H1/2018 Results August 24, 2018 Thomas Seiler, CEO Roland Jud, CFO
Disclaimer This presentation contains certain forward-looking statements. Such forward-looking statements reflect the current views of management and are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause actual results, performance or achievements of the Group to differ materially from those expressed or implied herein. Should such risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this presentation. u-blox is providing the information in this presentation 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. 2
Agenda Operational highlights H1/2018 Financial results H1/2018 Business review Outlook Q&A 3
Operational highlights H1/2018 2.6% revenue increase as compared to the first half of 2017 Gross profit increased by 7.1% R&D efforts continued at high pace EBIT margin at guided level 14.3% Increase in working capital for assuring delivery punctuality Reduced cash flow from operating activities Revenue, EBITDA and EBIT guidance updated Strong product innovation 7 new cutting-edge products launched Continued strong investment in R&D for next generation products New strategic partnership with Kudelski 4
u-blox group H1/2018 Key figures Amount CHF In relation to revenue Change H1/2018 to H1/2017 Revenue 199.0m - 2.6% Gross profit adjusted 1) 94.0m 47.2% 7.1% IFRS reported 93.6m 47.0% 7.1% EBITDA adjusted 1) 45.1m 22.7% -1.5% IFRS reported 40.1m 20.1% -0.5% Operating profit (EBIT ) adjusted 1) 34.9m 17.5% -3.8% IFRS reported 28.5m 14.3% -3.3% Net profit, attributable to owners of the parent Net cash generated from operating activities adjusted 1) 30.2m 15.2% 27.3% IFRS reported 25.1m 12.6% 39.3% 13.7m 6.9% -37.7% 1) Excl. Share-based payments, impacts based on IAS-19, amortization of intangible assets acquired and non-recurring expenses 5
Revenue and EBITDA Comments Organic revenue growth (+2.6% compared to H1/2017) Currency impact on revenues at H1/2017 rates: -0.5% at guidance rates: -0.1% Revenue and EBITDA (million CHF) 450 CAGR 9.2% 403.7 400 360.2 350 338.3 300 250 CAGR 5.2% 200 179.7 193.9 199.0 150 100 78.7 81.8 87.4 50 39.1 40.3 40.1 0 2015 2016 2017 H1/16 H1/17 H1/18 Revenue EBITDA 6
Market trends Comments Consumer market soft Good progress in automotive for telematics control units (TCU) Industrial markets expanding in many applications Revenue split per market for H1/2018 5.5% 28.9% 55.1% 10.5% Industrial Consumer Automotive Not assigned Note: Estimate 7
Revenues by geography Comments Growth in geographic regions compared to H1/2017: EMEA: +35.4% Strong growth with expanding customer base Americas: 0.0% Constant business level with shifted application importance; delays in network readiness Asia Pacific: -19.2% Decline due to weak China business affected by trade war implications Revenues by geographic region (million CHF) 12.1% 403.7 400 360.2 350 338.3 300 40% 250 39% 2.6% 37% 200 193.9 199.0 179.7 150 26% 27% 26% 37% 42% 33% 100 26% 26% 36% 50 37% 35% 33% 37% 31% 31% 0 2015 2016 2017 H1/16 H1/17 H1/18 8 Americas EMEA APAC Note: based on reporting area
Gross profit Comments Increase in gross profit to CHF 93.6m in H1/2018 Growth of gross profit of +7.1% compared to H1/2017 Gross profit margin in H1/2018 increased compared to H1/2017 due to changes in the product mix Gross profit / Gross profit margin (million CHF) (in % of revenue) 200 50.3% 50.3% 51% 180 50% 160 49% 140 48% 46.4% 47.0% 120 47% 100 80 184.0 46% 167.1 155.0 45.1% 60 45.6% 45% 40 82.5 87.4 93.6 44% 20 0 2015 2016 2017 H1/16 H1/17 H1/18 43% 42% Gross Profit % of revenue 9
