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Fiscal Year 2008: Solid Performance

Press Release

Thalwil, Switzerland – March 19, 2009 – u‑blox (SIX:UBXN), the leading provider of embedded positioning and wireless communication solutions, today announced that EBIT rose 52.3% in 2008 on the back of strong demand for its products.

 

Solid Sales

The number of invoiced GPS modules and chipsets grew by approximately 37% during 2008. By the end of 2008, u‑blox 5‑based products made up 44% of the total volume and ANTARIS 4‑based products 53%, the rest coming from sales of accessory products. In 2008, the company made about 80% of its revenue from sales to 62 customers. u‑blox’ biggest customer accounted for less than 6% of the total sales turnover. u‑blox was able to increase the total number of customers as compared to 2007 as well as achieve global expansion into new regions and markets.

 

Revenues for the regions Americas, Europe and Asia fell slightly compared to 2007, despite an increase in the total number of units shipped caused by the weak US currency and continued price pressure. Americas revenues decreased to 25.3% of u‑blox’ total revenue compared to 27.5% in 2007. Revenues for the Europe, Middle East and Africa region made up 38.2% of u‑blox total revenue compared to 37.9% in 2007. In Asia, revenue share increased slightly. In 2008, Asia generated 36.5% of the total revenue compared to 34.6% in 2007.

 

Increased Gross profit

Gross profit increased by 11.4% to CHF 31.8 million in 2008 from CHF 28.6 million in 2007. Gross margin was 42.7% for 2008 compared to 36.4% for 2007. The increase in relative margin in 2008 was primarily due to the migration to u‑blox 5‑based modules and u‑blox 5 chipset sales which allowed to achieve better gross margin as compared to the ANTARIS generation.

 

Expansion of distribution and marketing activities

Distribution and marketing expenses increased in 2008, mainly due to increased personnel costs incurred from further expansion in Asia Pacific, Europe and the Americas.

 

Focus on research and product development

During 2008, u‑blox hired additional Research and Development (R&D) staff, both in hardware and software, to strengthen its team of highly talented R&D engineers in Thalwil, Switzerland. The expansion of the R&D team further strengthened the company’s commitment and strategic focus on R&D to ensure that its product portfolio, technology and IP platforms remain competitive in the market also in the future. R&D expenses in 2007 were influenced as a one‑time expense from the exercise of stock‑options prior to the completion of the Initial Public Offering (IPO) on the SIX Swiss Exchange.

 

Strong increase of profit from operations (EBIT)

EBIT increased by 52.3% to CHF 8.4 million in the year 2008 from CHF 5.5 million in the previous year. EBIT margin increased from 7.0% in 2007 to 11.3% in 2008. EBITDA margin increased to 17.3% in 2008. In 2007, EBIT and EBITDA were negatively influenced by one‑time adjustments prior to the IPO.

 

Financial income / costs

In 2008, financial income of CHF 2.3 million was realized. Finance costs in 2008 were at a very low level.

 

The above comparisons are based on non‑adjusted figures.

 

 

 

For the year ended December 31,

(in CHF 000s)

2008

 

2007

  

% sales

  

% sales

      

Sales

74'506

100.0%

 

78'360

100.0%

Cost of sales

-42'710

-57.3%

 

-49'810

-63.6%

 

 

 

 

 

 

      

Gross profit

31'796

42.7%

 

28'550

36.4%

      

Distribution and marketing expenses

-11'434

-15.3%

 

-10'821

-13.8%

Research and development expenses

-9'277

-12.5%

 

-9'653

-12.3%

General and administrative expenses

-2'813

-3.8%

 

-3'410

-4.4%

Other income

139

0.2%

 

855

1.1%

 

 

 

 

 

 

      

Profit from operations (EBIT)

8'411

11.3%

 

5'521

7.0%

      

Financial income

2'268

3.0%

 

665

0.8%

Finance costs

-7

0.0%

 

-1'932

-2.5%

 

 

 

 

 

 

      

Profit before income tax (EBT)

10'672

14.3%

 

4'254

5.4%

      

Income tax (expense)/benefit

-1'911

-2.6%

 

1'190

1.5%

 

 

 

 

 

 

Net profit

8'761

11.8%

 

5'444

6.9%

 

 

 

 

 

 

      

Profit from operations (EBIT)

8'411

  

5'521

 

Depreciation and amortization

4'466

  

3'346

 

EBITDA (unaudited) (1)

12'877

17.3%

 

8'867

11.3%

      
      

Adjusted figures (all adjusted figures are not audited)

    
      

Adjustments

272

0.4%

 

7'321

9.3%

Adjusted Gross profit (2)

31'812

42.7%

 

30'568

39.0%

Adjusted EBIT (3)

8'683

11.7%

 

12'027

15.3%

Adjusted EBITDA (4)

13'149

17.6%

 

15'373

19.6%

Adjusted Net profit (5)

9'033

12.1%

 

12'765

16.3%

      

(1) Management calculates EBITDA (earnings before interest, taxes, depreciation and amortization) by adding back

depreciation and amortization to profit from operations (EBIT), in each case determined in accordance with IFRS.

