Good morning, everyone. Welcome to Nordic Semiconductor's second quarter 2015 presentation. If you sum up this last quarter, we had a record high revenue of $52.6 million. That's a 27% increase from Q2 last year. Our EBIT was at $10.6 million. Most exciting thing is Bluetooth Smart sales. More than $30 million, is more than doubling compared to Q2 last year. We would like to talk about all the width of customers, how many customers we basically gain quarter by quarter on Bluetooth Smart. That's really the pace we have going forward. The strong growth in these customers is really important, but also the new design win we are acquiring every week, really secure that we're going to get a strong growth going forward.
We also had a tremendously good launch of the nRF52 family on June the 17th in Trondheim. We had more than 100 design engineers from around the world sitting for 3 days, doing work on our new products in Trondheim. Last but not least, we released a HomeKit solution, and we were the first and the only one with a HomeKit solution based on Bluetooth Smart into the market. I also would like to discuss a little bit the HomeKit a little bit later in the presentation. I will hand over to Pål, he can go through the financial highlights. Before I give you the word, Pål, I would like also to talk a little bit about the backlog. This is the record high backlog we have, Pål's going to discuss that in detail. Yes, Pål.
Thank you. Thank you, Svenn-Tore. As Svenn-Tore mentioned, Nordic had record high revenue in the second quarter of 2015. The revenue was up from NOK 41.4 million last year, which is an increase of 27%. We're really happy with that. If we look at the underlying wireless growth, the growth is actually at 33% quarter-over-quarter, year-over-year. Compared to last quarter, the revenue is up 31.5%. The reason for this increase is both the underlying growth in the company, but also seasonality, because Q2 is a stronger quarter than Q1. In the previous quarters, as in previous quarters, the growth is mainly driven by the Bluetooth Smart technology sales.
Year-over-year, revenues from the sales of Bluetooth Smart increased from 12.2 last year to 30.1% this year. This is more than a doubling or a 145% up. This quarter, sales of Bluetooth Smart is at 57% of the revenue. Last quarter, Bluetooth Smart was below 50 due to seasonal resonance. The reason we've had such a good growth in Bluetooth Smart during this quarter is both new sales in gaming and toys that we reported in Q1. We also see that wearables has started to gain momentum again, and we also have lots of new design wins in consumer electronics and building and retail. All of this are adding up to the record number of $30 million in one quarter.
This is half the number we had the entire 2014. As Svenn-Tore mentioned, order inflows at $60.2 million, which is also a record high. The order backlog is now at $41 million, which is significantly up compared to last quarter. Gross margins are at 49.5%, slightly up from last year. Compared to last quarter, they are down close to 5%. I'm going to go more into detail about that later. It's mainly related to product mix and the customer mix within Bluetooth Smart and the proprietary business. Our EBIT is at $10.6 million. The EBIT is partly influenced by capitalization of R&D expenses, which were at $2.6 million this quarter, compared to $2 million last quarter.
If you look at our cash flow, we had negative cash flow of NOK 9.4 million, compared to NOK 12.1 last year, and NOK 14.8 last quarter. The reason we've built up or used cash this month is that we've further built up inventories and also other working capital items. It's mainly the wafer and semi-finished goods that we're building up, and the reason we're doing that is to be ready for the higher sales in the second quarter, and the lead time for wafers is between 3 and 4 months. We need to do the orders early. In addition, we've, during the first half of the year, spent quite a lot on CapEx. We spent NOK 3.6 billion this quarter.
This is partly new test equipment so that we can have high throughput at our test facilities, the Philippines and Taiwan, but it's also buying IP for our business in Finland. This will sort of cut down the development time by buying IP instead. We expect the CapEx to be slightly less during the next two quarters since we've done a lot of the investments early in the year. We ended cash at $25.4 million. We have used $10 million of our recurring credit facility this quarter, so we have $10 million left on that, but we expect to repay that during the next quarters. As I mentioned, group revenues were at $52.6 million, representing a 27% increase from last year.
