Good afternoon, everyone. Good afternoon, everyone. Welcome to our combined event today. We're going to have a Capital Markets Day, and we're going to release the Q3 numbers in the same moment. And it's nice to see so many here, and also welcome to everybody on webcast.
Market leader in IoT is Nordic. We've been into IoT before it really existed acronym, same IoT. We started with doing heart rates and and send it to mobile phones and to the cloud before anyone mentions IoT. We've been capitalizing on this early start. But today, let's check out again that very quickly.
I do some financial highlights for Q3. Talk a little bit about the pillar and the fact that we are a market leader within IoT. Guire Oviso is directly with the go to Marcus Rateshier, and we have our honorable guest from FedEx talking about delivering the future. FedEx do deliver, and it's going to be exciting to see how they're going to deliver in the future. Then we're going to have a short break.
And Chietel, Director of Product Management, which we are range update for you guys that are unfamiliar with short range is VLE and products for VLE Svenn Diego, our CTO, will do a speech on cellular IoT, and finally, Paul will do financials. And then we have some minutes set off to summary and outlook and Q and A by end of the day. We hope, as many as possible, we'll stay and get the whole event. It's great news even at the end. So let's look at the Q3 highlights.
We guided a strong Q3. And we deliver according to guidance. We also continue to guide a strong outlook for Q4. We came in at US82.2 million dollars. It's a 16.5% growth compared to last quarter.
We guided margins around 50. We came in around 50. So Q3 was all in line with what we guided. Q4 guidance, we see The in the squeeze was around 25% growth year on year. And, we also see we're going to keep the margins around the same level.
Why? Because tier 1 customers are starting to place orders. And, if you look here, you see that was a 45% up compared to Q3 'nineteen. I think the most important thing here is to see Nordie going out of Q2 with a record high backlog was 112, going into seasonal peak quarter which is Q3 is some logic. It's pure logic should be a strong backlog going into peak quarter.
Exiting Q3, we go into Q4 and Q1, which basically is not seasonal, the strongest quarter for us. Despite being managed to increase the backlog to 113 or 114 almost $1,000,000. And this is because we see volume orders coming in from our new Tier 1 customers. I said, we are market leading IoT I'm going to explain why we do it. I will take the overall picture.
And the other guys after me will deep dive into each of these point most of you in the room know Nordic, maybe somebody on, webcast doesn't do it. So I have to bore you, but know that we are a fabulous semiconductor company, specialized in low power wireless connectivity, and embedded processing. That's important. We are market leader in Bluetooth low energy. We have expanded into 802 0.15.4, thread and Sigve.
And we are now starting to get into low over cellular IoT, with LTM and our advanced IoT technologies. Actually, we had a revenue of $500 K in Q3, cellular. We are approximately 7 fifty people. We have been growing because the new custom base have pretty tough demands on us, both on timing and, products we have to deliver. This is, while some guys internal describe as a perfect storm, we're getting through this.
We have man to do a lot of new work now, and we are able to get engineers to perform all the tasks that are put on Nordic. But this has been a long lasting growth journey and it has just begun. We started back in 2002 with a slogan that we called cut the wire. We want to sort of free the gamers from the TV and the set of and buy boxes. We did that with a 2.4 gigahertz proprietary solution.
In 2006, we started to think. If we should get this curve up here to grow, we need to enter into a standard then we start working with other companies and form something we call VIBRE Alliance. This VIBRE turned into the B LE because of low energy and was officially, ratified by Bluetooth. Look at where can we benefit from having the first Bluetooth low energy parts on the market and variables. The first application, I recall, IoT variables, when you took your Heart rate moving to the cloud.
What's the obvious choice? I mean, got a great position in variables. I would say since 2016, we have seen the diverse of IoT. And today, we have, segments Moveable segment that are in production, and we have some new disruptive segments, which we will talk about a little bit later in the presentation. That we take these revenue levels to new levels.
We are the clear market leader in beauty energy. I mean, we have more than double the numbers of the science. Than number 2. And we are 7, 8x times as many as the 3 to 6 guys in the list. We are proud to be the leader.
In Q3, we had 44% market share. And there is we've been just going through some numbers. It's 2100 Bluetooth low energy products certified since 2014. 2100 products out there using Nordic yearly. If you look at, last 12 months, the accumulated, market share is 42% the sun bins.
We are proud to call to a success and is built on 6 strategic pillars. As a connectivity company, as always, we have to lead on connectivity. As a relatively small player, we have to excite the developers we meet. We need to show customer engagement. We need to understand every time we need a customer, we need to perform, and we do.
There has to be scalability within the company, and most of all, We need to invest early to ensure that we have products out in time to take the way that comes. We have been pretty good with 2.4 gigahertz proprietary. We got Hit market wireless keyboard, wireless mouse. We had a time where we are up to 70% market share. We have been pretty good with the Bluetooth low energy.
We have had a high market share years back behind us. And we are going to be good in LTE. We have great products with San Diego. We'll talk about later on. And obviously, with all these investments we are doing, we have to have high financial ambitions.
Which we have. Lead on connectivity. Most important, low power, high performance, You have to be feature rich. Some of the applications we in today demand more than just connectivity. And with all these products spread around the globe, you have to have a robust protocol, so you can connect to a new device that is nearly Bluetooth.
It's no point having the lowest cost Bluetoothhip if it does not connect. That's what we see. Sometimes our competitors have been used as certain customers when they come back to us because it didn't really connect. As we get into more advanced products, it could be basically serious if it doesn't connect. When it comes, hard track monitor, it's not that better, much matter because you didn't get your hard track on your phone.
But if you don't get your in when it's required, it could battle a little bit more. So lead on connectivity. And we have a strong connectivity applications offered here. I mean, we have shipped more than 2,000,000,000 ICS, We made over Bluetoothhip into a broad platform. We can cover advanced features, and less advanced.
And most of all, as I have spoken about, as my team's spoken for a long time, There won't be only one protocol when it comes to IoT. We think there will be multiple protocols. Nordic has flash memory. Why? Cause we want to offer these multi protocol solutions.
And I think when you see 2, 3 years ahead, you will see more than just the Bluetooth that's going to take market share in IoT. Embedded software? We need to ensure that our customer can do his software onto our leadership. So we start maybe going a little bit away from calling the radio. It's a microcontroller with radio.
And we make system in package. And obviously, you can have all the good ICs ships in the world, unless you have development tools that support them. And the feedback to Nordic is that we have excellent tech support, and we see the activity on developer zone, which is increasing week by week, So it's in use and it's a good addition to our standard technical support. We are winning prices is great. I think it's cool to see that if you look here NRF 96 LRIT, shortly for best connectivity solution in China.
We are getting recognition. Which I think my team certainly needs. So to everyone listening within Nordic, thanks for your great job. To be able to win these awards. Excite developers who doesn't want to be excited sometimes in different locations, but when you sit on a desk, 10 hours every day, doing design work, If someone come in and excite you, it drives engagement.
And the important thing is we do have ICs We do have stacks. We have SDK. We have developers on. We have software, and it's going to be easy to design your product. Pro Man ID to getting the product out there from production is important that you have less hurdles as possible.
OSHITE website had more than 2,400,000 hits, the last 12 months. We've seen 80,000 independent developers, We are having what we call Nordic tech tours where qualified engineers from Nordic travel the globe at locations, where we think there is enough, in the sign community that I disturb a trip, and it works. We have blogs, we have guides, we have various quarter, tutorials, and web seminars. Basically, We are trying to drive this company as, I would say, technology wise, is possible to do all tutorials and webinars to reach, larger crowd and we are reaching out. We, as a result, we see strong growth in our development kits.
And if you look at this last bar, 10% of this is related to the seller in 91. 10% of kits shipped over the last 12 months has been related to cellular. Engagement to customer Guy will talk a lot about this in his presentation, but we have to be able to combine the broad market and the tier 1 customers and engage with both
of them.
Why is that important? If you see in the under, part of my presentation here, you see some companies that are providing hubs. These are the guy where IOT gotchas will used as hubs is important to penetrate these customers. As important is to ensure that all new good ideas within consumer, within wearables, building retail, health care have hub to connect to. So we need to ensure to work on both segments.
And we have to make sales, optimized for both. And Gary is going to show how we do that. And lately, we have had increased focus on platforms and their growing ecosystems. Scalability. We need to scale across technology, market, and customers is important.
I mean, we
are all
started off as connectivity. However performance features and features are important and reliability. We understand that the customers need now It's more embedded processing. So we need to have performance. We have to have memory.
We have to have IOS in, out The software has to be easy to use, and it's going to bring value for the customer, so it's easy for the customer to write his own application software. Security, more and more important. Nordic were very early adapting security algorithms, and all are in these are using the latest IPs on security to protect customers' software, and or end customer's use of end product. Over some time, quite a bit of people have told me that use of low energy is going to be a commodity. ASP is squeezed from everywhere.
What we've seen is the opposite. Since 2016, over ASP had grown with 14%. It's basically features that Nordic is introducing into our ships. And as we get more and more complex application, It's important for us to understand and pick out the right feature to put into our platforms. Which up to now has been Maybe, if you look back 4 or 5 years, it was difficult.
Lately, the last years, we've been talking to the tier 1 customers. Remember the ones that are going to make the hubs, the platform guys, that tell us what they require And amazingly, we managed to do it. It's important to have good dialogue with customers, and that's what we have done for years. Invest early and identify high growth markets, extremely important because from we start deciding that we want to build a new product until it's in the market is years. We take sometimes decisions ahead of, ahead of what we expect to be in the mar when it's going to be in the market.
And we have to take the right choices. And it's much easier for us to do that when we do have good intelligence from end customers. And If you look at discussions around the globe on, cellular IoT, even in paper you usually read, I think, the economist a couple of weeks ago. So this is ships for everything and for everything. If you look at all the forecasts that are out there regarding IoT market, it's billions, and been business insider talks about 1,000,000,000, armed talk about 1,000,000,000,000.
I can say there is at least one common factor here. Is a large number. And we are positioned to take parts of these numbers. We do have short range, long range. We are the only company that can cover a total footprint.
If you look at external analysts, I talk about from IHS. I talk about the Bluetooth market, This is Outlook class here from now till 2023 of 1,000,000 of units. Strong growth, and this is the growth in what I call the established verticals. What we are going to talk today and talk about today is potential disrupting growth in several areas, which is not all covered in these outlets. Smart Home, a lot of irrelevant smart home, smart lightning, medical devices, and we are not talking too much about logistics asset tracking today because we have a representative probe FedEx will do that.
Get a third party look on how they expect to see logistics panning out the year to come, and what kind of technology do they need to realize the plans? We are confident in the long term cellular IoT outlook. Unfortunately,
volumes are
revenues being pushed out in time by some factor, and carrier and the industry ecosystem hasn't been as early mature as we had hoped. There has been more challenges with software development. Is, we have added functions. There have been some delay in certification process, and we see that customer development cycle relatively long. But despite we are more confident in our long term outlook, IoT outlook than we have ever been.
Restarting these activities that we like. We recognize the pattern from what happened when we start getting momentum in Bluetooth low energy. The but it made us change the timing when we would become breakeven. So it's not, unfortunately, going to be in 2020. It's disappointing for us, but it's a realistic thing.
We have to accept that we live in a real world where we don't control all parameters of itself. What's our famous American that has a dream. We have an aspiration We're going to build a $1,000,000,000 company within 5 years. We expect the growth between 20% to 30% for Bluetooth and multi protocol products. We are gradually building up the cellular IoT business to be similar size as a short range business in 5 years.
It's nice to hope aspiration, and it's good when you can put it into a spreadsheet and see it works out. So now I will hand the podium to Gayer who's going to go through our go to market strategy.
Alright. Thank you, Svenn Dore. My name is, Gere Langland. I'm the director of sales and, marketing in a Nordic Semiconductor. I'll take you through our go to market strategy.
