Ladies and gentlemen, welcome to the uBlock's Half Year twenty twenty five Results Conference Call and Live Webcast. I am Sandra, the Chorus Call operator. I would like to remind you that all participants are in listen only mode and the conference is being recorded. The presentation will be followed by a Q and A session. 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. Please go ahead, sir.
Hi, everyone. Thank you for joining our call today. Here with me are our CEO, Stefan Salla and our CFO, Camilo Jayapur. Our agenda for today, we start with a brief recap of our strategy, including our transformation, then we dive into our half year results, outlook and finally Q and A. As always, in order to make a question, please follow the instructions in the website platform.
And with that, I hand over to you, Stefan. Go ahead.
Thank you, Rafael, and welcome everybody. We are reshaping uBlocks for the future. I'm very pleased to walk you through our progress and the performance over the past six months. Let's begin with the key highlights. In H1, we delivered strong revenue growth of 32% year over year, driven by a solid recovery in our automotive and industrial businesses.
The momentum in our locate and short range business is very good. We saw strong demand for our products as excess inventory at customers continued to decrease. Importantly, our efforts to reduce costs are clearly paying off. Our cash EBIT margin turned positive at 2.4%, 30 percentage point higher than one year ago. We also generated EUR 5,400,000.0 in free cash flow, thanks to continued business recovery, cost discipline and working capital improvements.
Lastly, in June, we closed the divestment of our cellular business to TRASNA. This was a pivotal strategic move, which allowed us to dedicate full attention and resources to our core business, where we have a key technological leadership and growth potential. Our reported financials reflect this transition with the cellular business now presented as discontinued operations. Let's go to Slide five. Yes.
Before we dive into our results, I would like to recap key points of our strategy, starting with our market position and our growth prospects. UBlocks is the undisputed leader in the GNSS chip and module market. That hasn't changed, and it won't because we will continue innovating fast and maintaining our technology leadership. Our target markets are expected to grow by about 10% annually over the next five years. We focus on structurally growing market segments.
Next page, please. 60% of that growth in LOCADE will come from three applications, which are core to our strategy and are shaping the future: automated driving, automated agriculture and construction and mobile robotics. In each of these domains, uBlocks is not just participating, we are enabling the transformation. Let's have a closer look, starting with automated driving. UBlocks is the leading provider of GNSS solutions for automotive.
As vehicles become more autonomous, the need for precise and reliable positioning becomes crucial. We expect that 45% of all vehicles shipped in 2030 will use GNSS for automated driving functionalities, opening up a substantial growth opportunity that plays directly to our strengths. Next, agriculture and construction. The world is facing a shortage of skilled labor in those fields, and there's an increasing demand for precision. We expect more than 4,000,000 machines to require high accuracy positioning by 02/1930.
UBlocks is not only serving this market, we are enabling it. Our new X20 product family delivers centimeter level accuracy at an affordable cost, making it a game changer. We like this market a lot. Finally, mobile robotics. Think of robotic lawnmowers, a real world example of mass market adoption of precise positioning.
Our partnership with Husqvarna, the market leader, is a success story. Our customers enjoy great market success with boundary wire free robotic lawnmowers as they revealed at their Q2 earnings call. Our products contribute to this success. And this is just the beginning as we have more customers in mobile robotics lined up. We see a future where millions of mobile robots from delivery bots to industrial machines are autonomous, precise and reliable, powered by uBlocks.
Page seven. Let's turn to the transformation uBlocks is currently going through. It didn't happen overnight. In 2023, we launched our focus, innovate, execute theme. We intensified focus on our positioning business, took first measures to improve profitability of our Connect business and worked on our execution performance.
In 2024, we conducted a strategic review of the Connect business and started a process to exit cellular. We overachieved on cost savings, delivering 25,000,000 and took old steps to simplify our organization. This year, with the cellular divestment now completed, we emerge as the new uBlocks, a technology leader in positioning solutions, playing structural growth markets with a leaner, more focused organizations, strong margins and a high cash generation potential. Let's go to Page eight. Over the last two years, we have taken decisive actions to reshape uBlocks into a leaner, more focused and more transparent company, and the impact is clear now.
We have reduced our OpEx base from $215,000,000 in 2023 to CHF 155,000,000 today, a reduction of nearly 30%. We have also streamlined our organization from 1,400 full time employees to under eight fifty employees, and we also reduced the number of sites. At the same time, we have made significant progress in working capital management, reducing our net working capital from EUR 150,000,000 to EUR 33,000,000. These improvements reflect a more agile and capital efficient operating model. On the transparency side, we have fundamentally changed how we communicate and how we measure success.
We have reduced R and D capitalization from EUR 41,000,000 in 2023 to just EUR 2,000,000 now, giving us a much clearer view of our real cost base and investment levels. We now provide quarterly trading updates with both revenue and profit as well as quarterly guidance. We have also introduced a new financial model and a focused set of KPIs centered on cash generation. This reflects our commitment to running uBlocks as a high performance, accountable organization and giving the market the transparency and consistency you expect. Page number nine, please.
