Good morning, and welcome to Nordic Semiconductors, quarterly presentation for Q2 2020. Today, together with Paul Elstad, our CFO, I will go through the result of previous quarter. We continue to grow through Q2. Revenue and gross margin were above our guidance. We ended at $88,500,000 in revenue that's up 25.5% year on year and +26.2 quarter on quarter.
Our Bluetooth revenue accumulated to 70,100,000 is up 25.1%, again, within our guidance of a growth in Bluetooth between 25% to 30%. Our proprietary revenue reached $16,400,000 is up 29.8% strong growth and is mainly due to the coronavirus situation where people work at home. And you find much more domestic PC equipment. Our seller revenue reached $1,200,000, And our gross margin continue to be strong and it's very much influenced by high volumes of this new advanced system on the ships. And also it's affected by all the new equipment we bought more than a year ago to increase over time to high yield.
We had an increase in our backlog, a strong increase if you look Q2 2019, It was up 80% and it's up 64% compared to Q1 2020. What we see is there have been accelerated technology adoption and it's been demand across all the multiple markets. And if you start deep diving into the backlog, we see that the top 10 customers only account for 40% of the backlog. It really showed that we have a wide customer base And we also see that some of the small, medium customers are becoming more medium customers. So the smaller customer are increasing their volumes.
So all over is a very healthy backlog, and, we're proud to present $202,000,000 in backlog. I will also point out that Nordic has shown to be a very resilient organization and our business model is strong. If you look at how the shadows have been through this quarter, is being challenged in supply chain. We've been managing those. We have been sort of buffering a bit on critical parts to ensure that we can deliver the $202,000,000 we have in backlog.
We see that our distis Inventory is at moderate levels. So basically the situation going into Q3 feels good. We've been very focused on avoiding any corona disease internally in Nordic. And we now see and we have been successful. We had no COVID-nineteen cases And now we see that our employees gradually returning to a very safe and secure workplace.
We will keep strict travel restriction and we also limited physical meetings. To ensure that we not get any next wave of corona into Nordic. We continue to have high certification market share. Last quarter, was 43% market share. If you look through the year, it has been 46 accumulated market share.
What we see is some of the smaller customers have not been able to get into certification with some of the new products. And I think it's due to the difficult situation we have had through the first half year. When we analyze and look behind the design win legislation, we see strong contribution from tier 1 customers in these numbers. We tracked over, shipment of, kits, and we see that we continue to have strong kit shipments There has been more than 43,000 kits shipped during the quarter. And there has been a significant contribution from the 52840.
The 52840, which is the high end system on the ship from Nordic. The one with the highest ASP, significant about dollar contribution per ship, And it's exciting to see that the customer use of a microcontroller together with the integrated radio. Setter IoT kits accounted for 13% compared to 7% first half in 'nineteen, and 11% in second half of 'nineteen. So again, good interest for our cellular IoT products. So usually I show some products that we our customer have launched in Q2.
And Defect is a company actually based in Norway, doing gym management platform. It really tracks how much each of the Guys, in the gym are using the equipment. So you can optimize your equipment into each site. Vitek and Carvo. This is two examples where we see Nordic Bluetooth along beside the ultra wide band chip.
And you will see more of such products coming to the market the next half year. We also have a cool application. I think it's real cool is tech Industry. It's based on the 9160 and it tracks if, there is violence at, I would say, places should not be violent. So it's really, system that could save environment going forward.
It's based on trucks for Safeway going into Amazonas, And if I go into areas, I shouldn't be, it reported back. So it will track, rainforest is sort of the ID with this product. Core Connect is a tracker and is a monitoring fuel and fertilizer tanks. It's, again, a potential that is high. And we look forward to see how these products come to do in the market I think it's going to be, towards 2021.
We're going to see it. We've been having health care high on the agenda. Nordics been talking about Connected Patient for years. No, it's happening. And we have some, examples here, 6 real cents, is a tracker that they use in hospital to be insured to find, critical medical equipment when needed We also have a oral PAH monitoring system.