So first of all, I'd like to start by very quickly going through our, DNA, what governs and and and rules our decisions and how we behave. In Nordic, you know, the customer has been in the center of everything we do for, for more than, 2 decades. We've also believed in, in product, leadership with, quality, low power, being our number one, factors. We've also chosen to be very agile and try to be very disruptive in what we've put on to the market. As you've seen, in 2012, when we launched the 1st series of Bluetooth low energies with Flash and then 2016 and then the cellular products.
We also pride ourselves in outstanding and tech, support and that sorts reported back to us through our annual customer, surveys. Next, ease of use has been extremely important, you know, over this last, almost 20 years. We've always put the customer first, you know, and, and made our tours available. We modernized we've made, we've become an app company. We have mobile apps that's consistently receiving very high downloads We have desktop tools running on, different, platforms.
We're very scalable. Svenn Tore mentioned that we we ship, development kits across the, the globe. And also very importantly, devstone. I think with the growth of customers we've had over the last 2 decades, there is no way we could put enough application engineers in place in, in the globe. We need sort of scalable, support.
We like to think of
ourselves as open a very controversial topic. Do you want open source? We have nothing to hide, so we open source a lot of the new software we make. Our engineers' comments are available to our customers' engineers. So they see what we've thought, you know, and stuff when we made the products.
And they're very familiar with the IDs. We also believe it should be easy to get data sheets and documentation So a few years ago, we removed the, the login needed to access that on our, our web page. And we also, engaged in education. We're active in university programs Across the Globe We also contributed to the BBC Microbit program that's rolled out with millions of, school children across the globe. So there's a lot of activity, going on.
And then finally, as Mentorra mentioned, engagement, So we engaged with our customers. Back in 2012, we started a initiative in the Nordic sector. All the other guys in the industry were doing webex seminars, and we think, okay, let's be different. Let's put people on the road and train the engineers. The first time we did this, we had, sort of a 1000 engineers globally attend our seminars to get to engage and meet our people, and, and they they get to feedback stuff directly into the, into the source.
So all of this is then constituting our, our DNA. It's what we believe in. It's what we we practice, every day, and we like to think it, it sets us apart from, from other companies with a huge follower on, LinkedIn and Facebook, can we actually get responses back? So people are interested in what we're doing. A customer journey.
So this DNA has given us a strong position in the broad market, era. But how does it actually work? How do customers find our information? How do they get engaged with Nordic? So In in our situation, word-of-mouth from engineers to engineers, actually the number one referral factor.
It's more important than Google searchability. It's it's please customers relating to others, okay, this is a good company. If you work with them, people would also read our wireless quarter that, is distributed on your desks. It's actually a magazine we make as a company. With higher editorial value.
It's online. They I would search for our information. We're searchable on Google, Facebook, LinkedIn, Twitter, and Instagram. And, the figure out, okay, the next tech tour in my region, it could be in the US or APAC or or Europe is is coming up very soon. They would then attend the, the tech tour and and get the information from our engineers.
And then the next issue is how do you get hold of development tools? 10 years ago, you had to, to find a distributor on the, the web page and set up an account and stuff Now people would go online, digike mouse or Anil, the other leading, retailers and they ship it, and it arrives from the US or any other warehouse to your desk in less than 48 hours. And then, of course, you, you go online, you, you download, you know, user manuals or click at the videos, the go through guides and, and start developing, you hook up the kit. As we're driving thousands of customers, A lot of these, broad market customers get their information from the dev zone where engineers support engineers. And some of them get supported, you know, from the Nordic team.
And then in the time frame of, could be, 6 months, more likely 18 months you have a product ready to go to the market. And this has taken us from nothing to a broad market leader in 5 years. We didn't even know what a catalog sales company was, little more than 5 years ago. And now we have it confirmed, you know, for, for this server, actually done a survey with Digi Key Mouser and Nordic is now the number one company globally in the shipment of short range wireless development kits. They are extremely important to us, but we're also important to them because you remember we are creating engagement Our engineers are active on their forums.
They're using their video streams And it's not only Digi Key and Mauser, it's all these other, reputable, companies. We need some older types of, distributors as well. We can't just lean back and say, okay, we're gonna support everything through a forum and, and shipped from catalog sales companies. That's not going to occur it. So we have some large distribution partners.
We've turned them, broad liners. There's, rhetoric in, Germany, There's, Arrow and Avnet in in North America, which are our global distributors, the public companies, they're the giants. They, they typically carry tens or even 100 of, or product lines that they, support, globally or in several regions. We engaged with them. You know, we were interesting to them as well, actually have value and interesting products.
So we train their application engineers. We train their sales people, and they in turn, support our customers to create scalability. They also performed some very important fulfillment and logistics function for, for Nordic. We can't ship directly to thousands of customers. So these guys would actually carry their logistics, and make sure stuff is arriving at the right time, setting up logistics arrangements with customers.
Also, on a very wide scale, we do joint seminars and workshops with them to address a wider range of customers. And, they're also then promoting and selling both the long and short range portfolio from, from Nordic. So this is a sort of a generic, distribution setup. We actually complement this with a, a huge amount of what we call value add distributors. Some of these are extremely important partners to, to Nordic.
We actually signed the first of them up in 2001. So they've been with us since the beginning. They have a small product, a small number of product lines. Some of them just sell Nordic. So so we we share the blood in, in a way.
And, they're typically providing design services for for end customers they have design engineers employed in the company. They would work on, proof of concepts and engage deeply with the customer. In the case of Nordic, they have a deep engagement with our FEs and salespeople And we do very small seminars, some of them are even at the customer site where we have one on one, sort of relationships with, with customers. And they are, of course, now all selling our, long range cellular portfolio as well. So all in all, this has taken us to a, a number one in the Bluetooth, broad market, our claim to be the undisputed leader here is hard to refute as we see consistently 40% share of new design.
And as I mentioned up until recently, our distributor have had their focus on, short range products, but, What we've done on Bluetooth low energy, we're now in the process of repeating on cellular. If you look at the, the breadth of, products we've we've launched in Q3, there's, media remotes, luggage tags, electric skateboards, smart pillboxes, smartwatch, cellular emergency button. So we're everywhere. And we have all kinds of application. And, the universe is expanding.
And, for us, this is very important. And this expansion of the technology into to new areas has made us less dependent on single clients, products, or, or verticals. And you basically see here a reduced dependency on, sort of top 10 customers in Bluetooth low energy moving from 60% in, in 2012 to 30% in, 2019. And that's not because the large customer have, become smaller. It's because we've added a a lot of small to medium customers carrying our revenue.
But that, again, doesn't mean, we're we've taken the focus away from the major players in the key verticals on the contrary. These customers, they need to be engaged in a entirely different, manner. First, the keyword for the, the broad market may be ecosystem partnerships, engineering communities, and catalog sales, the larger players need, a much, much tighter follow-up. So we have targeted business development teams working on the, the tier 1, customers and key account managers We are key account support teams that are in order to, to service them. We engaged early with them to establish proof of concepts.
I mentioned this earlier. It's very important for us to have hardware very quickly up and running that can be used to create prototypes to sell into, to management. We spend a lot of time JETEL will talk about this later aligning our product road map to their requirements. You know, we need to have leading expedite their, purpose. And you see a few names there on the left hand side of this slide have included, colgate, which we actually released just this morning.
So, it's a new entry into our, slider. For this presentation, I'll I'll look more on on, on tire, which is, say, a clear market leader in the short as the tracking, market. They sold more than 20,000,000 tracker units over the past 2 years. I just type in to them to show how we typically work. So Thyle recently announced a, new lineup with, with Nordic.
And you may think of this as a pure component supplier customer relationship. It's not. Is actually a lot of engagement at management, level, at higher level. And we've also, integrating tire finding technology into our new Nordic software development kits. And if you think back to earlier, where I said we're scalable, we drive thousands of customers We want our customers to have access to the tile capability and they could then compile it into their, their products.
So there is a symbiotic relationship as, as partners. And that brings me to the next level of customers in this market, the, the platforms. As I'm sure you're aware of, more and more things are, connecting through platforms and the cloud instead of point to point from a mobile phone and the device. And you should all know these household names from the bottom of this, slide. And we obviously see a large market opportunity in servicing these at, space, we're actually bringing in 100 and and 1000 of, customers that could potentially connect to their device.
We also have, multi protocol devices we've demonstrated over time that, the interoperability we have is number 1. So there is a relationship there between the platform makers and Nordic in that we could offer a lot of customers to connect to their, their platforms. And we used to see that, smart home here is a is a good example of how this could be done. So there's a battle going for the connected, smart home with all the major players fighting to become the, the control center. Through smart hubs or speakers.
In order to dominate the market on Come the number one, control center, you do need to connect as many things as possible. You do need to have an ecosystem around you in order to become attractive. And it's gotta work, right? So interoperability, again, is the, is the key. We have that capability with, our devices, and our devices are already inside many of these things.
I'll take one example, the, the Chinese giant, Xiaomi, which is not, all that well known in, here, but it's one of the leading companies. We've actually announced, if you tally up the the releases, we have, 5 releases ranging from, virtual reality systems, door locks, Watchers, tire pressures monitoring system, some educational, robots. But that's not the only thing you gain by starting to work with these ecosystems. If you look at a company like Xiaomi, we're looking at 100 That company alone has acquired, you know, several 100 companies that they folded into their, portfolio. And then at the supplier, you get a vendor registration, you know, and you're certainly part of that, ecosystems.
So all of these customers are now potential clients for both our Bluetooth low energy, SigBee or Tread products, and the long range cellular IoT products. Not only that, we're basically getting, 3rd party access, you know, for our customers in there as well. Chao Mi has an outspoken strategy to actually connect up third parties into their, into their system. Moving on. So this is, what Svein tore mentioned.
You know, I think there's a strong market outlook for Bluetooth flow energy with 26% CAGR growth to 2023 provided by ISS. If you dig deeper into the composition of this market, we see some some segments are flattening a little bit, out like mobile or PC heads. Whereas a lot of others are, are, still growing, and very solid, like smart home variables, tail gaming, PC based, gaming and, virtual reality, etcetera. And our belief is that there are several verticals that could drive even, even higher growth and, but not necessarily tumor. So what we see as a company is sort of a shift in our base, consumer sales are still going to be very strong, but a lot of the new applications we see may not necessarily be within consumer, and it's sort of moving over to non consumer.
So you could ask, so why isn't this happening tomorrow? Well, nonconsumer is a market. It takes a little bit time to, to move over. So some of these will have, you know, 2 year, 3 year 5 year, cycle that is going to be there. And the good thing is when you win this application, you also wear it sticky.
They have a long lifetime when they come. So let's start looking at, some major opportunities in disruptive, verticals. We think that we may be underestimating, you know, the potential in in some of the, the verticals. And some, stand out for us in, in smart home, smart lighting, drug delivery, and disease monitoring, and in logistics and tracking. And each of these may grow into several 100,000,000 units over the next, 5 years.
We're spending a lot of time and resources into product and services, roadmaps development to target and unlock the the true potential in these areas. So today, like Mentorro mentioned, we're so lucky to have, Olapetris Cox through here, so he's gonna handle the, logistics part. I've already covered portions of the smartphones. So today, I'm gonna focus on the, the lighting and the medical part of this, this business. So Let's dive into, to smart, lighting.
Why would you have smart lighting anyway? I mean, is it to switch on and off the light or dim it or change color? Not necessarily. And I think you you take the time we distributed a copy of the wireless quarter with, 10 or 11 pages as a background around the, the lighting markets. It's a large untapped, market.
Today, only a small fraction of the light fixtures are, are connected. It's like everywhere in offices, meeting rooms, bathrooms, everywhere. That's about to change. There's some significant growth factors out there. There's, new EU regulations, you know, that enforces lower energy, consumption and packed initiatives on smart cities and programs with the same goals.
