Interim Report 4th quarter 2008
Nordic Semiconductor ASA 4th quarter 2008 Revenue in Q4 68.9 MNOK, an increase of 40% over Q4 2007 of 49.2 MNOK. A stronger USD rated contributed NOK 14 relative to Q4 2007. EBITDA -2.8 MNOK i the fourth quarter, compared to -10.4 MNOK i Q4 2007. Cash flow of 16.2 MNOK in Q4, cash position of 135.3 MNOK at year end The global financial crisis led to a substantial reduction in private consumption and de-stocking in the consumer goods industry in the fourth quarter. Volume growth wireless technology components of 42% Q4 year on year Key financial figures Operating revenue in the 4th quarter 2008 amounted to MNOK 68.9 which is MNOK 19.7 above the revenue in the same period in 2007 (MNOK 49.2). The global financial crisis led to a substantial fall in private consumption and de-stocking in the consumer goods industry in the fourth quarter. The effect on Nordic Semiconductor was reduced revenue in the period. An increased USD/NOK exchange rate and increased volumes contribute to the growth. 2008 fiscal year revenue grew to NOK 319.3 which is 17% above revenue from continuing operations last year of MNOK 272.0. Adjusted for the negative USD rate during the year, the revenue growth was 23%. The gross margin for the 4th quarter was MNOK 36.3 with a gross margin ratio of 53% compared with MNOK 20.3 and 41% in the 4th quarter 2007. R&D expenses in the 4th quarter totaled MNOK 14.1 of which MNOK 12.2 was expensed and MNOK 1.9 was capitalized. The corresponding figures for the 4th quarter 2008 were total R&D expenses of MNOK 10.4 of which MNOK 8.1 was expensed and MNOK 2.3 capitalized. Other operating expenses in the 4th quarter 2008 totaled MNOK 26.9, compared with MNOK 22.6 for the corresponding period in 2007. The increase in operating expenses is attributable to an increase in the number of employees, costs of the new ERP system and higher bonus payments to employees of MNOK 1.9. The number of employees has increased from 107 in Q4 2007 to 121 at the end of Q4 2008. EBITDA in the fourth quarter 2008 was MNOK -2.8 which is an improvement of MNOK 7.6 over Q407 (MNOK -10.4). After deductions for depreciation of MNOK 3.6, the operating profit in the fourth quarter 2008 was MNOK -6.4 compared with MNOK -13.7 in the same period of 2007. Operating profit for the year 2008 was MNOK 21.1, versus MNOK 0.5 from continuing operations in 2007. Net financial items for the fourth quarter of 2008 were MNOK 23.6, compared with MNOK 1.4 for the same period in 2007. The improvement was attributable to the substantial appreciation of the USD in Q4. Income before taxes in the 4th quarter 2008 was MNOK 17.2 versus MNOK -12.3 for the same period in 2007. Income before taxes for 2008 was MNOK 56.1 vs. 28.9 MNOK in 2007 including a non recurring gain of MNOK 33.9 from sale of assets. Income before taxes from continuing operation was MNOK -5.0 in 207. As of 31 December 2008, Nordic Semiconductor had total assets of MNOK 315.6, an increase of MNOK 11.6 during the quarter. The Company s cash and cash equivalents totaled MNOK 135.3 (43% of total assets) at the end of Q408. Equity on 31 December 2008 totaled NOK 237.3, with an equity ratio of 75%. The Company had no interest-bearing debt. Net cash flow was MNOK16.2 in the 4th quarter 2008, level with 2007. During the quarter, the Company acquired own shares for a total of MNOK 4.8. At the end of Q4, the component order back log was MNOK 36.9, MNOK 15.5 below last year. Component orders received during the quarter totaled MNOK 21.4 vs. MNOK 58.4 in Q407. As a result of global financial crisis, the visibility of orders and consumption has increased substantially. For Nordic Semiconductor, one of the effects is a low back log of committed orders from distributors and is expected only to a limited degree to reflect the coming quarter revenue. Based on the Company s industrial and financial position, the b board of Nordic Semiconductor ASA will at the Annual General Meeting on May 7, 2009 propose a divided payment of NOK 1.00 per share to the shareholders of the Company. The Board will evaluate the dividend amount annually. The Board believes that the Company is financially and technologically strong and well positioned for further growth. Market segments Revenue per segment 4th quarter Year to date cont. operations MNOK 2008 2007 2008 2007 PC accessories 24.7 13.7 120.3 84.7 Game controllers 5.7 0.1 33.2 13.0 Intelligent sports equipm. 4.2 2.9 23.5 16.8 Audio devices 8.0 0.6 19.8 4.3 Industrial applications 18.6 15.3 64.4 70.9 Other 7.0 13.6 55.5 59.5 Total components 68.2 46.2 316.7 249.3 Consulting 0.7 3.0 2.6 22.7 Nordic Semiconductor 68.9 49.2 319.3 272.0 PC accessories Operating revenue totaled MNOK 24.7 in the fourth quarter compared with MNOK 13.7 in the 4th quarter of 2007, an increase of 80%. The large customers continued conversion from 27 MHz to 2.4 GHz from Nordic Semiconductor drives the growth. Gaming controllers Demand from Nordic Semiconductor s main customers remained strong through the quarter. Operating revenues totaled MNOK 5.7 in Q4 2008 compared with MNOK 0.1 in the same period in last year. Intelligent sports equipment Operating revenue for the fourth quarter increased 45% from MNOK 2.9 to 4.2 in Q407. A wider portfolio of designs using Nordic Semiconductor technology stabilizes the revenue. Audio equipment Component sales in the Audio equipment segment increased significantly to MNOK 8.0 in the 4th quarter 2008 compared with MNOK 0.6 in the same period last year. Deliveries to a new, larger customer boosted sales in the quarter.
