u-blox Holding AG

team with Thomas Seiler as CEO achieved outstanding results. For the full year we reported record revenue and profitability. Our shareholders benefit from this as we pay a record dividend and invest into our future growth at the same time. We are successful in our target applications and regional markets. We made use of the tight supply situation to optimize our product mix, ramp cost-optimized products faster, and rediscuss business which did not meet the margin expectations with our customers. We closed the year with a well-filled order book for 2023, which is a good starting point for me as CEO. Before we continue, I would like to take the opportunity to thank and congratulate Thomas Seiler on behalf of the uBlocks team for his more than 20 years of commitment to the company, his leadership and his vision, and for all he has accomplished during his tenure as CEO. I'm very happy that Thomas stays with us as Board of Director member and as a valuable advisor. As a small thank you, Thomas, I have a bottle of champagne, vintage 2007, the year of the IPO of U-Blocks. Please join me in applauding Thomas. Of course, I get many questions about my plans as new CEO. So let me share the status on my day 69 as CEO of uBlocks. Standing here, I'm proud to say that our long-term business strategy has successfully paid off. And we have many ideas how to further advance it. I am convinced that by continuing to be laser-focused on our long-term goals, we will be able to continue to excel and provide meaningful results to our shareholders. Therefore, we continue to focus our efforts on industrial and automotive markets. Our goal is to drill down to individual applications even further. for example autonomous driving, to make sure that we have the best solution in the marketplace. We also plan to expand the cooperation with well-selected distributors to serve the long-time and innovative newcomers. This frees up our time to go deep and develop larger accounts and by this enabling us to capture additional value. uBlocks history is a history of groundbreaking technical innovations in positioning and wireless connectivity. There are many examples where we created world's best, world's smallest solution. In my opinion, our recipe for innovation is as follows. Identify a problem jointly with our customers. have the most talented people on board and have a culture which allows to create non-standard solution approaches, either on our own or with partners. This is part of our startup culture and we want to foster it even further. There's no doubt that uBlocks grew significantly. We want to take advantage of our size and add to our bottom line. Developing our organization to a greater operational excellence will help to maintain our growth path. The uBlocks team is highly committed to excel and bring us to the next level. And I am looking forward to update you about the progress regularly and outline our refined strategy during the capital market day at the end of the year. In our presentation, Roland and I will share the 2022 review. Afterwards, I will explain our 2022 outlook and key aspects of our strategy. I think we are a bit stuck with the presentation slide. But I already... can make room for Roland to take us through the financials.

This was an intended break to have enough time to... So thanks a lot Stefan, good afternoon ladies and gentlemen. As said, as soon as we got the slide to bring you through the deeper view into the financial figures, EU blocks reached with 624 million Swiss francs, a new record level in revenue this year. This implies an year-on-year growth of 51%. In 2022, we have also had some tailwind from the foreign currencies. of 4.1% or 17 million Swiss francs. But even without this tailwind, the growth at 2021 average exchange rates would have been 47%, a really impressive number. Reached not only on top line a new record level, Also, ABTA adjusted reached with 170 million Swiss francs a new level. This implies an adjusted ABTA margin of 27% for 2022, or 987 base points more than in 2021, where we have had an adjusted ABTA margin of 17%. The revenue growth in 2022 is driven by our module business with a growth rate over 2021 of 48%, as well as by our own chipset business where we have been able to grow even by 71%. Volume was the main driver for this growth, but also price increases and changes in the product mix towards higher end products helped to reach this strong result. Overall, the revenue split between modules and chipsets does not change dramatically. Also in 2022, we made about 79% of our revenue from modules and 20% with chipsets. With the growth on top line, also our gross profit grew to a new level. In 2022, we made an adjusted gross profit of 307 million Swiss francs. The change in product mix, price increase and improvement in operational effectiveness led to a large gross profit margin from 47% in 2021 to 49% this year. Next slide. Also in 2022, we invested further in our next generation products. Although R&D expenses grew only slightly from 102 million in 2021 to 106 million in 2022, this represents an increase of R&D expense by only 4%. Operational effectiveness improvements help to keep R&D expenses under control. With the growth in top line, R&D expense in relation to revenue came down from 25% to 17% in 2022. If we have a look at the gross R&D costs counted as adjusted R&D expense without capitalized R&D and corresponding amortization expenses, They amounted in 2022 to 124 million Swiss francs. In 2021, this was 115 million. In 2022, we spent about 72 million Swiss francs for SG&A compared to 62 million in 2021. The main driver for this increase is an absolute amount of 16% are the sales bonus payments coming based on the record contribution we made in 2022. Percentage-wise, SG&A also was reduced from 15% to 11% this year. So now let's have a look to the complete income statement. In the column