u-blox AG: u-blox reports first half 2022 financial results

Reports first half 2022 revenue growth of 52.7%, adjusted EBITDA growth of 166.5%, strong bookings and expanded customer base.

Increase FY 2022 guidance; Expects strong revenue growth of between 46% and 54% and an adjusted EBITDA margin of between 22-25%.

Thalwil, Switzerland 19 August 2022 u-blox (SIX: UBXN), a global leader in wireless and positioning technologies, today announced its financial results for the first half of 2022 (1H 2022).

The companys results for the 1H 2022 increased significantly as compared to the same period of last year, with record revenues, substantially improved gross profits and solid cash-flow. The acceleration in market demand across all regions and application sectors, together with the strong ramp-up of many new customer projects, resulted in continued strong bookings. Such progress is the result of novel product introductions over the past several years, and our enhanced solution capabilities. Thanks to well-managed supply-chain challenges, u-blox was able to improve deliveries to customers, thus recording strong billings of CHF 294.4 million, a 52.7% increase from 1H 2021. Furthermore, favorable product mix changes and realized price increases resulted in an improved adjusted gross margin of 48.9% (plus 220 bps) for the period. Free cash flow reached CHF 6.6 million, including a net working capital increase of CHF 51.0 million.

Financial highlights for 1H 2022
(All comparisons versus the same period of last year, unless otherwise noted)

• Revenues of CHF 294.4 million compared to revenues of CHF 192.7 million, an increase of 52.7% (at constant exchange rates: +49.9%).
• Gross profit (adjusted) of CHF 143.8 million compared to CHF 89.9 million, an increase of 59.9%, and equivalent to an adjusted gross margin of 48.9% versus 46.7%, plus 220 bps.
• EBITDA (adjusted) of CHF 76.6 million, compared to CHF 28.7 million, corresponding to an adjusted EBITDA margin of 26.0%.
• EBIT (adjusted) of CHF 57.4 million, compared to CHF 10.5 million, equivalent to an adjusted EBIT margin of 19.5%.
• Net profit (adjusted) of CHF 48.7 million, compared to CHF 6.3 million.
• Cash flow from operating activities of CHF 30.4 million, compared to CHF 43.0 million.
• Free cash flow of CHF 6.6 million, compared to CHF 27.7 million.
• CHF 89.3 million of cash and cash equivalents as of 30 June 2022, compared to CHF 83.7 million as of 31 December 2021.

Product Launches:

• IoT certificate manager: a new security service that continuously renews device credentials in a fully automated mode. Together with u-blox's existing zero touch provisioning service, it provides out-of-the-box on-boarding to IoT cloud platforms with total control of the device certificate lifecycle. Certificate lifecycle control target IoT devices that integrate with leading IoT cloud platforms including the AWS IoT Core, Azure IoT Hub, and DPS services.
• u-blox ANT-B10 antenna board for Bluetooth: designed for integration into commercial end-products, the board enables low power, high precision indoor positioning and speeds up evaluation, testing and commercialization of Bluetooth direction finding and indoor positioning solutions.
• MAYA-W2 tri-radio module: supporting Wi-Fi 6, Bluetooth® low energy (LE) 5.2 and IEEE 802.15.4 (Thread and Zigbee) on a compact form factor, the module brings Wi-Fi 6 technology to industrial and consumer mass-market applications in industrial automation, smart building & energy management, healthcare, smart home and many other applications.
• MIA-M10: the smallest GNSS (Global Navigation Satellite System) module series to date. Built on the ultra-low-power u-blox M10 GNSS platform, MIA-M10 offers the most power-efficient solution for size-constrained battery-powered asset tracking devices. The module targets an expanding market for people, pets and livestock trackers, as well as industrial sensors and consumer goods.
• Two cellular LTE Cat 1 modules: the u-blox LARA-R6, the smallest LTE Cat 1 module with global coverage on the market, and the u-blox LENA-R8 which includes a global navigation satellite system (GNSS) receiver based on the u-blox M10 platform. Together, the modules comprise five certified global, multi-regional and regional product variants, simplifying logistics for product developers and increasing design flexibility.

