 years. We’re very assured in our long-term technique and our targets, and we’re trying ahead to ship on these over time to come back. Lastly, our guiding rules stay clear. We offer steerage on income and gross margin for the upcoming quarter and we’re not going to offer any extra particular particulars for 2025. For the fourth quarter 2024, we anticipate income between $130 million to $150 million with gross margin round 50%. That corresponds with a income development of between 20% and 39% year-on-year within the fourth quarter. As we stated on the Q2 outcomes, we anticipate seasonally slower sale within the fourth quarter than within the third and our steerage corresponds with a decline of between 6% and 18% from Q3 to This fall. With that, I consider it is time to open the ground for questions and over to you Metal.

Ståle Ytterdal: Thanks, Vegard. We at the moment are accepting questions through the Q&A dial-in operate. For dial-in particulars, please confer with the earnings name invitation obtainable on our Investor Relations website below Inventory Alternate Discover. To maximise the variety of inquiries we will deal with earlier than market opens, we kindly ask that every participant restrict themselves to 1 query and one follow-up query. I’ll now hand it over to our operator to start the Q&A session.

Operator: Thanks. [Operator Instructions] The primary query we now have is from Sebastien Sztabowicz from Kepler Cheuvreux. Please go forward, your line will now be unmuted.

Sebastien Sztabowicz: [Technical Difficulty] elaborate a bit on — sure, are you able to hear me? Hi there.

Vegard Wollan: We are able to hear you. Hi there?

Sebastien Sztabowicz: Sure. Nice. On the stock, simply to have a little bit little bit of indication on the place you’re standing at your distributor, on the top prospects, each on, I might say, the short-range product and likewise on the mobile IoT as a result of you’ve got been affected by a type of stock correction within the third quarter. So, the place you’re standing now versus historic ranges? The second is linked to the aggressive panorama on Bluetooth Low Power. You’ve got this product transition ongoing. We take a look at ramp solely on the nRF54 SoCs. How are you positioned to combat together with your rivals over the following few quarters with restricted quantity from the nRF54 and could also be slowing traction from the nRF52? Thanks.

Pål Elstad: Okay. Let’s begin on the stock. Possibly you wish to begin with buyer inventories after which we’ll do distribution and Nordic inventories after that.

Vegard Wollan: That is superb. Sure. Thanks. Thanks, Pål. So, sure, buyer inventories, I believe that, to a point, is a blended bag. However I believe as you’ll be able to see in our largest prospects and within the client house — we consider that the scenario have normalized, nevertheless it’s nonetheless a blended bag. We nonetheless have Europe being slower clearly and industrial being clearly. And we do see particular person prospects having inventories as nicely. I believe typically, we see that inventories in our distribution companions are normalized on a common degree.

Pål Elstad: Sure. And we had a remark that we, within the quarter, lowered inventories for the mobile merchandise. However that is nonetheless very small within the complete image. As Vegard stated, the overall distribution stock is now on what we contemplate regular ranges. In relation to the Nordic stock on our notebooks, I commented that it was on the excessive facet at $181 million, additionally together with the write-down of the mobile stock. So, within the mobile, stock hasn’t actually moved rather a lot since Q2 as income this quarter solely was $2.5 million. The remainder of the stock relates primarily to the Bluetooth merchandise and are legitimate and regular merchandise that we’re promoting each day. And the worth of the stock at quarter-end will fluctuate some as a result of lag timeline of arrival and promoting to prospects. Then was the query on the competitors.

Vegard Wollan: Sure. And on the product competitiveness, I believe we really feel we’re in an excellent place. We’re assured. So, should you take a look at — should you take a look at the 52 and 53 Sequence sort merchandise, these are type of mirrored within the Bluetooth SIG certification. And also you see that we’re very secure on the 40% degree with our certification fee there and we now have designs being recertified and reused, so to talk, with these sort of merchandise to a excessive diploma nonetheless, I must say. 54 Sequence is a really important uplift in efficiency on a number of elements, decrease energy, increased radio efficiency. These are fully built-in merchandise with Nordic’s distinctive reminiscence applied sciences on board. So, we’re extraordinarily assured on the 54 Sequence shifting ahead and actually trying ahead to be beginning the official and public launches with that in November. And it may be a part the place we’re launching sub-launches and main launches for a mess of subfamilies on the 54 Sequence within the coming time.

Operator: The following query is from Christoffer Bjørnsen from DNB Markets. Please go forward, your line will now be unmuted.

