Good morning. My name is Birger Steen, and last December, I was elected Chair of Nordic Semiconductor. I wanted to take this opportunity to introduce myself to you to introduce some work that we've been doing between the Board and management since then. First of all, I've also had the opportunity to spend quite a bit more time with the company. I've been on the Board since the spring of 2017, the last six weeks I've spent time both in Oulu, in Finland, which is an impressive place in many ways, Trondheim and Oslo, also had the opportunity to spend a week with the Nordic team in Las Vegas. That's going to rank high on my highlights of 2019 personally, because these guys are like rock stars on that floor. If you're from Nordic, you're welcome absolutely everywhere, everybody comes by your stand.
I see a few faces who were also there, they can probably testify to this. More in particular, since I joined the Board back in 2017, particularly these last six weeks, it's become clear to me that many of our shareholders have opinions on our investor relations work. We have more than 3,000 shareholders, that's probably natural. It's no surprise that you guys have different perspectives different needs. Anyway, in phone calls and meetings, with the help of some qualified third parties, we've spent some time listening taking notes in these last few weeks. Then we've sat down as Board and management to think through how we could serve you in a better way. The net result of this is our revised investor relations policy, which you will shortly find on our website.
You'll see a key theme is our ambition to provide all shareholders with equal timely access to share price relevant fact-based information. We aim to produce a generally tighter information flow, timely, accessible, widely shared. We will focus on announcements, press releases, capital market days, road shows on both sides of the Atlantic as we reenergize our marketing efforts to international semiconductor investors. We have made some changes to our forward-looking guidance principles effective today, as you'll see in a moment, with an emphasis on key figures for the current quarter medium-term revenue growth aspirations. We're doing this to align with market practice, also in light of high uncertainty low visibility in our markets. By the way, this is a situation we do not anticipate will change in the foreseeable future.
If you look across comparable companies internationally, now just most recently, probably the company with the best insight in the whole world into the world economy, Amazon, you'll find a similar approach to forward guidance. We're also rebuilding our investor relations team with top-notch people, Svenn-Tore will provide more detail on this in a moment. That's really it in a nutshell, you can read more about the details on our website shortly. In my opinion, Nordic Semiconductor has a strong platform for future profitable growth, I hope to contribute to the company's development in my role as Board Chair. Going forward, though, I hope the Board of the company will be less visible rather than more, less of a factor in investor relations work than it has been in the recent past.
This company has products, customers, and full-time employed people who really speak for themselves. In that spirit, I'll leave the stage to our CEO, Svenn-Tore Larsen, who will present the first quarter results as usual, together with CFO Pål Elstad. Thank you.
Thank you, Birger. We do the as usual. I'll do the business update, Pål do the financials, and I come back and do the business outlook. Q4 highlights. We continue to strengthen our market position in Bluetooth Low Energy. But maybe the most important thing is, yes, we get 133 new designs in Q4, design win registration, but the difference from previously is that we also have high rank tier 1 customers among these, with opportunity to higher volume going forward. We had a successful production launch of our Cellular IoT product, and we received industry awards. For the second year, we won the GSA Award. Global Semiconductor Alliance is an association of all semiconductor companies that are voting for their favorite within the different categories, and we won the European category this year as last year.
If you look at numbers, we saw a solid proprietary revenue, and that was mainly due to accelerated shipments out of China prior to the new tariffs. We saw some of our customers produced and want to ship it out ahead of tariffs into the U.S. It was a challenging market in China due to these expected trade tensions, and we got a disappointing revenue compared to what we had planned for. We are not happy with $61.1 million, but it was a tough situation for all semiconductor companies during Q4 2018. As I said, $61.1 million is a decrease of 5%, again, far away from our target when we enter into this year. It's, as I said, impacted by trade tensions and following low demand in China.
