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Ladies and gentlemen, welcome to the U-Block School Year 2024 Results Conference Call and Live Webcast. I'm Sandra, the course call operator. I would like to remind you that all participants have been listed on the mode and the conference has been recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Rafael Duarte, Head of Investor Relations at Hublot. Please go ahead.

Hi, everyone. A warm welcome from my side to the ones joining here in Zurich, as well to the ones participating via webcast. Presenting today is our chairman, Andra Mühle, CEO, Stefan Sitala, and CFO, Camilla Jaipur. Let's go to the agenda quickly. We started with a forward from our chairman on strategy, then we moved to the full year results. And after we address some of the key topics that you have been asking for more clarity for a while. First, Camila will walk us through several topics such as our cost optimization program, R&D capitalization, and cellular phase-outs. Then Stefan will give us a strategy update focused on our locate business, including the new target financial model. Finishing up, we have the outlook and obviously time for Q&A. And now let's start with the chairman.

Thank you, Rafael. Also, welcome from my side. As the chairman, I usually don't speak up in those conferences. I have last done so in November 2023 at the Capital Markets Day. As you might have already realized, this is not a regular result publication. It is almost a mini Capital Markets Day, and that's also why I show up today, as you might have for this special event. You see, in November 2023, we presented to you our new uBlocks under the leadership of Stefan Zittala. Now, 16 months later, we are able to show you how this company actually looks like. And this is why I think it's important for me to be here today. 2024 was a year of execution and it couldn't have been a better time to bring Camilla on board as our new CFO in June. She was an instrumental addition to our uBlocks management team and key to the achievements that we present today. We had to take difficult decisions. We reduced over 20% of our workforce, and we decided to phase out Delaware, which once contributed one-third to our revenue. These are hard decisions, and they were not taken lightly, and they, as an entrepreneur, they are also emotional. I am confident in the near future near and long-term growth potential of the company. To reflect the challenging 2024, the board of directors has actually voluntarily decided to forego 25% of their compensation for 2024. Actually for the chairman is 33%. Going forward, we propose to align the board's compensation with shareholders' interest, lower the cash and adding new share component in the compensation. As it's written here, we are fully convinced in the near and long-term growth potential of uBlock and look forward to create significant value in the future.

Thank you, Andre, and welcome in the call, both for the people in the call and for the people in the room. Now, let's move to slide seven, the highlight of 2024. We anticipated 2024 to be a difficult transition year, and we were correct. However, even in such a year, we managed to deliver a solid free cash flow of 10 million. The challenging environment acted as a catalyst for us to accelerate uBlock's transformation into a more focused and a more resilient company. We significantly reduced our cost base fully implementing and even exceeding the targets of our cost optimization program. In August, we targeted 20 million and we achieved total savings of 25 million. This new reduced cost base sets the stage for profitable growth once the markets recover in future. Last but not least, we announced in January strategic decision to further strengthen our focus on locate and phase out cellular. We will explore these topics in the next slide. After two record years, our revenue halved in 2024 due to overstocking at our customers and continued softness of end market. Looking into the quarterly revenue development, We observed a gradual improvement from quarter one to quarter three. However, in quarter four, this trend got interrupted, mainly due to the weak performance of the automotive market outside of China. We expect this gradual improvement to resume in 2025, as you will see later in the presentation. Slide number nine. Aligned with our focus Locate performed better than Connect. In terms of end applications and regions, performance was weak across the board. There are some differences here and there, but the general picture is similar, mainly due to the common effect of overstocking. Going to page 10, our gross margin improved significantly in 2024, almost by 200 basis points. Again, the improvement reflects our strong focus on Locate, which comes with a significantly higher gross margin profile compared to Connect. You can see in the chart that the gross margin of 46% reached in 2024 is still lower than the highest level we achieved in 2022. This does not mean any deterioration in our business. This is a consequence some fixed logistics costs that are included in our cost of goods sold. In other words, also in the gross margin, we will see a certain positive effect from higher operating leverage due to the expected top line growth. You can see we manage this business towards a higher margin profile. I will pause here and hand over to Camilla, who will go through more financials. Camila.

