u-blox Holding AG

Ladies and gentlemen, welcome to our presentation about our results of the fiscal year 2021. I'm glad to do this together with my colleague Roland Jud, our CFO. We make this presentation with the usual disclaimer about statements into the future. And our agenda comprises that we give an overview on the highlights, then go into more details of numbers, also talk of business and strategy, and finally provide an outlook before we then provide time for questions. So in summary, our year was very successful. It was a record year. It was a record for the top line. We increased our revenue over the previous year by 24% to 440 million. This is also a record. We never had such high revenues in the lifetime of our company. Also, we increased our gross margin to 46.8%. and followed by such a good top input, of course, ABTA and EBIT also followed to much higher levels than in the previous year. And most importantly, cash flows were very strong, almost 100 million for the operating cash flow and 56 million for free cash flow. The Business was, of course, driven by very high demand. We communicated before that we have very, very strong order intake with record bookings, and this has increased our order book. to a high level. And we had, of course, to follow and increase our production capacity. But the limiting factor was the availability of components. This has decided on what was achievable finally for the fiscal year. So we are on a very good situation also looking forward we are continually investing into R&D and we have launched again in 2021 12 new core products that of course are then defining our way forward especially business further out into the many years to come also we have expanded our capability we acquired another company for expanding our services business with companies like Cordop This was important to complement what we have on the hardware side, but also with existing services for communication and security. Now I hand over to my colleague Ron Youd for talking the financials.

Thank you, Thomas. Good afternoon, ladies and gentlemen. In the next few minutes, I'd like to give you a short overview of the financial full year results. Thomas mentioned it, the revenue increase by 24.2% to 400%. 14.1 million Swiss francs. This is above the expected range of 15 to 20% we announced in our guidance. We could do this with adjusted gross margin increase to 46.8% and as mentioned with an EBITDA of 72.1 million compared to the 42.2 million last year. Cash flow from operating activities, 97.7 million, and free cash flow, 56 million Swiss francs. Free cash flow before acquisition, 54.9 million. This is compared to the minus 16.5 million, a good achievement for you blocks in this year. Equity ratio was further increased to 59.9% compared to the 54.6% in 2022. And based on this good results, the board of directors will propose to the AGM to pay a dividend in form of a par value reduction in the amount of one Swiss franc 30 per share. This is especially tax favorable for the shareholders. A little bit more in detail on the revenue side. We mentioned it now, 24.2% compared to 2020. This is a new record level based on a strong rebound since August 2020 and the accelerated trend for connected devices. Also the expanded production output we are capable to make this a revenue. The U.S. dollar has a negative impact on our revenue growth at the 2020 rate. We even have been 26.9%. And ABTA adjusted margin with this revenue was 17.4% in 2021. This is 72.1 million Swiss francs. We see this year a strong growth in every region with higher demand in industrial automation and automotive navigation and infotainment application which let the American revenue grow by 37.6%. The growth of revenues of 30.1% in EMEA was a On one hand, driven by a strong rebound in the automotive sector, and on the other hand, by the increased demand in the industrial automation and consumer telematics area. And also in APEC, we saw 2021, a strong growth in Japan and Korea in the industrial market. as well as in the automotive market. But this growth was tempered by the flat business in China due to, on one hand, supply constraints and also some COVID impact. But although also impact resulted in growth of nearly 12% of revenues. On the market side during the year, our automotive segment experienced a higher demand for navigation and infotainment applications, especially for electric vehicles. And we were able to support this rebound in demand after a strong decline in 2020, which leads then to a growth on the voltage side of 41% compared to 2020. Our industrial segment grew by 24% thanks to a strong demand for existing applications such as smart devices, but also new applications in micro mobility or medical automation and networks helped to grow the industrial market by 24%. And the highest growth in consumer market This is due to telematics and wearables so that we are able to grow this in 51%. The split of overall revenues remains similar to the years before. 