Nordic Credit Rating has affirmed its 'BBB-' long-term issuer rating on Norway-based Nordic Semiconductor ASA. The rating was removed from watch with negative implications, where it was placed on 26 Jun. 2025 following announcement of a larger acquisition and debt uptake. The outlook is stable. At the same time, NCR affirmed its 'N3' short-term issuer rating and 'BBB-' senior unsecured issue rating.
Rating rationale
The rating action reflects Nordic Semiconductor's improved leverage metrics and reduced debt following its successful equity issue of USD 100m on 4 Sep. 2025, which refinanced the bridge loan used to acquire Memfault on 26 Jun. 2025. Previously, we had limited visibility into the company's long-term capital structure and expected the transaction to increase debt and elevate financial risk, given limited free cash flow generation and low net interest coverage over the next two years. In our view, the equity raised, together with stronger-than-expected operational performance, growing revenues and reduced working capital requirements, is likely to reduce NCR-adjusted net debt/EBITDA below 1x by end-2026 and result in improved net interest coverage and reduced financial risk.
We expect sales to increase and for the company's margins to rebound strongly as broad market demand recovers. The company's customers have a robust pipeline of new product launches, which is expected to result in an accelerated roll-out of nRF54 chips in 2026. In our view, geopolitical tensions and ongoing uncertainty regarding tariffs present risks to demand, given the semiconductor industry's complex supply chains and limited broad market visibility. To date, the impact on both Nordic Semiconductor and its customers has been limited.
We expect an increase in working capital in the coming quarters from record low levels in the second quarter of 2025, driven by the need to invest in inventories to meet growing demand and higher accounts receivable balances. Combined with increased capital expenditure related to supply chain expansion, infrastructure investments and R&D, we anticipate limited free operating cash flow over the next two years. While we see limited organic deleveraging capacity over this period, the reduced debt lowers the risk of potential deviations from our base-case forecast. We expect the company to generate free operating cash flows of USD 46m in 2027e, up from about USD 20m in 2025e and minus 3 in 2026e.
We have revised our treatment of the company's R&D budget as a restriction to the company's cash balance following more detailed information about how the R&D coverage requirement imposed by some customers can be satisfied. We currently view it as a restriction to the company's available liquidity.
Stable outlook
The stable outlook reflects our expectations that Nordic Semiconductor will experience significant margin expansion due to increased sales and cost control, which should offset the impact of increased working capital and capital spending on the company's cash flows over the coming years. We expect the company to have limited organic deleveraging capacity over the next two years, but the recent equity issue reduces financial risk. Hence, we expect Nordic Semiconductor to operate within our rating drivers over a protracted period.
We could lower the rating if Nordic Semiconductor increases financial leverage, with NCR-adjusted net debt/EBITDA above 1x, or reduces debt servicing capabilities, over a protracted period. We could also lower the rating if the company's margins and free operating cash flows significantly deviate from our expectations, with negative implications for the company's cash balance. We could also lower the rating due to a loss of technological leadership within its niche.
While unlikely at this time, we could raise the rating to reflect significantly increased scale, a broader product portfolio, and increased customer and end-market diversity. We could also raise the rating to reflect a sustained improvement in working capital management and an NCR-adjusted EBITDA margin above 30%.
Related rating actions
i) Nordic Semiconductor ASA 'BBB-' long-term issuer rating on watch negative, 26 Jun. 2025.
ii) Nordic Semiconductor ASA 'BBB-' long-term issuer rating affirmed; Outlook stable, 17 Jun. 2024.
Related publications
i) NCR comments: Ratings unchanged following US tariffs on NCR-rated issuers, 3 Apr. 2025.
| Rating list | To | From |
|---|---|---|
| Long-term issuer credit rating: | BBB- | BBB- |
| Outlook: | Stable | |
| Watch: | Watch Negative | |
| Short-term issuer credit rating: | N3 | N3 |
| Senior unsecured issue rating: | BBB- | BBB- |
Contacts:
Gustav Nilsson, analyst, +46735420446, gustav.nilsson@nordiccreditrating.com
Geir Kristiansen, analyst, +4790784593, geir.kristiansen@nordiccreditrating.com
Elisabeth Adebäck, analyst, +46700442775, elisabeth.adeback@nordiccreditrating.com
The methodology documents used for this rating are NCR's Corporate Rating Methodology published on 8 May 2023, NCR's Rating Principles published on 14 Feb. 2024 and NCR's Group and Government Support Rating Methodology published on 14 Feb. 2024. For the full regulatory disclaimer please see the rating report.