2018 half‑year highlights
Thalwil, Switzerland – August 24, 2018 – u‑blox (SIX:UBXN), a global provider of leading positioning and wireless communication technologies, today announced results for the first half year.
- Reflecting a soft China business, u‑blox posted a 2.6% increase in revenues from CHF 193.9 million to CHF 199.0 million.
- Gross profit increased compared to H1/2017 by 7.1% to CHF 93.6 million in H1/2018 and gross margin increased compared to H1/2017 to 47.0% in H1/2018 due to favorable changes in the product mix.
- EBIT fell by 3.3% to CHF 28.5 million, representing a margin of 14.3% as guided for this fiscal year.
- Operating activities generated a cash flow of CHF 13.7 million, 6.9% of revenue.
- Net profit saw a 39.3% increase to CHF 25.1 million, a net profit margin of 12.6% (H1/2017: 9.3%).
- A surge of new and prospective products consolidated u‑blox’s leading position in the industry.
- Full‑year revenue, EBITDA and EBIT guidance have been slightly reduced.
Remark: All numbers in this report are IFRS based. Adjusted numbers are provided in the last table to this report.
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In the first half of 2018, we have seen a strong growth in our customer numbers and in the market for car connectivity devices (Telematic Control Units). At the same time, shrinking business with key Chinese customers as well as the delaying effect on our customers of their long lead times for receiving other components resulted in overall slow revenue growth of 2.6% compared to the same period in 2017, with consolidated revenues standing at CHF 199.0 million during the first half of 2018.
u‑blox registered another increase in gross profit from CHF 87.4 million to CHF 93.6 million, with gross profit margin remaining high at 47.0%. Operating profit (EBIT) was down from CHF 29.5 to CHF 28.5 million as the company continued to expand its R&D capacity, representing an EBIT margin of 14.3% as guided, while the EBITDA margin stood at 20.1%. There was a 39.3% increase in net profit, which increased from CHF 18.0 million in 2017 to CHF 25.1 million mainly due to foreign exchange impacts. Net cash flow from operations was CHF 13.7 million, which represented 6.9% of revenue. The balance sheet remained solid, with a healthy equity ratio of 62.0%.
The company has focused relentlessly on increasing its continued growth potential with the announcement of two new core product platforms and several new modules. Executing its time‑tested strategy, u‑blox is in a strong position to benefit from continually growing markets, and a full pipeline of new product developments remains a firm indication of potential future growth.
Revenue development and breakdown
The first half of 2018 showed continued growth in u‑blox’s positioning & wireless products segment.
Consolidated revenues from chips and modules for positioning and wireless connectivity rose by 2.6% from CHF 193.8 million in the first half of 2017 to CHF 198.9 million during the first half of 2018. Revenue growth was slightly negatively impacted by -0.5% foreign exchange decay. Wireless services (including intra‑Group sales) generated CHF 16.1 million in revenues compared with CHF 12.3 million for the same period last year.
During the first half of 2018, u‑blox reported an overall increase of revenues of 2.6%, with Asia‑Pacific accounting for 33.1%, EMEA for 35.1%, and the Americas for 30.7%. EMEA grew rapidly by 35.4% to CHF 69.8 million, revenues in Americas were stable with CHF 61.1 million and Asia‑Pacific reported a 19.2% decline over first half year 2017 to CHF 65.9 million. When compared to second half year 2017, the growth rates amounted to 31.3% for EMEA, -17.6% for Americas and -16.2% for Asia‑Pacific. These splits are based on reporting area.
Influence of Chinese economy and network readiness
In Asia, there has been strong progress in wearables, in‑car navigation, and after‑market car electronics, and a slow‑down in timing and shared devices. However, the overarching theme in our Asian markets was set by generally weaker business of many of our customers in China, also affected by trade war implications, which led to lower revenues than anticipated.
In the Americas, business activities in metering, medical devices, wearables, and point‑of‑sales were particularly strong, while fleet management showed a slowdown in the first half of 2018 due to delays in the adoption of the new Cat M1 and NB‑IoT networks.
Our business in the EMEA region continues to impress with strong growth, driven by a constant flow of new projects in various markets going into mass production as well as strong progress in solar energy, telematic control units (TCUs), automation, fleet management, and road pricing. Europe in particular benefited from a notable upturn in demand for connected devices destined for the IoT, as well as good demand from the automotive sector, stimulated by the need for in‑vehicle connectivity.
The company has taken the necessary actions to respond strategically to the current environment. Above all, it changed the management structure in China, and re‑focused the sales team to cope with emerging application sectors. In all regions, u‑blox pursued a record number of new business opportunities, driven by general interest in the Internet of Things (IoT).
Increased gross profit
Gross profit saw a 7.1% improvement during the first six months of the year of 2018, taking it from CHF 87.4 million in the same period last year to CHF 93.6 million. Gross profit margin stood at 47.0%, an increase over first half year 2017.
Research and product development
In the first half of 2018, R&D expenses stood at CHF 36.7 million, or 18.5% of revenue. These figures compare with CHF 32.0 million and 16.5%, respectively, during the same period in 2017.
