Good morning. Nice to see you all, welcome to the presentation of first quarter result for 2015 at Nordic Semiconductor. It's been a fantastic quarter for Nordic. If you overall look at the summary, we did $40 million. It is a 27% increase from Q1 2014. If you remember that Q1 is the quarter where we have Chinese New Year, it is basically three weeks with minimum production. Our Bluetooth Smart sales were almost $18 million, is close to double compared to last year in Q1. The most important thing, which I will come back to a little bit later in the presentation, is that it was a 35% increase in new volume customers. This is the biggest single increase we have had quarter on quarter since we started with Bluetooth Smart.
A lot of you guys been talking about these binary customers. We got the first one in this quarter. It was actually a $6.7 million order to a brand-new customer. We have more of those in our pockets. We got the operation in Finland up running. It's 80 employees as of 31st of March. It's running smooth. We're doing great progress. Small sentence, but extremely important for Nordic, a lot of you have seen pre-launches of new Bluetooth Smart products from competitors. At Nordic, we don't like to pre-launch, we launch. On the 17th of June, we are going to launch the new nRF52 Series part from Nordic. I will discuss that later in the presentation. First, I will let Pål go through our numbers.
Thank you, Svenn-Tore. As Svenn-Tore said, we are seasonally very satisfied with the performance this quarter. Revenues, as was mentioned, was $40 million, that's up 27% compared to last year. If we just look at the wireless components, exclude ASICs, the revenue is actually up 32%, which is our main focus area. Compared to last quarter, revenues are down 11%. This is approximately the same seasonal adjustment as we saw last year. Last 12 months revenue, up 34%. That's the same number as we showed for the whole of 2014, so it shows that we have the same momentum in the growth of the company as we saw in Q4.
I think one of the main, most positive things this quarter is the order inflows, $53.3 million. This is significantly up, both compared to last year, also compared to last quarter. I just want to recall, last quarter, we reported that we had some startup issues, but some phasing issues for the new XLR3. I think those are more or less solved now. We see more orders coming in for that part of the business. Backlog is at $33 million, which is also $13 million up from last quarter end, in expectations of a good Q2. Gross margins is maybe the area where we've seen the largest improvement since last year and also last quarter. This is due to a favorable product mix and a customer mix.
I'll come more into details on this. We don't see 54.6% as a going gross margin. We're still leaving it at the guiding we've done at 50%, which I think is what we expect as a long-term gross margin. Operating profit, $5.3 million, up from $0.8 million last year. The reason for this good operating profit is, of course, the good gross margin, but also the fact that we have OpEx that haven't increased as much as we anticipated. One of the reasons is, of course, the capitalization of $2 million related to the nRF52, also we have a strong tailwind from the U.S. dollar, which has impacted us $1.5 million this quarter.
Net profit after tax $4.1, compared to $0.7 last year. I mentioned during the last quarterly presentation that our inventory levels were too low to be sustainable for the growth of the company. We see that now. We've used approximate $14.8 million on building inventory so that we have wafers and semi-finished goods available for the growth in the coming quarters. This has, of course, drawn down our cash balance from $35 million last quarter to $25 million this quarter. We haven't just built up inventories, we have also invested about $6 million in lab equipment and IP software in Finland. This is not gonna be six months, $6 million every quarter, it's sort of a big chunk we've taken in the beginning of the year.
Other working capital items are fairly on the same level as last quarter. To fund the business, we still have the RCF available to meet sort of cash demands in the slower or in the buildup in the next quarter of working capital. Okay? Back to group revenues. As I said, group revenues increased 27% from last year. Growth was spread across both proprietary and Bluetooth Smart. Bluetooth Smart, we actually saw a slight decrease from last quarter. We believe that this is a seasonal decrease because the second and the third and the fourth quarter last year was very strong.