Thank you, Stefan. Hi, everyone. I'm happy to be here today to present my first full-year results at UBlock. Before I start, allow me a few words. I joined UBlock almost nine months ago, but it feels like much more. I arrived right before our half-year results and had to jump in several topics we will present today. It has been a challenging time, but putting together this presentation, I had the real feeling that we are on the right track. I am now more confident than ever in the prospect of your block. OK, I will go through the main lines of P&L, then cash flow, and finish with our balance sheet. Let's start with slide 11. Here, our most important investment area, R&D. I want to highlight two main messages. One, a substantial 10 million reduction while protecting investments in future innovation. Our R&D team did a great job finding a balance between addressing short-term needs and protect future business and growth. We do not compromise the future of our locate business. Now I will guide you through the chart that has two pieces of information. One, full year cash R&D in the left side and the breakdown with a view per half year in the right side. As I mentioned, we reduced the cash R&D by 10 million in the full year. When we take a look in the half year numbers, we had an impressive 16% reduction in the second half 2024. versus the same period in 23. Moving to slide 12, let's talk about the SG&A, which is about half of R&D expenses. Again, here you can see quite an achievement in terms of cost reduction, about 10% year on year. On the slide 13, we will see how the EBIT looks like. This is not a pretty chart, but we are working on it. The chart shows on the left side the full year EBIT and on the right side the half year view. Starting with the full year view, EBIT went from 70 million in 2023 to minus 1624, a direct consequence of a lower operating leverage. But as I said, we are working on it. It's clear when we look at the evolution by half year. In the second half 2024, we broke the trend of the sequential EBIT worsening. It's still negative at minus 23, but better than first half with minus 36. Now, I want to highlight one very important thing. we had a significant reduction of R&D capitalization in the second half of 24. Hence, we are not comparing apples to apples. If we had kept the same level of R&D capitalization in the second half, our EBIT would be around minus 9. It's four times better the first half of 24. As a reminder, EBIT adjusted exclude one-offs and impairment charts. Going forward, we will use cash EBIT, which takes in consideration cash R&D. We will adopt a profitability metric that is closer to cash. To conclude, even if we are not happy about the losses in 24, we are proud about the progress in the last quarters and confident about the future of the company. Big thanks to the team that worked very hard to reduce costs. It's painful to see many colleagues leaving the company, but the cost-based adjustments was necessary. So, changing gears now, we will talk about cash flow on slide 14. If we go back to my entry speech in August, I mentioned that my focus in my first months would be cash generation. And here we have it. Despite a very challenging 24, we achieved a positive cash flow of 10 million. In the first half of 24, we have a large free cash flow contribution from accounts receivable reduction. In the second half, we had a substantial reduction in inventory. The team did a great job managing our working capital. which contributes 60 million to our cash generation. I'm really happy with this result. Moving to slide 15. And to finish this review of 2024 results, a quick view of our balance sheet. On the left, we have our balance sheet on this netted version, which I like. It shows very clear how clean and strong our balance sheet is. a strong net cash position of 91 million. One super important message here is about the evolution of our net cash that you can see on the right side. We closed at 24 with a higher net cash position than previous years. And worth to remember that we paid dividends in 2024 and we don't have financial debt. Good. I have concluded the review of a full year result. Now let's get to another interesting part. We got a clear message in January from the market about the need to share more information. And we knew that. It's just that we could not share at that stage. Today I'm happy that we could add this new chapter in the presentation with the objective to give you more transparency and confidence that we are moving to the right direction. I start with slide 17 here. That is about our cost optimization program. I'm happy to share that we overachieved our cost optimization program. 25 million compared with 20 million initially expected. In the first box here, we double-checked box for a higher savings than achievement. The second box shows that this was 100% completed in 2024. In the third one, first savings are red reflected in Q4. We had 4 million in Q4 2024 and an additional 21 million to happen in 2025. And last but not least, our restructuring costs were 13 million instead of 20 million. This means no additional restructuring cost for this specific program. The majority of its cash impact is already reflected in 2024. A super important takeaway here. We have proved our ability to execute. We are in the drive seat and we managed to adjust the cost base as planned. Moving to slide 18, here is another topic that was also in my priority list, that is R&D capitalization. This slide is about the reduction of R&D capitalization. Before we dive deep in the numbers, let me clarify that we have two bridges in this chart. The