Shipments and ASP development Good volume growth with modules Modules GNSS Chips Decline of chipset volumes due to end-oflife of several projects with u-blox 7 Strong growth with u-blox 8/M8 Chip ASP increased (million units) 40 30 20 10 10.5% 6.3% (CHF) 10.00 9.50 9.00 (million units) 80 70 60 50 40 30 20 10 28.1% -13.0% (CHF) 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0 2015 2016 2017 H1/16 H1/17 H1/18 8.50 0 2015 2016 2017 H1/16 H1/17 H1/18 u-blox 5 u-blox 6 0.00 u-blox 7 u-blox 8/M8 Shipments modules ASP u-blox 9 ASP 10
Revenue split Constant share of module and chip revenue Modules dominate the gross margin generation Chip volume essential for economies of scale Revenue by product type (million CHF) 450 403.7 400 360.2 350 338.3 25% 300 26% 27% 250 200 179.7 193.9 199.0 150 72% 24% 27% 24% 72% 100 68% 50 74% 71% 73% 0 2015 2016 2017 H1/16 H1/17 H1/18 Modules Chips Other 11
Global customer base Comments Strong and stable customer base, now serving 5 900 customers worldwide Continued wide spread across different applications and geographical regions No significant customer dependency: Largest customer accounts for less than 3.9% of total revenue in H1/2018 10 biggest customers account for 25.1% of total revenue in H1/2018 Number of customers totaling 80% of revenue (Customers) 120 100 80 60 40 20 65 71 84 63 74 104 0 2015 2016 2017 H1/16 H1/17 H1/18 12
Distribution & marketing / Research & development Distribution & marketing expenses Research & development expenses (million CHF) (in % of revenue) (million CHF) (in % of revenue) 40 15.0% 70 25% 35 30 32.0 36.2 14.0% 13.0% 12.0% 60 50 19.2% 17.6% 16.2% 17.9% 16.5% 18.5% 20% 25 20 15 27.7 8.2% 8.9% 9.0% 8.8% 8.8% 9.5% 11.0% 10.0% 9.0% 40 30 65.0 63.5 65.6 15% 10% 10 5 15.9 17.2 18.8 8.0% 7.0% 6.0% 20 10 32.1 32.0 36.7 5% 0 2015 2016 2017 H1/16 H1/17 H1/18 5.0% 0 2015 2016 2017 H1/16 H1/17 H1/18 0% D&M % of revenues R&D % of revenues 13
Employment Employee breakdown (end of H1/2018, FTE based) Average employee level (FTE based) (Average FTE) 1000 Logistics, admin 15% 148 800 600 Sales, marketing, support 17% 172 Total = 1'010 FTE 691 Research & development 68% 400 671 786 893 729 839 926 200 0 2015 2016 2017 H1/16 H1/17 H1/18 Note: 75% of employees based outside Switzerland (spread across 18 countries) Note: Average number of employees (FTE = full time equivalent) 14
Income statement - IFRS Comments Revenue increase of 2.6% from H1/2017 to H1/2018 Increased gross profit by 7.1% OPEX 32.7% of revenue (H1/2017: 30.2%) H1/2018: costs for share based payments in the amount of CHF 4.3m (H1/2017: CHF 4.1m) EBITDA with margin of 20.1% (H1/2017: 20.8%) With an EBIT margin of 14.3%, EBIT declined by 3.3% compared to H1/2017 Financial result contains mainly unrealized foreign exchange gains and interests for the bonds Tax rate of 20.2% (year end 2017: 20.8%) Net profit margin of 12.6% (H1/2017: 9.3%) EPS = CHF 3.59 / diluted EPS = CHF 3.58 (H1/2017: CHF 2.61 / CHF 2.57) 15 Consolidated income statement (condensed) Jan-Jun Jan-Jun Jan - Dec (in CHF 000s) 2018 2017 2017 (unaudited) (unaudited) (audited) Revenue 198'983 193'908 403'712 Cost of sales -105'395-106'518-219'695 Gross profit 93'588 87'390 184'017 % gross profit margin 47.0% 45.1% 45.6% Operating expenses -66'108-58'707-120'852 Other income 1'063 845 1'921 Operating profit (EBIT) 28'543 29'528 65'086 Finance income 5'364 309 5'668 Finance costs -1'042-6'979-5'652 Share of profit of equity-accounted investees net of tax -1'443 0-400 Profit before income tax (EBT) 31'422 22'858 64'702 Income tax expense -6'339-4'846-13'442 Net profit, attributable to owners of the parent 25'083 18'012 51'260 Operating profit (EBIT) 28'543 29'528 65'086 Depreciation and amortization 11'510 10'730 22'290 EBITDA*) 40'053 40'258 87'376 (*) EBITDA (earnings before interest, taxes, depreciation and amortization) calculated by adding depreciation and amortization to profit from operations (EBIT), in each case determined in accordance with IFRS.