We see that we have a sort of a seasonal dip before sort of the holiday seasons start. As Svenn-Tore mentioned, we had the impact of the Chinese New Year. We saw in our end customer sales that February sort of was completely dead. When we go into March, we've really seen this pick up again. We are very confident on that part. What's interesting on the proprietary business is that it's not just PC peripherals. I think that's why we see that this number is stable or actually even in growing. If you look at the seasonal reduction last year, we don't really have that this much this year, sorry, here.
The reason for this is that we are getting design wins on the proprietary business, also outside PCs. Some gaming producers, some game consoles, et cetera, are actually using our proprietary solutions. I think this is something new. We haven't focused a lot on that, but it's something we're seeing, and it's good for the company. Order inflow, very strong, of $53.3 million. If you compare that, or the backlog to what we had last year at the same time, the backlog is approximately the same level.
I think I would like to reiterate what we've talked about the last quarters, that this is, of course, because the order cycle now is shorter, both with the Bluetooth Smart, but also the fact that we have more smaller customers and are working on new design wins all the time. Yes, the order backlog is less, but you see here that the order inflow really weighs up to that fact. Last quarter, we mentioned that we were going to change the reporting markets that we had in the company. We have done that change during this quarter, and the reason we've done that change is that we've seen that a lot of the market analysts that we follow and that we compare ourself against, had different segments or markets than we had.
We've done this both to. I believe we're going to be more precise, the numbers are going to be more accurate, and it's going to be easy to compare to what the analysts, market analysts are saying. What we've done is we've made a new one called Consumer Electronics. This consists mainly of the PC business, PC accessories business, but we also grouped in home entertainment and toys, gaming, et cetera, and also wireless charging into this segment. The other changes that we've done is that in the wearables, it's mainly focused on sort of the wearables, the things you carry on you. We've taken away health, and we've also removed the mobile phone accessories from this group. We've also added a new market called healthcare.
Healthcare is small, but we believe it's going to be a growing market for us. That's why we've decided to split it out as a separate market. We have building and retail, which is, of course, home automation. It also includes Beacons, et cetera, Beacons and credit cards and, et cetera, in this market. Finally, we have the ASIC consulting, which is not growing market anymore, but we've split it out as a separate part. If you go to Consumer Electronics, as I mentioned before, it's at $20.3 million, slightly up from last quarter, which we think is very healthy. It's both a mix of stable PC, but also growing in other, in gaming and toys.
Compared to last quarter, last year, the same quarter, we have seen a significant growth of close to 30% or 26%. As I mentioned, we are seeing high design wins momentum post-CES, with focus on wireless charging and on gaming toys. Okay. Wearables is our second biggest market and the market we saw the biggest growth in 2014, and mainly driven by the Bluetooth adoption of the activity trackers. You see a very good growth, 50% growth compared to last year. There is a small dip of 16.5% compared to last quarter, but we strongly believe this is a seasonal adjustment due to Chinese New Year. We have the two emerging markets, building and retail. Slightly stable.
You will recall that this market includes one big customer we've had for a long time. This customer swings slightly up and down based on their production, but we are adding on a lot of other customers into this market. We are confident that we'll see growth here in the future. Finally, healthcare. As I said, small market, $600 million. We believe this is an important market. We've seen 166% growth, and this will definitely continue, both within hearing aids but also related to, for example, the glucose meters and other healthcare items that need to be connected, so where the physician can sit and monitor the patients online constantly. We have big belief in this market.
ASICs, which was very disappointing, only $0.6 million, almost $0.8 million, down from $2.3 million last year. We see that this is very depending on the customers, we still believe that the total ASIC for the year will be slightly down from last year, sort of we won't see the huge declines. Gross margins. Gross margin at 54.6% is probably the best gross margin we've ever had. It's been sort of had a good trend over the last quarters. This is, again, as I've said many times, mainly due to the customer mix. We are adding on more and more mid-size customers, also the product mix, both within Bluetooth Smart, also within proprietary business, is positive in this quarter.