When people are getting cautious and we have lines of cautiousness, it really affects the first supplier, and that's Nordic as related to our market. Proprietary was only down 4%. When we started the year, we expected a decline of 5%-10%. It's been keeping up, which is a positive sign for one of the bricks in our revenue. We did promise revenue for our cellular modems, we delivered. We got $232K invoiced during the quarter. Our backlog is solid going out of Q4. It's up 30.4% year-on-year. What we've seen, though, is that some of this revenue has been pushed into Q2. That's why we are cautious when we do guiding for Q1 2019. I'm not talking about all the decline, but if you look, we had a growth of 23.3% year-on-year in Bluetooth, we continue to grow.
That's more or less what we will call, at least we aim for, having as our short-medium term goal of growth in Bluetooth. The bright spot is that we started to get paid for our efforts on supply chain, and we got a gross margin of 51%. It is up 3.4% year-on-year. We had an EBITDA of NOK 2.1, and if you look at short-range EBITDA, it was NOK 7 million or 11.5% EBITDA margin. It cost to the investment we are doing in Finland, but it is going to pay back. If you look at our product life cycle, and this is in short range, you will see the steep rise of Bluetooth. I just want to talk a little bit about the time it took from our first release of a Bluetooth chip till we got revenue. It was five to six quarters. When did we release the Cellular IoT product?
12th of December, and we got revenue in the same quarter. It really tells that the statement I made on the first slide, that we are a recognized semiconductor vendor, really also spread outside competitors. It is customers that are buying our product, and they buy it the same quarter as we release the product. Actually, when it comes to the cellular modems, we shipped 360 development kit before we released the official production. We are pretty confident on a solid growth in Bluetooth. Why? Because we now see Tier 1 customer are entering the market with products with Nordic inside. We will expect growth between 20% and 30% going forward. We said last year that we think there will be a decline in proprietary of around 10%. We have been a little bit more modest this year, and we say maybe 10% to flat.
The basis and for Nordic to grow has never been stronger than today. If you see here, the life cycle here is on two products. We are going to add another product on top of these two. If you look at that product, it have an ASP that is 10 to 15 times the existing Bluetooth ASP. By this, I leave it over to Pål.
Thank you, Svenn-Tore. I will now run through the financials for Nordic in Q4. As normal, these numbers are the reported numbers. They exclude capitalization of intangibles of equity compensation, which we will come back later when we talk about the cash OpEx. As we see, we had a disappointing revenue in Q4, sorry, with -5% versus last year. Of course, as we have communicated earlier, our fixed cost base continues to increase, so we will get a negative effect on our operating leverage in this quarter, which I will go run through more in detail. However, as Svenn-Tore just mentioned, we do see positive effects on our variable cost base. Our variable costs, the gross margin, has improved significantly compared to last year. We had a 3.4 percentage point increase from the same period in 2017.
Total OpEx in the quarter is 47.7% of revenue, up from 41.3% a year ago. Compared to Q3, which is the highest revenue quarter, our OpEx in the percentage of revenue in that quarter was 32%. Increase from Q3 is, of course, lower revenue. We also have, as normal, a higher activity in Q4 versus Q3, both in relation to activity in sales, in activity in exhibitions, but also the effect of holiday pay in the third quarter of the year. The underlying or the reported number in cost has gone from NOK 25.3 million to NOK 29 million in 2018. A few comments I'd like to make. One of the biggest cost increases have happened in the Cellular IoT business. The reported number for Cellular IoT is NOK 5 million. This has increased, without capitalization, to NOK 7.5 million, up from NOK 6.1 million a year ago. SG&A.
SG&A has gone from NOK 10 million a year ago to NOK 11 million this year. The investment in SG&A comes as an effect of the focus we have on introducing the cellular product into the markets that will happen in 2019. On the EBITDA margin, 3.4% versus 6.2% a year ago. As our cost base is fixed, of course, we get a negative effect, as I mentioned, on when the revenue goes down, I also want to highlight 2018 full-year operating model performance. We did have a 15% growth in revenue this year, including a Bluetooth growth of 23.3%, which is within our medium-term ambitions. As I also said before, gross margins, a very good improvement. In the beginning of 2018, we said that we were going to have one quarter of above 50%.
