Ladies and gentlemen, welcome to the u-blox announces strategic decision to increase focus on Locate business and phase out Cellular conference call and live webcast. I am Sandra, the Chorus Call operator. I would like to remind you that all participants will be in listen-only mode, and the conference is being 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 will 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 u-blox. Please go ahead. Hi everybody, thank you for joining us today. I'm here together with our CEO, Stephan Zizala, and our CFO, Camila Japur. You have all seen the announcement this morning, so this session is to give you the chance to ask any potential questions you may have. But before, I hand over to Stephan. Go ahead, Stephan. Good morning, good afternoon, everybody. Before we take your questions, let me say a few words to a straightforward story. You might remember the Capital Markets Day in 2023. We revealed that our cellular business was loss-making. We planned to turn it around, and I asked you to give us a few quarters to see results. The progress did not meet our expectations. Therefore, we are taking action now. After over a decade of investments in our cellular business, we decided to phase it out now. If you have been following u-blox, you are probably not surprised. Let me do a quick recap. In 2023, we revealed for the first time that the cellular business was loss-making, even in 2022, our record year. A turnaround plan followed with the intention of bringing the business to profitability. In 2024, one year later, it became clear that these plans were not panning out as expected. Therefore, we put the cellular business under strategic review as announced in August. In the review, we explored different alternatives, including a sale and a discontinuation of the cellular business. We worked very hard to find a solution that maximizes value to all stakeholders. Today, we announce our decision to phase out our cellular business. What does phase out mean? It means we will continue to serve our customers with existing products to generate cash, and we reduce all related OPEX to the minimum. This means especially that we stop the cell R&D activities. Talking about financials, the decision to phase out cellular means that we are eliminating at least CHF 30 million in annual losses on an EBIT level. That much money we lose in cellular now. It doesn't come for free, of course. Looking at the expected cash impact of the one-offs, we are talking about 25-30 million CHF. This means we spend 25-30 million now to eliminate 30 million in losses per year. An important point here, this does not include the potential inflow from selling our current inventory. This comes as an upside that we haven't yet quantified. We gave more indications on the financial impact in our press release, and Camila will answer questions on that. I feel sorry that this change will affect many u-blox colleagues and customers. For many of them, this change of strategy after such a long time will be perceived as tough. It was a tough decision, but it was a necessary one. Looking now in the future, u-blox becomes a much more focused business. We have the opportunity to put even more energy in our Locate Business and continue to improve the performance of our short-range business. The future of automated driving, mobile robotics, asset tracking will not be possible without an accurate and reliable position from u-blox, of course. Therefore, this is a very important moment for u-blox, and I can't wait to share with you the progress of our journey. But one thing at a time. Exactly two years ago, I took over the CEO position. And since then, we announced a number of changes and probably more important executed them. Focus, innovate, execute was the theme of our Capital Markets Day in 2023. We will continue on this path. That was it for my intro remarks. Maybe a bit longer than intended, but now we are ready for questions you might have. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to disable the loudspeaker mode and eventually turn off the volume of the webcast while asking a question. Anyone with a question may press star and one at this time. Our first question comes from Torsten Sauter from Kepler Cheuvreux. Please go ahead. Yes, good afternoon. I hope you can hear me. I have two questions on the phase out. Can you give us maybe a little bit of a feel for the timing here on the phase out? How long will u-blox continue selling cellular products, and how fast should we model the respective phase out? I mean, in terms of percentage declines maybe in the years ahead. And also, combined to that, tying into that, you highlighted that you will adjust certain conditions for the product that you are phasing out. Can you give us a feel for how this works in real life and could this be detrimental to, for example, cross-selling activities that you engage with? Thank you, Torsten. So let me start with your question number one, timing of the phase out. So we announced this decision today, and already today, we are in contact with our customers to discuss their needs and their demands of this phase out. What I would like to emphasize here, our existing products are technically working very well. We just need to produce them. And therefore, we are in a good position to negotiate with our customers their demand and make sure we maximize the value for u-blox in this exercise. If you refer more to the cost-saving