62.7% of our revenues we make in the industrial market has the biggest sex of 27.8% in automotive and this year 9.5% goes to consumers. If we have a look at the volumes after years of flat volumes or even declining, we are back on the growth path. In 2021, our volume grew by 36.6% and we sold roughly 48 million chipsets, which you see result as a graph 5.9% increase on volume from 2020 to 2021. As you can see, the chipset volume is driven by the uBlocks 8 series. And also on chipset side, at least the ASPs are increasing. This is due to sales price increases, which helped here as well. On the split between the different between modules and chips that you see a trend towards modules in 2021 81% of our revenue is we make with module sales 18% goes into chipset sales. On the gross profit side, our gross profit adjusted was 193.9 million Swiss francs. This is an increase to the margin from 45.3% to 46.8%. This is mainly due to a failure of products mix and also the sales price increases helped here. Now, a comment to the cost side. Distribution and marketing expense adjusted remain at the level of the years before with 9.4% of revenues. We spent in distribution and marketing 38.9 million Swiss francs in 2021. The income statement here, you see the adjustments we make to the IFRS figures, which are in more detail in the annual report as well. The adjustments are the usual ones. As in the past year, we have share-based payment adjustment of $3.3 million, pension impact of IS-19 of $1.3 million, and the adjustments from amortization of intangible assets acquired, including impairments of $3. 3 million and non-curring expense of 1.5 million. This ends up with an EBIT impact of 9.2 million and an impact on EBITDA of 6.2 million Swiss francs. On the financial result, this consists primarily of foreign exchange gains, the interest of the bond and the result of the equity counting in the fees and also the impact of the takeover of full control over subcorda. For all these adjustments on the tax side, we do apply the group tax rate of 18.1%. With that, we had earnings per share adjusted of three Swiss francs per key. Now let's have a look at the financial position. Our financial position is still high with a liquidity of 84 million in cash. Our inventories level 31.4 million. This is mainly raw material and working process. And trade vehicles were 51.1 million Swiss francs in 2021. On the other current assets then amounted to 35.2 million compared to the 56.1 million to 2020. In our books, we have also capitalized R&D. They are now at the level of 175.4 million Swiss francs compared to the 162.5 million in 2020. And right-of-use assets based on the IFRS 16 evaluation are 32 million Swiss francs and corresponding that there are leasing liabilities in the balance sheet of 32.8 million Swiss francs in the balance sheet end of December 2021. Our current liabilities contain trade liabilities of 25 million Swiss francs and also non-current liabilities which are mainly the bond of 59.8 million. This is repayable in 2023. Deferred tax liabilities of 1.5 million and the employee benefits are according to IS19, of 21.3 million. Last but not least, also in the liabilities, we have provisions of 7.7 million Swiss francs. On the cash flow statement, we mentioned it already. Cash flow from operating activities was very positive, 97.7 million Swiss francs compared to 39.5 million Swiss francs. This positive impact is due to the increased business on firsthand and also the used networking capital, which helped to increase this operating cash flow. We maintained our investing activities and paid with that result in a free cash flow of $56. million Swiss francs. I mentioned it before, free cash flow before acquisitions and participation in capital increase was 54.9 million Swiss francs in 2021. Also, the acquisition of full ownership in the joint ventures of Corda and the sale of Dachshund is part of this cash flow statement resulted at the end in an amount of cash inflow of 1.5 4 million Swiss francs. You can also see on the cash flow statement the repayment of the first bond in April, the 60 million here, which ends up then in total cash used of 11.8 million Swiss francs. And this leads to a cash of 83.5 million Swiss francs at the end of the year. Now, total equity we are still a very solid equity base. We were able to increase our equity ratio to 59.9% compared to 54.6% in 2020. Our treasury shares for the option program remained at 31.9 million Swiss francs, and without these treasury shares, our equity ratio would even have been 62.3% of assets. With the sale of Dachang, we have no more any minority interest in our books. Last year, this was still 100,000 Swiss francs. All this is based on a widespread global customer base over all geographical regions. We were able to increase our customer base again to 12,200 customers worldwide in 2021, which we serve. We could also remain our low customer dependency 74 customers were responsible for 80% of our revenues and our largest customer accounts only for 4.6% of our revenues in 2021. And the 10 largest customer accounts for 31% of our revenues. On the employee side, the usual picture Two-thirds of our employees are working in R&D, 758 FTEs, 193 were engaged in logistics and administration tasks, and 196 are in sales and marketing support. 76% of our employees are based outside Switzerland and across 18 countries spread. And now last but not least, our two segments, still the positioning and wireless product segment. The strong bond with 413.5 million Swiss francs revenue. The wireless service event, although we improved our services in our product offer, is still mainly dependable on intergroup revenue use, but as you already can see, there is an improving path. We are on the third party revenues and all service revenues will go in the future into this segment. And with that, I hand over for the business review back to Thomas.