Growth was spread across all our main market segments that we focus on, it's mainly driven by the Bluetooth Smart. If you look at the proprietary business, it is stable, has been stable for the last three quarters. It is 20% down from the same period last year. The reason for this downward trend is partly that Q2 last year was exceptionally good since the PC market took really off, had a rebalance in 2014. It's also slightly related to delays in PC sales. We are although seeing that PC sales are, on the global market, going down. There's no direct correlation between our sales to the proprietary business and the global PC sales. We're monitoring this closely. As Svenn-Tore mentioned, we had record high order inflows of $60 million this quarter.
I think this quarter we have reported $37 million in orders, this means that we are getting more and more small orders into our books. The unannounced orders on this quarter, close to over 40% of total orders. We believe this is something that's gonna continue while we're getting more and more mid-sized customers. We're getting less dependent on the large customers. Due to this, Nordic has decided to stop reporting orders effective December 31st this year. Q3 is gonna be the last quarter we report orders.
We will more focus in the quarterly reports on the ordering flow, the end backlog, but we will also try to focus more on the sign wins we get and report on that, and focus on this when we are able to do, of course, based on end dates with our customers. This is our target because. Let's go into our markets. I'll start with the growth markets. I'll just like to remind everyone that we have changed our reporting markets. The first one, consumer electronics, consists of both the old PC peripherals and also some of the home electronics markets that were two separate markets in 2014. Growth of 16.5% compared to last year, however, growth of 43% compared to last quarter.
As I mentioned before, PC accessories are slightly up compared to last quarter. We are observing a higher adoption of Bluetooth Smart within PC accessories market. This is, of course, something that will grow. The large increase from last quarter is mainly driven by the big order we reported in gaming in Q1. We have also seen very good attention in toys and other home electronic products this quarter. If we go to the wearables, a large increase of 69% from last year, however, a small growth from Q1 in 2015. We are seeing accelerated sales momentum within the wearables sector, which we did report in Q1.
We saw a slowdown. In the last months of the half year, so in May and June, we are seeing a very good acceleration in this market. Building and retail is the market that was mainly driven by one or two big customers within RFID. We are now seeing better attention, both in home automation and in beacons. We have recognized quite significant revenues within beacons in this quarter. Nordic sees this as a big potential for the years to come. Go to healthcare. We decided to report healthcare as a separate segment last quarter, even though we only had NOK 600,000 in revenue in healthcare.
This month, this is gone up by more than $1 million, so we now have reported $1.6 million in healthcare. This is some HairiGate, some glucose meters, heart rate monitors, et cetera. There's lots of new customers and new design wins coming into this market. This is an important market for Nordic going forward. Others, small markets, $500,000, mainly consisting of module sales. These are customers where we don't know where the end product ends up. Finally, ASICs. The ASICs revenue, as you know, will vary with projects that we deliver. This quarter, we had $1.2 million, doubling from last quarter. Still low compared to the numbers we saw in 2014.
This is a segment that where we know that the revenues will fade out when the projects disappear. We're not investing new in this segment. Gross margin as 49.5% in Q2. The gross margin is reduced compared to last quarter, mainly due to a product mix issue. We have sold less of the proprietary mature products that we reported as a high in Q1. We're also selling to slightly bigger customers within Bluetooth Smart, which will drive down the margin going forward. Also, finally, we have had issues with our production of our mid-life update of the nRF 51, as we also reported in Q1, which added some extra costs in Q2.
Overall, we expect that margins will stabilize at around 50% for the rest of the year. Operating expenses ended at $15.4 million in the second quarter. Total operating expenses, excluding depreciation and adjusted for options, which we call cash OpEx, went from $15.7 last quarter to $15.8 this quarter. A very small increase. The reason this hasn't increased more, given that we are quite a number of new employees, is that the holiday pace in June are booked against accrual. You will always see lower expense in Q2 and Q3 due to holidays. We have, as I mentioned, this quarter, capitalized $2.6 million in R&D, related to the introduction of the...
or the release of the nRF52 in, on June 17th. We expect, since this work now is more going into fine-tuning of the products, the capitalized amount will be significantly reduced in Q3 and Q4, so we expect it to be around $1 million in the next quarters. We haven't shown this slide before, but we would like to sort of present the employee increase in employees in the company. We ended the Q4 last year with 273 employees. At the end of Q2, this is close to 400 employees.