It's really put onto your tooth and check how your health is and basically take action if it's needed. Clean BOS box Technologies is doing mask cleaning and other hospital equipment cleaning. Sunny Nudge is cleaning and sensor and ID to ensure that all personnel are following the routines and need to have a safe environment in the hospital. And the last one which I'll talk a little bit more about later is CareTrack Technology. It's a remote patient monitoring system using 9160.
So throughout the quarter, we've been continuing to expand the product offering. We are we released the 52, 805. It's a part that is basically aimed at cost constraints applications. We now have the 52 A20 in mass production. And we are continuing to strengthen and improve across the whole 52 Series product range.
We also, as software getting more and more important part of our product offering, releasing version 1.3 with support for the whole 52s areas. We also, in the same 1.3 version, supports thread, Sigve and Bluetooth mesh. And as we are building up more and more support for different protocols, it's important for us to have a 2 chain manager and Nordic released a first updated tour manager also through this quarter. But what have we done mostly this quarter? We've been working with the new large growing ecosystems.
So basically, the Tier 1 customers are now building up new protocols to be able to have offering to We'll be building up our software teams to ensure that we have that we are on track and maybe ahead of our competitors offer, compatibility to these platforms. We released ship source code and is using the 52840 as one of the reference platforms. That's an important milestone for Nordic. We released our version 8 of Apple Home Kit. And also, the set boss open initiative for Sigve Pro software were included in the last update of our software package.
Lot of activity, lot of people engaged. Seller IoT is progressing. If you look at this slide, you will find that We have now been certified with Telstra in Australia, and we have got regulatory certification in China. So basically now our in line to 160 SIP can be used in a new territory or 2 new territories in China and Australia based on the certifications achieved through this quarter. It's been a little bit a challenging because the team that we usually do this certification are not been allowed to travel, but we have been using our own internal field application engineers to perform the test and support regulatorys in different regions to achieve this through last quarter.
And we will continue doing it for Q3 and we will add new, operators in next quarter or this quarter. So here, a case study on cellular IoT in predictive maintenance, that's also something we talked about for some time. To detect possible fault before it really happens. There's a German IoT designhouse. It's called Inblue, and Italian tool manufacturer called MT that had launched a system where they put Nordic LT on top of dimetors to ensure and a lot of sensors to ensure that they catch any misbehavior on these motors.
And we are proud to see that using the 9160 to perform these tasks. I said I come back to medical device, ClearTrack. I mean, this is the first remote patient monitoring system for bladder dysfunction. It uses ownership. And Doctor.
Brent Blang said that it's not possible to do this without the new cellular chips from Nordic. Again, we show that we enable new markets because of our ultra low power DNA. So I'll now hand it over to Paul Elsztain, our financial Director.
Thank you, Santoya. Just before I start, if you have questions to the to us after the presentation is done, please send the mail to irnordicsemi.ml, and we will answer them after the, presentation is done. So I'll jump to financials. As Antonio mentioned, revenues amounted to $88,500,000 in the quarter, and $158,700,000 for the first half year, representing a 25% growth compared to last year's quarter and 28.5% compared to last half year. It's a strong revenue and it's well within our 20 to 30 percent targets.
It's revenue came in above guidance, which was, 75 to 85, and also above the the updated market numbers we gave, 2 weeks ago. The reason for this is that, towards the end of the quarter, we got very strong numbers in consumer electronics than mainly home PC equipment and and connected health as Santul has been talking about. Bluetooth represents now 79% of total revenue or CHF 70,100,000, which is up 25%. Very special this quarter is our proprietary business that bow at $16,400,000 had a growth of 30% versus last year. If you look at last 12 months growth, it's at 2%, so still well above the single digit decline we have in our guidance.