Christoffer Bjørnsen: Good morning. Good morning. Christoffer from DNB Markets. So, to begin with, on the seasonality. So, you are type of now again to extra simply name it regular seasonality for This fall. However into subsequent 12 months, do you type of see any causes when it comes to buyer losses or something like that that will be there to type of indicate that Q1 must be greater than sort of the ten% sequentially down in Q1 than what has been regular traditionally?

Vegard Wollan: Sure, I believe it is — thanks. Thanks Christoffer. Nice query. I believe it is clear that we see the necessary a part of Nordic’s market is stabilizing and we see gradual market restoration. And as I commented on, it is nonetheless a little bit of a blended image, however we do see client again to a way more secure and stable scenario for us the place we now have a really giant half, about two-thirds of our enterprise is in that section. And that is additionally the primary motive to drive the seasonality for us as a result of you’ve got sure elements of shopping for patterns all year long within the Client section and in addition to the way in which our prospects sometimes launch their merchandise. So, we’re not commenting any additional on 2025 particularly aside from saying that we’re nonetheless anticipating within the present scenario that we’re going to see a seasonal sample as has been the scenario pre-COVID for Nordic Semiconductor.

Christoffer Bjørnsen: That is useful. It is simply that I type of really feel like your medical or healthcare house was holding up fairly nicely, doing decently in Q3 and we all know that there’ll come some headwinds from twin sourcing there in not-too-distant future. So, like into Q1, you are saying principally that you just’re solely seeing regular seasonal dynamics and probably not any important buyer losses or socket losses from Q1.

Vegard Wollan: Sure. Sorry, it was undoubtedly not my objective, Christoffer, to overlook that a part of the questions. We’re very assured and work intently with all of our key prospects. We do not see any important change in that image. We do not see any losses so far as we see it, which is completely different. So, we anticipate that section to be persevering with robust for us and it is a section which is necessary and we’re persevering with to put money into the healthcare section, clearly.

Christoffer Bjørnsen: Loud and clear. Thanks. I am going to bounce behind the queue.

Vegard Wollan: Thanks.

Operator: Subsequent up, we now have Harry Blaiklock from UBS. Please go forward, your line will now be unmuted.

Harry Blaiklock: Are you able to hear me?

Pål Elstad: Sure.

Vegard Wollan: Sure, we will hear you.

Harry Blaiklock: Morning.

Vegard Wollan: Morning.

Harry Blaiklock: Thanks for taking my questions. So, the primary is on foundry pricing and particularly what degree of value will increase you are anticipating from TSMC subsequent 12 months and whether or not you are assured in having the ability to move that on to your prospects?

Vegard Wollan: Sure, we recognize the query and it is an comprehensible query. We’ve clearly taken the place that our interactions and engagements with our key provide chain companions, together with TSMC on this case, isn’t one thing we’re sharing publicly. So, we is not going to be going into any particulars on that facet. What I believe we will say, nevertheless, is as we now have been stating that we’re assured in our gross margin targets of fifty% or above.

Harry Blaiklock: Acquired it, that is helpful. After which my second is simply on the design exercise that you just’re seeing in mobile for asset trackers and metering and simply once you’re anticipating that to start out translating to significant revenues?

Vegard Wollan: Proper, proper. Sure, it is an incredible query. We do see elevated and improved design exercise total for our mobile merchandise, which is nice. And we additionally see a little bit of a shift, as we now have stated, into extra, to illustrate, industrial sort firm prospects participating with us. These are extraordinarily advanced merchandise with all of the software program, all of the system options you’ve got round these merchandise with — many occasions, they embody a number of wi-fi requirements just like the mobile, Wi-Fi, BLE, et cetera. So, as you’ll be able to think about, there’s a little bit of a design time to get these merchandise designed in. It does fluctuate from buyer to buyer. And I might say about 18 months is one thing I believe we now have been utilizing for industrial-type merchandise. And we’re speaking up in that house, possibly even just a few months longer in some instances for our prospects to design on their facet and their finish. We do see elevated design exercise and traction and particularly, with our new nRF51 launch, which we did in — did launch to manufacturing now within the third quarter. That is one thing which is admittedly thrilling for us out there for the time being.

Harry Blaiklock: Acquired it. That’s very useful. Thanks, Vegard.

Vegard Wollan: Thanks.

Operator: The following query is from Oliver Pisani from Carnegie. Please go forward, your line will now be unmuted.

Oliver Pisani: Thanks and good morning. So, my first query was on the OpEx facet. Do you contemplate the present OpEx that we have seen on this quarter a run fee that we will annualize? Or have been there any, name it, non permanent results? I noticed this remark about, for instance, excessive R&D investments forward of This fall product launches? Thanks.