      

(2) Adjusted Gross profit is Gross profit adjusted by share‑based payments and related social security costs,

one time IPO costs and accruals for litigation expenses.

    
      

(3) Adjusted EBIT is EBIT adjusted by share‑based payments and related social security costs, one‑time IPO costs

and accruals for litigation expenses.

     
      

(4) Adjusted EBITDA is EBITDA adjusted by share‑based payments and related social security costs, one‑time IPO

costs and accruals for litigation expenses.

     
      

(5) Adjusted Net profit is Net profit adjusted by share‑based payments and related social security costs, one‑time

IPO costs and accruals for litigation expenses.

    
      

Table 1: Consolidated Income Statement

 

 

 

Positive cash flow from operating activities

In 2008, u‑blox generated cash from operating activities in the amount of CHF 2.6 million compared to CHF 16.7 million in 2007. This decrease was mainly due to the strong increase in inventories in the amount of CHF 10.4 million and one‑time payments for outlays in the context of the IPO in 2007 and the settlement of the CEVA claim. Due to the new production setup for u‑blox 5 with an extended value‑creation chain for the benefit of enlarged gross margins, our inventory level increased by work‑in‑progress material and additional finished products. Due to the slowdown in the market at the end of the fiscal year 2008 and additions to the product portfolio, inventory of finished products grew. u‑blox does not expect an obsolete risk as all our products are standard off‑the shelf products and continued demand will decrease these inventories.

 

        
     

For the year ended December 31,

(in CHF 000s)

 

 

 

 

2008

 

2007

        
        

Net cash provided by operating activities

 

2'570

 

16'663

        

Net cash used in investing activities

  

-50'239

 

-4'974

        

Net cash (used in)/provided by financing activities

 

-364

 

58'870

        

Net (decrease)/increase in cash and cash equivalents

-48'033

 

70'559

        

Cash and cash equivalents at beginning of year

 

85'922

 

16'011

        

Effect of exchange rate fluctuations on cash and

 

-742

 

-648

cash equivalents

       
        

Cash and cash equivalents at end of year

 

37'147

 

85'922

        
        

Table 2: Condensed Consolidated Cash Flow Statement

 

Investing activities

In 2008, main investments were CHF 1.2 million in capitalized development costs, CHF 1.1 million in tools and test infrastructure and approximately CHF 0.6 million in office and laboratories expansion. Furthermore, CHF 0.9 million were invested in software tools and CHF 0.7 million in Intellectual Property rights. In 2008, several short‑term investments in the amount of CHF 47.5 million were made. These fixed‑term deposits were denominated in Swiss Francs with a maturity of between 3 and 6 months at the time of investment.

 

Financing activities

In 2008, there were no major financing activities. In 2007, the proceeds from the issue of shares on the SIX Swiss Exchange and the exercise of employee stock options and net of transaction costs were CHF 59.4 million.

 

Strong balance sheet

u‑blox has a very strong balance sheet with an equity ratio of 87.6%.

 

 

 

 

 

 

 

At December 31

(in CHF 000s)

 

 

2008

 

2007

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

Current assets

 

 

 

 

Cash and cash equivalents

37'147

 

85'922

Short‑term investments

47'500

 

0

Other current assets

25'605

 

15'350

Total current assets

110'252

 

101'272

 

 

 

 

 

 

 

 

Non‑current assets

 

 

Property, plant and equipment

2'466

 

2'511

Intangible assets

3'314

 

3'129

Financial assets

307

 

247

Deferred tax assets

4'529

 

6'034

Total non‑current assets

10'616

 

11'921

 

 

 

 

 

 

 

 

Total assets

 

 

120'868

 

113'193

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

Current liabilities

12'626

 

14'210

Non‑current liabilities

2'325

 

1'381

Total liabilities

 

14'951

 

15'591

 

 

 

 

 

 

 

 

Shareholders' equity

 

 

Share capital

 

 

5'619

 

5'619

Share premium

102'132

 

101'860

Cumulative translation differences

176

 

156

Accumulated losses

-2'010

 

-10'033

Total equity

 

 

105'917

 

97'602

 

 

 

 

 

 

 

 

Total liabilities and equity

120'868

 

113'193

 

 

 

 

 

 

 

 

Table 3: Condensed Consolidated Balance Sheet

 

 

Outlook 2009

The strength of u‑blox’ business and the growing contributions from new products and technologies will positively support our business into the future. We see continued success with u‑blox 5‑based products with a large number of our new applications reaching production status. However given the challenging economic environment the short term outlook cannot be foreseen. However, actual business activities indicate that we will achieve similar business levels as in 2008. We plan to break even at sales of CHF 70 million for the GPS activities and at sales of CHF 6 million for the business of Neonseven. With the recent addition of the wireless communication products we intend to double our sales and triple our profits by 2011.