I want to reiterate that our long-term goal and expectations are still at 50%. Operating expenses. Operating expenses increased from $14 million to just below $ 15 million, increased 7% year-over-year. As always, there are some special items in here. First of all, we have excluded the options. The option expenses were lower this quarter. Last quarter, it was very high due to the massive increase of the share price during the fourth quarter, we still see this effect in the first quarter. The main adjustment item is the capitalized R&D. We have, during 2014, not capitalized much of our R&D expenses. The reason is that the products have been in the early stages of the development.
In Q1, we saw that the nRF52 is more or less ready. It's if we ever capitalize, it will be in Q1. This amount sort of reflects the final stages of the nRF52 development. Adjusted for these two items, total operating expenses ended at $15.7, up from $13.7 last quarter. Also, we need to remember that the FX was very positive this month for us. If you compare Q4 to Q1, the FX, positive FX impact was actually $1.5 million. Adjusted for these items and FX, we had an OpEx increase of $3.5 million in the quarter. Out of this $3.5 million, $2.2 million relates to the finish or the setup of the Finland operations.
We did report that Finland was gonna cost $5 million from Q1. The reason it's only $2.2 is, well, we have a slight FX impact on Finland, too, but the main reason is that a lot of the costs related to our R&D business is software licenses for the CAD tools and for everything we're doing. We have postponed sort of payment and using these licenses to late second quarter. Probably the cost won't be that high in Q2 either, but from Q5, from Q3, we expect that the $5 million that we have been reporting is still valid. Okay? Adjusted for Finland and these other items, total operating expenses this quarter, increased with approximately 10%.
That relates mainly to the increased R&D efforts in Norway, but also the fact that we are growing our sales organization to be ready for the future growth. Finally, our EBIT at $5.3 million. You can say that it, adjusted for the capitalization, it ended at $3.3 million, which we believe is a very good EBIT in a normal, a slow quarter. Okay? Finally, group revenues at $40 million, which is a very good increase of 32% from last year. Very strong ordering flow of $53.3 million, which really builds the foundation for growth in Q2 and Q3. Good EBIT growth based on high gross margins and costs not going as much.
Negative cash flow this year, the cash flow is used for important things that will be the fundament for the next quarters. Overall, a very good quarter. Svenn-Tore, I'm sure you guys wanna hear more about opportunities we have in the next quarters, but also more importantly, about the nRF52 launch.
Thank you, Pål.
Thank you.
Yes, we got a little stop in the growth of Bluetooth Smart in Q1, that was also a bit expected due to the fact that we have one customer struggling a bit, mostly, as I said previously, Chinese New Year. There is no need to worry, because we have other parameters that underline that the growth will come, I will discuss this going forward. Look at this slide. We call it Bluetooth Smart Active Customers, we see that this number continue to grow. It's more than doubling Q1 this year versus Q1 last year. I think the most important to look here is basically down here. If you look down here, you either you see very small compared to up here.
These design wins we had down here are the ones that generated sign up here, a revenue up here. I mean, remember that all the revenue we get in volume is basically originating from this customer base down here in 2013. If you extrapolate and look at what will this customer base generate, you will get a good number in your brain. That's, I think, what you have to understand. There is time lag between the active customer is starting to produce his pre-launch until you see the value of the real volume. It makes us very confident. Actually, some of you remember 2009? No? I remember. I went around with a really good feeling all year, quarter one, quarter two, quarter three, and you thought revenue is flat, and we weren't too happy.
We knew what we were doing. We saw the relationship we built with customers, we saw that the sign-ins that were appearing. We are in the same stage with Bluetooth Smart, and this number sort of shows that. Try to get that feeling. It makes your life so much better. Actually, if you have that feeling, and one day it just pops down orders to you like this, I think this is the leading game vendor worldwide. Really strong company. It's not as large, so they go, as large company, as a giant company, but it's really loved by gamers. We got this order of $5.7 million one week, and the week after, they added another $1 million to their order. This is one of those we call the binaries.