part of this phase out, we expect and target the maturity to happen in the second half of 2025. Your second part of the question was adjusting the terms and conditions. As usual, in a phase-out phase of a business, you discuss with your customers how long they want to have certain products and under which conditions, and we can supply this for a certain duration of time. And what it also means is that we will make sure we create value out of this during this phase-out phase. And this is meant we discuss with our customers the terms and conditions. And there was a question to me what this means for cross-selling. There are very few cases where we sold a positioning product due to a cellular product. So in this aspect, the effect of the cross-selling will be limited. The next question comes from Felix Remmers from zCapital. Go ahead. Yes, hi. I actually have two questions. Can you give an indication how big the inventory write-down has been? And has it been written down to zero and everything you sell is upside from here? And then secondly, in 2024, you executed on a CHF 20 million cost-savings program. Now you talk about CHF 30 million losses being eliminated in cellular. Can that be added up, or have cost savings been achieved out of the CHF 20 million in cellular? And maybe final question, if I may, do you have any visibility on the cost base ending 2025 if the ramp-down has been done? So what is the OPEX you assume exiting maybe 2025? If you have any indication. Thank you. Hey, Felix. Hi, this is Camila. Just to clarify, what we reported was in Q4 we will have an impairment of the R&D capitalization of CHF 31 million. This does not include inventory write-off. Just to be clear, that will be the impact of the inventory. For 2025, in Q1, we reported that the non-cash impact or total impact of CHF 65 million and around 60% should be non-cash. Inside this amount, it's an estimated inventory impact that comes with the decision of the phase-out of Cellular. And it's something that we will work together with the commercial team to try to optimize and see if we can convert that into cash as much as possible. This is top priority and has already been discussed with the commercial team. So together with our previous answer from Stephan, that's how will be our strategy here to address pricing and how to sell the remaining. We will also combine this with what we have in the inventory and how to ensure that we optimize this and convert in cash. So this is what we are doing now. So I don't have a number to you now, but I can tell you that it's inside this CHF 65 million communicated in Q1, the impact. Then your second question was about the cost-saving initiative, CHF 20 million. And then this additional loss is reducing CHF 30 million. So more than CHF 30 million is the losses of Cellular. So during 2024, we already made corrections in the cost base. So part of the CHF 20 million is inside this CHF 30 million. It's not fully on top, but it will be the total impact of 30 for the cellular specifically, or more than 30. Your third question about the cost base for 2025, we will not share the number today, so we're still working the Q4 closing, and we will come back to that when we report the full year 2024. The next question comes from Jürgen Wagner from Stifel, please. Go ahead. Yeah, good afternoon. Thank you. And you gave us the number for the first half for your cellular. Should we just take then around CHF 60 million sales and CHF 30 million losses for 2024 as you confirm your full year guidance to get to your positioning business in terms of sales and EBIT? Is that the number we should look at for positioning? Thank you. So we are still working the second half closing, right? So we will not disclose any new figure today. This will come. We will share more when we report the Q4 figures. So we'll give a bit more taste on the cellular numbers. But you can maybe extrapolate a bit what you saw in the first quarter, first half. Okay, and on capitalization, will you continue to do that for your positioning products now on the write-off? Yeah. The focus of today is the communication of Cellular, so I prefer to address those questions when we talk about Q4. But what I can tell is the Cellular, of course, we'll not do anything else, right, as we reduce our R&D and we impair now. But we will come back to that. Okay. Thank you. The next question comes from Harry Blaiklock from UBS, please. Go ahead. Good afternoon. Thanks for taking my question. The first is just around your longer-term kind of through-the-cycle growth targets that you gave at the Capital Markets Day. I know kind of historically the GNSS or positioning market has been lower growth than cellular and connectivity generally, and most market forecasts have that continuing going forward. I wondered whether this decision is going to have any impact on your 10% through-the-cycle growth rate. And then also similarly, obviously, cellular lower margin business, is there likely to be any change to the 14% adjusted EBIT margin as well? It's a valid question. We will not provide an exact answer today to those questions. What I can say, however, is that positioning is a very attractive growth market, especially if you think of the applications like automated driving or mobile robotics, so we will stay in this growing, structurally growing market space also in future where we have our leading position with our Locate Business, and on the other hand, you are