You see a lot of, really strong use cases in in both, enterprise and consumer markets, as a company, we're more focused on the enterprise side of things because of interesting, things it, it does for us. So I mentioned to you, I mean, light start necessarily connected to switch them on and off. What do they actually do? It's because lighting is becoming the building backbone with mesh networks, enabling light control monitoring and automation on actual real time big data. There's been a lot of focus in the media lately on, compromised networks and servers, etcetera, so that the lightning, backbone represents something which is safer, securer and independent, you know, from the IT department in the company.
The light must be there, and and it's, everywhere. So a chip in the network can make a light into so much more. I'll give you some examples. Nordic, we're partnering with the delighting, IoT leaders. We partnered in Gucci with, 2016.
It's a UK based, company. And just this summer, GUI announced an agreement with a Dutch real estate company to connect 5000 buildings to GUI's IoT platform, And these connected lighting systems will of course need wireless connectivity, and connectivity from Nordic is a key ingredient in this setup. So we're now not just looking at managing a room or a building. It's actually a portfolio of buildings controlled by, by lighting. So what could it mean for the real estate owner?
Here's an example of an office building where you actually have heat maps of people, moving around. So where are people? How many people are there? Where are they? You know, are the desks occupied?
Or does the, heat HVAC, need adjusting, or restrooms need cleaning? So you get real time information across multiple buildings, old floors, etcetera. Similar to be used in in gyms, where, gym equipment is idling in one corner. And if you move it, you know, suddenly you get usage on it. You free up area.
In the retail space, what's the most valuable space? You know, where are most people moving? Where are they stopping? And, and can we improve space utilization? Who's moving where?
And, can we influence consumers? And I think on an aggregated basis, this, really opens up for, for big day analysis of frame potential for both new revenue streams and lower energy costs. Then moving on to the, medical, verticals, drug delivery and, disease monitoring. Just want to quickly remind you of the obvious, use cases for connected devices for for large disease areas. So you, you with diabetes, you basically monitor, insulin injections and, and glucose, mirroring.
You could then have asthma or allergies that you want to, to control with injections or inhalations, respiratory disease, growth hormones, blood pressures, and, and others. Some examples here are beaders pumps or or a constant glucose monitoring, you have metered inhalers and self injection pens. The market will require continued time and effort on our part to develop, products and solutions meet in the technical requirements and also competitive price points for the, solution. And of course, given the large potential, these are challenges we're willing to, to take on. And Jetty would rest up in the, more in the road map presentation.
One important part here is to notice that the there are some strong regulatory regimes that will influence the, the rollout. You know, when, and there's processes going on to streamline that, as this becomes more and more, mature, but it's, sort of a, an external factor that is not controllable by Nordic. So if you look at, a very simplified, case then, you could have a, a DRIP delivery, so that could be the, injector by a Therika Health, which is a Nordic customer or a CGM from Dexcom. Typically, they will connect through a Bluetooth flow energy into the phone. The phone will then report it to the cloud It could then be part of medication management in an automated medication, diary I mean, what type of medicine did you take and how much did you, inject?
And also, notification and usage statistics could be sent to family or relatives or doctors, physicians. And I think one of the very exciting things here in, in Nordic is that we do see a potential to sort of, circumvent the connection to the smartphone by, using our LTM and Narrowband IoT lineup remember, we have small size, we have low power and ease of use. So a lot of these companies are basically looking to cellular connectivity because you want to get rid of the hurdle of the pairing to the, the phone, etcetera. So this represents a very exciting opportunity for us where cellular could complement the traditional Bluetooth low energy powered, equipment. So in order to to summarize, we have an excellent position in the growing Bluetooth market as the broad market leader and with very strong ties to the, the vertical market leaders.
We're strengthening our focus on the, platform ecosystems, and we've begun to see the effectiveness in our backlog and, and sales figures. Going forward, we will seek to fortify our strong position in the established verticals and go hard after these new disruptive, verticals that are, are coming out. And I think very, explicitly, you know, we're, extending and leveraging 2 decades worth of sales experience and distributor networks and everything to Bluetooth. So we're going to repeat in Bluetooth, what we've done for, Bluetooth low energy. So with that, I, thank you for your attention.
And I think I'd like to, to leave the floor to Ollopeta Skoksha from FedEx, which we're so lucky to have her, today. Glad to have her here.
Thank you, Rai, for that introduction. And, also thank you to the rest of the Nordic leadership team for the invite to speak here today. The it's always great to be back in Norway. The left 40 years ago and never never came back. It's one of those things that happened on that though.
They I have been a part of the, the advanced technology, teams, within FedEx. Ever since I joined And, 3 years that brought to life some of the more advanced and and valuable innovations, in in recent memory for for FedEx. Today, we don't focus, mostly on IoT and in the journey that has taken us to kind of the next generation of IT that we are about to be developing. I'll give you a quick overview of FedEx system, make sure everybody understands not familiar with all the facts of, of FedEx and, and and and how many pieces we have in motion every day. We operate across the world in more than 220 Countries And Territories.
The we are in in multiple operating companies in here in Europe, we mostly see FedEx express. The in the U. S, you have ground freight going after different segments of the market. We're delivering about 15,000,000 shipments every day. The and it's all done by a huge team, of people, more than 450,000 team members.
The so there's a lot of pieces in motion every day. And all of these pieces are linked together through an information technology platform that fuels the value to our customers and also ensures that we drive, and optimize the operation side of things. This all started through the vision of, of founder Fred Smith. The Smith is, very much a visionary leader, to this state within the company. And he set set the bar pretty high all the way back in 1978 when he stated that the information about the package is as important as the package itself.
Now to recognize that value, that early, I think, is is quite mind boggling. And it is that the division that continues to drive a lot of the innovations within FedEx, again, to this day. They started back in 1979 where FedEx for the first time introduced barcode scanning for all shipments. Today, that's just common. Commonplace, right?
If you shift the package, you weren't able to track it, we think something was wrong. The the decals that didn't happen, before 1979. 1980, FedEx, stood up its own private wireless network all across the US, recognizing that having die to have valuable information at the edge where it couldn't be connected to the business didn't make any sense. So we had to make sure that the information that was captured could be brought to where it had the most business value. And and again, FedEx will invest where we drive business value and differentiate our business.
And it was at this intersection between connectivity and capture that FedEx kept innovating for years years. As new capture technologies came online, you kept investing. As new connectivity solutions came online, we kept investing and kept reinventing what it meant to deliver to our customers. Now we have been, in this early 2000s and, then we've been looking at how do we take the next leap forward? How do you go from capturing information about the package to also introduce more information about the environment.
To really get into IoT as a as a general broad offering for for FedEx. They and the challenge was there wasn't really any, solutions out there that had a combination of enough compute power, and and also energy efficient enough to meet our use cases. They because at the base of our use case is we have to be able to operate within aircraft. The from the intro slide, you may have seen that we had a number of air aircrafts We actually have the largest, hardware line in in the world. And, then in in In 2008, we were able to put all these pieces together and launch, what was called Sensaware, to this case, still called Sensaware.
The that had that combination of fairly low power, enough compute to to be able to detect if that device was an aircraft taking off or an aircraft landing. So much of IoT is driven through, regulatory requirements. And operating with an airline is no exception. They so we had to develop that that technology and then how the platform that it could, could run on. We spun that out of my team and, it went into production.
Then we took it back in again, about a year ago. And we did that because technology is moving so quickly in the IoT space that they needed to let me take a little bit back from production to really pull more towards innovation, r and d space to make sure they can capitalize on the enablers that are being brought to life, through companies like, like Nordic. So in 2019, we launched, our latest, sensor device This stands for 3000. And, now we have gone from it originally being a U. S.
Only solution to not being a global solution. The and it has a number of capabilities from a Swiss army knife of of sensing for for FedEx. They it does humidity pressure, shrunk, vocational, of course. It's a highly accurate temperature, Sensory NetSol, you can, detect and and go after, pharma shipments, the security is not a big, area that we're within. So we have light sensors.
We can detect the packages, opened when outside an area, which should not be opened. And again, the, FAA approval is, is key because you have to be able to run within the airline. And what we're providing to our customers is this end to end visibility that starts before FedEx has shown up and continues after we have left. And, So much of that, again, is driven through location, with location being both a SAT driven, a satellite driven, cellular location, VLE location, Wi Fi location, everything to drive location visibility. They and then link it so it becomes actionable on the business side, in this case, through geofences.
Geofence is basically geofence's location, and they can have business actions triggered from that geofence. The temperature Pharma, is the primary area that you see a lot of regulatory requirements coming online. That is driving customer demand for more pharma monitoring, with highly accurate temperature sensors. Now that's where we have been, right? The now we look at what is possible today.
And, we're continuously investing in the next generation of capabilities. The this is this is really where it it gets interesting. When you look at the capabilities that are being brought to life through low power, wide area network technology, That's where you have the Neargun IoT. You have, LP, Katam Wang. Your you've changed the game completely when it comes to IoT, because now your battery life has suddenly gone through the roof your and that means that your cost of ownership of that visibility has gone down.
Today, it's no longer so much about the cost of devices. It's all about the cost of ownership as a complete package. The On airtime, will an operator have to touch that package to retrieve the, the device to recharge it? How long can a device stay out in the field without any interaction, again, to drive down the cost of ownership, drive up the value to our customers? And then also low power, short range.
Bluetooth low energy, is very powerful. And and opens up for disability that is similar to, sensorware within our network. Sensware being a cellular solution can go anywhere, BLE enabled solutions, upgrade within, ecosystems. Where you can leverage very low cost devices again with with a broad range of sensing capabilities. And and what's also different today is you have you have new ways that the information has been captured is being consumed.
No longer just a question of putting thoughts on the map. When we started, down this road, they even earlier in 20 18, was all about making sure that the user experience was right. Make sure that people could engage with the data. When life's all about making sure that the the data is right for algorithms, If you're not getting the data in the right density at the right quality, that it can be consumed by algorithms, you're falling behind they and we're also, at this stage, I'm seeing, embedded, machine learning, advancing with more and more computing available within these embedded devices, opening up for more compute at the edge of the network, which is really important when you look at highly congested, RF environments. We have thousands of nodes working together in a very tight, small space.
They, had to talk about blockchain, because it just increases my value incredibly. Their blockchain as technology is something that we have been investing in also for several years now. And we are going after blockchain, both on the IoT space, and beyond, to unlock new ways for, systems and people and organizations to work together. There's a it's a great article in in Forbes a couple of couple of months back. At this link I'll I can share with you all the that talks about how we are heading down the path towards leveraging blockchain specifically in the areas of, customs customs clearance, where the open ledger methodology is quite powerful.
And when you look at the the combination of Bluetooth low energy plus the, the low power wire network, type of capabilities and compute at the edge. You run into scenarios like this one, where at the package level, you can have a node that is Bluetooth enabled that you can have whatever sensors that use case requires, they and then now the package is being managed, by the VAN higher level device. The higher level device can can can the compute on the information coming from the package level device so that you're reducing the load, on the back end systems. It's great that we have a an endless, a scalable cloud available to us. But when it comes down to it, if you have billions of devices out there as as guide hard, on on his slide.
If you're depending on all of that information going to the cloud, you're gonna run to a scaling problem at some at some point. So you have to you have to bring compute to the edge, and you have to find a way to manage compute at the edge. Because ultimately, it is about making 1000 and 1000 of connections across the world and making that part of what we are offering to our customers. When we look at the 15,000,000 shipments that go every, every day through our network, where do we add value through IoT on top of all those shipments? This one is from, left the same Forbes article I mentioned earlier today.
This is overcoming, from knowing what has happened to a package, going back to the tracking information, the tracking through barcode, you see a historic view of what is what has happened to your shipment. With IoT, you are opening up for what will hap what has what is currently happening to your shipment, and with the combination of IoT plus ai, you're moving to predictive and being able to tell what will be happening to a shipment. That's it guys. Thank you all.
Thank you. Thanks, Anthony. Very, very good.
I hope
it opens up the audience view of what we can do with IoT. This is a very practical example. So thanks for flying out from the state and sharing this with us. So we soon have, break I would like everyone to go out so you can get some more pressure here in the room, and there will also be some snacks out there. But before we go there, Some of you might remember, some might even invest a little bit in April last year for us to build up our lab capacity.