What we have now is a robust and scalable business model, as you can see on the right hand side, one with low capital intensity, a lean structure and the ability to generate strong margins and free cash flows. Page 10, please. Finally, let me touch on capital allocation. Our priority is to invest in innovation and growth, especially in our core markets. We will continue to maintain a strong balance sheet.
And as cash flow strengthens, we will evaluate further shareholder returns and strategic investments that align with our focused strategy. Page 12, please. Turning now to the half year results. Starting with our revenue performance. We are pleased to report strong top line growth in the 2025.
Revenue increased by 32% year on year, reflecting the strength of our core business and the success of our strategic focus. Sequentially, we also saw good momentum. Q2 grew by 5% over Q1. And when we strip out the negative impact of currency, particularly the weakening U. S.
Dollar, growth was even stronger at 11% in constant FX rates. Let me comment on three aspects of this growth. First, we have seen a significant reduction in customer inventories, meaning end market demand is now flowing more directly into orders. Second, our Automotive and Industrial segments delivered strong double digit growth, supported by structural trends and increasing adoption of our technology. And third, both of our businesses, Locate and Short Range, performed well and contributed meaningfully to the overall growth.
Next, Page 13, please. Let me now break down our revenue performance in more detail to show where the growth is coming from and how it aligns with our strategic focus, starting with our business lines. Our locate business grew by 32% year on year, reaching CHF 106,700,000.0. This was driven by robust demand in both automotive, which grew 42%, and industrial, which rose 29. LOCADE remains the backbone of our business and a key enabler of high precision applications.
Our short range business also delivered solid performance with 24% revenue growth to CHF 16,700,000.0. Here, too, we saw a rebound in both automotive and industrial applications, up twenty percent and thirty three percent, respectively. Geographically, growth was broad based. In Asia Pacific, revenue grew 20%, reaching 58,500,000.0, with automotive up 57%, offsetting some softness in industrial. In Europe, revenue grew 41% to €37,200,000 driven by strong demand in industrial markets.
And in The Americas, revenue was up 49%, reaching EUR 27,800,000.0, primarily on the back of a rebound in industrial applications. Now looking at our end markets. Our automotive business grew 40% year on year to EUR 52,100,000.0. Asia Pacific led the way, accounting for around twothree of the total automotive revenue. A key highlight, our autonomous driving business, which grew the fastest.
Our Industrial segment reached 68,100,000.0, up 30%. Growth was broad based coming from UAVs, factory automation, aftermarket telematics and increasingly mobile robotics, all areas of long term strategic importance for us. As expected, consumer and other applications continued their decline, with revenue down 27% to EUR 3,300,000.0, consistent with the trend we have seen since 2022. The clear takeaway here is that our growth is coming from all major business segments, markets that are aligned with our long term strategy. Well, I will pause here and hand over to Camilla, who will go through the financials. Camilla, over to you.
Thank you, Stefan, and hi, everyone. I start with Slide 14 here. We had a significant improvement in the gross profit. It increased to $17,900,000 that is $23,000,000 higher year over year. This corresponds to a gross margin of 58.2% that is six percentage points higher year over year.
This is a very healthy step into the right direction for one of our key financial metrics. The improvement came from several factors like a strong operating leverage from higher revenues, a positive product mix, particularly with faster growth in the locate business and lower logistic costs. These results show the benefit of both our strategic positioning business and improved execution efficiency. Now moving to slide 15, we see our promise of a lower cost base materializing our numbers and a positive cash EBIT. Starting with cash R and D, our spending was $44,900,000 and lower than last year with $47,800,000 I want to emphasize that our efforts to focus resource, streamline operations and reduce complexity don't compromise our innovation and long term success.
SG and A expenses were reduced by 18%, coming at 23,400,000 compared to $28,600,000 in 2024. This is a clear result of our cost savings program we announced in 2024 and a reflection of the organizational focus and simplification we have achieved over the past few quarters. As a result, we saw a turnaround in cash EBIT. We have a positive €2,900,000 versus a loss of €26,000,000 in the 2024. This is an impressive improvement of €29,000,000 year over year.
Our adjusted cash EBIT margin improved to 2.4, an improvement of 30 percentage points year over year. This shift reflects the impact of our transformation with a leaner, more focused cost structure, improved revenue and a growing operating leverage. And important to say that we just started, we have now a foundation for a sustainable and scalable profitable business going forward. I move to Slide 16 now. Let me walk through the main points of free cash flow bridge for the 2025.
I will start talking about the numbers inside the box in the chart that reflects our continuing operations. This is the new U blocks without the cellular business. The cash flow from our continuing operations was million mainly driven by net working capital improvement of $22,000,000 The negative 8,000,000 is mainly related to FX impact over our assets. The free cash flow from the discontinued cellular business was negative by $12,000,000 That leads to a positive free cash flow of $5,000,000 for the first half of the year. This performance underscore the progress we have made in turning the business around.