Thank you Roland. So let's quickly review how our business was doing last year. So we mentioned already that the demand came back and the bookings recovered strongly. It started already in August 2020, so a time ago, and it was a continuous path upwards. Of course, the automotive segment recovered the most after a sharp dip in 2021, in the beginning of 2021. But it was not only the recovery. It was also a change in the industry, mainly that electrical vehicles suddenly took a very strong increase in production and interest, of course, in the market. And this across the regions with many of our customers. In the industrial segment, the difference was not that big because industry was less affected by the COVID crisis, but the growth continued and it was across the entire industry and the driving force was as before that the customers want to make their devices smart and connected away from what was before a standalone unit. The supply chain situation was challenging. There were disruptions. There was a lot of sudden changes because of COVID measures that were taken by governments in the various countries where components are manufactured. But we were able to manage well. We were optimizing everything we could. And by that, we were able to continually increase the production output and, of course, reply to the demand of our customers. It took a lot of effort to fine-tune what was then finally the output, fine-tune it to the actual demand of our customers. And in the far we were operating on availability driven system, no longer an inventory based system as many years before. So we were really reacting on whatever was on hands and that was put into production for making the products for our customers. And despite these challenges that affected the whole company, we continued to introduce new products to the market. And had at the same time also to redesign and remodel the products to also allow more different sources of components and broaden the supply basis for being able to deliver. So, when you look into markets, you heard it already from Roland in a patch, we had very strong growth in Japan and Korea, of course, also driven from the automotive side, but also in industrial. For continued expansion in automation. In China, the result was more flat. We had a good year before already, so it was also a base effect, but also supply constraints made it difficult. We sell a lot of chipset into China, and there, of course, we had severe limitations, as we said. In EMEA, the increase came on the one side from automotive, as we said, and similarly from industrial automation. And interestingly, also from some consumer telematics that had a very good growth pattern. The interest was enormous with some customers in this domain. In the Americas, here also, it was the industrial automation sector that drove us upwards and also automotive for the manufacturers in this region. So the order book reached record levels. It was eight times higher finally by the end of 21 compared to end of 2020. Now, a little more in detail, we have already seen the recovery made that the automotive sector again goes more towards the 30% we have traditionally. And of course, the growth of 41% was enormous. And we have, I think, still very good driving forces. Aside the rebound effect, it is the electric vehicle that demands a lot more electronic components and has a lot more automation right from the beginning in the car. And the autonomous driving is an important move in the industry. More and more cars are road to market that have certain autonomous driving capability and the industry is going to higher levels of such automation so we see a lot more new designings for higher capabilities. We believe that this is continuing. So autonomous driving is an important factor in the industry. And here we are very well positioned with our products, mainly for positioning. So it needs better capability to find out where is the car and what is driving. And also, what is added on is functional safety, because this is an automated device. Finally, it needs to be safe. And this is an additional value, respectively, technical challenge to solve. And this is where we have invested over many years and are now seeing fruits becoming available that we are harvesting. And of course, as I said, the electric vehicle has a strong drive, particularly in India and China. In the industrial sector, we see a relative similar importance as before. The growth was what we made as a company, about 24%. And interestingly, again, across the many different application areas, as you can reach them here. And this is, of course, most helpful that we have a diversified entry to this market that we profit from the many different applications that allow to expand our business. And it is the only one major driving force, the need to make devices connected and more intelligent. So when we look into the industries, in healthcare, it is the growing role that diagnosis is possible by delivering data and also by that helping to cut costs because there is better information available how to cure diseases. And of course, also on a much higher level because with such data, you have much better insights and this is of high interest in this industry. In mobility, we were very strong with smart micro mobility, that these devices are