Partnerships with:

• Universal Douglas Lighting Americas, a leading manufacturer of scalable lighting solutions: partnership to develop a new open standard Bluetooth Mesh platform. The resulting SIGMesh platform will be based on the u-blox NINA-B406 Bluetooth low energy module and will serve building automation use cases, including smart lighting, access control and energy management.
• Exsurgo, a company developing technology-based neurological treatments: partnership to offer Exsurgo's Axon headset for chronic pain treatment which will run on a u-blox ANNA-B112 Bluetooth 5 system-in-package (SIP) also used for wireless communication. The headset is part of a 116-person clinical trial to prove safety and efficacy. Exsurgo plans to take the device into high-volume production before 2022-year end to serve the USA, the UK and the European Union markets.
• Fitogether, a South Korea-based developer of the OHCOACH wearable sports tracking solution: partnership offers more than 350 football clubs in 44 countries, the highest positioning accuracy among GNSS (Global Navigation Satellite System) products in the Electronic Performance and Tracking Systems (EPTS) industry quality test report on these products has been already conducted by FIFA, the international football organization.
• Geespace, the world's leading provider of AICT (aerospace information and communications) infrastructure and application solutions: MoU for the expansion of respective augmentation services for high precision applications to the US, European, and Chinese markets, primarily in the automotive sector.

Financial Overview
During 1H 2022, u-blox generated revenues of CHF 294.4 million, EBIT (adjusted) of CHF 57.4 million and EBITDA (adjusted) of CHF 76.6 million. Revenues in all regions were higher in 1H 2022 compared to the same period of the previous year, reflecting strong and broad-based expansion of overall demand. The stronger USD/CHF exchange rate had a 2.8% positive impact on revenue growth.
 
For the 1H 2022 period, revenues in all regions and business segments substantially increased as compared to the same period of last year, despite supply chain constraints. Specifically:

Revenues by region

• AMEC: 1H 2022 revenues rose to CHF 96.3 million from CHF 59.9 million recorded during 1H 2021 (+60.8%) due to higher demand in healthcare and industrial automation. Also, demand for automotive applications expanded strongly.
• EMEA: 1H 2022 revenues increased to CHF 83.6 million (+41.8%) from CHF 59.0 million reported for 1H 2021 primarily thanks to increased demand in industrial automation solutions and buoyant demand in automotive.
• APAC: 1H 2022 revenues were CHF 114.5 million (+54.9%), compared to CHF 73.9 million generated during 1H 2021 driven by strong growth in healthcare, networks and in automotive applications. Business in China remained flat due to supply constraints and COVID impacts.

Revenues by segment

• Positioning and wireless products: 1H 2022 revenues for chips and modules for positioning and wireless connectivity that are used in industrial, automotive and consumer applications amounted to CHF 293.9 million compared to CHF 192.7 million during 1H 2021.
• Wireless services: 1H 2022 revenues for wireless communication technology services including data services, reference designs, and software increased to CHF 21.5 million compared to CHF 17.5 million in 1H 2021 (including intra group revenue).

During 1H 2022, u-blox continued to expand its customer base and as of 30 June 2022, its customer base increased to over 14'500 customers worldwide (12'200 at the end of 2021). During 1H 2022, u-blox generated approximately 80% of its total revenues from 65 customers, with its largest customer accounting for less than 4.0% of total revenues.

Adjusted gross profit increased by 59.9% to CHF 143.8 million in 1H 2022, from CHF 89.9 million, resulting in an increased adjusted gross profit margin of 48.9% (1H 2021: 46.7%). The gross margin benefitted from favorable product mix changes and realized price increases.

Adjusted operating expenses, which include R&D, distribution, marketing and G&A expenses, totaled CHF 87.1 million in 1H 2022, compared to CHF 80.5 million. As a percentage of revenue, operating expenses were 29.6% of total revenue compared to 41.8% in the same period of last year.

R&D expenses (adjusted) remained stable at CHF 52.6 million during 1H 2022, compared to CHF 52.3 million. Despite an increase in headcount, the R&D expense ratio benefitted from a weak EUR/CHF exchange rate. As percentage of revenue, R&D expenses decreased to 17.9% (1H 2021: 27.1%).  