When we look at the year as a full, we actually almost managed to get 50% for the year as a total. We're very happy with the development within our cost base on production. Total OpEx at 38% versus 37% for 2017. OpEx going from NOK 87 million to NOK 103 million. Higher OpEx. Our revenue growth combined with improved gross margins have driven an EBITDA margin improvement of 1%, from 10% in 2017 to 11% in 2018. I'm now going to briefly go through the revenue per market. When we have a 5% decline in revenue year-over-year and a 22% decline quarter-over-quarter, it will be negative in most areas. First of all, consumer electronics and wearables is the two markets that are most impacted by the trade tensions that Svenn-Tore mentioned and the low demand in China.
The reason for this is that within consumer electronics and wearables is where most of our customers are ODMs in China, which see the lower demand. Two areas with very positive development is Healthcare and others. Healthcare is one of our key target markets. In 2017, that was slightly low due to new products released. In 2018, we've seen a very good drive on these new products. In others is the module business. That also has shown very strong numbers throughout the year. Building and retail, of course, the worst area with a 37% decline. If you adjust for the two applications we discussed in the Q3 presentation, building and retail shows a pretty good growth rate. For the next 2019, we will of course add our Cellular IoT products into these market categories. Gross margin. We had a strong gross margin expansion of 3.4% versus last year.
This comes as an effect of the continuous improvements on cost and yield on our products. Actually, we now see the highest gross margin since Q1 2015. Q1 2015 is really when we released nRF52, and we started to have lower yields. All that is now improved during this timeframe. Compared to last quarter, we have a 0.2 percentage point improvement, driven by underlying cost improvements again, but also favorable impact of ASIC revenues, which have a good gross margin, and volume bonuses received in Q4. It's also important to highlight that we do have quarter-to-quarter fluctuations, and they should be anticipated also in 2019. Now I'll turn to cash OpEx. Cash OpEx is what we have as an underlying cash cost, where we exclude the effects of capitalization. In Q4, we have capitalized NOK 3 million, of which NOK 2.5 million relates to the cellular IoT investment.
The reason the highest amount is there is, of course, that's the product that's running into the commercialization phase. Whilst in Bluetooth, we have more products further down the pipeline. As previously communicated, our cash OpEx has been increasing. However, from last year, the increase is now 10%, which is slightly lower than we've seen in historical quarters. This increase in cash costs comes mainly as an effect of higher headcounts. We have increased headcount by 14%, from 601 last year to 685 this year. This increase comes as a broad basis, both in R&D, mainly cellular IoT, but also in the sales and supply chain to fuel the future growth. We do target to have continuing cost discipline during the quarters, and cash OpEx should follow the operating model that we've discussed earlier.
This list is a slide we introduced last quarter, where we like to focus and show the profitability of our short range business. Our short range business, which is the Bluetooth and the proprietary through the ASIC, actually showed a strong 15% growth year-over-year. In this growth business, coupled with improved gross margins, we have been able to improve our underlying EBITDA by 10%, from NOK 43 million a year ago to NOK 47 million, or close to NOK 48 million in 2018. Due to the higher cost base, the EBITDA margin is slightly down from 18.4% to 17.6%. However, we are happy that we're able to keep the relatively high EBITDA margins in the short range business. My final slide is on cash flow. We did have a very strong cash conversion in the quarter. The total cash flow was a positive NOK 9 million.
However, if you look at the underlying operational cash flow, this was NOK 26.5 million. The strong cash flow is a seasonal effect. We always see improvement in cash flow during Q4. However, this was stronger than we've seen in the previous period. The main reason for this is that we've been able to reduce our net working capital substantially from 32.1% of last 12 months revenue to 22.6% this quarter. We continuously have a focus on reducing our internal inventory and also keeping good control of our customers. In addition, we had a CapEx of NOK 5.4 million in Q4. As we mentioned earlier during the capital increase in April, we are investing in test equipment to speed up the certification process and also analyzing yield, et cetera, for new products coming into the market. This is very important when we're selling to the more complex customers we're doing today.