Industrial applications Operating revenue in the fourth quarter was MNOK 18.6 which is MNOK 3.3 higher than Q4 of last year. Increased sales by to two customers improved revenue in the segment. Other segments Revenue in the 4th quarter 2008 was MNOK 7.0 in Q4 2008 vs. MNOK 13.6 in 2007. Lower sales to smaller customers with varying market positions in a soft consumer market affect Nordic Semiconductor s revenue in the fourth quarter. Geographical distribution of revenue Revenue per region 4th quarter Year to date cont. operations MNOK 2008 2007 2008 2007 Norway 5.6 4.4 17.8 27.4 Europe 13.1 10.7 48.4 62.5 USA/Canada 8.3 5.3 24.1 22.0 Apac 41.5 28.7 226.6 159.6 Other 0.4 0.1 2.4 0.5 Nordic Semiconductor 68.9 49.2 319.3 272.0 Share and shareholders Nordic Semiconductor s 10 largest shareholders at the end of the quarter: Shareholder No. of shares %of total DNB NOR Luxembourg SA 3 466 590 9.9 % Verdipapirfondet Odin Norge 3 233 710 9.2 % Folketrygdfondet 3 068 550 8.7 % Ferd AS Invest 1 846 800 5.3 % Orkla ASA 1 782 500 5.1 % INAK 2 AS 1 740 000 5.0 % Goldman Sachs Int. Equity 1 633 396 4.6 % KLP LK Aksjer 1 586 400 4.5 % Tore Engebretsen 1 507 500 4.3 % Nordic Semiconductor ASA 1 201 800 3.4 % 10 largest shareholders 21 067 246 60.0 % Other 14 066 874 40.0 % Total no. of shares 35 134 120 100.0 % Nordic Semiconductor purchased 252,000 own shares in the fourth quarter of 2008 through in the market for a total of MNOK 4.8. Nordic Semiconductors held a total of 1.201.800 own shares after the acquisition. The Board of Directors has wished to demonstrate continued belief in the Company and its shares. The transactions were completed in accordance with the power of attorney given in the Annual General Meeting on 8 May, 2008. Outlook The Board of Directors is viewing 2009 as a year of good opportunities for Nordic Semiconductor, but with a back drop of a challenging global financial situation. The ongoing financial crisis intensified through the fourth quarter of 2008. The loss of consumer buying power was substantial and visible in all major markets globally. However, a major part of the reduced revenue at the end of 2008 came as a result of a substantial reduction in inventories throughout in the whole value chain. For Nordic Semiconductor, however, only a smaller part of the revenue growth has historically been generated by growth in the general consumer. Nordic Semiconductor s revenue growth is built around a combination of technology replacement (i.e. 27 MHz to 2.4 GHz) and new products and customers using wireless technology. This trend is expected to continue. In 2008, a number of important, larger customers and applications accounted for the major part of the growth. The majority of the customers continue to add new applications. In addition, new customers in the portfolio are expected to add revenue and lay the foundation for future growth. The stream of new designs confirms Nordic Semiconductor s leading market and technology position. In PC accessories, the conversion from 27 MHz to 2.4 GHz radio technology is increasing. With the development of a set of new integrated circuits and successful sales work, Nordic Semiconductor has lately seen great progress in the Company s efforts to take market share from the 27 MHz technology with Nordic 2.4 GHz solution in the wireless mouse and keyboard market. 