But this comes as a result of the the strong pull for home offices. And now go to go to each of the markets. Of course, as the overall revenue shows growth, both compared to last quarter last year, all the underlying markets are showing strong numbers. First of all, consumer electronics continues to be very strong with 8.1% growth compared to last year, Consumer electronics is around 1 third of our total business and and will continue to be a very strong driver of the business. As discussed many times, mainly home PC equipment, both proprietary and Bluetooth solutions.
Wearables continues to be one of our biggest markets with 11% growth compared to last year. The main driver of this, this growth is we have a very good desired traction in on the high end systemal chips, especially in the Chinese market. Then I'd like to to highlight the healthcare business, which has 157 percent growth versus last year and now totals $14,000,000. This is up compared to the $5,000,000,000, which has been the average run rates for the last nine quarters. Of course, some of the the growth in in health care relates directly to the COVID situation and will be a little bit lumpy.
But we have seen, a trend shift in health care, and we have very many new design wins that are also outside pure COVID, products. So will we see good numbers in health care going forward? And this was also mentioned in the Capital Markets Day in October last year. Finally, in building retail, the whole favorite of the city bikes is included there. And then the city bikes is, of course, a a popular product now that people don't want to take the buses.
I'll jump to gross margins. Gross margins came in at 51.9% this quarter, we have thereby been able to consistently execute at margins above or 50% growth 50% margin targets. The higher than expected gross margin came as a result of continued high demand for higher systemal chips as well as favorable customer mix, in addition, having higher volumes good predictability in our in our demand makes it possible for us to drive production costs down. We expect this favorable product and customer mix to continue also in Q3. However, we wanna reiterate our medium term gross margin range of 48% to 50% for the short range business as new customers and products will come into, the model.
Also, cellular IoT will impact when cellularity starts getting higher revenues into the P and L. Now turn to operating model performance. As you can see, the 25% growth and the higher revenue results in an EBITDA of $16,000,000 or 18.1 percent, significantly up from the 13.9 percent a year ago. Total R and D spending is now 21%. So it's pretty close to the 20% numbers we're talking about for for the business, down from 23.8 percent a year ago.
Also included in these numbers is the capitalization of intangible R and D. This was 2,000,000 this quarter. Of of this 0.6000000 relates to the cellular business. Last year, it was 3,800,000 So we are capitalizing less than we've done in historical quarters, mainly due to the fact that the cellular business is now more into the commercialization phase. I'll see that activity levels are picking up, although we don't know when we will start having, for example, the 40 station together with people again.
Despite Corona, we've been able to onboard new key talents into the company So we've added 14.6 percent, people and are now 822 employees. Mainly a mix between R&D and customer facing sales. Other OpEx, at 8.3% down compared to to last year. As I already mentioned, less travel, less activity. However, there's also a mix of less tape outs being done in this quarter, but that's more facing of when we face products into the market.
As mentioned, strong revenue and no cost drives the 18.1 EBITDA margin. Adjusting for the cellular business, we actually have a 26% EBITDA margin in the quarter. Also very interesting to see at the last 12 months, EBITDA is now at 13.9% for the consolidated group and as high as 22.5%. For the the business if we exclude cellular IoT. CapEx was $5,000,000 in the quarter.
So on the high side of our guiding, the reason for this increase is that We did some some investments in test capacity as we see higher demand, coming. However, in percentage of revenue, it's it's we're continuing the downward trend, and it's now at 5.6 percent. The main reason for this is that we've we've done with the large lab investments that we did a year ago. Q3, we expect to be at similar levels as in Q2. Finally, I'll talk about our cash position.
Overall, in the very strong growth quarter, we managed to maintain a stable cash position at $125,000,000 124,000,000 dollars. We had operating cash flow of 5,300,000. This came as a result of the strong, profits. And, offset by a $8,600,000 increase in net working capital. Although We do have a strong growth in revenue.