We have purchased treasury shares for NOK 12.1 million this quarter, 2.8 million shares. When we did raise capital in April, we sort of announced that the use of proceeds of this share capital increase was threefold. First of all, it was to invest in working capital when we will start and commence our cellular business. Secondly, we will invest in lab equipment to speed up the testing processes. Finally, we do want to show a strong balance sheet to our Tier 1 customers. In light of this, we've decided to stick to this use of proceeds that we announced, and we've terminated the share buy program as of today. For the year as a total, we have a break-even cash flow adjusting for the financing activities we did in the second quarter of the year. Tore, I'm now going to let you do the business outlook.
We've been announcing a couple of design wins on cellular modem earlier, this time we add a new product. It's a beverage machine, the Slush machine, they designed the nRF91 parts in there to do maintenance and reactive maintenance. During CES this year, we got a lot of customers doing the same. We got the guys that are all the popcorn machines around the U.S., we have guys doing soft ice around the U.S., want to implement something similar. We see high activity in a segment that we actually predicted a year ago when we talked about active maintenance. We also see that we continue to win smart tags for asset tracking, healthcare life monitors. Again, new wins. In the middle, you see a product from ABB. It's a bearing, they have a sensor and a Bluetooth Low Energy communicating with the hub.
You're going to see quite a bit of these sensors collecting information from industry applications going forward. The sales team have also worked with a couple of companies doing electronic shelf labels. This space has mainly been driven by IR, infrared light. Now we see companies moving to Bluetooth Low Energy. Good volume opportunities. We have this chart from an analyst showing that Nordic is back on track and close to 45% market share on the design wins that are registered at Bluetooth SIG. It's exciting to see us back where we belong as the leader, absolute leader. I think another thing to look here, a comment we got in Q3, is this red bar with others. These others contain around 20, 22 different semiconductor companies that have one to three design each. Usually, they are in the low end BLE products.
You see these guys had a relative sharp decline in Q4, we don't think you can maintain the specification, put all the functions and features that are required for Bluetooth Low Energy with one to two designs. It requires more revenue to be able to be the leader of BLE. I think this chart shows that Nordic is there. 8% year-on-year, 10% growth quarter-on-quarter. We also believe that shipping kits is the right way to get attention with customers. Easy-to-use kit. We are showed on the demo on the 12th how easy it is to get our Cellular IoT kit up running. Everybody that's been working with Nordic know how easy it is to get a BLE kit up running. We shipped close to 66,000 kits last year. It's a 33% growth for the second half, 39% growth for the full year.
It shows that the market for BLE is growing, it also shows that our position is strong in this growing market. Kit shipments we're proud of. We're also proud of how we keep up with development in BLE and Bluetooth SIG. Bluetooth 5.1, which is the latest specification of Bluetooth, contains something called direction finding. Nordic has implemented direction finding from our chip, which is called nRF52811, and it will be on all subsequent devices out of Nordic. We do have some exciting applications already today with all the parts where we have preparatory direction findings, which I will come back to on a later stage. To be able to lead in a technology sector, you need to ensure that you have the new additional feature timely out to the market.
We're there. Of a new segment, Cellular IoT, it's going to be the next driver for Nordic, and it won't take five to six quarters before we continue seeing revenue. If you look at the left side here, this is the first projections from external analyst, ABI Research. It's two weeks old. It shows what I expect from the market from 2019 to 2023. If these numbers are correct, it really shows that the statement we've given to the market, that we should be break-even in 2020, implies that we need to take less than 10% of market share. That's not a traditional Nordic approach. We aim for more. 2020 is not that long out. If you look to 2023, we are close to 700 million units that I expect to be shipping into the market, and this is LTE Narrowband IoT and LTE-M only.
We're not talking about LTE generally. These are the two standards Nordic delivers. I know there are guys here that are really sharp with the calculators. If you take close to 700 million units and multiply by 10, 15, we can see that this market is significantly larger than the BLE market. If you then think we have a modem that is suited for most of these verticals that will apply Narrowband IoT, LTE-M. We have market-leading power consumption, we have a community of designers out there that are familiar with the Nordic development tools. I think it's important for you guys to understand, when as a designer, you should start a project, you have extreme pressure on time to market.
