Annual Results 2007
Thalwil, Switzerland – March 19, 2008 – u‑blox (SWX:UBXN), the leading Swiss provider of GPS technology, today announced that adjusted EBIT rose 50% in 2007 on the back of strong demand for its products.
- Consolidated sales increased by 44.1% to CHF 78.36 million in 2007.
- Adjusted profit from operations (EBIT) rose from CHF 8.02 million to CHF 12.03 million, up 50% from the previous year.
- Adjusted net profit increased by 54.9% from CHF 8.24 million to CHF 12.77 million, which represents a 16.3% adjusted net profit margin for 2007.
- Cash flow from operations grew strongly from CHF 8.78 million to CHF 16.66 million.
u‑blox develops and markets leading positioning technology and products, including chipsets, modules, software and services, for the Global Positioning System (“GPS”) and other Global Navigation Satellite Systems (“GNSS”). u‑blox products are designed to provide location awareness capabilities for the automotive, mobile terminal and infrastructure markets. Location awareness functionality allows users to use location information in a broad range of applications and services including navigation, automatic vehicle location and asset tracking, security, traffic control and road pricing products.
Strong Product Line‑Up
The company has optimally diversified risk with a product portfolio that addresses a variety of markets, from the high‑volume consumer devices market to the automotive market, characterized by higher quality requirements and longer product lifecycles. During 2007 u‑blox has entered into business relationships with more leading players of its industry.
u‑blox’s product portfolio leveraged growth opportunities across a number of key markets and the ANTARIS 4 product line contributed to the strong increase in sales in all business areas. The award‑winning SuperSense high sensitivity technology, capable of tracking the weaker GPS signals typical of indoor environments and dense urban areas, performed strongly. High sensitivity solutions gained traction throughout 2007 as several new handsets came into the market that incorporated u‑blox GPS modules endowed with SuperSense technology.
The development of the new u‑blox 5 GPS chipset was complete with the final silicon chip becoming available in late 2007 and the final firmware released at year's close. This new chipset generation combines outstanding performance with important features such as very short time to first fix, low power consumption, high sensitivity and best accuracy. Key customers received the new chipset generation eagerly, and the company expects it will be well accepted in all market sectors - automotive, mobile terminal and infrastructure -, and that it will attract new business opportunities. The introduction of the u‑blox 5 generation will also lead to an improved control of the value chain.
The number of invoiced modules grew during the year 2007 by approximately 74%.
Turnover grew in all geographical regions, with the Americas representing 27.5% of global turnover, EMEA 37.9% and Asia Pacific 34.6%. Asia Pacific saw the largest sales growth, with 70% compared to 2006. Sales growth rate in EMEA was 52% and in the Americas was 14%.
In Asia Pacific, u‑blox' main markets are asset tracking and mobile terminal products. Both areas saw high increase in demand and an expansion in the number of customers.
In EMEA, the company was able to maintain its position as one of the leaders in the GPS module market and increase sales and develop a strong customer base mainly in the automotive after markets. Furthermore, the ANTARIS chipset allowed u‑blox to become a significant player in the European OEM automotive business.
In the Americas, u‑blox' main markets are fleet management systems and asset tracking, where u‑blox is the market leader. In 2007, u‑blox expanded its business into consumer applications, for example for golf tracking products.
In 2007, the company made about 80% of turnover from sales to 61 customers and u‑blox' biggest customer accounted for less than 5% of the total sales turnover. u‑blox was able to increase the total number of customers compared to the year 2006 and reach a wider global spread over the different regions and markets.
Increased Gross Profit
Adjusted gross profit increased by 34.9% to CHF 30.57 million in 2007 from CHF 22.66 million in 2006.
Adjusted gross margin was 39.0% for 2007 compared to 41.7% for 2006. The decrease in relative margin in 2007 was primarily due to an increased volume of ANTARIS 4 based modules being sold and lower average selling prices for customers in the mobile terminals sector.
Expansion of Distribution and Marketing Activities
Distribution and marketing expenses increased in 2007, mainly due to commissions from higher levels of sales and increased personnel costs incurred from the further expansion of support offices in Asia Pacific. u‑blox additionally opened a customer design support center in Singapore, to strengthen customer support capabilities in this region and to efficiently address customer needs, especially those in the chipset business. Albeit, distribution and marketing expenses in relation to sales fell from 14.3% in 2006 to 13.8% in 2007.
Emphasis on Research and Product Development
During 2007, u‑blox hired additional R&D staff, both in hardware and software, to strengthen its team of highly talented R&D engineers in Thalwil, Switzerland. R&D expenses in relation to billings rose from 10.7% to 12.3%. This expansion will further strengthen 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.
Strong Increase of Adjusted Profit from Operations (EBIT)
On an adjusted basis, EBIT increased by 50% to CHF 12.03 million in the year 2007 from CHF 8.02 million in the previous year. Due to operational leverage the adjusted growth of EBIT compared to sales growth was higher. Adjusted EBIT margin increased from 14.7% in 2006 to 15.3% in 2007. Adjusted EBITDA margin increased to 19.6% in 2007.
Adjustments details: The Initial Public Offering (IPO) of u‑blox at the SWX Swiss Exchange led to the following related expenses reflected in the income statement of 2007:
- Share‑based payments incl. related social security costs: CHF 3.986 million
- Consulting fees for lawyers, auditors, PR CHF 0.815 million
In addition, adjustments were made for accruals relating to litigation expenses.
Doubling of Operational Cash Flow In 2007, u‑blox generated cash from operating activities in the amount of CHF 16.66 million up from CHF 8.78 million in 2006, reflecting a strong increase in the company's sales and profitability.
In 2007, main investments were CHF 1.9 million in capitalized development costs, and approximately CHF 1.4 million in office and laboratories expansion.
Furthermore, CHF 1.2 million were invested in IT infrastructure and production tools.
As a comparison, in 2006, the company divested the CHF 3.0 million in the fixed‑term deposit, and CHF 2.6 million was spent in outsourced development costs for the u‑blox 5 chipset. Furthermore, u‑blox invested approximately CHF 1.0 million in new furniture, tools, IT infrastructure and equipment.
The proceeds from the issue of shares at the SWX Swiss Exchange and the exercise of employee stock options, net of transaction cost, were of CHF 59.4 million.
Strong Balance Sheet
u‑blox was able to further strengthen its balance sheet due to the IPO and the strong underlying business.
Outlook for 2008 (barring unforeseen circumstances)
The strength of u‑blox’s underlying business and the growing contributions from new products, technologies and subsidiaries is expected to drive full‑year revenue growth in 2008 by approximately 33%- 37% compared to 2007. u‑blox 5 based products will mainly impact business in the second half of 2008. This transition will provide for an exceptional margin step‑up, a unique event, not repeatable in the future.
With increasing sales from u‑blox 5 based products, u‑blox expects gross profit margin to grow to 44% - 46% and adjusted EBIT to grow to 18% - 20% for the full year. Varying exchange rates will probably affect sales and profits.
For more information, please view the presentation slides on: www.u‑blox.com under the Investor Relations section.