Ad hoc announcements
20 Aug 2020
Thalwil, Switzerland – 20 August 2020 – u-blox (SIX:UBXN), a global leader in wireless and positioning technologies, today announced its financial results for the six months ended 30 June 2020.
For the first half of 2020, u-blox generated revenues of CHF 174.0 million, EBIT (adjusted) of CHF 13.2 million and EBITDA (adjusted) of CHF 24.1 million. Revenues in all regions were lower in H1 2020 compared to the same period last year, reflecting the impact of the COVID-19 pandemic. In particular, demand in the automotive end market and certain industrial sectors were substantially affected. The weakened USD/CHF exchange rate had a negative impact of -3.1%.
In APAC, revenues declined to CHF 70.1 million in H1 2020 from CHF 71.5 million in H1 2019
(-2%). While revenues benefitted from the steady development and deployment of 5G networks, automotive ramp-ups with new customers, and demand for drones, these positive developments were offset by decreased demand from certain sectors of the automotive market and also various telematics applications used in industrial and consumer product markets.
Revenues in EMEA decreased to CHF 51.7 million in H1 2020 from CHF 61.6 million in H1 2019 (-16%) due to declines in the broader automotive and mobility end markets. Automotive OEMs experienced prolonged shutdowns due to the pandemic, and the mobility markets, where applications are especially used in shared services such as scooters and e-bikes, were particularly impacted by COVID-19. Areas of revenue growth in EMEA included IoT applications for smart cities which was mostly driven by demand from local governments. Additionally, there was solid demand for driver assistance and point-of-sale device applications.
AMEC revenues decreased to CHF 48.9 million in H1 2020 from CHF 56.6 million in
H1 2019 (-14%). Decreased demand in general consumer applications and fleet management customers were the primary reasons for the decrease in revenues. Partially offsetting this decline was increased year-on-year demand from industrial automation applications, such as metering, as well as fitness applications.
u-blox operates in two segments:
Adjusted gross profit decreased by -7.8% to CHF 79.4 million in H1 2020 from CHF 86.1 million in H1 2019, resulting in an adjusted gross profit margin of 45.6%
(H1 2019: 45.2%). The higher adjusted gross margin was due to favorable product mix during H1 2020 compared to H1 2019.
Adjusted operating expenses, which include R&D, distribution and marketing and G&A expenses, totaled CHF 66.7 million for H1 2020, compared to CHF 67.8 million in H1 2019. The higher R&D and G&A expenses were offset by lower distribution and marketing expenses. As a percentage of revenue, operating expenses were 38.3% of revenue compared to 35.6% last year.
R&D expenses (adjusted) remained stable at CHF 39.5 million in H1 2020 compared to CHF 39.8 million during the same period in 2019. As a percentage of revenue, adjusted R&D expenses in H1 2020 were 22.7% of revenue compared to 20.9% in H1 2019.
Distribution and marketing expenses (adjusted) in H1 2020 were CHF 15.8 million compared to CHF 17.8 million in the previous year period. As a percentage of revenue, distribution and marketing expenses (adjusted) were 9.1% in H1 2020 compared to 9.3% in H1 2019. Distribution and marketing expenses declined as expositions, conferences and other large-scale events were cancelled or moved to a virtual setting due to the pandemic.
Finance costs of CHF 3.5 million consisted primarily of interest payments for the two outstanding bonds and unrealized foreign currency losses. Share of loss of equity-accounted investees net of tax was CHF 1.9 million in H1 2020.
During the first half of 2020, u-blox recognized an impairment charge of CHF 74.1 million due to current market conditions mainly in automotive, changes in business plan expectations and refocusing of various programs. The company’s existing lines of product offerings remain unaffected.
Net profit (adjusted) before minority interests was CHF 4.7 million, compared to CHF 13.6 million last year. Diluted EPS (adjusted) in H1 2020 was CHF 0.67 per share compared to CHF 1.96 per share in H1 2019.
At 30 June, 2020, u-blox had a strong balance sheet with an equity ratio of 54.2%. Cash, cash equivalents, and marketable securities totaled CHF 100.1 million as of 30 June, 2020, compared with CHF 127.4 million at the end of 2019 and CHF 121.0 million at 30 June, 2019. u-blox generated cash from operating activities of CHF 13.9 million through H1 2020, a decline of 58.2% compared to the previous year (H1 2019: CHF 33.1 million), due to lower business levels and an increase in net working capital. This increase in net working capital was driven by lower demand which increased inventory levels. Investments in property, plant and equipment and intangible assets totaled CHF 22.2 million for H1 2020, compared to CHF 29.2 million in H1 2019. Free cash flow (before acquisitions) was CHF -8.4 million, compared to CHF 3.9 million last year.
On 1 April, 2020, u-blox acquired the IoT communication-as-a-service provider Thingstream. Thingstream provides a comprehensive, end-to-end solution for global IoT connectivity, offering its product “as-a-service” which provides predictable cost and on-demand scalability for customers. The acquisition of Thingstream aligns with and accelerates u-blox’s strategy to expand its services business into a new dimension, the IoT Sphere. The IoT Sphere will provide customers with a reliable, smart and secure solution to connect sensor data to their cloud enterprise. With this capability, u-blox moves forward in achieving unique silicon-to-cloud differentiation. The integration of Thingstream was successfully completed during the first half of 2020.
u-blox has appointed Carl Bellanca as new Head of Sales Americas to lead u-blox’s initiative to grow sales in the U.S. and its overall global distribution capabilities. Mr. Bellanca brings over 25 years of experience in sales and management positions, most recently as VP Sales – East at u-blox America since 2018. Bellanca will report to Markus Schaefer, Executive Director for Global Marketing and Sales in his new role.