We've done that, and I would just like to show you a video of a world leading
Here at Nordics And My Conductor, we're incredibly proud to show you our new state of the art failure analysis lab. We have always focused on delivering parts with the highest possible quality and armed with our FA lab, we are raising the bar to an even higher level. Please join us for a look inside. For the past year, we've been equipping our facilities in Tremheim with cutting edge failure analysis tools. Close collaboration with our suppliers has enabled a record fast ramp up.
The FA lab is now equipped with all the needed personnel into to perform complex, failure analysis and advanced device characterization. Among the multitude of tools available are the various sample preparation tools, fault localization tools, electron microscopes, 3d x-ray, circuit editing, and delayering tools. The mission of our FA lab characterization and testing of prototype silicon. We can also perform design modification and then have the changes verified immediately. Because of the proximity to our main R and D office, we work efficiently face to face, which is very different from booking slots at external labs or with external experts at Wafer Boundaries.
We will also improve our products through the deeper and long term analysis, which we are now able to perform. Secondly, for new devices, we can analyze and understand yield issues, which will enable us to reach mass production yields targets rapidly. Lastly, in the event of a customer complaint, we can offer increased service to our customers both in terms of response time and analysis quality, a full root cause analysis, which would have previously taken as long as 4 weeks, will in most cases, be completed within 7 to 10 days from receiving the device in our FA lab. We are certain that our internal FA lab will help us decrease the time to market for new products, enable faster ramp up of high volume production, and reduce the amount of customer complaint cases due to even higher quality devices. Here at Nordic Semiconductor, we are thrilled we can offer the attention to detail and quality of service that our customers deserve.
Thank you for listening to our nice video. I also have one more comment before we have the break. Already this installment has saved us time
to market.
And time to market is return of investment. So I think in 2, 3 years, this will all be returned. So break.
All right. Welcome, back everybody. My name is Chetter Holstad, I'm the director of product management at Nordex Cinema Connector. And I'm gonna give a little bit of update on the short range side, of things. So Santoda talked about, the the waves of revenue growth we've been going through over the past couple of decades.
And behind that growth, there is pioneer ship on connectivity. Lead on connectivity is a strategic pillar for Nordic. And we have done so by introducing more and more capable products, supporting more and more technology protocols over the years. And you will see that this pretty much overlap with some of the growth, that's, so I'm sort of talked about. An important month was obviously the introduction of Bluetooth low energy in the 2011 time frame.
But on top of that, we build more and more advanced multi protocol capabilities with these recent addition of 80250.4. That is the standard, that is the basis for protocols like Tread and SYNB. By doing this, we are also, leading on integration, adding more and more value for our customers. And I'm gonna talk about how this advanced multi protocol landscapes pace out when we go to our customers and try to solve their problems. So I'm not going to draw a lot about this, both Guide and and Svenuri has mentioned this, but even though we're in the landscapes where we're supporting more than 5 different protocols, In the short print landscapes, the Bluetooth low energy is driving pretty much all the growth going forward.
So already now, Bluetooth low energy has to pass all over low power short range technologies, and it continues to grow. And me, as I someone who's looking at products for the next 5 years are looking into this and are seeing the same trends that Kate and the others are seeing there's a continued growth in the consumer segments, but there's also an accelerator uptake in non consumer.
And that has changed a
little bit on how we look at our products. And how we are defining the products for the years to come. There's a healthy CAGR here that's supporting us And even though the the graph here shows a very smooth, smooth growth, I do think, the ways that the ST We'll continue to be present. Kai talked about the Mexican market where there are some regulatory approvals and things that needs to hap happened before the market takes off. So it could come in this kind of stages.
So end of digital energy is driving the growth. You see an expansion with what we call 802.50.4. 802.50.4 is like I said, basis for the thread and thick day protocols that are starting to see find this home and smart home and more industrial and enterprise automation applications. And this is markets where we'll be today technologies where we today have a very modest share. But going forward, we see that the importance of being multi protocol capable and the importance of diluted low energy also for this application is spearheading our introduction into these markets.
It falls very nicely with the higher end SSCs that we've developed over the last couple of years. And as soon as we started off multi protocol, there's additional innovation that can happen in the software realm. So we're spending a lot of resources, making sure that our solution, not only on the ICS and the things that we sell, but also the software that our customer is using, tackle this problem. And the next kind of, very fragmented and large ecosystem out there, And this is showing a a smart home example. And Guy talked about smart home being one of the one of the growth.
And here we can see how this is a very complicated picture. There are platform providers out there who are making the hubs, the voice assistant, hubs for the home, and the gateways, they are depending on ecosystem around them to deliver thousands of various devices, sensors, security systems, etcetera. And these large ecosystem providers have chosen different networking protocols to communicate in between them. There's Google. We're basing their ecosystem on shreds, Amazon on Sigbee, Apple Home Kit who's using Bluetooth low energy and Wi Fi.
So when customers are going to make sensors that talk in our part of this ecosystem, they either have to make deliberate choices or work with a company like Nordic that has multi protocol capability to design products that can be part of larger ecosystems. You can see here illustrated with a phone on the left that for some of these ecosystem, the importance of phone connectivity either directly into the sensors or the gateway either for reading status or for setting up networks since we're pairing. So very benefit, very powerful to have a Bluetooth connectivity into this one. On the back call, there are gateways that are internet connected. So we have 24 access to a smartphone system.
But what we're seeing now is also emergence of people having security system and door locks on, back ends that might be cellular. So if your internet provider goes down or there's power shortage, there are batteries and cellular connections that allow this system to operate even under, shortage. So combining the Nordic technology, we can help these customers to navigate these ecosystems to build the right solutions. So that's just kind of one example. And this wouldn't happen if there is not things like interoperability, code systems, and robustness in place.
So when Gabe talked about our position in in this space and our market share, we have a proven solution that allows customers to build problems for this. So breaking down the short range market units in a shipment map, As a product product developer and make a strategy for products, we continue to be monitoring the landscape. And we will try to look for complimentary requirements within this space. So markets that are growing and overlapping in some of the requirements are extreme important to Nordic. We're also looking for new high growth markets, and we, of course, have this picture also for the next 5 years.
I can tell you the biggest box in 5 years are not the same that are the biggest today. So when we build up
our portfolio, we are looking for
the healthy mix these existing large marches markets that will continue to grow in these new markets. What this is also showing is extremely fragmented space where there are certain markets where Nordic don't have an interest to go after. We don't do extra additional effort to go after. So in some of these markets, we might have a position with their devices, but we don't do targeted investments for those. So what we're looking for is an opportunity to bring value to our customers and to differentiate from our competitors.
And the large thing of what we're doing right now is around investment in platform. It is about maximizing the R and D value. We spend quite a lot of money on on R&D and investments to bring up platforms that scales on the IC side where the MR51 used to be a single chip with kind of small iteration. We're now building up families of devices. Introducing new technologies, etcetera.
So we have platforms that scale in turn, maybe also a platform that scales up customers. You see more and more customers, they use high end devices from Nordic, and they use low end devices. 1 device in the hub and 1 device in the sensor. So that scalability that we do on the ISO levels is very, very important. Platforms also allow us to do rapid and targeted expansion.
So you've seen that, and I will give some example in the Enverse 52 series, how we can go out and tar deliberately targets certain requirements or certain applications. The scalability also comes across software where we're building up equally important platforms. These are framework that our customer depend on the developer and products. It's a framework that has to cover all the Nordic ICs from the very lower end to the high end, from Bluetooth to cellular. And we will do all this to bring this value to customers that Svennage and Gaedas talked about.
Truly building a scalable solution across technology, markets, and customers. And when we look at this in the for the MRA 52 series that hopefully all of you are familiar with, there's a couple of things I want to point out. So It was introduced in 2015, and over the year has built up a market share that is averaging 40% of the time wins every quarter. So it's really, really market proven. A lot of the applications and customers we go after, the ID behind the product is not necessarily the connectivity.
They have a their ID and their the value of their products is not necessarily related to connectivity, but it needs connectivity to talk to a phone or talk to a hub or whatever, And this is something that is market driven. It's an easy choice for this one. But this perhaps to the left, shows a different way of looking at that 40% market share. And we have previously sold, talked about a big other category. This is now breaking down to a very competitive landscape.
This year, we've seen 39 different competitors in the short range landscape. A lot of companies out there trying to co master, our customers and our base. But with our share, you have something that is very unique to Nordic. You have a funnel of insights in terms of what the customer requirements are, in terms of the market requirements, and where this is going forward. And we built up a 52 series that allow us to tactically move into the right direction when and where we see edit.
They also build up a huge amount of software that allows us to expand where and where we see but naturally. And because of this, we think that the 52 series is a platform that will continue to grow for the next years. So this shows, the introduction of NRA 51 from year 0 compared to the introduction of NRA 52 from year 0 and the revenue share. Initially, the 52 series was one device, and you can see trails the 51 fairly, fairly accurately. As we started to introduce more members of the 52s areas, you can see that the growth of the 52 decouples from the 51.
And it is this lower end to high end and still expanding through the customer engagement that we do that allow us to capture this growth. The recent addition to the 50 three series has also allowed us to strengthen the ASP for our Bluetooth low energy offering this is in a market where the ASP has dropped. Yesterday we introduced the 5th member of the 52 series, the 52a33, but we're not done there. With the growth that we have in front of us, with insight we get from markets and the insight we get from customers,
we
are still looking to further expand the 52 series. There are some capture new high growth markets that we're looking at that needs dedicated chipsets going forward. And the 52 series as a platform is the best choice for us tackling those. Engagement alluded to some of the markets that we're going after, and we're doing so aggressively in this space. And the other thing that is changing now is we introduced the 52 in 2015, it was to a large degree replacing a lot of the 51s.
What we're seeing now is the line that is expanding. And when the student will introduce the ENDRA 53, it will be very complementary to the 52. So they will to continue to grow and they will continue to be releases in both this families going forward. They even have a wider net and wider coverage of low to high end to midland and different requirements that are going forward. So we're doing strategic investments in the 52 series for high growth and we're pushing the boundaries of what the technology can do upwards for introducing new devices.
Yesterday, we introduced the 52833. It sits there in the higher end of the series. Not going to dwell into the block diagram on the left, but it's a snapshot of the capabilities. And anyone who's touched on an 52 so far, we've found a lot of familiar building blocks. And that is intentional.
We want something that has the same architecture, the same software, that allows customers that already familiar with the 52 series to have a rapid time to market. But there are some important things that we have done here introduced extended temperature range up to 105 degrees. So Gay talked about at length about the lighting markets, And there are certain portion of that market that require temperatures above and beyond what we have supported so far. So by extending this, temperature range for the 52 series, They're better tackled for some of the requirements. These requirements will also see in the industrial space when they go out to consumer.
All of a sudden, there are much more harsher environments and supporting extended temperature ranks help us echo those. And of course, multi protocol is de facto in the 52 series now. Having capabilities to tackle things like the smart Home Ecosystem landscape is really, really important for us. We are soon introducing the Mref 53. It builds on top of the 52 series and everything that is good with this one.
And where the 52 is the benchmark, the 53 is pushing the boundaries upwards, significantly reducing the power consumption, significantly improving and adding the performance capabilities, advancements in security, talked about the importance of security in the IoT landscape. This one has the latest and greatest in terms of security And we are aligning it even further with NREL91 than what the 52 series can do from an architecture and a software platform capability. This is because since we're negative to go a little bit more interest, there's a large overlapping customer base between our short range and our long range business. This increases our scalability both at the customers and internally. And there are aspects of standard 53 that is also tailor to tackle some of this shift from consumer to non consumer applications.