on the left hand you find our P&L for 2022 according to the IFRS accounting rules. More details on the various positions of this statement you find in the financial section of our annual report. The columns on the right hand side then show the corresponding adjusted figures. And the adjustments we made are the usual ones. We adjusted share-based payments $4.4 million. The pension impact based on IAS 19 was in this year $1.8 million. And amortization of intangible assets acquired amounted to $3.3 million. no other non-recurring expenses are adjusted. With these 9.5 million adjustments on EBIT, we reached an EBIT of 131 million Swiss francs, or 21%. This is again 1,287 base points better than in 2021, where our EBIT margin was 8.5%. The financial results consist mainly of financial expenses for the bond and for the right of use assets booked under IFRS 16 accounting standards. And the adjusted rate on tax was 15.9%. And this leads then to the net profit of 100 million Swiss francs. As you can see on this slide, Ublox has a solid balance sheet with a liquidity of 138 million. The inventory increased in 2022 to 118 million Swiss Francs. This to cope with the supply constraints which are in the market and consists mainly of raw material and work in progress. In total, Ublox has current assets of 352 million end of the year 2022. The non-current assets of 316 million Swiss francs contained capitalized R&D of 193 million, but also goodwill of 56 million, PPE of 13 million, and the right of use assets booked under IFRS 16 of 34 million Swiss francs. In the current liabilities besides the trade payables also the bond which is due mid of April this year is shown now in this figure. In previous years this number is under the non-current liabilities shown as the maturity was not so close. The non-current liabilities at the end contain 67 million for leasing liabilities 30 million, provisions of 10 million, employee benefits of 10 million, and deferred tax of 11 million Swiss francs were included. So with that, uBlocks was able to keep a solid equity base with an equity ratio of 62% in 2022. This is worth 412 million Swiss francs. Some treasury shares in 2022 were used to cover the employee share option program, and treasury shares amounted, end of the year, 28 million Swiss francs. Without the deduction of these treasury shares, the equity ratio would even have reached 63.1%, compared to the 62.3 last year. Now, last one of these, the increased business led to a record level of cash flows in 2022. Cash flow from operating activities was 117 million Swiss francs and it reached a free cash flow of 66 million. The increased networking capital to cope with the supply constraint prevented an even higher operating cash flow. As already mentioned, uBlocks is still investing into the future as 62% of our investments went into development of our new products and 4% into capacity expansions. Overall, we used in 2022 51 million Swiss Francs in investing activities, which led then to this free cash flow number of 66 million. Although we were paying a dividend in form of a par value reduction, also last year in July 2022, Ublox was able to increase its cash position by 55 million and had end-of-the-year cash and cash equivalents on its accounts of 138 million Swiss francs. And with that I have finished the part of the financial insights and hand over back to Stefan for the business review.

Thank you Roland for explaining the financials. So let me give you some business background to the numbers. 2022 I could summarize as strong market, right products, reliable partnerships. Let me add some more flavor. During the year, like most of our peers, we operated in a positive market environment. And we worked hard to capture new opportunities with the right customers which ramped new products based on our solutions. Our new offerings were widely accepted. Our cellular module platforms with our own chipset ramped up very well. Our new positioning chip ramped to a millions per month run rate within six months. Previously, this took years. We expanded our position in 5G infrastructure. Overall, we want projects from competition. Obviously, besides the differentiating features of our solutions, delivery performance was a key topic in 2022. Our long-term relationships with our diversified supplier network paid off. We could deliver while others couldn't. Our customers liked this. The key growth drivers in automotive were infotainment, navigation and telematics. And of course the automotive market recovery overall. The key drivers in our industrial business were healthcare as well industrial and building automation. In summary, a broad range of applications. Regionally, Asia-Pacific grew the fastest. But it wasn't China this time. We enjoyed good success in Australia, Japan and Korea. Key growth drivers in Americas and Europe were in automotive, complemented with healthcare in the US and industrial automation in Europe. A well-balanced regional business distribution should make us more resilient to short-term regional pushbacks. uBlocks is a high-tech semiconductor solutions company. Innovation is in our DNA. Here are just a few examples what innovative products and solutions we brought to market in 2022, the result of our long-term consistent development activities. Small is not only beautiful, but also a key requirement for many industrial applications. We launched world's smallest Zellular LTE CAD1 module and have already sold millions of it. With our GNSS module, We did cut the size in half compared to competition. We help industrial customers to quickly embark on the low-power and feature-rich Wi-Fi 6 standard with our new short-range radio module. And with our service offering, we intend to create a stream of recurring revenues We added several new services to our portfolio, aiming to allow customers out-of-the-box solutions for secure IoT cloud access. Those few examples, and