Distribution and marketing activities
Wide‑ranging expansion in our operations drove distribution and marketing expenses up from CHF 17.2 million to CHF 18.8 million. This figure is equivalent to 9.5% of revenue, compared with 8.8% during the same period last year.
u‑blox posted EBIT of CHF 28.5 million, or 14.3% during the first half of 2018, which compares with the CHF 29.5 million or 15.2% in the same period in 2017. The EBITDA margin was 20.1%.
Finance income and costs
Finance income totaled CHF 5.4 million due mainly to positive unrealized foreign currency gains, while finance costs amounted to CHF 1.0 million due to interest on the bonds issued in 2015 and 2017. The financial result also contains the result from the equity‑accounted investee Sapcorda GmbH.
Stable strong financial position
u‑blox maintained a strong balance sheet during the first half of 2018; the equity ratio amounted to 62.0%. Cash, cash equivalents, and marketable securities totaled CHF 150.2 million as of June 30, 2018, compared with CHF 172.4 million on December 31, 2017. Cash was used for working capital needs because of the on‑going tight supply chain situation.
u‑blox carries treasury shares in the amount of CHF 24.4 million; shares that will serve the employee stock options program.
Strategic highlights and initiatives
Designed to deliver sustainable, profitable growth across market cycles, u‑blox’s strategy is founded on four discrete pillars: ongoing strengthening of our leading market position; continuing technological development and innovation; outstanding operational performance; and strategic partnerships. Despite a challenging environment in some of our core markets during the first half of 2018, u‑blox made advances in all three of its key strategic areas.
For instance, strengthening its market and technology leadership, u‑blox has partnered with the Kudelski Group, the leader in digital security, to bring premium security to IoT devices. As the IoT takes hold across u‑blox’s key markets, the importance of dependable connectivity and location awareness is at an all‑time high. The collaboration with Kudelski is taking advantage of this opportunity and will result in high‑quality products and services that meet both current and future needs.
New product rundown
u‑blox’s strategy remains to provide a coherent range of products and services that are secure, easy to use, and of high quality. It is also an ongoing aim to continually increase the number of products that are built on its own silicon.
In our solution portfolio, we saw good growth in the area of cellular and short range products: LTE modules performed very strongly across the first six months of 2018, and we have seen continued growth in sales for Wi‑Fi modules. By contrast, sales of positioning chipsets have slowed.
In keeping with its strategy, u‑blox launched a variety of significant new products in 2018. Highlights include the u‑blox F9 technology platform, which delivers high precision positioning solutions for mass market industrial and automotive applications; the UBX‑P3 chip for vehicle to everything (V2X) wireless communication, and a new cellular technology called LTE Cat M1, specifically designed for the needs of applications targeting the Internet of Things (IoT) or machine‑to‑machine (M2M) communications.
Revenue by reporting segments
u‑blox operates in two segments:
- Positioning and wireless products
u‑blox develops and sells chips and modules for positioning and wireless connectivity that are used in automotive, industrial, and consumer applications. Revenue was CHF 198.9 million for the first half of 2018 compared with CHF 193.8 million during the same period last year.
- Wireless services
u‑blox also offers wireless communication technology services in the form of reference designs and software. In the first semester, revenue for wireless services was CHF 16.1 million compared with CHF 12.3 million in the first half of 2017 (including intra‑group revenue).
Board and management
Due to his age, Mr. Fritz Fahrni, Chairman of the Board, chose not to stand for re‑election as a Board Member at the Annual General Assembly on April 24, 2018. In his stead, Mr. André Müller, member of the Audit Committee, was elected as new Chairman of the Board. At the same Annual General Assembly Mr. Ulrich Looser was elected as non‑executive director to join the Board of u‑blox Holding AG.
u‑blox expects the remaining months of 2018 to remain challenging due to the slower deployment of Cat M1 and NB‑IoT networks and the situation on the Chinese market. u‑blox is adopting a cautious but positive outlook for this period and remains confident that the fundamentals of our company are in place for healthy future growth and bottom line results, and that we will meet the new guidance.
For 2018, u‑blox anticipates updated EBITDA of between CHF 90 million and CHF 100 million and EBIT of between CHF 60 million and CHF 65 million, based on revenue predictions of between CHF 435 million and CHF 445 million, with unchanged assumptions for foreign exchange rates. In the medium to long‑term, u‑blox expects continued growth.
Table 1: Consolidated income statement
Table 2: Consolidated statement of cash flows (condensed)
Table 3: Consolidated statement of financial position (condensed)
Table 4: Consolidated Income Statement (adjusted)
Adjusted numbers are provided below for allowing comparison with industry peers.
u‑blox (SIX:UBXN) is a global provider of leading positioning and wireless communication technologies for the automotive, industrial, and consumer markets. Their solutions 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 a growing ecosystem of products supporting data services, u‑blox is uniquely positioned to empower its customers to develop innovative solutions for the Internet of Things, quickly and cost‑effectively. With headquarters in Thalwil, Switzerland, the company is globally present with offices in Europe, Asia, and the USA.
Analyst day: November 21, 2018
2018 full year results: March 15, 2019
Annual general meeting: April 25, 2019
Phone +41 44 722 7486
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 Group’s products, the potential for the Group’s products to become obsolete, the Group’s ability to defend its intellectual property, the Group’s 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 Group’s ability to generate revenues and profitability, and the Group’s 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.