There is a significant ongoing software investments in Nordic. With NRS 91, we introduced the NRF Connect SDK And this has the ambition to unifying all Nordic ICs and all Nordic technologies into a common platform. And there are some supporting components here that we also bring into the picture. So they have something that is complete from board level all the way up to the cloud. There's a new, generation of engineers out there, so that I are behaving differently from a Niobrut software 10 years ago, It depends on real time operating system on our devices, open source, modern development environment, and distribution models.
So this pushing the software for the new generation of engineers, and we talked about scalability from low to high complex applications Singapore to multicore SoCs from Nordic, but the idea here is to allow customers to focus on their application and their problem and, Nordic to help them with everything else. So the 52 is made stronger through partnership. Have you shown some of the partnership already? And this is because the technology landscape is going in many different directions. If you've been following Bluetooth low energy, It added higher throughput capabilities, long range capabilities, location capabilities, and through partnerships that are excellent in some domains, can have further our customer reach, on some of these verticals.
And this is just some example of the partnerships we've done done recently. There's one particular I want to dwell on, and that's the partnership that we're doing on audio with Cirrus Logic. So this is a strong established partnership that really combined the excellence of 2 companies. So Nordic has a world leader in low power and Bluetooth, and same serious logic have a similar position when it comes to audio and voice processing ICs. So what we build together is a demonstration vehicle showing the capabilities of combining the top technologies from these two companies.
For a full end to end audio application over Bluetooth low energy. And by combining these technologies, you will have the industry leading ultralow power consumption in wireless audio. So this is something we now have under active customer relation to see what this technology could bring forward. So wrapping up, we see significant opportunities in the short range wireless landscape and significant opportunities for growth. And we are continuing to invest in the Android 52 and the 53 series with accompanying software to accelerate this growth And we're expanding our reach through some of the strategic partnerships we have shown here today.
Thank you
Good afternoon. My name is Sliner again, Lucy. I am CTO at Nordic Semiconductor, which meets I'm responsible for all our development activities. Today, I get to speak to you about cellular IoT. So cellular IoT for us is It's it's a way that we thought about the company and how we can accelerate growth.
How could we maximize the value of what we do in R&D? How could we become a bigger and more competitive company in the overall, I'd say ecosystem where we are How could we eventually also improve profitability at what we do? So when we look at these objectives we've had, I think we come a long way in cellular IT. We've developed products and ICs that are very complementary to short range. We have the leveraging our ease of use, which we talk a lot about and which you heard about at length today, We look at the market and how it overlaps.
We talk about existing customer relationship, how important those things are. The broad market model that Garex described it's it's perfect for this market, a market that's never seen any broad market at all. I mean, cellular IoT has typically been a very niche business where where a few companies actually able to make any product. And finally, I think that's something that we we we rarely talk about, but it's it's very important for us is to our ability to manufacture. We produce more than 1,000,000 device per day.
We are manufacturing powerhouse. We have grinded our production facilities and our quality systems for the last 20 years. We become a company who can make high volume, highly advanced devices, with a high level of quality, and that's important for us. So if you look at our perspective, I think seller IT adds a as a very natural expansion to our business. We've invested, around $100,000,000 into our cellularity products.
We've built a capable organization, with cellular expertise that came into our organization, that has contributed significantly as you know, we have large facilities in Finland. A lot of these engineers that we hired there has, you know, cellular expertise that such as back 15, 20 years from the Nokia, the Renaissance, the Broadcom, the Ericsson Times. These are things we've done before, and of course, it's been a really great opportunity for us to, to, to scale that organization. So I think we started this in, the idea came about in 2014. We started developing team.
And today, I think we can well, I would like to say that we actually made a great product, which is, is typical power great cellular IT product, and we'll talk a little bit more about that today. At the end of 9160 is our product. That's the product you can order today, and this is the most advanced products, most sophisticated product we noticed in the conductor has ever made. If you look at the growth diagram, of the whole system in package, as we call it, it contains the Android 91 SOC, the chip itself, and it con it contains our front end power management passes. You can see in the 91 SOC, we typically divided that in 2.
One part is the modem part of it. Which which which performs the the the radio and the protocols itself. And on the left side, we'll see the the application MC The application MCU is what gives customers the ability to to develop their application, to do their edge processing, to interface with sensors, to make something meaningful, not just transfer data. And in a way that system package itself, it's what we believe is a self contained that it can probably be because the only thing you need to put on external is battery. You need some sensors maybe.
And, you need the SIM card and antenna. And there you go, you have a similar product. So highly integrated. And I like to think that this is the leading product in the world. From an ultra low power perspective, we are better than any of our competitors on all power modes of different rates of measuring power consumption.
Were better. We use techniques we've learned in short range of integrated memories low leakage process technologies, the way we do power domains, there's enormous amount of different things that could be on and off at any given time. How all these things act to a power consumption that no one else has. Integration, important Small size is good. That makes you available to make small products.
And I think we've been pushing the boundaries on this device about how small we can make it right now. Ease of use, again, important this product should be able to something you could take, design, make a product, and get to market. I think We, we're leveraging what we have from the Bluetooth world and investing more into the space of interviews. The the modem or the radio part of it itself supports both LTM and NBRITY. The reason for that is because it gives us the opportunity, of course, to compete in both market that has either an NGLT or LTM if you look at the the pure hardware elements of it, it's not that big of a deal if you do both or just the one of them.
It makes sense for us to do both, and it gives us a great opportunity when we go into market. Well, there still is territories that choose one over the other. We also add the GPS report to our modem or radio which, as you heard about, location and these kind of applications is a great thing. Tightly integrated between MCU and more then gives the developers a good solution. And finally, this is a
also up until now
the most secure power automate. There's multiple secure end clients on this device. Customer competition is designed to be normal secure or secure. We have, had this device certified for something called platform security architecture level 1, It's a first step of an industry wide standard of or or architectural standard that defines the layers of security. So this is the most secure device we've ever made as well.
We We believe that the cellular market is right for innovation and a little bit more than just a device. And one thing we want to make sure is that seller the products can be made by more than just seller experts. I gotta actually take someone to make a product and to enable that kind of cellular IoT ecosystem of of getting something out there. We decide to make what we call the thing in 91. Yeah.
The main thing that comes for brainstorming where no one could come up with a better name than thingy, and it speaks with us. But it is a proof of concept tool, a tool that contains enough functionality for any customer or developers to go out and try out this ID. It has some sensors It has batteries. It connects to the the cloud. You can easily test out your ideas.
Of course, as with everything else we do, the Thinking IT 1, the hardware descriptions, all the software it put into it, we make it freely available to our customers so they can happy to see customers copy the design and get going. And, we launched this in August. We shipped around 2a half 1000. And so far, you know, looks pretty good. In fact, we're so excited about this, thing that we actually made a video about it, and we would like to show that video to you now.
Have you heard about this new startup and pizza delivery, guys? No. What are they doing? Seller IoT pizza delivery. They're running a prototype, around now with an auditing in 'ninety one.
Oh, that's cool.
What are they doing differently from other pizza delivery services. So they're taking pizza delivery to a whole new level. Every pizza box has a Nordic thing in only one inside. And this has sensors on it capable of measuring temperature, pressure, and acceleration, and much more. And, this is transferred over to the Nordic Nf9160 SIP, which also has GPS.
Then all of this data is transferred up to the Nrf Connect for cloud. Using the new low power cellular technologies, LTM, man, and reality. Mhmm. That sounds cool, but what are the actually using the sensitive data for it. Oh, they they also have this app called, NRF Pizza.
And after you've ordered your pizza, we can see exactly where it is on app and when it will arrive, but also show you the temperature of the pizza, and if it has been flipped or not. The app extracts all these data through the network cloud device API so that the app can get access to GPS and sends the data directly. Yeah. And the best part is if if the temperature gets too low or the pizza's flipped, you get it for free. Oh, sweet.
Sounds like something that will really disrupt the Pizza delivery market. My pizza's here. Gotta go.
Yeah. See you.
Here's your pizza. Sorry. I've got flipped right outside. It happens, I guess, but I
get it for free now. Right? That's correct. So where are you going next? I'm going to the other side of the city to Bosch to Bosch.
What coincidence, did you know that you have a BME 680 sensor inside the thingy 91 that can measure temperature, humidity, pressure,
and air quality? I know we plan on leveraging this, multi sensor even more. We plan to use the barometer for weather change notifications. And we're also in talks with the city council, to monitor air quality all over the city of Oslo.
It's exciting to see how well the Bosch BME 680 sensor and the Nordic NRF 9160 SIP operate together. The multi sensor capabilities of the BME 680 and the low power cellular IoT connectivity of the NRF9160 SIP will open new markets and make brand new applications and use cases possible. The Nordic Finney 91 is an amazing platform for putting ideas into life and testing our prototypes quickly.
NRF pizza is still in its infancy, but it's only a matter of time until it takes over the world, delivering hot, unclip pizzas to everyone. All thanks to the Bosch EME-six 80 and the Nordic thingy Lampi1.
If it's up to me, we will be just drawing videos here today, but I was told to do some slides too.
So I
want to go back to, we talked a little bit about tools, but I want to go back and look a little bit about competitive positioning. When it comes to our NRF9160. And there is really what we like to compare the competitiveness on 4 axis. One being power consumption, and one of the benchmarks we look at is something called, an EDRx type power consumption actually means that you're pinging the base the base station towers in this scenario once every 82 seconds. So it's a long interval nothing happens.
You're paying the the the the towers, and that's the number. And it's a very relevant use case for a lot of things where you don't want to be sending data too often. Could argue at the end of pizza, guys, now you want to be doing a little bit more often, but in some cases, you know, once every 1 a half minute is a good interval. The other thing we look at is size, and size is more than just x by y. It's also x by y by c.
So when we look at size here, we think about it as a cubic millimeters, not just square millimeters as an important element. Imagine you wanna put something in a small form factor the height becomes very important. The third one is the fact that you can actually do meaningful things on our device. You can actually have an application MCU that you can do edge processing or your compute and interface to sensors. And it might sound maybe when you know Nordic, you think about that as an this thing, but it isn't.
It's something that we are very good at and the other guy is not so good at. And finally, what about our software development kits? So we have extensive software development kits and and I think, we shine when it comes to this element. So of course, we think we compare better than all these 4 axis. We do not operate with competitor names.
We never do that, but on all access, we think we are definitely better than everyone else, but one of the important things to think about is also the sum of it. You can be better on some things, but we think we're better on the sum of everything, which is good. Please be note that there's some preliminary marketing numbers in my experience that means that that number
is gonna go up later.
So, we don't know where that's going. But yeah, we think we compare very favorably and, and that seems to be the the market acceptance as well. When it comes from our developers,
we try to make it simple for
them to take their device and get their data to the cloud and do something meaningful with it because eventually, you know, all data here is going to go to some kind of cloud somewhere. Without developer tools, the the the developer kit, the thing in 91, together in F Cloud, can provide a solution here that that gives you a secure connection between the device and cloud. That means that all the data is encrypted all the way from the device to the cloud. It's safe, and we can add services to our customers so they can add more thingies. They can add more things so well.
What you did see on the previous on the video is the the way we can visualize data to NRF Cloud as well. You can write, make a website and somebody may have done that many years ago, but you can make a website with an API, and you can pull data straight from your sensors. And that might seem obvious too, but it's it's it's not something that you can always do, not that but for many of cloud, you can easily use an API, pull data, and see your sensor data and present things like we saw on the NRF thingy video. Finally, of course, with enterprise, you can manage your devices, you upgrade firmware, you can manage SIM and so forth. It's part of us trying to deliver more solution to the customers than anyone else does by that also try to speed up the delivery, our customers' development time and get things to production faster.
I was asked to talk about 5G and the story about 5G is pretty simple. First of all, you know, that our LTM and NBRT is part of 4 g. And we support that 4 g l t. The good news is also this. LTM and NBRT as it is today forms the basis for machine type communication on 5G.
So the that means that our NER 90160 is ready for 5 g as well as 4 g. So long story short. Don't worry about 5 g. We work on 4G networks, we work on 5G networks, and we're not depending on having a 5G network for us to be successful. Pretty simple, right?