left side reflects first half, and the right side reflects the second half. The bridge show. reported R&D, the capitalization, the amortization, and finally the cash R&D. The golden boxes in this chart show the capitalized values. As you can see, we had a substantial reduction of 14 million in the second half. Capitalization reduced from 20 million in the first half to 6 million in the second half. And then side note here, less than 1 million in Q4. Another important message here is the reduction in capitalization leads to a higher R&D value in the P&L. This is a different effect from what we were used to see. Prior to the second half of 2024, reported R&D and EBIT had the benefit of higher capitalization. As a reminder, Nothing changed if you look at cash R&D. In 2025, the capitalization is expected to be a low single-digit amount for the full year. Now we are on slide 19, and we will talk about balance sheet exposure. Here, I'm showing a significant reduction of R&D capitalization over the period. Capitalized R&D in December 24 is almost half of the amount in June 2023. You can also see that the majority of remaining capitalized R&D is related to positioning. I also want to recap where the main reductions came from. First, let's start with the drop from June 23 to June 24. This was the impact of the impairment announced in the CMD 2023, where the company decided to stop its own cellular chip development. The other large reduction is the 31 million from the cellular impairment in Q4. This impairment was announced together with the decision to phase out cellular business. The important message here is that capitalization will be much lower in the future, low single digit per year, as I said. So this balance sheet position is expected to reduce over time. On slide 20, I will talk about cellular phase-out. In fact, I have two slides about this topic. The first one is a recap and clarification of what we announced in January. The second slide includes relevant numbers. So let's start with the recap. We will talk about the phase-out, what it means, and what to expect. After trying to turn around the business and not being able to divest, we have concluded that phasing out the business would be the best value generation option for your block. What do we mean by phase-out? We will support our customers. We will stop new product developments. and we will keep a small team to support our customers. And what should we expect from this? There are two important things here. One is we harvest existing portfolio, and we will consume inventory as much as possible. The expectation is that the gross income and the reduced working capital will generate some cash to partially fund the phase-out. The second aspect here is more related to the cost part that is expected to be much lower in the second half of 2025. Have in mind that we still have running costs until we execute all reductions. And we also have restructuring costs. Now let's move to slide 21 to take a look in the numbers. Here, I answer something you asked. This is our best view one month after the announcement. On the left side, you have the financials of Cellular24, approximated and not audited values. You can see here the loss estimation in January over 30 million. In fact, it is 31 million. On the right, you can see our best estimation for 2025. Cash one-off of 26 million, no cash of 39 million. Both are in line with what we communicated in January. If you look beyond this one-off and talk about the underlying business performance in 2025, we are expecting a single digit negative cash EBIT in 2025 for cellular. This is our best estimation at this stage. Then, If we look into cash terms, we do have inventory. So depending how successful we are in consuming this existing inventory, the cash impact of cellular could be neutral. Not a promise, but we are working on it. So moving to slide 22. There are many slides in this deck that I like. But I admit this one is special. And this is special because it shows our efforts translated into numbers after the implementation of our communicated moves. I will repeat, this is the run rate after cellular reductions are executed. What we see here is a bridge from the old U-Blocks cost base by end of 2023 to the future U-Blocks. It reflects the cost optimization full effect of $25 million executed, plus the cellular cost base reduction of additional $25 million, and other cost cuttings here. So we should be achieving this new cost base in 2026. After cellular cost reduction execution that will happen during 2025, you see a 61 million reduction on the cost base. This is quite significant, significant and necessary. With this new cost base, uBlocks is ready for profitable growth. Just a reminder that this new cost base includes locate, short range, and a fraction of cellular cost. Slide 23 is my last slide for today. And here we are introducing a new KPI to measure our operating profit, cash EBIT. I have heard that financial community doesn't like much change in KPI, but this one is needed. With the substantial reduction in capitalization, our EBIT becomes non-compatible with the past. We are not reinventing the wheel. We are just replacing R&D expenses with cash R&D. That's it. This is the change. Here on the left, you see the reconciliation. Note that EBIT and cash EBIT are the same in the full year 24. But this is just a coincidence. The half year split shows better how the reduction in capitalization impact EBIT and cash EBIT. I know this was a lot of information. We hope this clarifies where we are now. And I'm happy to take more questions in the Q&A. With that, I hand back to you, Stefan.