If you can start in a development environment very familiar, you can become the star of the company, especially if you use the component that has the lowest power consumption and has the best specifications. We are extremely proud of the team in Finland. I'm particularly proud of how the sales organization, how our partner's been rolling out the LTE shipment. We have an exciting trip ahead of us. I hear from people occasionally, Nordic is not well-known around the world. I would like to stop that here and now. This is one of the broad-leading catalog distributor shipping worldwide. One morning, Geir got this letter into his email box. It says, Digi-Key would congratulate us to the tremendous interest in our products.
9160, the cellular modem design kit, the product was ranked 2 and 4 in views on their webpage among 97,000 new part that they have stocked the last six months. This is incredibly good, and we are proud of that. Read further. We also had the nRF52840 Dongle up there. It was ranked number 5. Three products for Nordic among the top 5 products. I'm proud and impressed. And so are David Stein, the Vice President of Global Supplier Management at Digi-Key. Still want to discuss that we are well-known around the market? We got the award from the GSA. We get such kind of feedback from leading distributor. I'm sorry, I'm not accepting that Nordic is not well-known in the market. We are known as the connectivity leader.
We also see now that we have created a leading product that generate interest at engineering desks globally with the nRF91 family. We had an impressive launch of the nRF9160. We now get certifications in place. We got the global certification program, which covers more than 100 operators. We are working on 10 major operators lined up for network-specific approval programs. Some of them will already be in place the first half of 2019. We are starting to ship development kits and samples through distributions. Do you know how they were shipping LTE and cellular modems before? Our competitors had FAEs going out to customers, sitting with them for weeks because it was so complex. Our Finnish guys have made this ease of use, which is the Nordic mantra.
Anyone that has a little bit of knowledge of electronics can hook these kits on the net, and I come back to that as proof of that. Anyone remember when we launched the product? 12th of December. Between 12th of December and 1st of January, there is a holiday. Despite that holiday, we shipped 2,000 development kits out of Nordic. And customers are now building prototypes across a range of verticals. It's not only slush machines. It's not only popcorn machines. It's absolutely other areas too. I don't know who saw this was released yesterday. Nordic facilitates Telenor LTE deployment. It's Ove Fredheim, Head of Telenor Business. He says in the press release, "Nordic's dual-mode LTE technology fits perfectly with new networks." What did I say? I used the word easy. Ease of use. What does Telenor say?
Making it easy for more people to make use of IoT on 4G." The operators really need IoT to take off, and they have the vehicle to do it. Telenor is going to sell the nRF9160 development kit in their own web shop. Christer can buy one. Fionnuala can buy one, and you can put some power supply on and suddenly you are connected to the cloud. Before we go there, actually. What's happening? Nobody can hear you. There was also another major operator out with a press release yesterday, and Nordic was mentioned as one of the partners. Telenor is not the only one. It's significant movement in the space, and Nordic is dependent that operators are putting 4G and 5G and Narrowband IoT on the base station, and this happens as we speak. Now I'm over to guidance.
I've been talking a lot about good things going to happen in Nordic, and I'm showing a not very good guidance on the numbers for next quarter. This is very much in line with what you see from other semiconductor companies that have been guiding for the first quarter. We think we are ahead of an uncertain quarter, and we are expressing this through our guidance on the revenue. This is a temporary thing. We don't know if it's going to be Q2, Q3, or whenever we're going to see this tension, or if it's going to get relaxed tomorrow. Nobody knows, and that's why we are cautious in our first quarter guidance. Be sure that we have projects to drive excellent revenue in time to come. We are continually focusing on cost improvements, so we expect to keep the 50% margin.
We, as Pål said, raised capital to invest in lab equipment. Two reasons. One is to comply to Tier 1 customers' requirement. As you're getting more of the Tier 1 customers, you need to fulfill their expectations, and Nordic is doing that. We also want to accelerate our process to get approved for networks. We have bought the same test equipment that the operators use when they test Nordic against their own network. We don't want any surprises when our modules get into our operators' test labs. This obviously costs, and we expect a CapEx of around NOK 7 million-NOK 8 million in Q1. We do it because we expect to see a result of this not only in margin improvement, but in revenue in quarters to come after the Q1 quarter. A final comment I will make is that next quarter, you all will meet our new director of IR.