So I
have to get that question anymore.
I don't know.
It was good. I'm talking about Readiness. And Centurra started off or ended up his side deck talking about some of where we are. And, I started off with what we showed earlier today. You know, we're confident in the IoT long term, Stella, you're gonna talk more about what we are in a few states.
But, we have, seen that, volumes and revenues have been coming in later and expected. We've seen, research, and, analyst expectations moving some of that out, Santor talked about some of these elements that, has delayed, or pushed some of that out, things like ecosystem maturity, our software development, certification processes, customer development cycles, so forth. And I'd like to address, first of all, some of the things that I think have caused some of delays, and I'll talk about why I think these are things are accelerating as we go forward. So very simplistically speaking, so that why do I think it's taking more time then ideally we won't like to happen. Well, I think there's something about network roll out.
Although there's been a lot of roll out, there's been a lot of press about it. There's been many Jizzo has LTM and NBRT, it has taken longer time in many territories for it to be globally available. So, if you're seeing some carrier announcement, they typically talk about pilots that turn on a city that turn on some territories But if you're making products, you're not really ready until you have toe coverage. You can't really sell your products, say at least only works in this part of the country. So in terms of network, the carriers really roll out in the four countries,
I
think there's been some hesitation from customers and device maker to make it going. Now it's part of it. One thing that also think, maybe slows it down or something we get some grief about often is that what about the So the short story is it's so expensive to do it. Why why in the world's name do they need x amount of money for this per month? That doesn't make sense kind of way.
And I think that the many carriers has, in some way, been struggling to find what is the right business model for cellularity. They come from a world where everything responds or most of these phones, some 2 g, now they're gonna come up with business model that attracts developers, that has pricing flexibility that goes from, is it a monthly? Is it a fixed year? What is it? And that's taken some time.
Some carriers have been successful, have been doing smartphones, and others are still lagging in the space of coming up with solution that works for product makers and, and developers. So I think the ecosystem has taken more time than we expected. We've been delayed with some of our software development, and I'll come back a little bit to that topic, but, we would have loved to be, you know, earlier, with more deliverables than we've been able to get out. And that has delayed some of our customers. And the ease of use as we talk about is not where it is at Bluetooth yet.
It's not as easy to do cellular over Nordic yet as it is to do Bluetooth. Well, the power is pretty high, to do Bluetooth as easy as we do, but it's something that we will improve and will continue to improve. Certification has also been a complicated matter not only for us, but I think for the industry at all. And I thought a lot about what about certification and why is that process that takes longer time? One of the things is I wanna highlight is I call it the process maturity.
It means that in practice, it meant that every time we gone to a carrier and asked, how's your cellular IoT, course certification process? Where's the document? They never had a book for us. It was always an early version, preview series or something. It wasn't really clear for them either how they were gonna certify this product.
So while we've been doing a lot of certifications and we're still doing Some of these requirements from carriers being fluxed for a long time here. And that's, makes things a little do you actually need a feature or is it optional? Is it voluntary or it's not? Do we need to measure all networks? You have to do these things.
I think that Carris has been struggling to simplify a certification scheme that is, appropriate for devices like that that is not sponsored. Finally, of course, some of our certification efforts have been delayed because we had firmer and toll free that hasn't been, really at the time we needed to be. That's some of the delays reasons, I think. There might be more. Now why do we be optimistic that this is going to go forward?
I like I wanted to show this map and some of may have seen this map already, this is the map of LTM and NVID deployments on carriers worldwide. It's data collected by GSMA and it shows the world. If you count up all the networks deployed is in the order of 130 last time I counted, could be a few more. But as you see, apart from, from, large parts of Africa and some places in in the Middle East, coverage is getting pretty good. If you've been following this space for a while, you might also see that more and more of these slides went from being may be yellow, meaning LTM only
to
this color, which is purple, maybe. Which shows that they've chosen to deploy both kinds of networks. And that we see in many places. So this map is getting plugged all the time. More and more carriers and more and more territories are doing both type of protocol.
I think there's two reasons for for choosing both. One is that you can actually address slightly different scenarios, but also because, the investment of network upgrades doing one or the other protocol may not be that significant. But this is good news. So, although it's come maybe later than expected, It is there's no question anymore in my mind that the carriers are embracing cellularity.
The good news
about our product is that we have made a worldwide product. Our product supports more LTE band than any other product in the market, meaning it fits in more markets or fits in all markets worldwide. That matters for you as a company, when you make a product, you can make a product in a single SKU, piece of hardware, you can sell worldwide. Maybe there's software configurations you put in your product, but it will work in all the territories in the same piece of hardware. You don't need to do 2 different versions of your product or 3 different versions of the product.
Very important for many customers to make sort of medium sized quantities, but they wanna address, you know, some 10,000 in each market. You really don't wanna have to go out and make different products. We made a product that, that allows customers to operate in a single SKU, This NR of 1960 has also been through a significant amount of teleregulatory certifications, which is the FCC FC all these other abbreviation from different countries. We've already done a number of them, and we are wrapping up a few more to make this map look pretty similar to the previous map. Of course, in addition to that, we've done global, the GCF, which is a standard for cellular protocol compliance similar like the Bluetooth SIG is for Bluetooth and PT CRB, which is another organization that do similar.
So we're in very, very good shape it comes to telerigulatory worldwide SKU. And I haven't seen this isn't really, really good shape. We do also need to do, in some territories, carrier certifications. Those go that's kind of certification that goes beyond the tele regulatory and beyond things like GCF. Worth noting, and I wanna emphasize that right.
A lot of carriers do not require us to do this, but some do. And you may have seen that we certified the Verizon in August. That was something we were happy with. It, was, it's, it's a, it's a big carrier. They're very stringent in how they test, and we passed that.
But also right now, we are in active certification process with 9 carriers globally. That's true in the U. S, 2 in Europe and 4 in Asia. So this is going very well as well. I will again allow customers to deploy in more markets.
I wanted to highlight something when I said business models, we're not really there. Carriers are really trying hard on advertising. It's one of those carriers I think is doing a lot to make sure that developers find their portals and can actually make products. This is an example. Of course, we're very happy to see NRS 9160 on the Verizon website.
It shows as part of the ThinkSpace ecosystem and good things there's also some software solutions that Verizon offers. And by having this in place, you can go on over SIM cards. You can start doing your development. You can start going through certification process well because it's part of this system. So business models are improving.
Carriers are putting up these websites. They're doing much more to to promote this market. And this is one of the benefits we get as well when we engage with carrier and carrier certification is that we become part of their marketing machinery as well. Software deliverables. So We launched our first production release of our cellular software in early July.
So this is what we call modem firmer 1.00 and s NFS decay. Nordic Connect SDK version 1.00. That was launched in early July as we planned, but I think one of the things that we've seen is that some of the functionality that some customers want didn't make those releases. Chit, they'll talk a little bit about Enerf Connect SDK and how that is a big lift for us in terms of software platform. And I think, not only speaking, it's been hard, a lot of effort for us to move to a new platform, which this is on, at the same time, supporting existing customer base with soft device and NLF5 SDK and having a lot of Tier 1 customers asking for special software.
It's been a tough last year, software development. But I think the software development, the platform list is getting to the point where the steep hill has gotten flatten out. And I feel much more confident right now that with the development efforts coming on board and the new features we're releasing continuously. Q3 and Q4, we'll see significantly wider customer be able to go to production as software we provide. We have production releases scheduled for Q4, which will significantly add more functionality.
Now we're not going to stop making functionality. Because this is an ongoing thing but but with the November releases and the interim release up to November, there'd be significant amount of software coming out of it. So feel like we're the hardest part is over, I hope, in terms of getting everything in place for this big lift. Mark, let me turn there. So I was told that this flight is too busy, but I wanted to show it anyway.
And this slide is an example of all the projects where we engage with NRF91. It's a long list gonna go into details about the list, but the long list itself is an interesting thing. It just shows the breadth of all these different verticals we're currently seeing devices being designed into. As everything from, you know, agriculture monitoring, parking system, street lights, logistics, it's all over the map. And that's sort of what we thought and we believed all the time that, yeah, this is not just a market for smart meters.
It is a lot of different use cases, a lot of different changes, and this is straight out of our project databases, our tracking of projects, and that's pretty cool. There's a lot of different verticals. And again, I think that serves Nordic very well with our business model and how we go to Those are highly complementary with short range. I think that we mentioned before today, maybe, but But one thing that may not know is that 61% of our customers who who's now ordered our NRF 91 SIP has already ordered Bluetooth before. Has a nice overlap, you know, run 2 thirds, is is existing custom system is not, and, it really shows that, our ambition of, of happening to existing customer base is working.
There's 2 ways of looking at that. It's already been mentioned here, but there's, of course, these products that have both cellular and a short range device in it. And those are the ones where different applications in the ecosystem using different kind of protocols. It's highly complimentary and, it's a great benefit for us moving forward. Right?
Asset tracking. So when you think about when I think about asset tracking, I think about asset tracking as you wanna know where everything is at any given time, where regardless of what it is. And you can really expand that to think about, yeah, you wanna know where your kid is. Wanna know where you put your mobile phones. You wanna know where your book is.
You wanna know where everything is. You wanna find your remote control. You know, the guys at McDonald's wanna know where you're sitting so they can put the burger in front of you. Everything about everything you want to know where things is. And it's it's in a way pervasive if you think about the whole concept.
Everything needs you don't need to know the location and the state of device at any given time, whatever it is. Somebody might be scared, but as I said before in the previous life, we got people who wanna monitor where your kids are. I'd be grateful. I love to know where my son is going. But this is, I think, a megatrend.
Everything's going to be tracked. Everyone's going to be having a location. Everything's gonna the status. And with everything being digitized, you'll see that everything gets put into massive databases and, and I guess, to to all piece points, it's in a way we gotta be able figure out how to use that data and make something meaningful out of it, but this is a big mega trend. And we really think that R9160s is really, really good for the space.
Know, it's a low power and small.
So I
mean, you can make smaller things, less batteries, last longer. We provide GPS for four location you can integrate your sensors with the MCU we put on board so you can do like the guys did on the thing in 91, you know, the temperature, the flip, you can do some other nice sensors to make sure that the product is in the shape it want to be. And finally, I think the product with a global product, you can track things globally as well. We think it's a very strong product for asset tracking. So how are we doing?
I think We believe we're getting significant traction in 9160. Here's some numbers on this slide. Well, we we moved the NRF 91 system in package into full volume products. And it produces good yield and very satisfied with what we're seeing in production. That's good.
And not a concern at all.
We shipped more than 4000 development boards. So these boards, we shipped around 2 and a half 1000 and a thingies. We have more than 200 customers who's doing the audio devices, building their own PCBs. And it's a big step when you go from using a dev kit to making your own PCB you're making your own product. That's an investment on the customer side, which is pretty significant.
When we track devstone, which is our support portal, this is the number 3 device, meaning, and it keeps growing. So this means it's the 3rd most popular in our portfolio, competing against the likes of some of our massive 52 series devices. And, we had revenues around 500,000 in Q3 on pork pipes and development ports, which is pretty good. Traction is good. I believe you paused for greatness and great growth as we move forward.
We've made a product that we think is very, very competitive We believe that the carriers are fully on board with LTM and NBIT in pretty much all markets. Certification of firmware variability is gaining a lot of pace. It's no longer such a such a, how to say. Concern for me as the chief of development as it was a few months ago. Considerable design activity as I showed
a bit more than 220
customers making boards. And we know that we highly complementary to Bluetooth, exactly as we want to do. So we hope that the grass keep growing, but we will, feel in good shape on satellite. Thank you.
Okay. Thank you, Simon again. My name is Paul Lester. I'm CFO of Nordic. I'm gonna do the the last part of the the presentation.
I'm gonna go through the financials. I'll start with a q 3 wrap up, and then I'm gonna give some more forward looking views on the business. So first, on revenue. So revenue very strong revenue in Q3, $82,200,000,000, first time of $12,000,000 in revenue. Also on the high end of the guiding that we provided in the Q2 presentation of 78 to 83.