This can be a large customer of Nordic and contribute to our future revenue. Remember me talking about 2013 on the slide previously? Here, you see, this is a customer that started designing with us in 2013. We got the first real volume order, Q1, 2015. It's not all the signs that is 12 months -18 months. It depends on the complexity of the product. We did quite a few designs here in 2013, that we're going to see the same sort of pattern happening, so we feel good. What makes us feel even better is that we are now making this relationship for next growth. Important thing is that you can have a hardware, but you need to have the services there to support the hardware.
My team is working with the world's leading tech companies to be part of the next offerings. It's extremely important. We are still a small semiconductor company, but we are the largest within Bluetooth Smart. We bring most value to the large customers that are going to make their ecosystem start growing. It's all going to happen through services to clouds. Nordic has established this relationship. We know that Wireless chargers will come onto the market. We saw a release just a couple of weeks ago that one major company incorporated Wireless charging. It was not a recent standard, but it was Wireless charging. At the time, when they took a decision for go for Wireless charging to that model, the reasons were not completed as a standard. Today, it is.
There is an advantage with Rezence, with resonance charging versus inductive charging. When I say, I believe in the, in resonance charging, that's not too important. The important thing is that the market, the analyst, believes that resonance charging is a better way of charging going forward. We are happy to see that the first volume product had wireless charger. We believe we're going to see more of wireless chargers going further into this year. You're going to see wireless charger with Nordic inside. This is new market, which is not on the revenue chart for 2014. You read? The game changer.
I'm a little bit pissed when I see all these competitors trying to sort of convince market about their products and start doing, I would say, adjustments, small adjustments, some desperate moves, to bring out a component that can beat Nordic in Bluetooth Low Energy. Nothing that are out on the market today, either launched or pre-launched, can beat the new 52 System on a chip, part. Nothing. We beat them on radio performance, compute power consumption, connectivity for IoT. We use the advanced 55-nanometer embedded flash process. We don't have any stacked die with memory on top. This is a embedded flash product. It means the size and level of integration get even better, and if someone have seen the presentation we did in New York on the Capital Markets Day, ease of use is important for our customers.
Software and tools, mature software and tools are important. Do Nordic outsource our Bluetooth stack? Answer is no, because the Bluetooth stack is like the heart of your body. You can't outsource your Bluetooth stack and be successful. We optimize our stack and are bringing more value to our customers. Second thing is, all of our customer base that have nRF51 can migrate easily to nRF52 and take advantage of the new radio performance, the new compute power, the new power consumption, the new IoT connectivity. All of these good things you get for free if you've been using nRF51 have some smart engineers that have made this happening. It ends up to simplicity and flexibility. We're going to launch this product in June 17th, in Trondheim.
We will have a session where also we will invite some of the— Actually, all shareholders and also journalists, but most of all, engineers from our key customers to come to Trondheim and get familiar with the new product. If someone, some of you want to have fun on the 17th of June, come to Trondheim. I know Jarl would like to go. Jarl always likes Trondheim. Going back to outlook, we see strong growth in revenue, driven by Bluetooth Smart. Gross margin, as Pål discussed, approximately 50%, but also, as Pål said, the legacy products, the proprietary parts, are still designed in, and we have optimized the production of these parts, so it give a good contribution to our market margins. We will, of course, get a little bit higher OpEx in 2015, as we spend more on R&D and also are increasing our sales force.
We get more customers, we need more sales, we need more Field Application Engineers. The important thing is, even through Q1, we've done that, and we keep on making money in Q1, a significant amount. We said that Q1 will be the quarter you're going to feel the impact of Finland, and then it's gradually going to disappear because of the revenue growth. I don't think you felt that impact too bad this quarter either. Stay tuned, and prepare to meet the game changer. That's what I'm saying. We are really excited, and we have the reason to be so, because we've seen what kind of products our competitors have pre-launched. That, when I was talking about the pre-launch, I said Q2, we say a date, early Q2, or end of Q2, seventeenth of June.