Distribution and marketing expenses (adjusted) in 1H 2022 increased to CHF 21.6 million, compared to CHF 18.1 million, due to better margin which resulted in higher personnel bonus accruals, and an enlarged workforce. Regardless, as percentage of revenue, distribution and marketing expenses (adjusted) decreased to 7.3% in 1H 2022, from 9.4%.

Financing costs of CHF 0.8 million (1H 2021: CHF 6.6 million) consisted primarily of interest payments for the outstanding bond. Unrealized foreign currency gains from the USD resulted in finance income of CHF 3.1 million (1H 2021: CHF 5.1 million). After acquisition of 100% of the shares of Sapcorda GmbH, the share of loss of equity-accounted investees net of tax reduced to CHF 0.1 million (1H 2022: CHF 1.5 million).

Net profit (adjusted) before minority interests substantially increased to CHF 48.7 million, compared to CHF 6.3 million. Diluted EPS (adjusted) increased accordingly to CHF 7.00 per share during 1H 2022, compared to CHF 0.89 per share in 1H 2021.

Net cash generated from operating activities
Cash from operating activities amounted to CHF 30.4 million during 1H 2022, compared to CHF 43.0 million generated in the same period of the previous year. This was largely thanks to higher investments into net working capital to support the fast-growing business and inventory build-up.

Investing Activities
Investments in property, plant and equipment and intangible assets totaled CHF 24.4 million during 1H 2022, compared to CHF 17.4 million. Free cash flow (before acquisitions) amounted to CHF 6.6 million, compared to CHF 25.8 million in 1H 2021.

Financial Position
As of 30 June 2022, u-blox had a solid balance sheet with an increased equity ratio of 63.1% (31 December 2021: 59.9%). Cash and cash equivalents totaled CHF 89.3 million as of 30 June 2022, compared to CHF 83.2 million as of 31 December 2021.

Management Commentary
Thomas Seiler, Chief Executive Officer of u-blox, commented: Despite the ongoing challenging environment, demand for and interest in our products has remained strong across all markets and business segments. Thus, we were able to substantially increase our top and bottom lines as compared to the first and second halves of 2021, with record numbers in terms of revenues and profitability.
  
During the first half of 2022, we saw strong demand and higher bookings across all markets: Industrial (especially for connectivity), Automotive and Consumer. Order fulfilment is still somewhat affected by supply limitations, but we managed to improve the situation. The introduction of re-designed products, coupled with re-modelling of other products, provided us with multiple solutions to manage specific shortages. We also focused our efforts on negotiating with multiple suppliers and sub-contractors to achieve acceptable delivery schedules for our clients. As a result, billings have been exceptionally strong. Order book as of end of June 2022 almost doubled as compared to a year ago. Furthermore, due to the steps we took to implement sales price adjustments, our operating leverage improved, we are now seeing gross margin improvements. Adjusted EPS increased to CHF 7.00 per share for the period.

We have well managed the supply-chain challenges we faced since the start of the pandemic thanks to our highly diversified supplier base. Demand remains robust thanks to our large geographic customer footprint, strong interest in our new and existing products and solutions which results in continued strong order intake. Although, for the foreseeable future, we expect global supply-chain disruptions to continue to affect all businesses across the globe and our ability to source components from our suppliers, we have been quite successful in managing and balancing component supply with product demand from our customers and fulfill their orders as quickly as possible. This was largely due to several game-changing actions we took to address customers low inventory levels, including changing our operating model from an inventory-based system to an availability-driven system.

Outlook
Mr. Seiler concluded: We continue to provide our customers with value-adding innovative products and solutions which will generate higher revenues. Our visibility for the remainder of the year remains solid due to our record high order book. Thus, for FY 2022, we expect an acceleration of revenue growth to 46% to 54% as compared to FY 2021 and our profitability to improve further.