Pål Elstad: So, I believe it is appropriate. It is — Q3 is fairly normalized. The results evaluating to final 12 months with variable pay and wage enhance is type of out. So, should you take Q3, I do not foresee quite a lot of modifications going into This fall. So, that is appropriate. Every little thing must be included in This fall versus Q3. So, appropriate.

Oliver Pisani: All proper. Thanks. After which maybe the second query. I imply, you say that you just see this stock buildup and also you proceed to supply strategic stock to drive development. On the identical time, you simply principally downgraded the steerage, simply anticipating modest development for 2025, beneath 17%. How do you sq. these two, type of, actions?

Pål Elstad: Sure. Thanks Oliver. It is an incredible query and we may help one another out on {that a} bit. So, I believe it falls a bit within the class, Oliver, of provide chain administration and our interactions with our key suppliers. And the timeline of which may be a bit completely different from the precise, to illustrate, output-throughput from the corporate. And there is likely to be causes for that and that is — these are typically causes we do not wish to be sharing. It might be customer-related, might be provide chain-related. So, I might say, generally, we do not wish to share extra data in our provide chain interactions. We do have very stable relationships and interactions with our key suppliers there and are extraordinarily proud of the image, which we now have going ahead with merchandise from the 2 key main foundry companions of the world.

Oliver Pisani: Superb. Thanks.

Pål Elstad: Thanks.

Operator: And the following query is from Rob Sanders from Deutsche Financial institution. Please go forward, your line will now be unmuted.

Rob Sanders: Sure, good morning. I suppose the query — first query is for Pål. Simply given your type of finances for subsequent 12 months, do you anticipate to interrupt even whether or not on the EBIT or web revenue degree? And I’ve a follow-up. Thanks.

Pål Elstad: We’re not going to information for subsequent 12 months, Rob, you understand that. However as Vegard has stated a number of occasions, after all, profitability is our key metrics going ahead. He will flip the corporate to be worthwhile. I believe that is what we will say on that time.

Rob Sanders: However are you intensifying value discount efforts or are you simply working by means of the present plan?

Pål Elstad: We’re at the moment engaged on the present plan to drive profitability within the firm.

Vegard Wollan: I believe on that merchandise, Rob, it is also honest to say that we’re saying that we anticipate OpEx to be moderately flat within the coming time.

Pål Elstad: Sure.

Rob Sanders: Okay. After which only a follow-up on China. You flagged a pickup within the third quarter in China on the final set of outcomes. Has that pickup sustained itself into the fourth quarter? Simply curious about any commentary you can give, whether or not it is on the channel or the demand facet? Thanks.

Vegard Wollan: Proper. Sure. I believe we now have seen new design wins, new design exercise coming for Nordic in China all through 2024 after a little bit of a flat improvement in 2023 and we do see that that is persevering with, Rob.

Pål Elstad: Sure. So, the development we commented on in Q2 versus what we noticed in 2023 is completely nonetheless legitimate. That is appropriate. However nonetheless not again to historic ranges, however a major enchancment versus 2023.

Rob Sanders: Thanks.

Operator: The following query is from Øystein Lodgaard from ABG. Please go forward, your line will now be unmuted.

Øystein Lodgaard: Good morning. I used to be questioning, you — with the feedback of a modest development in 2025 and then you definitely nonetheless anticipate to have over 20% development for the following few years, you would want some type of pickup in 2026, 2027. Are you able to say — do you have already got now at this level, some concrete design wins on the 54 which can be significant that provides you some type of visibility about this pickup in development in 2026, 2027? Or is that also too early at this level?

Vegard Wollan: Sure, that is an incredible query. Thanks. We’re — the design exercise at our buyer base and the innovation occurring within the interplay between Nordic and our buyer base is, as I stated, very robust and really excessive for the time being. And these are for merchandise I might say, sometimes truly launching within the timeframe of between one to 3 years out in time. So, we’re engaged on design traces for sure packages, that are pretty lengthy within the design interplay with our buyer base. So, we do see robust exercise for 54 Sequence merchandise, that are going to be launching all through subsequent 12 months and as we now have stated, accelerating into 2026 and onwards.

Øystein Lodgaard: Thanks. And might you give some taste on are there any typical finish markets or segments that you just’re seeing quite a lot of design-in exercise on the 54? Or is that too early to remark?