27 MHz vendors still has 60-70% of the volumes shipped the mouse and keyboard market. Nordic Semiconductor has started implementation of the next phase of the conversion of a substantial part of this remaining volume to Nordic 2.4 GHz technology over the next 2 years. This positive conversion effect is expected to be stronger than the effect of the financial crisis. More than 90% of Nordic Semiconductor s 2008 revenue was generated in USD. The exchange rate in the fourth quarter of 2008 was substantially stronger and had a positive effect on revenue and profits. This situation has continued into the first quarter of 2009. The exchange rate fluctuations are substantial and affect the Company s financial figures. The majority of the Company s direct production costs are also in USD, while operating expenses are mostly in NOK. The average selling price (ASP) per unit increased through 2008. The increase came as a result of Nordic Semiconductor s introduction of new integrated components with increased functionality and customer value. Due to the strategic move, ASP has increased and volume growth will be reflected in increased revenue going forward. In 2008, Nordic Semiconductor continued to allocate substantial resources to product development and specification of the new Bluetooth Low Energy standard for wireless communication. The Bluetooth Special Interest Group expects the specifications to be approved in the second half of 2009. The Board of Nordic Semiconductor expects this initiative to contribute to the Group s further growth when the market for the new technology is established. Despite the material challenges and risks identified in Nordic Semiconductor s markets and operation, the Board of Directors expects the Group to show continued profitable growth in 2009. The Company s turnover is affected by general seasonal fluctuations and follows the customers sales cycles. The fourth quarter normally sees lower sales activity. Underlying activity, however, is good and supports the Board s expectations for growth through 2008 and into 2009. This interim report has been prepared in accordance with IFRS and Nordic Semiconductor's accounting policies, which are stated in the annual report for 2008. Oslo, 18 February 2009 The Board of Directors of Nordic Semiconductor ASA Tore Engebretsen (Chairman of the Board) Kjell Bråthen Terje Rogne Jon Helg Nistad Anne-Cecilie Fagerlie Annfrid Standal Lars Sundell Svenn-Tore Larsen (Chief Executive Officer)
Income Statements Amounts in NOK million (unaudited) 4th quarter 2008 4th quarter 2007 1.1-31.12.2008 1.1-31.12.2007 Orders received 21.4 58.4 303.4 259.3 Operating revenue 68.9 49.2 319.3 272.0 Profit on sale of non-current assets 33.9 Operating revenue 68.9 49.2 319.3 305.9 Cost of materials -33.0-27.4-151.2-132.2 Direct project costs 0.4-1.5-0.3-10.9 Gross profit 36.3 20.3 167.8 162.8 Other operating expenses -26.9-22.6-89.2-84.0 Research and development -12.2-8.1-43.4-32.3 EBITDA -2.8-10.4 35.2 46.5 Depreciations -3.6-3.3-14.1-12.1 EBIT -6.4-13.7 21.1 34.4 Net financial items 23.6 1.4 35.0-5.5 Profit before tax 17.2-12.3 56.1 28.9 Taxes -4.4 3.4-15.3-8.0 Net profit, but before discontinued operations 12.8-8.9 40.8 20.9 Discontinued operations 0.7 Net profit 12.8-8.9 40.8 21.6 Earnings. pr share 0.38-0.25 1.18 0.61 Diluted earnings. pr share 0.38-0.25 1.18 0.61 Balance sheet Amounts in NOK million (unaudited) 31.03.2005 31.03.2004 31.12.2008 31.12.2007 Intangible assets 6.8 0.6 28.7 13.5 Property, plant and equipment 4.2 5.6 16.3 19.7 Financial non-current assets 0.6 0.6 0.0 0.0 Non-current assets 11.6 6.8 45.0 33.2 Inventories 27.7 15.0 58.0 34.9 Accounts receivables 41.9 21.0 59.2 46.5 Other short term receivables 8.7 4.3 18.1 32.9 Cash and cash equivalents 46.7 29.4 135.3 108.4 Current assets 125.0 69.7 270.6 222.7 TOTAL ASSETS, but before discontinued operations 136.6 76.5 315.6 255.9 Assets discontinued operations 0.0 0.0 TOTAL ASSETS 164.3 91.5 315.6 255.9 Shareholders' equity 103.9 76.2 237.3 214.2 Long-term liabilities 16.4 4.2 16.9 13.5 Tax payable 17.2 0.0 Other current liabilities 33.4 18.2 44.2 28.2 TOTAL EQUITY AND LIABILITIES 153.7 98.6 315.6 255.9 Change in equity Amounts in NOK million (unaudited) 31.12.2008 31.12.2007 Equity as of 01.01. 101.1 73.9 214.2 202.3 Net income (loss) 2.2 1.8 40.8 21.6 Changes, Treasury stock 0.0 0.0-17.6-9.7 Translation differences 0.0 0.0-0.1 0.0 Equity as of end of period 103.3 75.7 237.3 214.2