While we believe u-blox is well positioned to continue to grow revenues and improve profitability, the global market volatility that continues to affect businesses worldwide, coupled with reverberations from the COVID-19 epidemic might affect our supply-chain and the market demand. However, we expect this effect to be mild due to the multiple proactive steps we have taken. Our business model is designed to maintain solid long-term customer relationships despite supply constraints. 

Looking beyond 2022, we see multiple new opportunities arising from the widespread IoT adoption and the desire for connectivity throughout the world. Thus, we expect demand for our products to remain strong across all regions.  

(in CHF millions)	Actual FY 2021 (adjusted)	Guidance 2022 (1) (2) (adjusted) As of 11 March 2022	Updated guidance 2022 (1) (2) (adjusted) As of 30 May 2022	Updated guidance 2022 (2) (3) (adjusted) As of 19 August 2022
Revenue	414.1m	+2132%	+2739%	+4654%
EBITDA	72.1m	+1618%	+1721%	+2225%
EBIT	35.1m	+810%	+1014%	+1619%

¹⁾ Exchange rate assumptions for 2022: Average rate of 2021 (USD: 0.914, EUR: 1.081, GBP: 1.257)
²⁾ Changes as compared to FY 2021
³⁾ Exchange rate assumptions for H2 2022: Average rate of H1 2022 (USD: 0.944, EUR: 1.032, GBP: 1.226)

Ad-hoc release with tables

1H 2022 financial report

Presentation

Conference call and webcast details
Thomas Seiler, CEO, and Roland Jud, CFO, will host a conference call and webcast with analysts and investors Friday, 19 August 2022, at 2:00 pm CET.

To participate, please dial the following number approximately 10 minutes prior to the start of the call:

Switzerland / Europe:                  +41 (0) 58 310 50 00
United Kingdom:                           +44 (0) 207 107 06 13
United States:                                 +1 (1) 631 570 56 13
 
Pre-registration link: https://event.choruscall.com/mediaframe/webcast.html?webcastid=ouhw5ZjH

The archived version of the webcast will be available at u-blox website: https://www.u-blox.com/en/reporting-center#tab-presentations.

IR calendar:                                                                                                    
Capital Markets Day:                                    22 November 2022
Full year results 2022:                                   10 March 2023
Annual General Meeting:                              19 April 2023

ublox investor relations contacts:

Switzerland and Europe:
Dynamics Group AG
Doris Rudischhauser
+41 79 410 81 88 / doris.rudischhauser@u-blox.com

US:
The Equity Group Inc.
Lena Cati
(212) 836-9611 / lcati@equityny.com
 
ublox AG
Zürcherstrasse 68
8800 Thalwil
Switzerland
Phone +41 44 722 74 44
Fax +41 44 722 74 47
info@u-blox.com
www.ublox.com

About ublox
ublox (SIX:UBXN) is a global technology leader in positioning and wireless communication in automotive, industrial, and consumer markets. Their smart and reliable solutions, services and products let people, vehicles, and machines determine their precise position and communicate wirelessly over cellular and short range networks. With a broad portfolio of chips, modules, and secure data services and connectivity, ublox is uniquely positioned to empower its customers to develop innovative and reliable solutions for the Internet of Things, quickly and costeffectively. With headquarters in Thalwil, Switzerland, the company is globally present with offices in Europe, Asia, and the USA. (www.ublox.com)
Find us on Facebook, LinkedIn, Twitter @ublox, Instagram, and YouTube

Disclaimer
This release contains certain forward-looking statements. Such forward-looking statements reflect the current views of management and are subject to known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the u-blox Group to differ materially from those expressed or implied. These include risks related to the success of and demand for the Groups products, the potential for the Groups products to become obsolete, the Groups ability to defend its intellectual property, the Groups ability to develop and commercialize new products in a timely manner, the dynamic and competitive environment in which the Group operates, the regulatory environment, changes in currency exchange rates, the Groups ability to generate revenues and profitability, and the Groups ability to realize its expansion projects in a timely manner. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this report. u-blox is providing the information in this release as of this date and does not undertake any obligation to update any forward-looking statements contained in it as a result of new information, future events or otherwise.

This press release is published in German and English. Should the German translation differ from the English original, the English version is binding.