The increase is mainly related to the team in Finland, who now have 93 employees, but also R&D in Norway, and sales and marketing and admin are increasing slowly to adapt to the growth in the future years. Geographic distribution of employees. You can see that we still are main number of employees in Norway, where we are 60%. This was close to 80% end of last year, but the share in Norway is, of course, decreasing with the investments we're doing in both Finland and in the rest of the organization. Finally, operating profit is at $10.6 million.
A very good increase, compared to the last quarters, mainly due to higher revenues, a stable gross margin, costs that, although increasing, don't increase more than the revenue, and of course, the capitalized R&D during the quarter. In summary, Nordic had very strong revenue across all its targeted markets in Q2 2015. Revenue for the wireless sales grew with 33% or 27% overall. Bluetooth Smart revenues were at a record high, $30 million. We had very strong order inflows and very strong backlog. As a result of the increased revenue, margins are expected, as margins as expected and capitalized development expenses, total operating profit ended at $10.6 million, close to doubling from last year. We have used cash to build inventory and also build working capital.
However, we still think that we have sufficient cash to fund future growth of the company. Overall, we are satisfied with the performance in Q2. I'll now hand over to Svein-Tore, who will talk more about the exciting developments in the company. Thank you, Pål.
I think the important thing is to look at this graph. I mean, we have done the first half of 2015, close to $50 million, and it's 52% of the total revenue for the company for the first half, and we're going to see that increase its share going forward. With this rapid growth on Bluetooth Smart, it just shows that our customers are now starting to get into production. I think that it's important to discuss a little bit customers. If you look at Bluetooth Smart customers, and we have a definition of active customer. A active customer is a customer have purchased more than 10K pieces over a 6-month period.
We have set that to 10K pieces because we believe that a customer that already have produced 10,000 end equipment are very likely to go into production and ramp up going forward. Yet we have had a growth of 50% of this active customer during the first half of 2015, and we continue to get these customers in the same pace. If you look here, our development kits, sales for the first half, 16,000 kits. I don't say this is 16,000 new customers, because some customer buy more than one kit, but there is a significant number of new customer behind these 16,000 development kits. It's a 36% growth for 2014.
Obviously, as these kits getting out to customer, our customer base is expanding, we will get more and more medium-size orders, which basically is not going to be reported under existing regulations we have today when we report every order above NOK 1 million. We might get 10 orders of NOK 3 million, we won't be able of NOK 300K, which we're not reporting. That's some of the logic behind not continuing to report orders because it will skew the picture. Again, 16,000 kits, remember, we have in the second half now, we have introduced the nRF52 Series. It's a new family, we're going to see a good run rate on the nRF52 development kits. We are very, very excited about the pickup in the industry.
What we see is that more and more companies that we have not seen any revenue from previously, because they've been Bluetooth Classic customers, are coming to us and looking for Bluetooth Smart. That's going to drive the future growth for Nordic. I would like to talk about HomeKit solution. On the 16th of June, we announced our HomeKit solution for the 5100 family. We'll obviously also follow up with the 52 support going forward. This provide developers with a fantastic solution that meet all the requirement on power consumption, performance, and basically are fitting straight into iOS 8. HomeKit is the framework for these products and applications that is up, out there from Apple. This is a significant event for Nordic. We expect that customers coming from this solution will contribute significantly to our revenue in 2016 and onwards.
It takes time, as we discussed previously, to start from development till production. As long as you get more and more finished solution, like HomeKit is basically a finished application, so the customer don't need to do all the parts of development. He do the hardware, the apps and the software around is there already. The infrastructure is ready. We saw the first resonant charger on the market. We've been talking a lot about reasons. Gil Electronics choose to use Nordic for the communication with the devices from the charging plate. It's a great win. Gill is a serious player in this segment. This is a PC. It's a 33 plus W of power, is for charging PCs. It's the first one we've seen out there from using Nordic for resonant charging. There is more to come.
