u-blox on track with new u-blox 5 technology – 32% volume growth in the first half of 2008, sales and net profit impacted by weak US dollar
- u‑blox 5, the latest GPS receiver technology, was successfully introduced to the markets and has found widespread acceptance. In Asia a large percentage of u‑blox customers have already migrated to the new platform.
- Total volume sales of modules of all product generations increased by 32%.
- Sales growth has not been as strong due to the weakness of the US dollar against the Swiss franc. This had a negative impact limiting net profit to the same amount as in the first half year 2007.
- Sales were further limited by capacity constraints on the part of the subcontractor for ANTARIS 4 chipsets.
- The number of new business opportunities for u‑blox 5 based products has been growing in all business areas. Accounts with industry leaders have been added in the automotive and mobile terminal sectors.
- u‑blox expects a stronger second half of 2008 with sales growth over the first half year in the range of 10% to 20% and an adjusted EBIT margin of 16% to 20%, based on actual exchange rates for the Swiss franc.
Sales in the first half of the year 2008 saw a total growth of 2.3% over the first six months of 2007 to CHF 40.3 million. Adjusted for exchange rate effects, growth would have been 11.9%. In terms of units sold u‑blox has increased output by a strong 32%. Sales growth, however, has not been as robust because of the weakness of the US dollar against the Swiss franc. In general, market prices for our mainstream products decreased at a similar rate as in the same period in 2007. In addition, production problems with the manufacturing partner of ANTARIS 4 chipsets have resulted in constraints on our deliveries and thus unexpectedly limited our growth capabilities.
Sales in the Americas declined by 13% due to increasing shift of customers’ production to Asia and due to the weak US dollar. In Europe, the Middle East and Africa an increase of 17% could be realized, thanks to strong business activity. In Asia, numbers fell by 1%, also due to the weak US dollar and some significant business in the first half of 2007, which could not be repeated. In all areas volume grew vigorously.
Despite the challenges, gross margin increased from 35.7% in the first half of 2007 to 39.8% in the first half of 2008. This is thanks to u‑blox 5 products, which in the first six months of this year already represented 25% of the shipped volume. Profit from operations (EBIT) grew slightly to CHF 4.5 million, and net profit remained constant at CHF 3.7 million, impacted by the weak US dollar. Adjusted EBITDA reached CHF 6.7 million for the period (CHF 7.4 million for first half 2007). Operational costs were higher than in the previous year, with increased expenditures over the period of CHF 1 million for R&D and CHF 0.5 million for marketing and sales. This was in accordance with expectations.
Cash flow from operations provided CHF 3.8 million (CHF 7.3 million in the first half of 2007) and was impacted by one‑time payments for outlays in the context of u‑blox’ recent IPO.
Strong Market Demand
The markets served by u‑blox have seen steady expansion with many new applications and products launched for consumer and industrial use. The demand for positioning solutions has been growing continuously and u‑blox was able to ship record volumes of products. The new GPS receiver platform has found very high interest in the market and has been rated by design engineers as a leading product in the industry. The launch of u‑blox 5 allows u‑blox to compete very successfully, also in light of the ongoing market consolidation into fewer players. u‑blox believes that its market position could be substantially strengthened, which is clearly visible by the very large number of new business opportunities that have developed during this time frame. The sales organization was heavily engaged in supporting customers with implementing u‑blox 5 technology into many new applications. Consequently u‑blox sold its entire production of u‑blox 5 products to the market.
Operations expanded, and capacity constraints overcome
On the operational side u‑blox has ramped up production volumes for u‑blox 5 chipsets and modules and added extra manufacturing and testing capacity for them. Additional semiconductor specialists for R&D were recruited in order to expand product development capabilities. The marketing and sales teams were enlarged to deal with the growing demand, and u‑blox has increased its presence, primarily in Japan and in the Americas.
Important gains in market position
u‑blox has won significant new accounts with industry leaders in the automotive market and in consumer applications. Important new customers are involved in tracking and fleet management solutions, navigation devices and handheld communication devices. Microsoft, for example, has launched the latest version of their MapPoint software package incorporating a u‑blox 5 based GPS stick that fits every USB port of a PC. The entire New York taxi fleet was outfitted with tracking units including GPS receiver technology from u‑blox, and the new Peugeot 107 benefits from a portable navigation device with u‑blox 5 inside. Two new u‑blox 5 based golf tracking products were rolled out by SkyGolf and uPlay, and Openmoko introduced an interesting open source platform for mobile terminals incorporating u‑blox 5 technology.
The product range was completed with a full range of u‑blox 5 products, both chipsets and modules. In addition, specialty products were launched, for example for timing applications, which have created new demand.
New products are under development that will complement the product line in the future. A new technology platform will be added in 2009 with the aim of deepening and expanding the response to market needs through application and sector specific solutions. Later this year u‑blox plans to launch significant additions to the product line, including a new module form factor. In the market u‑blox anticipates additional business from both automotive and mobile terminal applications. u‑blox 5 technology will clearly take the lead in shipments over ANTARIS 4.
u‑blox is confident that the second half of 2008 will show stronger sales than the first half and product capacity has been expanded accordingly. New customer projects will go into production phase and will generate additional demand. u‑blox expects a sales growth over the first half year in the range of 10% to 20%, with an adjusted EBIT margin of 16% to 20%, based on actual exchange rates for the Swiss franc.