Thank you, Camilla. We are in a true moment of change for UPOC. Let's see now where these changes lead to. We are now on page 25. First, let me recap the steps we are taking to create a better uVLOGS. The first important moment of this journey was in November 2023, when we announced our Focus Innovate and Execute theme. At that time, we laid out the status quo of our different businesses and our view of the future. In August 24, We went a step further and made important announcements. The strategic review of our Connect business and the cost optimization program for a higher profitability profile that Camilla already went through. Finally, we come to January 2025 when we announced the decision to strengthen our focus on locate and phase out cellular. We have stepped up. and showed our ability to focus and execute. We used the weak end market as a catalyst for change. We reduced organizational complexity significantly, not only by a painful but necessary 20% workforce reduction, but also by streamlining our R&D footprint. This was a huge effort And it's good to see how professional the uBlocks team manages this transformation. Where does this lead us to? Let's see that on the next slide. Page 26. Our strategy is all around locate. We operate in structural growth markets. And having a trustworthy and reliable partner with uBlocks is of high value for many of our customers. We are thrilled by our plans to shape the future. Now you might say, well, automated driving will not come. I would answer, travel to California or China. It's already here. Other applications we enable are literally in our backyard, like automated lawnmowers enabled by GNSS. Our strategy is based on three pillars. Expand, locate market leadership in our focus market. Transform into a lean organization with a strong focus on value creation. And execute the cellular phase-out plan. Of course, this will pay off for uBlocks. On the right-hand side of the slide, you see our new target financial model for Locate. Locate has a very nice gross margin. With such a gross margin, it's all about OPEX discipline and operating leverage. We are taking significant steps in OPEX discipline and can show the full beauty of this once the end markets start to recover. As you know, we are living in a low visibility period. And therefore, we model a future in three scenarios, starting from the column on the right. It is our target in the midterm to reach 350 million revenue, same as in 2022. However, in the current market condition, we don't want to speculate about the exact year. It's a realistic target to reach. and the margin profile is just beautiful. This is the North Star that guides us. Besides our target model, we provide you with two other revenue levels and the respective cash EBIT margins. As a first proof point, you can see the break-even point of 200 million fully in line with the indications we gave in the past. The indications on margins we show here should help you to understand a locates new leaner cost base. Two things before we move on. First, use cash EBIT, which will be our new KPI starting in 2025. And second, at 350 million revenue, the greater 25% cash EBIT margins corresponds to the greater 30% EBIT margin, which Locate achieved in 2022. In the next few slides, we are going to substantiate this model. Page 27. Our market position is unchanged. uBlocks is the undisputed leader in GNSS chip and modules. We will continue on this path. In 2024, we want 10% more projects than the year before. Our distribution partners contributed to this significantly, exactly in line with our go-to-market strategy we showed during the Capital Market Day in 2023. In other words, We are broadening our footprint further. Our target markets are expected to grow by 10% per year in the next five years. Page 28. We do not only intend to outperform market growth. We also know how to. We know where our growth will come from. We know the customers and the projects fueling our growth in the next years. 