Ståle Ytterdal will move back from Hong Kong and participate in the Q1 presentations and roadshow. For those that, there is some few ones, maybe not in Norway, that we meet him actually on the roadshow we have next week. He will be active from now, and will be a leading part of the presentation in Q1. We open for questions. Pål.
Christoffer here from DNB Markets. I was just wondering if you could start with, I guess you don't know what will happen in Q2 and Q3, could you share some thoughts on what will need to happen for this situation to normalize? What are your clients telling you that they need to see before this will normalize the situation?
There is two thing related, we have to take it related to the Nordic. One thing that's for sure is that we will get new customer. Even if the situation not normalizing, we will grow our revenue because this customer will get into volume production in the second half. If we get a situation where the trade tension basically disappear, we will get a double weight. Then we will get existing Chinese customers back on track. We have accumulated quite a bit of design wins, as you know, and they will move to production.
Yes. I guess even though there are these trade tensions, we still need the same amount of wearables or keyboards and mice and stuff like that. How long will the end customers, the Western companies that use these sub-manufacturers in Asia, how long are they able to wait before they have to move production out of China or do other initiatives that fixes the problem?
I think that's very individual of the power of each customer. We see some of the leading customers are exploring opportunities in countries like Thailand or Vietnam. That's nothing that Nordic can comment on or have an opinion. We can just watch and convey our view.
Two more. The first one, you take down the long-term or medium-term target of business growth from around 30%-40% to 20%-30%. Could you just share some thoughts on what's the main driver behind that significantly lower growth? Secondly, on medium-term growth margin and CapEx targets, is this a temporary higher CapEx? And the gross margin, is it medium-term 50%?
I take the first part of your question. Pål can take the second. The first part is basically that we say this is a medium-term target. That's because we have the tensions ahead of us. We would like to comment when situation change, but we can't comment before we see real proof of changes. We think with the 20%-30%, we are in a range where we are able to fulfill that guidance.
With the tension still going on?
Not for Q1, basically, but with the mid-term. If we had that in Q1, the number guidance wouldn't be 50%-55%. We have to lift our view above Q1. Q1 is unfortunately what it looks to be, but it will not continue in the same pace as we add on new design wins. There will still be production of product. There will still be consumption of products globally. It doesn't stop.
For gross margins, I think we've communicated previously that our long-term target there is 50% on the short-range business. It's important to remember the short-range business. On the cellular business, which where we sell System-in-Packages and modules, our target is still for around 40%+ gross margins. You'll have to calculate the corporate average when we start looking into the cellular IoT numbers. On CapEx, we do have a higher CapEx in Q1. I don't want to communicate further than that because, of course, our CapEx really depends on plans and targets. On what we want to do and how the whole business develops. That's the target for Q1. Then we'll see what happens for the rest of the year. Look at historical numbers and you get an indication.
I maybe have to adjust at market conditions.
Yeah.
Sure.
Yeah.
Thank you.
Yes. Axel from ABG. A couple of questions. Firstly, you have a backlog of NOK 70 million ending the quarter. It is up over 30% year-on-year, and it paints a little bit different picture than the revenue, which is down. Could you comment a little bit on the backlog, the duration on the backlog?
Thank you for your question. That's a very good question, and that shows the situation. Basically, yes, we have had orders. What you see is that orders are pushed out in time. The good thing is that they're still on the backlog.
Just follow up criteria, because I discussed with my colleague earlier and we wondered how long can an order be in a backlog before it's taken out of the backlog?
An order is never taken out of the backlog before it's canceled by the customer.
Okay.
I don't have a magic number of how long that time is.
Yeah. If you could comment on the duration on the backlog, how long does it stretch out in time for?
Yeah. I think the length of major of part of our backlog is ending in Q2.
Yeah.
Basically not longer than Q2.
Okay. Normal then.
Normal, yeah.
A question relating to the gross margin improvement, which has been very strong. You cite a couple of different reasons, but would you say that it's primarily driven by supply chain improvements or primarily driven by favorable customer and product mix?
Which is the key factor?
If it is-
Is it 50/50?