So that's a great achievement. The growth came as mix mainly from Bluetooth where we had 15% growth. Now we're gonna go through all the all the segments or markets in in detail. However, due to the the strong nature Q3, which is always the strongest quarter of the year. I'm just going to pick a few of the specific areas.
Start with consumer electronics, a 6.6 percentage growth from from last year, is actually very strong since, since, proprietary, which is the dominating this part of the business had a 19% reduction. So showing that there's quite a few new design wins and design activity happening in the consumer electronics business.
Then where those where those
was in 'eighteen, early 'nineteen, very slow, but now we've had 2 consecutive quarters with strong numbers, so a 12% increase. A lot driven by the designs and the strong design activity we have in the Chinese ODM market. So a very strong, market there. Finally, health care, both Guide and and Santul has talked a lot about, health care. So it's, of course, sulfur, disappointing that there's a decline of close to 30%.
However, as as Guy said, this is, a market that's that's taking pace, and it's a growth market going forward. The reduction this this quarter is mainly driven by some of the customers in the midlife product life cycles. And, Jim, to, to, gross margins. So Nordic has continuously showed a great improvement in gross margins during since 2016, really, and then it peaked up as 51% last quarter. So I did reduction of 1.14 percentage points, quarter over quarter.
The reason for this reduction is is is twofold. First of all, as I've talked about, there's for the first time, quite large influx of Tier 1 customers, which inherently have a lower gross margin, in addition, there's some some mix in in products. In in Q2, we had a lot of, the high, high end products salt in in Q3, there's more mix towards the mid and lower end projects. This this mix, as you've seen, the last few years has has changed from from quarter to quarter. That's why there will be fluctuations in the gross margins going forward.
Going to the operating model performance, I've already talked about 4.4 percentage points increase in revenue. Part of that increase is is eaten up by by lower gross margins, still strong gross margin. On R and D, split between, sore prints and long range or cellular IoT. The short range business, we've invested $12,400,000, this quarter, which is around 15% of revenue. That's that's pretty stable compared to, what we've seen in in previous quarters.
This money is is used to invest to capture growth opportunities that we see out there, and especially working on on the high value customers. But of course, it's also, spending to capture growth opportunities with new products, etcetera, in the future. Cellular IoT is in a heavy wrap face with high activity on certification and development of software. That's why, in spending has gone from 3.9 to 6,700,000 over the year. However, a little part of this is kept station because in 2018, we capitalized significantly higher amount.
We'll come back to that in the cash expenses part. We've been able to keep SG and A costs relatively stable at just around $10,000,000 and shows the scale of the operating model and then how we're able to leverage the strength of our distribution setup. Finally, EBITDA of, of $11,500,000 or 14.1 percentage points, down from 14.3 a year ago.
However, as we always do,
I think it's important to look at the split between short range and, and long range because the the only the short range business is generating revenue. So if we exclude the investment we do in cellular, With exception of the dip we had in, in Q4, last year and Q1 this year, with, with exceptionally low revenue. We've seen that, the the short range business have been giving, EBITDA margins at around 18% and actually in Q3, even well below above, 20%. Also, given the guided range for Q4, we've made that the full year EBITDA, for for the short range business will be up compared to to last year. Very good from, cash operating expenses.
In this quarter, we've, capitalized 1,800,000. The corresponding total amount last year was 3.1. The the reduction is really driven by the cellular IoT products project now going more into, or final phase. So so more end of the spending is done on finalizing project and then working on on on new products. So the the RF or the sale IoT project from Q4, we will start depreciation of that project, adding depreciation of around 700,000.
For those who dig into the models. If you look at the total number from Q3 last year to to this year. It's gone up by, 9.3 percentage points, adjusted for the IFRS 16 implementation that we did earlier this year increases around 13%. The growth comes as a result of increasing from 663 employees a year ago to 7 50 now, so a 13% increase. If you look at sort of the bottom, light blue there, which is the the the other operating expenses, also all other things done done and employees.
You see that we've sort of come up to a scale. So so we're able to utilize the base investments we already have and on people on top of that without increasing the other part of the cost. Compared to last quarter, It's it's pretty stable. We do have a a very positive effect of effects. The the weakening of the Norwegian kroner is is very positive fluidic as we have a very strong base in Norway.
Briefly on our cash flow, we started the quarter with $87,900,000, so a small reduction of 1.2, for, ending at 86.7. And normally in Q3, which is the growth quarter, we would see a negative, cash flow, which we also did last year where we actually had $12,000,000 in negative. So we are able to reduce the negative effects of of a seasonally weak cash flow quarter. We've done that by really working on, on cash conversion. If you look at the net working capital, it's it's at around 27%, which is a significant reduction of 5.4% compared to last year.
Also, in in Q3, we spent $6,500,000 in CapEx, a lot of this CapEx is related to the video you saw earlier today, the lab equipment, which is being finalized in these days. Overall, I think we're satisfied with the Q3 results. We're back to growth in Bluetooth. We've maintained a quite strong gross margin, we're able to keep the cost development on the control. Now I'm going to go to a more out view of the cost basis going forward.
1st of
all, on gross margins, As discussed earlier, Nordic has been able to stabilize and exceed the 50% targets. We've been able to do this sort of a mix of operational things, but also as Nordic is growing, we get more favorable pricing from from a vendors. Also, we're able to to forecast better with getting when we get larger customers on board, it's it's much more easy to get visibility. In, in, in our deliveries, and thereby we can significantly reduce costs. And then, and that's something we're going to continue to work on.
However, of course, the the product mix, going forward and and that date the customer mix going forward, we estimate that that gross margins would go slightly down to 48% to 50% levels. We only provide outlook on medium term for gross margin, as as both ASP and then cost levels is a little bit unsure in further terms. When we launched Bluetooth in 2011, Our aim was to provide our customers with, very easy to use out of the box experience, supply all all the software, etcetera. We're doing the same, on the cellular IoT, where we're partnering with Corvo to make a module. So when we deliver a module, you have to give away some of the the gross margins to the external vendors.
That's why for the long range business, we indicate gross margin of 35% to 40%, It's very difficult to give an exact point there because revenue has been limited, and we're still ramping the production. So it's not exact to know the exact points of costs. So for the time being, we have a medium term, guiding on 35 to 14. Effect on the group margin, of the cellular business, of course, depends on, on the cellular grant. So it's too early to say anything there.
On R and D, not expensed or will spend approximately $74,000,000 in R And D this year. This is based on the, on the midpoint for guiding. And this will represent about 26% of our revenue. Of course, you you see a steady increase. The reason we have, a significant increase also in in 2019 is, of course, that we had lower revenue in in the earlier part of the year.
How much does this relate to the short range business? Well, we spent around 17% of our revenue in R&D. In order to be hands staggering 40% design wins, we need to be a leading vendor of Bluetooth products. So 17% is a adequate number to be there and is something we should expect. On the cellular business, it doesn't really make sense to compare R and D to revenue, since since there's no revenue yet, but but it adds up so that you we get 26% in revenue on on the total.
R and D intensity is expected to decline. We see we believe that this number is is on the peak in 2019. Of course, the absolute number of, of, spending in R&D will increase, although the KPI will be reduced. Also, I think Sanjay talked a lot about the synergies between short range and long range. So so So in the long range, we're working a lot on projects together between the two businesses.
On SG and A, we are growing in the organization to capture growth opportunities, both between short range and long range. That's why we're spending around 14 percent of our revenue on, on SG And A. We believe we soon meeting the peak point there also so that in absolute numbers, the cost level will, of course, grow. But that has to build the, or ramp the cellular business, the overall KPI will go down towards around 10%, which we believe is a reasonable level for a company like Nordic. Being a fabulous semiconductor company, CapEx is limited, so so our main investments relates to, to test equipment that we use in our, in our production in Asia.
We invest in lab facilities to support customers. And we also spend quite a lot on software, that we use in the design of our products. You know, and finally, we buy some licenses for our, software IT for our our products. We have been investing quite a lot in the new lab facilities in in Trondheim and also in in Asia. That's why you see that CapEx for 2020 will be around $20,000,000, which represents about 7% of our revenue.
Of course, this KPI of 7% is is is too high going forward. So so when volume ramps, we will see a decline in this this KPI to around 5%. But still in absolute terms, for 2020, you should see around the same CapEx levels. 3 slides, final slides on, on the cash, position. When we did, the capital raise, in April 2018, we highlighted 3 items that we were gonna use $100,000,000 for.
First was to, to, to support, working capital for the growth, secondly, was to to build the lab. And, and thirdly, we were going to show our big new customers that we had sufficient funding to do R and D investment and deliver on the roadmap. If you look back to the amount of cash we had a year ago, We've we've spent $200,000,000 on debt repayment, we've bought treasury shares that we're going to use to the option program. That's for all employees in the company. We've also done the lab investment of around $20,000,000.
Then we've used the gross profits the strong gross profits that we've had during the last 12 months, on R and D spending and, and of course, SG and A. Working capital, we've been able to keep pretty stable, meaning that the cash balance adjusted for the the debt repayment and treasury shares is more or less the same as we had a year ago. Now the current cash position, and available credit line provides a good foundation heading into the next year, which is a large ramped year for cellular IoT, and we're continuing to invest in short range. And we believe we have the ability to continue driving the technology roadmaps that we've set out on. However, if you see on the left side there, one of the KPIs we measure ourselves about is the R and D cash coverage, that we have.
And the reason this is important is that our our main customers are are exaggerating us when they do the diligence processes on procurement. On how much ability we have to fund the road map, we've set port on. We are, aft in 2019 at around 1, meaning that we we have cash available for 1 year's investments. When we look at comparable analog semiconductor companies, most of them are in the range of between 0.8to1.5. So we believe this is a reasonable level.
The growth we are planning will require some working capital, which I mentioned, we haven't increased the seller working capital yet, but so we will need more working capital. And the medium term outlook we're providing for the cost items imply that it will take some time before cash flow materializes. Therefore, we anticipate no dividend payments in 20202021.
However,
we see that with the expected volume ramp of our new products, we should see significant improvements in cash flows from 2022 and onwards. I think that's all I have on finance. I'll hand over to Santouris who has a few final comments. Before we open up for Q and
Thanks, Paul. So back to our aspiration, building a U. S. Dollar 1 $1,000,000,000 company in 5 years, the growth of 23% of Bluetooth, buildup of a cellular business, to similar size within 5 years.
It's possible,
don't you believe it, after getting through this date? We are in a good way to reach it. We also have ambition for our EBITDA margin, and we have an ambition to reach around 20%. That's really the key goals that the company is working for today, and we're going to continue to be very open with our progress. So I think we're going to have some exciting times ahead of us, and I would like my team to come up here.
We have some answers, if you have some questions. Thanks. Yeah. Come on. Guys, So do you have a microphone so the webcast pass we have over here?
Thank
you.
Christopher from DNB Markets. So I have a lot of questions, but I'll try to contain myself. So just first on the cellular business, you seem quite confident and it's also helpful to see obviously that there are independent analysts that are confident as well and you list 20 different kind of use cases. Could you give some more color on kind of what they're telling you in terms of timing and volume just to kind of understand where the most important source of volume will will be, you say, asset tracking and agriculture? What is kind of the tangible feedback at the moment?
Could you do it there? Sure.
So I think a lot of our customer cases are taking advantage of the the GPS there in the solution. So there's a lot of combined sort of, tracking, valuable, items, you know, even street lamps, where you use GPS because you put the street lamps out and then, you need to know where they are. And, basically rolling out the network. So so I'd say, 1st and foremost, is anything that involves, GPS where you take more value of the complete solution.
You're saying that there will be ramp or you said the significant ramp in free cash flow from 2022. Is that kind of based on these applications? They're now having decided to use your product and either kind of indicating to you or what kind of volumes they will need in that time frame or Is that more based on you're seeing around in the numbers from 3rd party analysts? It's it's both.