absolutely right. The margin profile will go up, but we have not disclosed or we do not disclose a new midterm model today. Got it. Thank you, Stephan. Very helpful. I have a few follow-ups as well, if that's okay. One is just on strategic review. My understanding was the whole of the Connect business that was under review, but then you've obviously decided to keep short range within the business but wind down cellular. I'm not sure whether that's the right interpretation, but it would be great to get a bit more color on the reasoning behind kind of keeping short range within the business. So first of all, the understanding is correct. So we phase out cellular, and we improve the performance of our short range, meaning we will bring it to profitability in the second half of 2025. And the important thing for us is it's our job and our task to maximize the value. And this was the guiding principle during the strategic review, which we announced in August timeframe. And the conclusion we came up with is exactly the decision of today. We phase out cellular, and we improve the performance of short range with a break even in the second half. Got it. Are you able to give a kind of once you've turned the short range or the short range business to profitability, are you able to give a rough estimate to kind of what you expect gross margins to be in that business? Sorry, just to make sure that I understood. So what you are saying is your question is about gross margin of Short Range, or can you? Yeah, that's right. Sorry. Yeah, we don't disclose gross margin, right? So what we disclosed in the Capital Markets Day in 2022 was negative connect business, right? So we are removing the lost business cellular, and we are confident to reach break even in 2025. We will still come back how we report the numbers next year given this new reality, but for now, we don't disclose the gross margin of this business. Okay. Got it, and one last one if I may is just if you exclude cellular, are you able to give kind of a rough revenue split in terms of end market, so also industrial and consumer? Or is it just similar to what it was with consumer with cellular? Sorry. POS has a higher exposure to automotive, so the share toward auto will increase, this weekend, yeah. Great. Thank you both. The next question comes from Tobias Schulte from UBS. Please go ahead. Yeah, hi. A few questions from my side. One may be related to the locate or positioning businesses. Now, looking at the disclosure you gave at this sales level, also the positioning or Locate Business is probably loss-making. And I was just wondering if you can confirm that or I'm missing something. And the second question is, I remember at the Capital Markets Day, you were mentioning that the Locate Business has a margin, an EBIT margin of around 30%. It was probably at a completely different sales level. I was wondering if you recoup this kind of sales, is that kind of margin maybe today still possible, or is there something happened in the market like pricing, which is not available? Maybe the third one, I know that you are not disclosing a lot, but I was wondering if you can give us any indication how the split in R&D is divided between the Locate and the Cellular businesses? On this topic, you are spending. I was wondering a little bit what can we expect going forward? Do you need this kind of level of R&D spending for the projects you have? Yeah, we hope that the sales level will be normalizing as well at a higher level, or are you also able to reduce the kind of R&D spend you have? Okay. So let's take one after the other. So your first question related to profitability. I want to repeat, 2024 was a year which was highly distorted by overstocking. And this was the major effect of what we have seen over the year. And I cannot give you numbers for the full year as Camila indicated, but you can extrapolate that from our guidance and our reporting that all of our businesses were not profit-making. Now, to your second question, the margin profile, so if I understood your question right, did anything change in the market dynamics to come to a similar margin profile what we indicated in the Capital Markets Day in 2023? And it remains the same. Positioning, especially, is a highly differentiated business and a highly differentiated market space. We are leading there, and we have unique technology to be there. So I do not see any change in the market environment which would disturb this dynamic. Of course, we suffer from the loss of operating leverage due to the lower revenue base, especially in 2024. On the third question, R&D spending between cellular and positioning, we cannot provide details at this point in time, and so we have to leave the information where it is. Okay. But you will disclose more details with the numbers 2024, or is this something which, yeah, you don't want to share? No, no. Let me clarify here. So we are fully aware that it's difficult to understand with all these data points, and we understand also that we need to be more clear about it. So we will try to do something already for the Q4 reporting to give a bit more transparency. Okay. And maybe, yeah, the last question is still related to that I had is about the absolute number of R&D spending. Related to the actual sales level, it's very, very, very high, but I hope and assume that you are thinking about a higher number of sales in a more normalized space. But I was wondering, do you need to keep