there would be many more, showcase our innovation power. It takes about four years to develop a significant innovation. Afterwards, we enjoy around 10 years of revenue with such a product. Therefore, we capitalize R&D. We understand that this raises questions about the value of our capitalized R&D in our balance sheet. I would like to give some more background to this. In the last year, the share of capitalized R&D assigned to products which are selling increased significantly to around 75%. Some major projects, mainly chip developments, started to generate revenue. In other words, our long-term R&D investment pays back. At the end of the year, the capitalized R&D also was very well balanced between our cellular and positioning products. The capitalization is driven by our own chipset development, which is focused on cellular and positioning. Of course, we manage our R&D investments carefully and review the value of our capitalized R&D regularly. As a high-tech company, we must continuously invest in R&D to develop new products and offer innovative services to stay ahead of competition. Overall, those numbers underline that the R&D costs in our balance sheet generate revenue. We are in the lucky situation that we have by far more R&D ideas than we can afford or can cover with our own team members. But we do not even intend to do everything ourselves. We rather prefer to work with the best in the industry. In the case of end-to-end safety solutions for autonomous driving, we partnered with the Spanish company GMV. This helps our customers to have a faster time to market, less development effort and less development risk. Partnerships also open up new opportunities for us with less R&D effort on our side. Working with strong partners like GMB creates a value for us and our customers. Talking about customers, we generate less than 30% of our revenue from our top 10 end customers. And the largest one is below 10%. Therefore, we have strong customers, but there is no dependency from a single customer. This type of customer portfolio is part of our DNA for long. We established a strong sales channel on a global basis. Our sales channel strategy focuses on distribution partners to grow business with medium-sized customers and innovators in the long tail. We also pay special attention to larger customers, ourselves. In 2022, we made significant progress in ramping up sales with our largest customers. Let's have a look at some examples of our wider customer portfolio. Our customer Rico uses our GNSS module in their robust 360 degree camera. They chose us because it's important for their industrial customers to have a precise position, smallest size and lowest power consumption. This is just one example showcasing our success at very large customers. We also have been successful with our new and fast-growing customers, the innovators in the long tail. NoFence developed a livestock collar using our positioning and cellular modules. The market for such a solution is almost infinite. 1.4 billion cattle, 1 billion goats, 1 billion sheep. We are ready to support them and be part of their success story. This is one of many examples which showcases our success with startups and medium-sized companies. An important additional success factor for the fragmented industrial customer base is ease of use. Connecting devices to the cloud requires skills and effort. We are very happy that Amazon Web Services chose uBlocks as a partner to make it easier for their industrial customers to connect to the cloud. This partnership is a multiplier for us. Let me come to the outlook to 2023. In our automotive and industrial target markets, we expect overall a positive environment despite some visible temporary clouds. We expect a continuing content growth in automotive and still some catch-up effects in car production. However, we notice that customers are ordering more carefully compared to last year. Inventory stock levels at our customers are sufficiently high and they could adapt their orderings, focusing on the overall demand for the next months. In industrial applications, we see continued penetration of IoT functionalities in more and more applications. This is a good sign for us, as it should lead to continuously growing volumes. Right now, some industrial customers are still affected by industry-wide supply chain bottlenecks not related to us. We assume that those will ease over the year. However, in some applications, for example medical or industrial tools, we see a slowdown. This could be caused by temporary more careful investment decisions at customer level due to high inflation. In our small consumer business, which is not a focus market for us. We see a slowdown in line with the consumer electronic market. In the regional view, we see Americas and Europe rather muted in growth, while Asia-Pacific shows solid growth. We even think there might be an upside with China's post-COVID reopening. Our business visibility in this context is good compared to pre-COVID times. We have a strong order book, especially for the first half of the year. And overall, we have more than 50% of our planned business in 2023 secured with contractual agreements. The overall semiconductor market is predicted to shrink by 3.6% in 2023. The automotive semiconductor market on average grows with 6 to 8% on the long term. In this environment we expect a growth between 6 and 16% in 2023. For EBIT, we expect a range between 14% and 18%. For EBITDA, we expect a range between 21% and 24%. We acknowledge that the environment is influenced by macroeconomic conditions and geopolitical energy or pandemic-related restrictions. Consequently, it's hard to make accurate predictions. but we are ambitious to expand our business and the guidance reflects our current view of orders, customer contracts and structural growth drivers. With this guidance, we reconfirm that uBlocks is on a structural