I mean, it's literally 2 decades of, sales experience where you sort of, you look at the metrics, you look at the project milestones look at the significant movers, it was mentioned that we had 200 customers that had taken parts for pilots and preproduction So you sort of aggregate all the different variables and then you make up an educated guess. At the end of the day, the networks have to be rolled out. And the operator is certified and, all the firmware, in place. So it's a combination of analysts figures on our own intelligence. Great.
And then just moving on to the kind of the R and D, our product roadmap. You mentioned the NR53 and that you're planning to kind of piggyback on the investments that you've made in the NRF 91 could you just elaborate a bit on that? Does that mean that we should expect that to continue to stay on kind of the 55 nanometer process node and not move further down? Do you expect to kind of include a similar end to you that is in the North 91 with the presses on everything? Yes.
I think we will reveal much more of that when we actually launched the device. Right now, we're keeping a little bit tight here on the inner workings of the 53. And don't want to add it to more than what we pointed to the slide sets, but I think there are enough hints there to do it to, for you to figure out, lot of the confidence of January 52. You're a clever guy.
Sure. Okay. 2, 1, and I'll try to give, come back later if there's time. So just more of a maintenance question on the proprietary business, which you didn't talk too much about. You say growth in the medium term for Bluetooth 20% to 30%.
Can you just remind of what kind of growth you're expecting for proprietary when we think about how long or kind of the mix of that 1,000,000,000 within within 5 years. And then yes, let's start with that one.
Maybe I should do that. We, we don't have wide spread of customers on proprietary. And, it's hard to answer your question without exposing our customer. So we rather don't want to come of that, but it's not the fastest growing segment within Nordic and it's going to be less and less significant on the impact of the company. I think that's the best answer I can give you.
Sure. Okay. And then, the last one for me is more towards the guidance. He's still here?
I I'm sorry. I don't think we should ask to FedEx as an Nordic event. And, I think I've told him that he's not going to get any questions from the audience.
Okay, sure. I'll ask you. So can you just be a bit more specific on because the presentation was a bit including a lot of information that was already out there in the market. So if you could kind of elaborate on where you see yourself positioned in that value chain, obviously there is cellular and Bluetooth in there, but doesn't mean that you, our natural fit for all the different products that they're planning to launch. So do you see yourself both in cellular and Bluetooth?
And what parts of their products that you kind of envision yourself?
We have not confirmed annual the size with the customer you're talking about. But obviously, it's a typical target customer for Nordic, And it's important for us to work with Tier 1 customers as they always done when we start it into the hit human interface devices. We identify the notches, the providers of hit, and worked hard towards these guys. We are not doing anything different this time, reseller.
Sorry. Very quickly. One last one. On service logic, the partnership on audio there. Can you just give some more color on why you think this is such a kind of powerful combination of your capabilities.
There are really kind of huge significant players in this market like Qualcomm, I don't know, Chinese players licensing IP. Why should this value prop be so much different? And why should you kind of get a significant position in that? In that market? Is it power consumption or yes?
Yes. So that's what we're showing the customers that are interactive evaluation right now is putting us some proof in front of that of combining the Sirius technology and the Bluetooth low end, we're saying benchmarking it with kind of state of the art wireless audio solutions today. And we're showing showing a promise. That being said, just some color on this. This is a a prototype on on Bluetooth low energy and audio experience.
We don't know yet how fast or even if, this will be adopted by kind of major players. Development is something. So at this stage, we're showing the capabilities and the promises of the technology and the combined solution from the companies. And that's what we're showing our customers.
Thank you. 1st, on your backlog, could you give any more color on how much of your backlog is from Tier 1 customers or your top 5 customers, for instance?
Very good. I mean, basically, what we see is a tier 1 customer have a much more production logistics in place so that orders is a little bit longer lead time. And that means that over quarters, it will accumulate unless you ship more into this quarter than is expected for next quarter. Obviously, there was, expectation of growth for next quarters since the backlog went up. And if you come to ratio, how much new business there is in this $114,000,000 that's back.
We can look at the backlog exit in Q3 last year was 85, if I recall, right? So a significant part with new business plus, obviously, some of the mid sized customers that we hold mainstream customers, but it's a significant amount.
And just a follow-up from Christopher's question. Your salary segment, Mattly, what is your aspiration for when you expect to breakeven for the second one? Is it 2021
If you look at
what
we've done lately in Nordic has just been guiding quarter by quarter, and we will continue doing that going forward. And we have not given any long term guidance. And if we should have done, we will have done it earlier today.
Just two short questions. The Q4 guidance on revenues, can you give any color on this based on Vuzu belly, proprietary, or seller?
Have you analyzed it, Paul? In this, I don't know in basically, I would say it's close to 75% to 80% is Bluetooth, for sure.
And one last for me. Healthcare was somewhat weak this quarter, any comments on this? And also, you would see that's reported in the consumer vice segment, or will it be reported in the health care segment just for reporting?
I can, I can sort of Yes? So the Q3 numbers is, as you know, from history, we've had to 3 customers driving the health care business, for some years. And then, and these, these customers have product cycles. That's why it's a little bit lower in this quarter. And for the other customer, you talked about that's on health care.
We have some applications there already and they're reported in consumer electronics.
Yes, Axel from ABG. So, I have a follow-up question on the audio over Bluetooth low energy. Can you, say something about how long you have been working with the series logic? And also, you're saying today that you are achieving industry leading, power consumption on on this, audio, Bluetooth solution. Can you be more specific on what you're, are achieving this new solution
So the the partnership with Cirrus Logic stretches a little bit, back in time. I was going to to how long for those of you who have followed the industry, there has been talks of all the Uber Bluetooth low energy for some time. And during this period, we have had active engagements with Sirius Logic. And when we say industry leading performance, I don't want to give out any numbers, obviously. We're measuring up against state of the art equipment already available in the market today and also benchmarking this about what we see out there from competitors, promises of their next generations.
And it's a merit of, one aspect is is the Bluetooth low energy in itself. The promises, Bluetooth low energy over classic Bluetooth. And then there's merit of the technology that Nordic brings to the table and the Sears Logic brings to the table that brings this even further down. So kind of that's the, to the, yeah, how far I want to answer
that question.
And, following up on that, there has been discussion about the Bluetooth SIGs, coming out with a new standard, they have been working on that for for audio solutions. Do you expect that to be ready sometime in 2020?
I don't want to comment on that. We're not allowed to disclose a road map from Bluetooth. Thank you.
Fair enough, moving on to to cellular. So you have gotten the Verizon certification in place, and then you highlighted that you're working with 9 other cash carriers, can you, say something about how far along you are in the process? And when you expect to to have this other 9 certifications in in place?
So all of these 9 we're working with is actively sort of in lab right now.
So they are actively actively working with them right now. It's not only reading papers, but actually doing measurements and doing paperwork and measuring
on all mine. When will they be done?
It varies a little bit on the different carriers, but I
think was the things in the
end of Q4 maybe in Q1.
And, you highlighted this new, cash R and D coverage ratio, and, and you also mentioned that peers are at 0.8to1.5. And we know that you lately have gotten many new tier 1 customers with, with stricter demands. Do you have any sort of covenants on, on maintenance covenants on, on how much cash you must have at hand?
You can do it.
No, so no covenants, I would say, but, I would also say that's Santorin, and you have a annual meeting with, with, the C or the high end purchasing departments of these companies. And then they will set up their expectations and review, just like all other customer supplier relationships. So no written softenus, but more of a stick case.
-Sive dialogue. Gary and myself, an active dialogue with these customers, we know what I need. And we took action here in April last year, and we are fully covered under the compliance.
And you're, expect to continue to be sort of in compliance going forward with this. Yeah. Yes. And and just with regards to this, cellular, I know, of course, you're somewhat in the dark, but but, you now revoke the this target for 2020 breakeven, which was seems like it was largely expected, but by analysts, but can it quantify it somewhat when you expect to see an inflection point and and see commercial deliveries of of cellular solution, will that happen in Q4, Q1, Q2?
Actually, we saw that in 2 this year, we had a 200K revenue of samples. In Q3, we just reported 500 K. Dollar of, early production samples. And we are not guiding, outside next quarter. So, we come back to that as quarters progress.
All right.
Thank you.
Hans Satal and Carnegie. Just a quick follow-up on your R and D, on the R and D question, and tied in with yours $1,000,000,000 revenue aspiration. If you sort of plan not to be significantly under invested compared to peers, it would maybe implied that you're going to have an R and D spend of sort of 100,000,000 to 150,000,000. Could you give a, maybe a indication on how the, sort of, is it back end loaded or front end loaded where you see it's almost doubling from from the current level. And how will the revenues come first or will they sort of come after?
And you can continue the most important thing for a semiconductor companies that all investment and work happens ahead of revenue. We've been working 4 years, investing 4 years on cellular. A lot of the investment is taken. When it comes to Bluetooth, the same, we have been investing, as you see here, in the high 20s, 26 for this year. And we have done great investment, and we're going to keep more maintenance Now I'll ask that our revenue is growing.
Obviously, the percentage will turn down. A lot of things are done already. That's really the answer. Yes.
So the 26% we are using today will, of course, the intensity will go down compared to that level. But in order to be a market leader and actually, attracting 45, 50%, or 48% to 50% gross margins, you need to invest and have the best products out in the markets.
Question.
So, lately, we have seen, Apple, which seems to be coming to the market with a new tag using ultra broadband technology, and we also saw Amazon, had an event where they announced that they plan to launch a tracker with a new proprietary low power technology, seemed to to, to be very similar to the LoRa technology. I would love to hear your thoughts on on this these, global helmets, commented to to market with, with, say new and established low power wireless technologies? And what do you think about that?
I think before you start, yeah. Tell, I will said, it's not unestablished with Avaya Bank for a long time. We've been working with a company that is commercial have commercial available. We'll provide parts a day, deck away. So we know this technology pretty well.
Yeah. So, so both of these companies, like, that you mentioned, Amazon, and Apple, they have very little, very little actual facts out there. We are obviously monitoring this very, very closely, but, speculation on speculation is this is not something we we can do. Ultra wideband, I do think what Santura mentioned, the partnerships that we have with a company like Deca Wave who are supplying ultra wideband, established DOE as a very complementary technology to provide bandwidth lists. And for side work, I don't have any further comments.
All right.
Yes, so Christopher from the Indian Markets again. Just two more questions. And the first one is regarding the $1,000,000,000 sales target. I'm not surprised to see you're announcing that target, but one thing that I think was a surprise and you didn't really have to do was to commit to that 5 year time frame. So why did you choose 5 years?
What are kind of the pillars that you're seeing that makes you so certain that that will happen within the 5 years? It makes you say that instead of just saying we will reach it sometime?
You are very good with models because that's what analysts do using models. We also put things into models. And what we see with what's happening around us, it seemed to be within that time range. Based on new customer based on standard growth in VLE, That was sort of a time frame that we thought was correct.
And then on back to the efforts within audio again, there was a slide early on in the presentation where you talked about all the different platform companies. I think it wasn't Guy's slide set. And then on top, you had some examples of projects that you're in. And on the left hand side, there was what seemed like true wireless type earbuds which you now then announced that you're in. It was a bad picture because you just kind of explain what kind of product that is and what vendor it's from.
So I don't have to pretend hours trying to kind of
Well, that's not the the question I expected coming into this. You know, it's, it's it's just a few out of, 100s and, and, and 1000 of, of products coming to them all is that they they would connect through platforms, now as opposed to the actual, phone in the past. So, so these are for illustrative purposes, only not necessarily, you know, actual candidates for deployment to any of the partners on the bottom. Just to be clear.
Thank you.
Good. There's no more questions, and we would like to thank you guys for coming and attending today. We also have a few We also had some gifts to they also took almost all of you days to come here. So maybe Paul, you can live out when people are leaving. And we are happy to sort of talk to individual later on, but unfortunately, we are all going on our own trip.
Now also, it won't be much availability the next few weeks.