connected is the only reason why this market is existing and why business models are available. Insofar, this is a growing area and also with the changes in becoming a more green This has, of course, a high interest how in towns mobility is finally organized. In production, continued expansion because devices become better automated and also better maintained because you are continually collecting data and you deliver insights into how to keep the production equipment even more efficient and how you can increase productivity. And last but not least, also infrastructure in the form of homes and buildings are becoming more smart. Here also, it is primarily the aim to reduce energy consumption with regard to becoming greener and less CO2 effects. And of course, it's also about comfort and safety. Finally, our consumer segment. Here we saw a very strong uptick because also during the COVID time, the demand dropped in the first instance. But also, wearables and everything that gives to consumers certain data points is in high demand. And insofar, we have seen very good success with customers around the globe here. It's not the segment where we are focusing on, but for certain applications where it's rather the upper end and the high-touch consumer goods, here our technology and our qualities that we have in the products are the perfect fit. And therefore, we have seen very good success with customers. So our launches of products have been numerous and this is important. This is what we will have for our future. And this is laying the basis to again create new solutions for our customers and build business from which we will profit in the many years to come. In the cellular domain, we have launched a product called Alex R5. This is a super compact module for connectivity in the standard of category M and is essentially helpful for anything that needs to be compact and portable. It is a product that can run from batteries for a long time and is made Uh, for, um, these, uh, use case. Where, uh, you want to have a wide area connectivity in your pocket. Also, we launched a new family of products called R6 and R8. This is the category one. So this is a category for higher data throughput. This is mainly used when our customers want to transmit videos or pictures. and is the appropriate standard in for our industrial customers. Here we see a continued good demand and we replace all the products by these new generations to support our customers continually. In Schotterdrengio, we brought out a new module for Wi-Fi and mainly for more for applications that do not need extremely wide bandwidth, but are here to have a connection point, for example, in industrial applications or in the power management for electrical vehicles, where you basically transmit data to just steer the charging, and therefore the bandwidth needs not be that wide. and secondly very interesting are new modules in the bluetooth domain here with mesh networking this means bluetooth is not only connecting between two points but it can build a mesh network that connects many points and is sort of expanding itself into wide area there we see a lot of interest in the industrial use case where you have many data points to connect and to collect data. This is, of course, a very low cost solution for these use cases, primarily in smart buildings or in the smart industry. On the positioning side, we continue to expand. We have brought out the module, the NIO-M9V. for dead reckoning and this is a combination where you can collect additional information from the vehicle by being connected to certain sensors in the car but also without and this is a very versatile solution and offers additional capability especially for anything that is also a vehicle and not only a car. And the other products you are seeing here are very special receivers. They receive satellite signals in the sense of communication signals, not positioning signals. As you know, there are also satellites that provide connectivity signals. um from the space to the earth and this is very nice because we can deliver wire satellites correction data to anything that moves on the earth and is independent of the terrestrial communication network this is of course extremely flexible and versatile and is an extension of our product offer into such a very specific receiver And on the services side, we have expanded the offer. Again, all these services do improve the functionality of our products in cellular, short-range radio, and positioning. They make these products to better perform, to deliver additional capability, and also to maintain them over the entire lifetime. this point perfect. This is our correction service for high precision. This is what we got via the acquisition of Subcorda. It is now part of our SyncStream platform where all these services are available. And it does complement our hardware offer for high precision. And with that, our customers get everything out of one hand. what is in the hardware, and what comes through the air, so to say, as a service, to make then finally a very precise position determination possible. And this cloud locate, it's also about positioning, but this is an alternative. It delivers positioning without the availability of satellite signals. It does compute position in the cloud and through data. delivery