Income statement Adjusted (in CHF 000s) Jan-Jun Adjustments Jan-Jun Jan-Jun 2018 2018 2017 (IFRS) (adjusted) (adjusted) Share based payments Pension impact based on IAS-19 Nonrecurring expenses Amortization intangible assets acquired Revenue 198'983 198'983 193'908 % growth 2.6% 2.6% 7.9% Cost of sales -105'395 382-105'013-106'131 Gross Profit 93'588 382 0 0 0 93'970 87'777 % gross profit margin 47.0% 47.2% 45.3% Operating expenses -66'108 3'939 758 1'281-60'130-52'326 Other income 1'063 1'063 845 Operating profit (EBIT) 28'543 4'321 758 0 1'281 34'903 36'296 % margin 14.3% 17.5% 18.7% Finance income 5'364 5'364 309 Finance costs -1'042-1'042-6'979 Share of profit of equity-accounted investees, net of taxes -1'443-1'443 0 Profit before income tax (EBT) 31'422 4'321 758 0 1'281 37'782 29'626 Income tax expense -6'339-872 -153-258 -7'622-5'925 Net profit, attributable to owners of the parent 25'083 3'449 605 0 1'023 30'160 23'701 Earnings per share in CHF 3.59 4.32 3.44 Diluted earnings per share in CHF 3.58 4.31 3.39 Operating profit (EBIT) 28'543 4'321 758 0 1'281 34'903 36'296 Depreciation and amortization 11'510-1'281 10'229 9'512 EBITDA 1) 40'053 4'321 758 0 0 45'132 45'808 % EBITDA margin 20.1% 22.7% 23.6% 1) EBITDA (earnings before interest, taxes, depreciation and amortization) calculated by adding depreciation and amortization to operating profit (EBIT), in each case determined in accordance with IFRS. 16
Segment information Positioning and Wireless services Total segments Non-allocated/ Group wireless products eliminations January - June January - June January - June January - June January - June (in CHF 000s) 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 Revenue third 198'877 193'815 106 93 198'983 193'908 198'983 193'908 Revenue intragroup 16'043 12'172 16'043 12'172-16'043-12'172 0 0 Total revenue 198'877 193'815 16'149 12'265 215'026 206'080-16'043-12'172 198'983 193'908 EBITDA *) 39'623 39'728 430 367 40'053 40'095 163 40'053 40'258 Depreciation -3'392-3'397-1'252-1'056-4'644-4'453-4'644-4'453 Amortization -6'851-6'253-15 -24-6'866-6'277-6'866-6'277 Impairment 0 0 0 0 Operating profit (EBIT) 29'380 30'078-837 -713 28'543 29'365 0 163 28'543 29'528 Finance income 5'364 309 5'364 309 Finance costs -1'042-6'979-1'042-6'979 Share of profit of equity-accounted investees, net of taxes -1'443 0-1'443 0 EBT 4'322-6'507 31'422 22'858 17
(million CHF) (million CHF) Statement of financial position Comments 600 Strong financial position with a liquidity (incl. marketable securities) of CHF 150.2m (Dec. 2017: CHF 172.4m) Inventory CHF 56.7m (Dec. 2017: CHF 44.2m) increased due to tight supply chain 500 400 300 Fixed Assets Inventory Accounts Receivable Trade receivables CHF 58.6m (Dec. 2017: CHF 50.4m) increased with accelerated business at end of H1/2018 Increased intangible assets due to capitalization of R&D expenses Goodwill of CHF 56.4m (Dec. 2017: CHF 57.6m) slightly decreased as result of exchange rate changes 200 100 0 0 100 2014 2015 2016 2017 H1/2018 Other current assets Cash (incl. marketable securities) Trade payables of CHF 24.7m (Dec. 2017: CHF 20.3m) Non-current liabilities contain bonds of CHF 119.0m, Deferred tax liabilities (CHF 7.5m), Employee benefits (IAS- 19) (CHF 15.7m), Provisions (CHF 5.9m) 200 300 400 Short Term Debt Long Term Debt Shareholder's Equity Share capital increase due to exercise of options 500 18 600
