Dialog Semiconductor Reports First Quarter Results Ended 3 April 2015 Company Delivers First Quarter Year on Year Revenue Growth of 41% and Record Cash Generation

(2) 2014 IFRS amounts have been adjusted. Please refer to Note 2 of the Q1 2015 Interim Report

Revenue in Q1 2015 was up 41% to $311 million. The strong revenue performance was the result of:

- 53% year-on-year revenue growth in Connectivity driven by strong momentum in Bluetooth(R) Smart and wireless audio (DECT based solutions)

- Mobile Systems - up 46% over Q1 2014

Q1 2015 IFRS gross margin was 46.0%, significantly above Q1 2014 and 30bps below Q4 2014. The year-on-year increase was the result of:

- The lower allocation per unit of the fixed component of Cost of Goods Sold;

- Positive product mix contribution from the latest generation of products in Mobile Systems and Connectivity ;and

- The continuing realisation of the benefits of manufacturing cost optimisation.

In Q1 2015 underlying (*) net OPEX as a percentage of revenue was at 23.8%, 490bps below Q1 2014. The value of underlying net OPEX in Q1 2015 increased 17% over Q1 2014.

Investments in R&D increased through the first quarter. On an underlying (*) basis, R&D investment was up 14% over Q1 2014, which is in line with our strategy of continuing innovation and diversification of our product portfolio. As a percentage of revenue, underlying R&D in Q1 2015 decreased to 16.0% (Q1 2014: 19.9%). This reduction was the result of the strong top line growth during the period.

Underlying (*) SG&A in Q1 2015 stood at 8.0% of revenue, 140bps below Q1 2014 primarily as a result of the strong growth of the business. In Q1 2015, the company booked a provision of $3.4 million for the settlement of a claim brought in April 2014 by the former iWatt Inc. shareholders. Subsequent to quarter end, a settlement was reached for that amount without admission of faults, wrong doing or liabilities by Dialog. The Company expects to pay the settlement in May 2015.

In Q1 2015 we achieved IFRS and underlying (*) EBIT of $55.6 million and $71.0 million respectively, 142% and 120% over Q1 2014. Underlying EBIT margin in the quarter was 22.8% (Q1 2014: 14.6%). The Q1 2015 underlying EBIT increase of 120% was primarily driven by good performance in the Mobile Systems segment and the turnaround in the Connectivity segment. On an underlying basis, the Connectivity segment contributed $1.7 million EBIT profit in Q1 2015 (Q1 2014 EBIT loss: $1.2 million).

In total, a net tax charge of $15.5 million was recorded in Q1 2015. This represents an effective tax rate of 28.5% (adjusted Q1 2014: 32.8% excluding one-off non-cash deferred tax credit). The effective tax rate for the year ending 31 December 2014 was 29.0% (excluding one-off non-cash deferred tax credit). The decrease in our group effective tax rate is driven by the on-going exercise to align our Intellectual Property with the commercial structure of the group. This has allowed Dialog to fully recognise previously unrecognised UK trading loss carry forwards and to benefit from the favourable UK tax regime for technology companies. We believe this gradual decrease is sustainable and will now accelerate from 2016, thus continuing to drive further reductions in our effective tax rate in the years to come.

In Q1 2015, underlying (*) net income and underlying EPS more than doubled from Q1 2014 levels. Underlying diluted EPS in Q1 2015 was 109% higher than in the same quarter of 2014.

At the end of Q1 2015, our total inventory level was $105 million (or ~56 days), an increase of $6 million over the prior quarter and 19% over Q1 2014.This represents an 18 day increase in our days of inventory over the prior quarter. We are managing our inventory levels tightly at an appropriate level to service our current customer backlog. During Q2 2015 we expect inventory value and inventory days to increase from Q1 2015 in anticipation of a number of high volume product launches during the second half of the year.

At the end of Q1 2015, we had cash and cash equivalents balance of $421 million. In the first quarter alone we generated a record $132 million of operating cash and $98 million of free cash flow (***).

Subsequent to the end of the quarter, on 28 April, Dialog Semiconductor announced the total conversion of the $201 million Convertible Bond due 2017. As such, no bonds will be redeemed by Dialog pursuant to the optional redemption notice dated 16 March 2015 (in which Dialog announced its intention to redeem any outstanding Bonds on 5 May 2015) and all Bonds have been cancelled. Dialog has issued 6,797,025 new ordinary shares and the total number of ordinary shares issued by Dialog is now 77,865,955.

(*) Underlying results (net of tax) in Q1-2015 are based on IFRS, adjusted to exclude share-based compensation charges and related charges for National Insurance of US$7.3 million, excluding US$0.2 million of amortisation of intangibles associated with the acquisition of SiTel (now Dialog B.V.), excluding US$2.1 million non-cash effective interest expense in connection with the convertible bond, excluding US$0.2 million non-cash effective interest expense related to a licensing agreement, excluding US$3.7 million acquisition and integration expenses in connection with the purchase of iWatt (of which US$3.4 million correspond to a litigation provision)and excluding US$3.2 million of amortisation and depreciation expenses associated with the acquisition of iWatt.

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