60% of our growth in Locate will come from three focus applications which will shape the future. Automated driving, automated agriculture and construction machines, as well as mobile robotics. I will go through them and share why we are so excited about their potential. Starting with automated driving on page 29. uBlocks is the leading provider of automotive GNSS solutions. We have an impressive presence in the auto market. We are supplying 18 out of the 20 biggest names in America, Asia, and Europe. We work with traditional players and the fast-moving innovators. This broad coverage is important as not all of them will be equally successful in future. The number of cars equipped with additional driver assistance system, or ADAS, is forecasted to reach 90% adoption by 2030, providing a significant growth opportunity for us. Evidence of this opportunity are the contract wins we have previously communicated. 100 million revenue over lifetime of projects already won. And this is just the beginning. On page 30, not all ADAS systems are equal. Higher levels of driving automations require higher technological content. As soon as the driver can have hands off more advanced GNSS solutions become crucial. We expect that 45% of all vehicles shipped in 2030 will use GNSS for automated driving functionalities. And uBlocks is perfectly set up to take advantage for this. We have a large, scalable portfolio of automotive GNSS products and services, which allows our customers gradually and quickly introduce more and more automated driving functionalities. This makes us unique in the market space and highly appreciated partners for key automotive innovators. Going to page 31. Agriculture and construction machines are very interesting markets. We can help to solve two problems, a lack of qualified workers and the precision how certain tasks are performed. For example, this is very helpful when seeding and fertilizing exactly on the spot you want. Precision agriculture and construction machinery is a large market. We expect a market demand of more than 4 million units by 2030. And we do not only address this market, we enable it. U-Block's new X20 product family brings centimeter accuracy at affordable cost to those applications. We like this a lot. Going to page 32. Let's talk about a sub-segment of mobile robotics which happens literally in our backyard. Robotic lawnmowers. This is one of my favorite applications for GNSS solution. Robotic lawnmowers can help to save costs and make our lives more convenient. However, today it's very inconvenient to install the boundary wires in the ground as well as finding and fixing any damages of the wires which will come over the years. This was the past. Today, Lawn mowers can get the position from satellites. U-Block's positioning products and services enable centimeter accuracy for a consumer product. You might remember we announced design wins adding up to 100 million over lifetime of the contract in this area. We are even more proud that the market leader and trendsetter Husqvarna selected and uses our solutions. We see this as a clear sign that the mobile robotics market in general holds tremendous opportunities for uBlock. uBlock brings centimeter positioning accuracy to mass markets. We are very confident of our bright future. Let's talk about the near term for guidance for Q1. For Q1, we expect revenue in the range of 65 to 75 million and cash EBIT margins between minus 12 and minus 2%. For the remainder of the year, we expect a sequential quarter-and-quarter improvement in 2025, resulting in a double-digit growth for both the locate and the short-range businesses for the full year 2025. Let me conclude. We started this journey in 2023 when we laid out our vision for uBlock. 2024 was a year of important decisions and intense execution. I'm happy now that the new uBlocks starts to take shape and gains traction. I'm convinced that we go after the right growth market, like automated driving or mobile robotics. We are the undisputed market leader in positioning based on our unique IP. And we will double down on this. And we, the uBlocks team, are fully committed creating sustainable value in line with our focus, innovate, and execute theme. This is just the beginning of a bright story. We are all on it. Thank you.