Statement of financial position Comments Strong capital base Equity ratio of 62.0% Treasury shares for option program CHF 24.4m Equity ratio without treasury shares: 63.6% Total equity and equity ratio (million CHF) (% of total assets) 400 100% 350 90% 300 64.2% 67.0% 80% 60.7% 65.4% 62.0% 70% 250 58.1% 60% 200 50% 150 346 319 40% 285 275 248 254 30% 100 20% 50 10% 0 2015 2016 2017 H1/16 H1/17 H1/18 0% Equity Equity ratio 19
Statement of financial position Comments Cash flow from operating activities negatively impacted by investment into working capital of CHF 21.6m Cash flow from investing activities: CHF -4.3m investments into property, plant and equipment (equipment, tools) CHF -27.6m investments into intangible assets (Software, capitalization of R&D) CHF 0.4m net proceeds from marketable securities CHF -4.1m investment into Sapcorda GmbH Cash flow from financing activities: CHF -15.4m dividend 2017 paid in May 2018 CHF +13.6m capital increase from options CHF -1.8m paid interests for bonds Consolidated statement of cash flows (condensed) For the period ended June 30, June 30, December 31, (in CHF 000s) 2018 2017 2017 Net cash generated from operating activities 13'736 22'061 60'504 Net cash used in investing activities -35'158-27'914-63'511 Net cash provided by / used in financing activities -3'654 26'021 26'012 Net increase in cash and cash equivalents -25'076 20'168 23'005 Cash and cash equivalents at beginning of year 169'624 149'545 149'545 Exchange gains/(losses) on cash and cash equivalents 3'291-5'928-2'926 Cash and cash equivalents at end of the period 147'839 163'785 169'624 20
Business update 21
Product launch highlights Cellular Communication SARA-R410M The world s smallest multi-mode LTE Cat M1, NB-IoT module, ideal for diverse IoT and M2M applications including smart cities, connected healthcare, and more. Short Range Communication UBX-P3 The industry s smallest V2X communication chip and takes u-blox s commitment to shaping the future of active safety and autonomous driving technologies to the next level. Positioning u-blox F9 platform High precision positioning solutions for mass market industrial and automotive applications. SARA-R412M The world s smallest multi-mode LTE Cat M1 module with 2G fallback, ideal for diverse IoT and M2M applications in EMEA. ANNA-B1 Ultra-compact Bluetooth 5 module designed for tough environments, ANNA-B1 is fully tailored to applications for the Industrial Internet of Things. ZED-F9P First high precision GNSS module based on u-blox F9 technology delivering centimeter-level accuracy in seconds. NINA-B2 Ultra-compact NINA-B2 dual mode Bluetooth stand-alone module features strong security for the Industrial IoT. 22
UBX-P3 - the next step towards increased traffic safety and autonomous driving UBX-P3 is industry s smallest concurrent dual-channel V2X communication chip UBX-P3 chip with a combination of unique features: Concurrent dual-channel Flexibility of installation Smallest size Low power 23
UBX-P3: V2X enables wide-ranging applications Making transportation safer, more efficient, and more sustainable Active traffic safety Smart cities and traffic management Platooning Autonomous driving Other applications 24
UBX-P3: Applications Making transportation safer, more efficient, and more sustainable Autonomous driving heading towards level 5 Driver Only Driver undertakes lane holding and lane changing activities. LEVEL 0 Assisted Driving Driver carries out all lane holding or lane changes. LEVEL 1 Partly Automated System handles lane holding and lane changes in a special application case. LEVEL 2 Highly Automated Driver no longer needs to continuously monitor the system. Must potentially be available to take over. LEVEL 3 u-blox High Precision GNSS and V2X Fully Automated No driver is necessary in special applications. LEVEL 4 u-blox solutions with functional safety & integrity Driverless LEVEL 5 25
