Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue for Q2 2024 amounted to $128 million, marking a significant 70% increase from Q1.
- Adjusted gross margin for Q2 was 50%, in line with guidance.
- Guidance for Q3 2024 projects revenue between $150 million to $170 million, indicating a year-on-year growth for the first time since 2022.
- Nordic Semiconductor ASA (NDCVF, Financial) has maintained a strong market share of around 40% for Bluetooth Low Energy end-product certifications.
- The company is progressing with strategic changes to enhance engineering execution and strengthen monitoring and accountability.
Negative Points
- Year-over-year revenue declined by 17% from $154 million in Q2 2023 to $127.9 million in Q2 2024.
- A $10 million write-down of long-range components impacted the gross margin, reducing it to 42% for Q2.
- Reported EBITDA for Q2 showed a loss of $7 million.
- Sales to top 10 customers have declined through 2023 and into 2024.
- The healthcare market saw a significant year-on-year decline of 57%, despite strong sequential growth.
Q & A Highlights
Q: There are still some pockets of customers who do have excess inventory. Would you say that the current revenue level you're guiding for Q3 is still reflecting sell-in being lower than sell-through, and such revenue in Q3 is still artificially lower or below the underlying demand? Any commentary on the significance of this headwind from still high inventories at key customers?
A: We have seen that the distribution inventory of Nordic components has decreased and is now at a balanced and normal level. However, the end customer inventory is still mixed, with some customers having excess inventory lasting into 2025. The Q3 revenue guidance is still below sell-through, indicating that some customers still have higher inventories.
Q: On the cellular IoT business, it seems like cash OpEx in the cellular IoT business is growing both sequentially and year-on-year. How should we interpret this? Is this an indication that you are seeing some positive data points there in interest from customers and as such is confident in ramping your investments in that area?
A: The number of employees is pretty flat compared to last quarter. The increase in OpEx is more due to capitalization and vacation effects. Overall, OpEx in that business is stable. We are confident in the business and technologies, seeing strong design activity, especially with industrial players.
Q: On the industrial market, you're seeing a pretty solid sequential improvement. What do you think is driving that? Is it purely different product exposures, or is there something else?
A: We see underlying demand improving and the market stabilizing. However, industrial remains one of the slower areas, especially in Europe compared to the U.S. and Asia.
Q: Can you comment on the demand in China? Have you seen demand coming back or is it still stagnant?
A: We have seen a positive revenue increase in China in Q4 compared to a flat development during 2023. It's early to draw conclusions, but it's a positive sign for us.
Q: On the inventory write-down, you recorded $10 million of obsolete inventory. Is there a risk of further write-downs in future quarters, especially with the new 9151 product?
A: This is our best estimate based on current forecasts. We believe this is a good estimate based on the shelf life of the products we have. We follow a cautious policy in this area.
Q: On the market share, which dipped slightly in Q2, can you talk about why that was? Are there concerns about losing share at large healthcare or proprietary customers?
A: We have seen these numbers ranging between mid-30% to mid-40% levels. This is in line with our expectations. We are growing and winning at least our fair share of the market at the moment.
Q: What is the anticipated pricing uplift from the new 54L versus the 52 series?
A: The 54 series presents a wider range of applications compared to the 52 series, covering both lower cost and more advanced, highly integrated products. This results in a wider range of ASPs.
Q: On cellular IoT, what type of product applications are you seeing increased design activity in? Are larger companies adopting this technology?
A: We are seeing a lot of trackers, positioning systems, and increased activity in metering (water, electricity, gas meters). We also see some industrial players designing with us.
Q: Are the new designs in cellular IoT coming on the 9151 or still on the 9160?
A: Most of the new designs and current design activity are coming on the 9151, which is smaller, more energy-efficient, and lower cost.
Q: On the healthcare business, how do you see the dynamic moving into Q3? Have you seen any change in market share at your main customer in the healthcare business?
A: We have a strong long-term partnership with our key customers in healthcare. The segment is dependent on a relatively small number of customers, leading to more quarter-to-quarter variations compared to larger segments like consumer.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