this high level of sales? Is it, let's say, productive enough, or is there an intention at some point in time that you probably can go ahead with less? Yeah. So maybe the best way to answer this question before we share more details that we expect to do in Q4 results earnings call is to say that the break-even level in the past in Q2, when we report the numbers, was around. We need CHF 70-80 million top line to break even. So we are taking actions now to drop significantly that number. So we believe that we'll be more towards around CHF 50-60 million. So it will be much lower because we address the cost base. So you know that we made these cost cuts of CHF 20 million. That was fully executed already. So we start to see more of the impact in the first half of 2025. And then on top of that, with the cellular actions, when we have a normalized quarter, then you see the impact. But it will take a few quarters, or at least for half, as Stephan mentioned, for us to address the cost base. Okay. Thanks. Just that I get it right, the CHF 70 million-CHF 80 million quarterly sales break-even levels, these are how the business is actually running? No, that was when we reported in the first half of 2024, right? So we. So with the cellular and/or short range and positioning or location business, right? Okay. Good. The whole company. Yeah. And so now we addressing the cost base, right? So CHF 20 million was together with all the initiatives, and then we will expect a much lower revenue to reach break-even. Thanks a lot, yeah. The next question comes from Michael Inauen from ZKB. Please go ahead. Thanks very much. Hi all. I just have a strategic question, actually. I mean, I assume that, or when we were discussing last year often, I understood you want to find a solution for the whole Connect business, which hasn't happened now. So you get rid of the Cellular business. Short Range remains. I'm just trying to understand what happened in the process that you decided to keep the Short Range business. Second, is it a strategic business for you going forward, or sorry for being a bit blunt, but are you just turning it around and then trying to sell it again? And third would be, is it a risk that now clients of yours in the Cellular business see what happens with basically your Cellular business phase out, that some of your Short Range clients would potentially look for other suppliers down the road? I mean, in other words, I don't see a chance this business is going to stay with you for much longer. So let me again, also this one, take a step by step. So what happened in the process? So we said very clearly, we evaluate all options. We did not just evaluate one possible option, and we choose the one which maximizes the value for all stakeholders. So this is what happened in the process. The second one is on the strategic relevance of this product of the Short Range product line. Now, first of all, I think we made it very clear in the announcement, u-blox will become an even more Locate-focused company, and there we put a lot of energy, and this is the core of our activities. So there's no doubt, and this is where we are leading the market, and this is where we are going after. Now, independent of any long-term question, you could always ask, who is the best owner of a business? We came to the conclusion it's best if we further improve the performance of this business because it creates value for us. Number three, is this a risk for the strategy? I don't see this because phasing out businesses and doing portfolio management is something very common in the semiconductor industry. We are not the first, and we will not be the last company doing this. u-blox has been a very reliable partner. We communicate transparently with our customers, and we walk our talk, and our customers can also feel this. So I'm not concerned about your question number three. Thank you, Stephan, for this. And just maybe one additional here. Is there any reason that the short range business and the positioning business would need to stay together in terms of products, synergies? I mean, I know you have combined products with partners of yours, but does the short range business need to be a part of positioning, or is there any advantage of it, or the Locate Business can obviously run alone, yes, technically? Yes, those were three questions. So let me answer again, or let me start with the third one. Yes, the Locate Business can run on its own. It has sufficient size, and obviously, this is a straightforward answer. Your question number one, does it need to be together? No, not necessarily. Question number two is, are there advantages? Yes, there are areas in indoor positioning where it can be interesting to have both in our hands. So indoor positioning is based on short range technology. So there is an application advantage to have this together. Okay. Understood. Thank you very much for that. Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Rafael Duarte for any closing remarks. Thank you very much for the questions and for attending this short call. We see from the call that we have a lot of questions on figures and models. We tried to provide as much as we could. As of now, there is a number of data points there. Once we report full year results in about a month, we will do what we can to provide a bit more visibility on how it goes forward. Thanks a lot, and talk to you soon. Thank you. Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.