We promised you, as investor, that we will see revenue from resonant charger in 2015. Now we have the first revenue, but we'll put it in the consumer segment. Finland, it was half a year since we kicked off Finland. It's been very well integrated with our development team in Trondheim, Oslo, and in Krakow. We've been able to get all the licenses that we need to build the product. It's been assembled. We are starting talking to partners and potential customers already on the end product, and the project are progressing as planned. Maybe I could say a little bit ahead of plan. We are very, very pleased with operation in Finland. We managed to get a excellent management team in place, and we see that it really helps on the progress. Again, we changed the game. We released the 52 family.
It's built on the rock solid, I like that word, rock solid foundation of the nRF51 Series. It's a proven solution which have been sort of beefed up with new hardware. We keep the same software, but new hardware. It is absolutely the most powerful Bluetooth Smart solution out there today. It's easy to use, and it has extremely low power. We are basically pushing the envelope of a single chip solution. It's architected for speed. It's a high-performance radio. It's embedded flash, it's multi-segment RAM, and it has very easy DMA. The feedback we got from customers that have got hands on the 52 is positive. I would say extremely positive. We feel that we did a good job on designing the 52, and the design team in Trondheim should be very proud of what we achieved with the 52 family.
What does that make to the outlook? As Pål mentioned, growth in revenue will be driven by Bluetooth Smart. We see that it sort of came to a level in proprietary, very stable, and we have some of these new designs outside PC assessment, accessory, that might increase going forward. We are pretty sure that we are going to keep the margin around 50% for the rest of the year, as we've been predicted. Our OpEx will continue to grow as we expand to catch even more market share of the large emerging market of Bluetooth Smart. The most important thing is that the, I would say, the diversity of the customer base and the numbers of customers within the different segments.
It's overwhelming, the numbers of new customers we're getting, and customers we didn't even believe were going to use electronics or Bluetooth Smart. If you want, if you are on webcast listening, for more information about Nordic, sign up for Nordic MyPage, you will receive all the latest info from us. Cool. That was what I want to say on a July holiday day. Any questions from the audience?
Hi, it's Pegg Manuram.
Hi, Pegg. Yeah.
Okay. If you look at your Bluetooth Smart sales of $30 million, subtract what you had in wearable sales, let's assume a crude assumption that all of that was Bluetooth Smart related, that means that, you know, almost half now is other components than the wearables. Could you shed some more light on what categories are actually driving that growth?
I think Pål did it through his segment, discussions. We say beacons, we said PC accessories, and we also see some reasons and basically all the segments we've been discussing, and obviously also some toys.
Okay. Thank you. A second question, if I may, to you, Pål. The cash flow was quite weak this quarter, and you explained the reasons for that. Would you expect that to reverse again in the second half of this year, as, you know, you enter into more a seasonally slower quarter, and then you regain your working capital?
Yeah, we expect that the inventory should stabilize at this level. Also, I have a question from the net, from Frederick in SEB about the days outstanding from our customers has increased. I think that's... We see a shift in the larger distributors are taking a lot of the growth. We will see that the credit terms are slightly lower than if we sell to a small customer. Anyhow, I believe that some of this will be reversed, and with profits coming in, that the cash balance should go up again.
Okay. Thank you.
Mm-hmm.
Carnegie. Following up on the, on the cash flow, can the credit facility be increased from the levels they are today?
Of course, everything can be increased.
Yeah
... if needed. Yeah. That's negotiations, and then, and depending on how we want to do that. If, if needed, that can be done, yes.
I think the important thing is, we don't plan to do it because we don't think it's needed.
No. Great. Could you elaborate on the customer composition of the unannounced orders? Is that older customers doing less orders, or is it new smaller clients coming in?
It's basically a bunch of new, smaller, or starter production for new customers. As you see here, we more than doubled our customer base since last year. Some of these customers have been in the design cycle for a year, are now starting to get into production and ramp up.
Thanks.
Okay. Thank you for coming, and wish you a great day.