Statements of cash flows Amounts in NOK million (unaudited) 4th quarter 2008 4th quarter 2007 1.1-31.12.2008 1.1-31.12.2007 Net income (loss) before tax 17.2-12.3 56.1 28.9 Taxes paid for the period 0.0 0.0 0.0 0.1 Depreciations 3.6 3.3 14.1 12.1 Gains from sales of property, plant and equipment 0.0 0.0 0.0-33.9 Change in inventories, trade receivables/payables and other working capital 0.4 27.3-4.9 16.4 Other operational related adjustments 2.5 1.9 5.3 1.8 Net cash provided by (used in) operating activities 23.7 20.2 70.6 25.4 Capital expenditures -0.4-0.6-3.7-11.6 Proceeds from sales of property, plant and equipment 0.0 0.0 0.0 20.2 Capitalized intangible assets -2.3-2.3-22.3-7.6 Net cash provided by (used in) investing activities -2.7-2.9-26.0 1.0 Changes, Treasury stock -4.8-1.1-17.6-9.7 Net cash provided by (used in) financing activities -4.8-1.1-17.6-9.7 Effekt av valutakursendringer 0.0 0.0-0.1 0.0 Net change in cash and cash equivalents 16.2 16.2 26.9 16.7 Net change in cash and cash equivalents from discontinued operations 0.0 0.0 0.0 1.3 Cash and cash equivalents at beginning of period 119.1 92.2 108.4 90.3 Cash and cash equivalents at end of period 135.3 108.4 135.3 108.4 Quarterly key figures Amounts in NOK million (unaudited) Q4 08 Q3 08 Q2 08 Q1 08 Q4 07 * Q3 07 * Q2 07 * Q1 07 * Orders received 21.4 95.6 129.7 56.7 58.4 50.9 97.9 52.0 Operating revenue 68.9 103.0 83.8 63.6 49.2 80.1 80.7 95.9 Contribution margin 36.3 57.2 43.9 30.5 20.3 40.1 40.9 61.5 Contribution margin ratio (%) 52.7 55.5 52.4 48.0 41.3 50.1 50.7 64.1 Operating income before R&D costs 5.8 31.7 19.4 7.5-5.6 19.1 15.7 37.5 Expensed research and development -12.2-12.1-9.3-9.9-8.1-7.9-7.5-8.8 Operating income (loss) -6.4 19.6 10.1-2.4-13.7 11.2 8.2 28.7 Operating margin (%) -9.3 19.0 12.1-3.8-27.8 14.0 10.2 29.9 Income (loss) before tax 17.2 31.1 11.1-3.4-12.3 6.2 7.0 28.0 Net margin (%) 25.0 30.2 13.2-5.3-25.0 7.7 8.7 29.2 Equity ratio (%) 75.2 75.5 78.7 84.7 83.7 82.9 85.6 87.3 Earnings pr. share (NOK) 0.38 0.65 0.23-0.07-0.25 0.13 0.14 0.60 Diluted earnings pr. share (NOK) 0.38 0.65 0.23-0.07-0.25 0.13 0.14 0.60 Cash flow pr. share (NOK) 0.61 1.01 0.43-0.01-0.26 0.27 0.29 0.88 *Adjusted for the sale of Data Converter assets
Notes to the interim report 4 th quarter 2008 Note 1 - General The condensed financial statements for the 4 th quarter of 2008 were approved for publication by the Board of Directors 17 February 2009. The Group is listed on the Oslo Stock Exchange and is a joint stock company registered in Norway. Note 2 Confirmation of the financial framework The Group accounts for Nordic Semiconductor ASA and its wholly-owned subsidiary, together called the Group have been prepared in accordance with IAS 34 Interim Financial Statements. The financial statements for the 4 th quarter of 2008 do not include all the information required for the full year financial statements and shall be read in conjunction with the Group annual accounts for 2007. Note 3 Important accounting principles The accounting principles for 2007 are described in the Group annual accounts for 2007. The group accounts for 2007 were prepared in accordance with International Financial Reporting Standards (IFRS) laid down by the EU, relevant interpretations of this, additional Norwegian disclosure requirements described in the Norwegian GAAP and the Norwegian Securities Trading Act that were used in the preparation of the annual accounts per 12.31.2007. Note 4 Use of estimates In the financial statements for the first half year of 2008, evaluations, estimates and assumptions have been applied that may affect the use of accounting principles, book values of assets and liabilities, revenues and expenses. Actual values may differ from these estimates. The major assumptions applied in the financial statements for the first half year of 2008 and the major sources of uncertainty in the statements are similar to those found in the annual accounts for 2007.