We were able to maintain, the net working capital, over last 12 months revenue at around 26%. We continue to have a tight cash management and optimized cash conversion, as a result. We have a cash balance of $124,000,000 at the end of the quarter and total available cash of $160,000,000. Including undrawn facilities. We still have drawn $40,000,000 on the facility.
All of this is kept in the US dollars, so that we manage our FX. Okay, Santula. I'll let you do the final summary and guide.
Thank you. So the important thing for Nordic now is to maintain the long term strategy We are leading on connectivity. We should excite developers. We should have customer engagement. And customer engagement is an important point in these difficult times we have now where we can't travel.
We have been so fortunate to build up our customer relationship throughout quite some years now and it's easier to maintain a relationship on Zoom, on teams, on Skype platforms, than create new by fronting customers. So we are in a good situation. Paul said we had less activity Having said, we never had as much activity as now, but it's been less travel activity. Basically, we are conducting meetings these platforms, day and night, and we really have an exciting time at the moment. So we do customer engagement.
We have to scale the business. We've shown that we can do that. We will continue to invest early where we see there is potential for strong business. And we obviously have high financial ambitions We do have a solid market position. I just showed you the sign in ratio, for the whole year worth 46% for the quarter was 43.
It really showed that we have a strong market position. We are actually market leader in Bluetooth low energy, and we're going to continue to be so. We have strong ties to vertical tier 1 and platform Air Consystems because this is what's come to dominate the connected, world going forward. And we now see results that we are positioned for market leadership even in cellular IoT. We have ambitious targets you have to have.
We are aspiring to become a $1,000,000,000 company within the next 5 years. That was a statement we did in October, last year, still as valid as it was on the Capital Markets Day in October last year. And we have a long term ambition to be a 20% EBITDA margin. We have a solid Q2 behind us. We also see a strong backlog and it support the growth for Q3.
So Q3 guidance range, we expect the revenue to come in between $95,000,000 to $105,000,000. That's a growth between 16% to 28% year on year, 7% to 19% growth quarter on quarter. We expect the margin to be around 50 to 51 as some of our larger tier 1 customer will contribute to the growth in this revenue. We should not forget that there still are risk and uncertainty regarding COVID-nineteen situation and it continues into 2nd half. But there's also an upside in this situation And that's that we see that there is faster technology adoption and especially in the connected area.
And last but not least, I mean, all the longer term drivers are in place to support our strategy. It's not only that we have a strategy, but we have all the drivers in place. And we are looking forward for the second half of this year. I think that ends my presentation today. We are now open for Q And A.
So, Paul, can you come up and see what we got of questions?
Okay. We have some question. I've split it up. On segments. So we can start with the backlog.
Christopher from DNB. With the 80% year on year jump in order backlog, is it fair to assume that we are likely to see a break with the seasonality pattern in Q4? Meaning should Q4 be at least as big as Q3 in term of terms of revenue?
I think if you read the report, I think this is a very, correct statement. We say that the backlog is evenly spread between the two next quarter. So the question answer to your question is yes.
Then we have from,
I also was to add some more. It's always as we get the Simon ratio of 43% some of these new product will get into production, which means that we get the number of active customer will continue to grow and contribute to our revenue. So each quarter going out as long as we maintain less sure we should grow.
Then we have a question on the topic backlog again. From Henriette Arctic. Can you give some color on which segments are driving the strong step change in order backlog? And if order backlog includes new products from Tier 1 customers?
We've been talking about Tier 1 customers for many quarters now. And obviously, it has to get into volume production at some time, and it does we expect in Q3 in the second half of this year. When it comes to segments, I expect to see more or less the same mix in segments, but at a higher level on each segment?
So we mentioned, that, consumer electronics was the 3rd, of the business, and we believe that will continue.
We have another questions from Henietta on the backlog. Can you give any color on the length of your order backlog and the customer concentration concentrating in your backlog?