Thank you, Stefan. So we move now to the Q&A. So let's just move to the Q&A slide. To make it easier, we start here in the room and we move to the webcast later. So, any questions from the audience in Zurich?

Günter Holfelder, Polar Capital. Just on the locate business and your targets for locate, is this including a short range or not?

This model is locate only.

Locate only, okay. And for the short range, you're still targeting a break-even in the second half?

Unchanged.

Unchanged, okay.

I would have three questions and I would take them one by one. One, if possible, you guided for Q1 and mentioned that you expect through 2025 sequential improvements every quarter. What gives you the confidence on that statement? Is it, you know, the low inventories at yourself and the customers, project ramp up, design wins, anything to share that, you know, that gives us as well the same confidence as you have on the market recovery?

Now you took part of the answer. So my answer can be a little shorter. So yes, we are confident because indeed there are quite some differences and some observations we make. So the inventory level at our customers, we can see and observe they are lower. And you might remember previous meetings where you asked me, when do you know how much is it and when it will be stopped? And I answered, hopefully consistently, best indicator is order entry. And we see a significant elevation of our order entry. Therefore, we have very high confidence that this overstocking period is mainly behind us. And this was a special effect for uBlocks in 2024, which hit us harder than many others on this one. The other thing is, as you mentioned also, we see new projects ramping up. We know them. We see them coming. Customers are executing. I mentioned one of them, so literally robotic lawnmowers with satellite positioning. That's something you will find in shops already. So there you can make your own proof point even more. So yes, that's the reason why we are more confident.

Okay, perfect. And the second question is on networking capital improvements. I mean, you had the cash inflow of roughly 60 million in 2024. How much of that is really just a function of shrinking top line and shrinking business? And how much was really structural improvement because of better operational excellence and so on? Just to have a bit of a sense of how much also cash outflow we would need to model if sales return?

It's a good question. So for the first half, we had the reduction in working capital from the accounts receivable. That I think it's a bit effect of what you were saying, right? The sales went down and then we are just collecting the cash. In the second half, we were much more disciplined to address our inventory level. And this is, it is also an impact of the company more discipline and try to find, you know, untie that cache. This continues now if the cellular phase out. So if the phase out, we have the chance also if you have a substantial inventory for cellular that we can, you know, harvest from that. And this is what we are working.

Can you quantify how much inventory you have for cellular?

We don't disclose this information here, but it is a relevant part of what we have in the inventory today. And it's part of what you see. You have a one-off write-off of a cellular, right, that will be booked now in Q1, and that is a large part of this inventory. But we will try as much as possible to cache that inventory. Okay.

Okay, the final and then I'll pass on the micro. On the cellular phase-out, just a quick update where you stand. If I remember correctly, the reductions are mainly focused on a site in Italy. Italy is not known for being easy to be restructured. Just from your experience on the progress you made.

We have... appointed a professional liquidator that has a lot of experience doing this. So he's on top. It's progressing and at this stage, this is what we can communicate. We have strong support to drive this process. I don't know if you want to

Thanks. Two questions on R&D. So you've significantly reduced the cash spending by 10 million. And I was wondering how do you really steer that? I mean, what kind of R&D are you not really doing or basically you don't allow or you just don't do or it's not necessary and what is really necessary? How do you steer your teams now? Because I assume in the last 10, 20 years that has worked probably differently than it should work in the future. So can you maybe elaborate a little bit how you the teams now to focus on what's really needed and probably what's not needed and at what point in the project you're going to stop for example just that we can understand there is not a huge risk you're returning to into the old habit for example let me take and I prefer to talk about the future not past and here I very clearly can say first of all

profitability metrics are now all over the company. Part of this topic is we want that our people are proud about their technological achievements and we want them to be even more proud if we make a lot of money out of this. And we spend quite significant effort also internally to make this present everywhere and also accept it everywhere. And we see the effects on this. People are questioning this. The second thing, for sure, you can rely on. We are very stringent which projects we do and we don't do. And we are also very stringent to act quickly in case things change much faster than maybe it was common in other times. So they are for sure that the team feels a big difference. And third, this goes a bit in line what Camilla presented you. She presented you a significant elevated transparency on our company for the outside. Obviously, we have much more also insight in terms of financial transparency. The whole target is to act faster, to take conclusions and decisions faster. And therefore, I'm confident that we will manage this very well.

Thank you for that. And maybe a second one just on the typical discussions we have these days in the media, tariff discussion. I remember we had a discussion in the past that you could potentially benefit in the US. I think that story is a bit over. Now with Donald Trump as a president, the discussions are pretty intensive. Any risk we have to be aware of that you could face with or doesn't it touch you at the moment?