of the positioning information directly to the back end. The information is not in the device, but is precisely where normally you want to have the information this means in the cloud. And here are a few examples. So this is an example for mesh connectivity. It's a Bluetooth device in this lighting sensor, and you can put many sensors. They connect one to each other and help to easily install such a system in the building. This is very typical for light installations in buildings to have them connected via Bluetooth. Here is a very different example in the medical area. This is a special device to help treat chronic pain treatment, chronic pains, excuse me. And here, of course, the Bluetooth connectivity is to connect to the smartphone to make the smartphone the user interface. And, of course, it is important here that it's a very compact and lightweight device because you wear this device on your head. And here, the typical use case for micromobility, here a bicycle, where we supply all the elements to make this device connected. First of all, that you know where is the device. Second, that you can connect via the cellular network and connected to the back end and also with a Bluetooth device that the user can unlock the device, respectively, also program the functionality of this bicycle. And all is handled via our SyncStream platform. This makes it very easy for this customer to have the solution readily available with little engineering effort and, of course, fully maintained over the lifetime of the product. And finally, a little device available for temperature measurement. This was invented during the times of COVID. It existed before for a different use case. Now it helps to do body temperature monitoring. And the Bluetooth device must be very low power. It must have a long lifetime from battery. And it is here to monitor the well-being of people. So our strategy is still that we are looking for good solutions for our customers. We solve problems to connect and to make devices smart. We are continually working on our innovation paths to preempt what markets are needing and insofar invest with a long-term perspective into R&D. We are expanding sales channels to reach markets. We have, again, reached more customers than ever before and make sure whatever we offer is the perfect solution for our customers that we are here, that we have the capability that makes it easy for customers to work with us. We, of course, look continually not to do everything ourselves, but if possible, also look for inorganic growth whenever there is an opportunity. And primarily, we look for bolt-on acquisitions that are not so large in size, that have a very good fit for culture, for strategy. And, of course, they need to be financially attractive. And we made acquisition, as we mentioned, last year. And all in all, the goal is to provide shareholder value return, consistent dividend. Unfortunately, during the crisis year, we had no dividend, but I think we are recovering very well now with what we propose and based on strong free cash flow also for the future. And again, when we look into acquisitions, we have done 17 so far. We have a strategy team that does look continually into such cases. It needs a lot of effort and a long time to really build a final case that becomes viable. And of course, it is not directly predictable when such cases become mature. However, they help us as before and in the future to expand our technological capabilities or, in the other case, to gain economies of scale. In the far, we believe we still have opportunities and are, of course, continually reaching out to find more possibilities. Now I come to our outlook. We are providing here the numbers what we think we could achieve in 2022. And as we have explained, we see continued expansion of demand. The industry has very strong needs for all what we do in automotive and in the space of industrial Internet of Things. And we see very good ramp up these new products, meaning new products that make our customers, but also, of course, with our products that are new and help customers to build new solutions. We see no direct impact from the Ukraine crisis. Fortunately, we had very, very little business in the Russian territory. However, of course, the supply constraints continue still. I mean, with the revenue growth that we predict between 21% and 32%, this is a little relative. We could grow more because we have higher demand than this 20% to 30%. But this is our estimate what our suppliers can deliver more in 2022. And insofar, whatever you see as numbers, and also when you look into 21, don't forget it was driven by supply and not by what customers really demand. This means we have quite some distortion in the numbers because they are created by the supply side and not by the demand side. So we also guide for ABTA and EBIT margin that are in similar ranges as we had in 2021. Also, this guidance is made with exchange rates average of 21. And of course, with the current exchange rate situation, we have a positive impact, probably, at least actually, because the dollar has increased, the euro has become weaker. That means our top line has a positive boost, whereas our breaking expenses are reduced by this currency situation. And with that, we come to the time to answer your questions.