Obviously, as we have seen now, there is uncertainties in the supply chain. So I expect that some of the larger tier 1 customers are doing a little bit of insurance, basically placing orders ahead. And I would say that, that's represented in the backlog. Yeah.
We also have a question regarding the backlog from Hans. Looking at the sequential and annual growth in your order backlog, it seems like the acceleration in momentum. However, the medium term guidance is unchanged. Is there any extraordinary drivers in the order backlog lag effect or reason that the 2 should not follow each other over time?
I mean, basically, if you look at the backlog and analyze the customer behind it, I mean, I think that we should guide arranged that we are sort of sick feel secure with. And, that's what we've done. And we stick to the guidance we've given.
Then we go over to, the topic revenue, NESTER from Arctic, is, is asking cellular is a new growth area. Any color on when you expect revenue to ramp? Can you give any color on which segments you now see growing?
We've been saying that we expect a pickup of, revenue in 2021 and we still have this as our, statement, when it comes to segment, we are shown some here. We are shown some unpredicted maintenance. We are shown in health care And still, we talk about logistics or asset tracking as, another segment. Okay.
And then we go over to guiding Henry at that, again, your Q3 guidance, could you give some more color on the split between blue to smart and proprietary?
I think we were very equal to what it was in Q2.
And also, as I mentioned, the proprietary has has been relatively flat over the the last 12 months. And then we believe it will continue there.
But, obviously, since numbers up, so maybe a little bit more skewed towards Bluetooth of energy. Okay. The reason is that we see quite a bit of, the human interface devices, the keyboard mice, moving from preparatory to, Bluetooth, especially in gaming products. And gaming products are doing very well during this period we had behind us, and we also expect it to keep growing in second half of this year.
From ABG, we have a question regarding the guidance. In Q2, last year, your guidance for Q3 sales, midpoint was plus 70% of the backlog reported in Q2 2019. Now the guidance, the Q3 guidance midpoint is roughly 50% of backlog. This is much more conservative if, if the due duration of the backlog is constant. Can you explain the difference?
Lastly, we did not have the uncertainty regarding supply chain and a corona sort of uncertainty we have to multiply this, guidance with. Yes.
Then we go over to markets. Christopher from DNB. There was a steep change increase in revenues from, 5,000,000 in the pack quarter to 14,000,000 pack quarter on health care during Q2. Can you elaborate a bit on what is driving these steep change and also help us understand if this is only a short lived COVID 2019 monitoring effect, meaning should we expect it to come down again post COVID 2019?
It's very hard to have an exact answer on the question. What we can say is that we are getting much more design wins into the healthcare segment than we ever had. And we also see from my presentation today that is spread of complete different products within the that has nothing to do with the current situation. So, getting connected patients, being in a hospital, getting all these leads connected to you is a nightmare for nurses, for doctors. So as soon as you have Good protocols, good products that can support wireless monitoring, it's going to happen.
And usually during such crisis, like we live now. These changes take place.
Then we go over to technology. We start with Bluetooth. We has we have a question from Lars Guerraer. What is the start status on Bluetooth audio LE?
The status is that Bluetooth SIG is pushing to get the standard ratified and as soon as the standard's ratified, we can comment more on Bluetooth audio.
And then we have a question on proprietary, Kristofer from DNB. As proprietary wireless continue to deliver revenue ahead of its expected, transaction during Q2, should we expect this to be a less important revenue driver during Q3?
Q3, no. If you look further, yes. We said that we expected, decline of around 10%, during 2020. And we see that's not happening due to the crisis, Marine, But we also see there is a tremendous effort on moving from preparatory to Bluetooth on new products, PC periphery products. So we expect to see the revenue moving from proprietary to Bluetooth.
And I think we could say time on this year, maybe 2, I think, before we come to see impact.
Hi. I think that's all for now. We apologize for a presentation falling out, but hopefully the recorded version will have everything covered. So that will be available on the web later today.
Thank you for everyone. That's some questions. Bye bye. Bye. Have a great day.