growth path at a sustainable profitability level. Let me briefly recap uBlocks long-term market view and strategy. uBlocks will benefit from global megatrends. Climate change and resource scarcity will require that we make best use of our resources. Solutions for asset tracking and positioning in autonomous vehicles will directly benefit from this trend. Demographic change is clearly visible already now. Solutions for remote wireless connected healthcare equipment will directly benefit. Urbanization will drive up the need for automated parking, car sharing, delivery services, micro mobility. All those applications need solutions for exact positioning and wireless connectivity. Digital transformation is everywhere. The fourth and fifth industrial revolution will require remote monitoring and operation of industrial equipment, autonomous indoor positioning, virtual reality, Solutions for positioning and wireless connectivity will be key for this. uBlocks has a history in automotive, which is remarkable over the last 10 years. We did not only outperform the car sales growth, we extended our success from very few platforms to hundreds. We also capture more and more content per car we serve. We have proven that we are able to drive innovation in the automotive market and we should capture significant additional value in the years to come. The car of the future will be autonomous, electric and increasingly shared. The average bill of material addressable by our current offering will almost double in the next five years. This is mainly driven by a strong increase in the telematic control unit and in higher levels of advanced driver assistance system. Let me give you a concrete example of just one use case. An autonomous vehicle needs to know the absolute position when it leaves a tunnel. It needs to know on which side of the tunnel it is and which direction it is traveling. quick and with centimeter accuracy. A high precision GNSS based solution is the best choice for this task. There's one more complication. The autonomous driving computer needs to know if it can rely on the correctness of the position. This is called functional safety. uBlocks is known for its precise and reliable positioning solutions. We also invested early in functional safety. We complement this with our GMV partnership for an end-to-end functional safe positioning solution for autonomous vehicles. We are the perfect fit for autonomous driving. We are strongly committed to capture a significant share of this upcoming growth in automotive and we should even strengthen our position. The fourth and fifth industrial revolution require that industrial applications become connected and autonomous. Positioning indoor and outdoor will become widespread. Every device will be connected to a cloud. Applications like remote monitoring and operations will be much more commonly used going forward. Let me give a concrete example here too. Remote healthcare was a huge topic during the pandemic. Many people enjoyed its benefits. On the long term it will help our aging population to stay self-determined. Many of the more complicated healthcare equipments like injector pumps or respirators need parameter setting and supervision by the manufacturer. and give doctors the ability to remotely supervise measurements. Or the devices should send alerts themselves. This is a large market for our wireless connectivity solution and therefore a strategic growth area for us. This was just one of many industrial growth applications. Also in industrial market, we outperformed the semiconductor market in the last 10 years. We expanded our business from a few dominating applications to a much broader coverage of the industrial space. One key aspect in the future for industrial applications is positioning. It is predicted that the demand for this grows remarkably. The growing requirement of the industrial markets is uBlock's home turf. We should take advantage of this and continue our growth path. uBlock's strategy focuses on industrial and automotive target applications. We provide solutions enabling our customers to determine their position precisely, have a reliable wireless connection to the cloud, combined with more edge computing capabilities. Our solutions are reliable and safe. This means they do what they are supposed to do. And they are secure. This means it's hard to compromise them. Our solutions are easy to implement and designed to work for thousands of end customers. With this, we are confident about our future long-term growth and we want to reconfirm our long-term financial ambitions introduced in the Capital Market Day 2022. So far, we talked about organic growth plans. Let me mention our M&A criteria. We are set up for growth. We consider M&A when it helps to improve our profitability by economies of scale or if we can complement our offering. So far, uBlocks has had an impressive track record of complementing its offering by M&A. Most impressive for me is how well the acquired team members are integrated in uBlocks even years after the acquisition. I can say integrating acquired teams is an asset of the uBlocks team and culture. And one reason why this integration works so well is culture. Therefore, we consider M&A only if the culture of the acquired company enriches our culture in a good way. And of course, the purchase price must allow us to create value for our shareholders. In summary, we are incredibly strong in automotive and industrial growth markets. Our profitability and free cash flow has reached a solid and sustainable level, which is reflected in our proposal to increase the dividend. and we clearly target to provide reliable and growing return to shareholders. Thank you for your attention and with this we would like to answer your questions. We start with the questions in the room and continue with the questions in the chat afterwards. And I guess Roland has to join me on stage.