F9 takes GNSS precision to the next level Delivers accuracy down to the centimeter level Paves the way for high precision navigation, augmented reality, and unmanned vehicles 26
F9: High Precision GNSS is a reality in automotive Results from typical road-test, a trip in Zurich Positioning error [m] L1 ADR High Precision GNSS (SSR) and ADR 27
Kudelski a new strategic partnership u-blox connects IoT devices Leading player in IoT connectivity Established IoT customer base Sets standards in the industrial, tracking & automotive markets Building services platform to provide customers access to innovative services from u-blox Kudelski protects IoT solutions 30 years securing their customers business $90B revenue enabled annually 400M connected devices secured Innovative security experts with proven track records Comprehensive security offering from design, platform to managed security services Field-proven security technologies to empower customers to secure their IoT products and devices 28
Strategic priorities 2018 (1) Market position Further develop our position in the automotive market, including for autonomous vehicles Expand high-precision positioning into a broader range of markets to support general automation Capitalize on strong move towards LTE based cellular connectivity for the IoT Establish short range radio solutions based on latest standards Technology & innovation Push ahead with the development of our own silicon to give us even more control over the core technology in our products Launch products based on our own silicon across all three technology areas Continually strive to make our products more secure Expand our offering of solutions combining u-blox products from different lines 29
Strategic priorities 2018 (2) Operational excellence Strongly focus on emerging applications in IoT space Further explore unique partnerships with suppliers of key components Improve the resilience of our supply chain by reducing dependency on any single supplier Strategic partnerships & acquisition opportunities Develop new and expand existing relationships with key players in our markets Continue to review potential acquisitions that will strengthen our product portfolio and technology base and accelerate our strategy 30
Outlook 31
Financial performance and guidance 2018 Guidance amended reflecting H1.2018 Stronger H2 but cannot compensate fully slow first half year 2018 R&D efforts maintained for supporting new platforms Impact by product mix on gross margin Natural hedging protects gross margin against foreign exchange variations Actual FY 2016 *) This guidance is based on the absence of unforeseen economic adversity and exchange rates assumed at budget level. Actual FY 2017 Exchange rate assumptions for 2018: Previous Guidance 2018 EUR/CHF: 1.11 USD/CHF: 0.98 GBP/CHF: 1.27 FX-sensitivity against CHF on Guidance 2018 Updated Guidance 2018 *) (IFRS) Revenue 360.2m 403.7m 460m 475m 435m 445m EBITDA 81.8m 87.4m 95m 105m 90m 100m EBIT 59.0m 65.1m 65m 70m 60m 65m CHF CHF CHF CHF +10% of USD EUR GBP Revenue + 9% + 1% 0% EBITDA + 16% 0% -1% EBIT + 22% - 1% - 2% 32
Upcoming events Investor and Analyst Day November 21, 2018 2018 Annual Results March 15, 2019 Annual General Meeting April 25, 2019 33
Thank you for your attention 34