I mean, first of all, what we discussed previously was, is there a risk or an opportunity out of the geopolitics? And we, as a trustworthy Swiss supplier of GNSS solutions, I see us definitely on the side where we will see more opportunities than risk out of this, because we are highly appreciated both in the East and in the West. Regarding to tariffs, none of our competitors have production of GNSS product in the US. So therefore, I don't expect any direct disadvantage in case a tariff comes up or doesn't come up.

Do you have any exposure already to humanoid robots or any requests? I'm not sure whether with GNSS or chips I assume there are also outdoor developments, outdoor robots.

Sounds logical, but I personally don't know. So this doesn't mean that it's not the case. I just don't know.

For the locate business, you mentioned the margin, the gross margin at that time. Can you disclose the locate gross margin two years ago or so?

three years ago it is 60s or even higher yeah so in 24 it was slightly lower than uh 60 percent but this is also because we had uh you know lower avenue as well we have a fixed cost logistic right so then it's fairly in line with uh the target financial model that we report to see quite constant constant at 60 percent okay um

you outlined the opportunity around ADAS. Can you explain us a bit where you signed in? Because recently there was some big platform announcement in Vidya and also BYD with their own one implementing it in, I think, all the vehicles. Can you elaborate a bit where this 45% come from until 2013, how this works now for you?

I mean, the 45% is the share of the vehicles where we think that will need GNSS for the automated driving level. And this is more or less whenever the driver can take the hands off. So what we know is the project we are in. I cannot list them now name by name. And the other thing we know, players like NVIDIA, they include us in their reference design platforms, which means it's a very clear sign to every customer of NVIDIA, if you go to a higher automated driving level, GNSS is needed and there's already a good proposal on the reference board.

Anyone else from the room?

Maybe on page 26, you say you get 350 million revenues and you say more than 60%. If I plug in 60%, I get 210 million gross profit. And then with your cost base of 158 million, I don't get to a margin of 25%.

But the cost base, are you referring to that bridge? But that's the whole company. It includes short range and it includes, you know, a fraction of cellular cost. That is the thing that you keep. That's not the locate cost base.

And then a similar question. The cellular cost base on 22, you have 25 million and 22. And 38 million on the previous slide.

24, yes. In 2020, sorry.

On slide 28, you have 38 million OPEX for cellular.

Yes, in 24.

And on slide 22, you have 25 million cellular cost. What's there the difference?

So the 38 million, million OPEX on slide 21. This is reported cash OPEX, sorry, OPEX adjusted in 24. This includes nine months of cellular cost without any cost reduction. One quarter, Q4, that we saw some reductions from the cost saving program, okay? Then on the other slide that we talk about, we'll take an additional 25 million. This is an additional cost that we are taking out of the company. So if you cannot compare, the 38 is reported OPEX in 24. So it's a mix. You have a lot of cost there that we already took out, right? And then we will take an additional 25 now during 25. Okay.

Thank you. So we can check now if there are any questions over the phone. I don't think it's the case. Operator, can you confirm if there is anything?

For questions on the phone, please press star and one. We have a question from Reto Huber from Research Partners. Please go ahead.

Good afternoon. Thank you for taking my question. One of them is relating to your cellular inventory. You're saying you're using that up. to continue to support the existing customers. Now, what happens if you run out of inventory and one of your important customers still wants that particular cellular product? Would you continue to produce that respective module again?

So let Let me clarify first. When we talk about consuming inventory, we don't talk about consuming uBlocks end product inventory. We are rather talking about chips from other chip suppliers which are needed to produce the modules. And in case those would run out, we would simply reorder at the supplier. So there is no risk in terms of that a customer would like to have more margin is attractive, then we can easily reorder components needed for this.