During the first half of 2020, u‑blox made advances in certain important product offerings. The company recently announced its latest contribution to vehicle-to-everything (V2X) technology, the short range VERA-P3 V2X module. Based on u‑blox’s existing UBX-P3 V2X chip, VERA-P3 puts automotive OEMs, Tier-1s, and manufacturers of traffic management infrastructure on a fast track to integrating V2X technology into their platforms and solutions and deploying them commercially. Additionally, the company introduced the global LPWA cellular module, SARA-R422, which provides increased security and positioning features [compared to previous generations / other available products]. The SARA-R4 series is ideal for a wide range of mission-critical IoT solutions such as connected healthcare, industrial monitoring, point of sale and vending terminals, tracking and telematics devices, as well as smart lighting solutions and building automation.
Thomas Seiler, u-blox Chief Executive Officer, commented, “After a solid first quarter, our business became increasingly impacted by the COVID-19 pandemic and the unprecedented effect it has had on the global economy. In particular, in EMEA and the Americas, we experienced declining demand, predominantly in the automotive end market and certain industrial markets such as telematics and smart mobility, as production and business shutdowns affected sales to customers in these sectors. In APAC, where the initial outbreak occurred and, accordingly, where the economy reopened earlier, revenues decreased less on a year-on-year basis. The development and expansion of 5G networks in China and Korea, drone applications and several automotive ramp-ups drove demand for our products in this region. We are encouraged by trends observed in APAC, and as businesses and societies continue to reopen across EMEA and AMEC we expect similar developments in these regions.”
Mr. Seiler continued, “Our supply chain remained fully operational and we have experienced no significant issues or interruptions with respect to product availability and delivery. For the safety of our employees, customers and business partners, we instituted company-wide measures for employees to work remotely beginning in mid-March. Our existing infrastructure was key in facilitating efficient online collaboration, and therefore this transition has not impacted our productivity in sales and marketing, R&D and other operational areas of the business. In fact, we implemented new measures for conducting R&D while operating remotely, and we have been maintaining full R&D capacity to keep our innovation pipeline continually flowing. However, we also defined measures to reduce our operational expense significantly. Throughout the pandemic, no employee was subject to reduced working schemes.”
Mr. Seiler said, “The core fundamentals and underlying drivers of our business remain solid and we are pleased with our ability to service customers and improve the business despite these challenging times. We experienced interesting ramp-ups of new applications that should accelerate our business once economic conditions improve and stabilize. These new applications include a variety of classical applications like infotainment, as well as new applications in the areas of automated vehicles, building automation and smart cities. We also benefited from the strong build-out of network capacity, both cellular and point-to-point.”
While we remain confident in the underlying growth drivers to our business, particularly wireless content extension in automotive and the expansion of industrial IoT, the near term remains difficult to predict with respect to how quickly and strongly economies will recover across our regions. For these reasons, we are retracting our guidance that was presented on 13 March 2020 and the mid-term guidance, and we will not be issuing guidance for the 2020 financial year.
Thomas Seiler, CEO and Roland Jud, CFO, will host a conference call and webcast with analysts and investors Friday, 21 August, at 10:00 AM 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
Webcast Participants’ Links:
Pre-Registration Link: https://www.u-blox.com/en/investor-relations
The webcast will be available at the u-blox website after the event.
|Jan-Jun 2020||Adjustments2)||Jan-Jun 2020||Jan-Jun 2019|
|(in CHF 000s)||(IFRS)||% revenue||(adjusted)||% revenue||(adjusted)||% revenue|
|Cost of sales||-94'927||-54.6%||362||-94'565||-54.4%||-104'466||-54.8%|
|Distribution and marketing expenses||-16'907||-9.7%||1'102||-15'805||-9.1%||-17'758||-9.3%|
|Research and development expenses||-115'483||-66.4%||76'001||-39'482||-22.7%||-39'777||-20.9%|
|General and administrative expenses||-12'935||-7.4%||1'562||-11'373||-6.5%||-10'255||-5.4%|
|Operating Profit (EBIT)||-65'790||-37.8%||79'027||13'237||7.6%||19'666||10.3%|
|Share of profit of equity-accounted investees, net of taxes||-1'907||-1.1%||-1'907||-1.1%||-1'989||-1.0%|
|Profit before income tax (EBT)||-71'143||-40.9%||79'027||7'884||4.5%||16'282||8.5%|
|Income tax expense||11'121||6.4%||-14'328||-3'207||-1.8%||-2'645||-1.4%|
|Net Profit, attributable to equity holders of the parent||-59'953||-34.5%||4'746||2.7%||13'637||7.2%|
|Earnings per share in CHF||-8.64||0.67||1.96|
|Diluted earnings per share in CHF||-8.64|