I think basically supply chain has contributed mostly to this. The exact split I have not calculated on, but obviously it's supply chain and improvement and investment we've done based on the capital we raised earlier this year.
Yeah. When one has seen the gross margin improvement and one has seen that in relation to the unsatisfactory Bluetooth growth and perhaps a little bit stronger proprietary sales, some reason that you have stronger margins on the proprietary side, and that has been a key driver for the high gross margin. Is that correct reasoning?
No.
No?
No. I think our gross margin is a little bit mixed. It's difficult to exact pinpoint.
Yeah
if proprietary is better than Bluetooth.
Couple of final ones. You saw a headcount growth now in 2018 of 14%, and you continue to hire many new people. Do you expect a similar growth rate in terms of staff for 2019?
We have plan for growing support, especially for cellular modems and sales. It will not be in the same range, but also depend on market conditions.
Okay.
The important thing for us is that there is a limited pool of available, really good guys in this industry. What we see lately is that some of these guys have start coming to Nordic, and if we can get capacities that can lift the total organization, we will always employ these guys.
A quick final one, more short-term oriented. On Q1 now, I would guess that it is a quite difficult quarter to guide on, given that you do a lot of business in the end of the quarter, and in this quarter you have the Chinese New Year also.
This week, yeah.
Yeah. Could you say a little bit about visibility that you have on the quarterly development so far, and how much of the quarterly business is going to be done in March, and how that could change your outlook better or worse?
I think the visibility is more or less the same as it is other quarters. We do a lot of the business towards the end of the quarter. It doesn't really matter that there's one week of holiday in between.
Okay.
Yeah.
That's all?
Yeah.
Okay.
Thank you. Rette in Arctic Securities. Could we quantify how much of your weaker sales was due to weaker end demand, and how much was due to cut in inventories from your distributors, approximately? Dialog, they claim that the underlying Bluetooth Smart growth is about 20% also growing into Q4, and that cut in inventories by the distributors is a problem.
Yes, we can comment a bit. Obviously, there is inventory adjustment when you see such a disappointing guidance for Q1. We also see that there is some new project coming in that will use different products from Nordic. It means that the inventory situation needs to be dealt with, and that's what we're doing. The exact ratio on over products is hard for us to know because it's our end customer that sits with that information.
Q4 specific on the building and retail segment, if you exclude Share Bike, how much approximate there is revenue year-over-year?
We haven't given that details. We say that underlying, we see good momentum in that business. We've all talked about smart homes, retail solutions. Also the city bikes in other areas than in Asia has a positive momentum. Overall, building retail is an important market for Nordic.
We see a new segment in building retail starting, that is lighting, smart lighting, which will contribute a bit in Q4, will continue to contribute in quarters ahead of us.
On CapEx, can you give some more color on the mix on what you expect to be invested in Finland this year and what you expect to be invested in Bluetooth and how we should think about the CapEx number for the next few quarters?
I think the way we invest is a lot of it is combined. We're not buying a lot of equipment just for the long range. Most of it can be used for both long range and short range. It's a good mix. Yeah.
I think we have to make a little bit more. Basically, all the component tester, we use the same test equipment. When it come to network tester, is specific for Cellular IoT. We've done most of the network test equipment already.
Thank you.
Andreas Bertheussen, Kepler Cheuvreux. Two questions here from me. First of all, you mentioned a sort of pull-in effect on proprietary. Can we see a reversal of this going into Q1 in the guidance?
We didn't see the pull-in request ahead of Q4, and I think we are very much in the same situation. If there is a push-out for Q1, we haven't seen that either.
Thank you.
We have inventory. We are prepared for a continuation of this if it happens.
Okay. Secondly, on this slush machine, popcorn machine type segment, surprised to see that the economics can work out in terms of how much you would save on predictive maintenance versus the cost of the module and the subscription. Do you have any color on how these economics work? If you can really justify this type of chip with subscription on such a sort of small device?
Yes. Usually these machines are maintained by persons going over there and sort of checking and having some people employed to go around and check these machines is relatively costly. The companies that we met said they would save significant over time.
Okay. Thanks.
Okay, I think our time is over. Thank you.
Have a good day.