Vegard Wollan: That is in all probability a bit too early to touch upon for us particularly, nevertheless it’s a variety of functions. It is a variety of shoppers working the 54 Sequence with us. And as I’ve additionally stated, quite a lot of our present key prospects in addition to broad market prospects are participating with us on the 54 sequence.

Øystein Lodgaard: Okay. Thanks very a lot.

Vegard Wollan: Thanks.

Operator: The following one we now have is Oliver [Indiscernible] from Financial institution of America. Please go forward, your line will now be unmuted.

Unidentified Analyst: Good morning. So, earlier you talked about regular seasonality for Q1, Q2, Q3, and This fall. I used to be simply questioning should you may give a little bit extra colour on that, a little bit extra element on what you imply? Thanks.

Vegard Wollan: Sure, I do not assume we are going to — it is going to — giving extra element on that, Oliver, would imply for us to start out speaking forward of ourselves and forward of the present quarter. So, that will not be applicable for us to be doing for the time being. And I believe what we do say is that we anticipate to see that seasonal sample which is coming from the buyer market footprint to be nonetheless legitimate for us within the time to come back.

Operator: [Operator Instructions] We’ve a follow-up query from Christoffer from DNB Markets. Please go forward, your line will now be unmuted.

Christoffer Bjørnsen: Sure, thanks for taking my questions once more. Simply noticed that there was a sequential decline within the non-current a part of the prepayments to GlobalFoundries. Are we appropriate in our understanding that this implies you are type of extra bullish on the outlook for 54H now than you have been like after Q2?

Pål Elstad: Sure. So, Christoffer, as you have seen and you understand in accounts, there’s this line associated to anticipated utilization of the prepayments over the following 12 months. Properly, all of us perceive that you just all prefer to have this to point the quantity of wafers we plan to buy from World the following 12 months. And as you see, this line has been unchanged. What we are saying we do not actually consider this line is a number one indicator as a result of, to begin with, the prepayment can be utilized for different purchases from the provider. We talked about tape-outs and different NRE we do. Secondly, we’re in a ramp part. So, orders from the suppliers and deliveries from the suppliers throughout a ramp part isn’t performed regularly. So, the quantity doesn’t essentially change quarterly. In terms of the ramp of the nRF54 and the expectations we now have to this product, I believe it is extra necessary to hear what Vegard is telling concerning the design wins we now have and the traction we now have from key prospects on this groundbreaking product. So, I believe that is all we wish to say on the prepayment right this moment.

Christoffer Bjørnsen: Thanks.

Operator: Subsequent up we now have [Indiscernible] from JPMorgan. Please go forward, your line will now be unmuted.

Unidentified Analyst: Hello. Are you able to hear me?

Pål Elstad: Sure.

Vegard Wollan: Sure.

Unidentified Analyst: My first query is on stock. I imply, I believe you probably did spotlight that your stock is excessive. However are you able to clarify why your stock has elevated from the prior quarters provided that your income continues to enhance now or at the very least has improved within the third quarter? And my follow-up query is in your prices. How do you see your OpEx trending into the next quarter, into the fourth quarter and into the next 12 months, if you’ll give any indication on the next 12 months?

Pål Elstad: Sure. So, I believe on the stock, Vegard simply answered that that is primarily based on an excellent relationship with our key suppliers within the worth chain, and this can change from quarter-to-quarter. However we do nonetheless have a goal to scale back and enhance the working capital KPIs going ahead. So, I believe that is all we are saying there. On OpEx, I commented that we expect Q3 is an effective degree for the run fee going ahead and we now have a goal to maintain the OpEx flat going into subsequent 12 months.

Unidentified Analyst: Thanks.

Vegard Wollan: Thanks.

Operator: As there are not any additional questions on the convention name at this level, I’ll hand it again to Metal and shutting remarks. Please go forward.

Ståle Ytterdal: Thanks, operator. Earlier than we conclude the session right this moment, I wish to inform you that Nordic will host 3 — post-Q3 outcomes Q&A gaggle calls with analysts and buyers tomorrow on Friday, twenty fifth of October. These calls will function our CEO and CFO and shall be moderated by the overlaying analysts from every respective brokerage. For sign-up particulars, please go to the IR calendar on our web site. We kindly ask members to join one group name solely primarily based in your geographical location. With that, I’ll now conclude our Q&A session for right this moment and hand over to Vegard for the closing remarks.

Vegard Wollan: Thanks, everybody. Thanks rather a lot for becoming a member of us. This concludes right this moment’s name. Thanks.

Pål Elstad: Thanks.

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