If you want to follow this excitement, please sign up for my page at Nordic, and you will get all the information you ask for directly. Cool. We open for any questions. Yeah, you get a mic here.
Yes. First of all, two questions. Does this work?
It does work.
Yeah. You were talking about one struggling customer.
Excuse me? Yeah, one struggling customer.
Could you give some color on how the impact was from that customer?
N ot really. I mean, it wasn't that great, but it was less than I had anticipating from the customer. I'm not discussing individual customers.
Second of all, could you give some color on what you expect from order dynamics relating to the new chips? Do you expect large orders to be held back or delayed?
No, it doesn't work this way in my industry. Here, basically, it takes, as I said, 18 months to two years before you see any revenue. All the revenue we see now is from existing designs back in 2013, 2014. The nRF52 revenue you won't see before today is in June 17, 2015. Let's say June 2016 on the first product, and end of 2016 for the product that has a little bit longer design cycle. No one will stop using the nRF51 and wait for the nRF52. No.
Great, thanks.
Over here.
Last time you had the slide about the development kits.
Yes.
Can you comment on how the numbers are there?
First, I would like to structure, put the structure of development kit. Development kits, we do every second quarter, but I, of course, I checked through the development kits' sales in Q1, and it was stronger than we ended Q4, and I come back with a real number in Q2 presentation, but it's still very strong. It accelerates.
Yeah, I guess this is a question for Pål. I don't want to challenge you too much on the gross margin, it's been rising pretty steadily the last three to four quarters. I guess you referenced both customer mix and product mix. It seems to me that the products mix that you have now is sort of where you're headed anyway. Does it reflect a sense on your part, that you're headed towards more large clients, and that's what's gonna sort of drive gross margins down toward 50% again? Is it some other reason?
I think we can say, yes, there will be some more large clients. You would also, as in all businesses, see price pressure. Also, as I said, there were some very favorable product mixes this quarter for some of our mature products. That's why I don't see we'll see this pro rata share in the next quarters. I think that's the main reason. Yeah.
Thank you.
I can add on. W e also been working extremely hard on getting production cost down and optimize production. You know, the more parts we run through of a production line, to more efficient we become, so it helps our margin. More questions? Yeah.
A question about definition. bullet point three, on the first slide, you say that there is a 35% increase in large Bluetooth Smart customers.
Yeah.
What's the definition of large?
Large, we didn't put a real internal definition. We don't want to be too transparent to competitors. When we say large, it's a significant number, it's more than 5,000 customers and less than 5 million customers. Somewhere around that range.
Good answer.
One more question over here.
I have a question regarding capitalized R&D. You capitalized some $2 million in the quarter, which I assume is related to the nRF52 Development. How should we think about that going forward?
Probably, a lot of work will be done in June on the same product. No, in the second quarter, I mean, but then sort of it will phase out. We will more start working on product enhancements and then start working on new products. Yes, in the second quarter, probably the same amount, but then it will sort of, if you look back to the Q3 present, no, 2013 numbers, I think you'll see some of the same trend of a few months, a few quarters with higher numbers there, but then it goes down again.
Usually two quarters and then we're done.
Yeah.
Okay.
Yeah.
Thank you. A second one, if I may. We've seen Bluetooth Smart sales being quite dependent on wearable sales the last years. Now it's kind of branching out, and we're seeing gaming and toys coming into this. What new categories will come up next to facilitate Bluetooth Smart growth, do you think?
I don't think. [audio distortion]
Thank you.
One more question over here.
The healthcare segment, is that gonna pick up soon, or?
I think you saw it start picking up. I mean, we have a hearing aid company that's doing very well. We have a bunch of glucose metering that's starting to get into production. That will be as we see now, a good growth through this year. Yeah. If no more question, I thank you for your attendance and wish you all well today. Thanks.