Just to add on that, just to be super clear here, we also, in the communication, if a customer also, now that we are phasing out in a there is a minimum margin that we will charge for the you know so if if there is something that is not in the inventory and we will not take any risk as this deformation and additionally to that you have a you know a margin that is higher than what we have today the margin control really works

Very good, thank you. And then the other one, slide seven with the 10% CAGR, what average annual price reduction have you baked into that number?

Typical annual price reduction for those products is in the low single digits. That's really in line with all other players in this area. Good.

Thank you very much.

The next question comes from Lucas Spang from Tigris Capital. Please go ahead.

Yes. Hi. Good afternoon all together. I have two questions. I would also do them one by one. The first question is just a clarification question regarding your phase out of the cellular business. What exactly do you understand about of phasing it out. Do we see after this phasing out period a certain, let's say, let's call it base revenue going forward or will there be a point in the future that we see zero revenues going forward from the cellular business?

Yes, it's the second one. So phase out means that we give our customers a certain opportunity buy those products and have sufficient time to design in the next generation. And this will not last forever. It's rather something which will come to a fixed end in 27. Okay.

And then to the investment topics. So we talked a lot about reduced capitalized costs and I think that's That's very welcomed from investors' perspective. But what does this mean in terms of capex in 2025 and beyond?

So you have a low single-digit capitalization in 2025. This is what we expect.

And that's just the intangible part of capex. So do you have any intangible?

R&D capitalization. We are not changing the process we have in the company. We just review the project that we have for a more conservative view. That led to that reduction, but some projects we still capitalize a fraction. That will be very low compared. Then we have the normal capex. I can tell you that it's a low single digit for the year. This is what is in our budget. We are not talking about

high investment here okay but that means also in terms of cash flow generation going forward that will be a very attractive cash flow model in the future correct okay thanks so we come back now here to the to the room

Maybe first just from an accounting or legal perspective, what's the difference to discontinued business? In your accounting, that you decided not to have this discontinued business?

It's a good... We are not... I don't know the answer, to be honest, from the accounting and legal point of view, but we check the case with auditors and legal, and this is how we should report. It's phasing out, and be reported as other companies do. Like we have a Texas instrument that does this type of thing. What we should do is try to give more transparency. So this is what we are working on. We are not ready yet, but we are working for it.

On the market shares you showed with Broadcom and SDMicro, is it possible to provide more information regarding your market share and how it compares to Broadcom? Or is it difficult?

Well, the situation is as we come out of a few very special years. First, there was undersupply, then there was oversupply, then there was inventory correction. And we rely on external market studies on the numbers. Otherwise, I can tell you everything. What is here and there, a lot of these special effects disturb the picture highly. One thing which we can say with sufficient knowledge and confidence is that we are the gear number one. If I make it a bit more concrete, companies, the number two, Broadcom, we don't see them in our target. markets. Not at all. We don't see them in our automotive customers. We don't see them in our industrial customers. So that if I would reduce the picture exactly to those markets it would be a huge huge let's say gap to the next one.

If we look at cash R&D related to locate business in absolute terms, where do we stand in 2025 versus 2023? Higher or lower?

Cash R&D 25 compared with 23?

Yes.

All, I don't know by heart cash R&D for locating 23. But what I can tell you is that we had a reduction in R&D. This was in all areas, including locate. However, connect took a bigger hit. And also, as I mentioned, what is super important here is that we are being very careful to protect the business that will address future growth. So we are addressing the short-term needs and being more disciplined with costs. So, including Locate, they also made reductions, but we ensure that for the future business, we have the OPEX.

So, any other questions here from the audience? If not, we close here. If there are any further questions, so there are a lot of bridges in the presentation, a lot that we did to try to explain, so do let us know. And thanks to you guys from the market that also with all the feedback allowed us to prepare the presentation. Sometimes from our side, we take it for granted that some things are clear and there are some pain points that we Just heard it from you, so let's continue the feedback and the interaction so you know where to find us. Thank you very much.

Thank you. Thanks a lot for joining and both virtually on the phone and here in the room.

Thank you all. Thank you.

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