We have a solid foundation as we move forward with a leaner and more focused U Blocks. Moving to slide 17, let me now talk about two important indicators of our financial health, net working capital and net cash. On the left side of this slide, you can see that the net working capital has reached a record low of $33,000,000 which represents 14% of revenue. This is a significant improvement from historical levels. This reflects the operational discipline we have built in the organization over the past quarters, particularly around inventory and receivables management.
We are very pleased with this continued increase in efficiency. On the right, you see that our net cash position has crossed the €100,000,000 threshold, ending the final half at first half at $101,000,000 This milestone underscore our strong cash generation and give us a strategic flexibility to continue investing innovation, selectively pursue growth opportunities and navigate external uncertainty with confidence. Overall, this combination of a lean working capital profile and a strong balance sheet puts uBlocks in an excellent position to execute on its focused strategy. And with that, I hand over back to you, Stefan.
Thanks a lot, Camilla. Let's go to the outlook on Page number 19. Looking ahead to the third quarter, we are guiding for revenue between CHF 60,000,000 and CHF 70,000,000. At constant FX rates, this reflects an 11% year on year growth and a 6% sequential growth at the midpoint, a very solid performance in a volatile macro environment. On profitability, we expect adjusted cash EBIT to be in the range of 0% to 10%, reflecting our continued focus on cost discipline and operating leverage.
Now in terms of the broader market environment, while we see clear structural drivers for long term growth, geopolitical volatility and slower than expected recovery in the automotive and industrial markets are leading to more cautious ordering behaviors from customers in the short term. That said, uBlocks is very well positioned to navigate this environment. The cost base adjustments we made over the past twelve months have significantly improved our flexibility and resilience. We are maintaining a strict cost focus on and we continue to invest in our innovation at the same time to grow in our focus markets. The impressive order increase in the 2025 for autonomous driving and mobile robotics of over 100% year on year underlines this.
We continue to expect double digit growth for the full year 2025, supported by our core markets. Let me conclude on Page number 20. The 2025 marks a strong and decisive step forward for uBlocks. We delivered 32% year on year revenue growth, driven by solid execution across both locate and short range. Our profitability turned the corner.
Adjusted cash EBIT is now positive at 2.4%, a dramatic improvement from the minus 27.7% in the same period last year. We generated EUR 5,400,000.0 in free cash flow, reinforcing our capital light cash generative model. And in June, we finalized the divestment of our cellular business, completing the strategic shift we announced less than two years ago. We are excited about what lies ahead. Demand drivers in our key markets from autonomous vehicles to precision machinery and robotics are structural and robust.
These are long term trends, and we are building the business to lead in them. At the same time, we remain realistic. Near term visibility remains limited with ongoing geopolitical uncertainty impacting ordering patterns. But we are not standing still. Our lean cost base, clear strategy and execution focus puts us in a strong position to manage through this period and come out even stronger.
Today, we are proud the new uBlocks is in place, a company that is focused, resilient and positioned for sustainable value creation. Thank you for your continued support and your confidence in UBLOX. This over to Rafael.
Thank you, Stefan. Thank you, Camilla. So we're now ready for the Q and A. Operator, do we have any questions?
We will now begin the question and answer session. Our first question comes from Harry Blackrock from UBS. Please go ahead.
Good afternoon. Thanks for taking my questions. I've got a few, if that's okay. The first two are just on gross margin. Obviously, a key positive for the quarter.
It seems like GNSS margin is over 60% now, but kind of only just. So it seems like there's more upside to the above 65% that you're targeting. Wondering if you could just outline what the key drivers of that upside is? And do you really get that much operating leverage at the COGS level?
This is we expect continued growth, right? So and we expect to have a high operating level on revenue that should address stronger gross margin.
Got it. But I guess, the COGS level, because you most of the manufacturing is outsourced, like is there how much could how much do you think that gross margin can how much operating leverage do you think you get at the gross margin level? And
Yes. Are constantly work with our suppliers, but we don't disclose this level of information of but we are working on that.
Okay. And then on short range, I think historically, it's been around kind of 30% gross margin. Is that where it currently is for you? And do you see any upside there as well? Or is the upside predominantly coming from GNSS?
Yes. You are right. Short range is around the 30% and the higher margin is from the GNSS business.
Okay. Got it. And then I had a question just around OpEx and specifically R and D. I know you've obviously made good savings over the last year. I'm wondering if there's any further potential for savings on R and D.
As a percentage of sales, it's quite high for the industry. The average is around 15% of sales. So even if you grow sales at your kind of 10% target through to 2029 and then maintained R and D at current levels, it would still be around 30% of sales. Obviously, you'd have to factor in the lower capitalized R and D into that. But I think even with that, you'd still be significantly above peers.
So yes, is there any potential for further savings on that front?
You are right about the ratio as R and D as a percentage of revenue is still high. However, our expectation is that revenue goes up rather than we have a significant reduction in R and D. It's important we are especially cautious about R and D because we need to protect the business and technology leadership. So we look, of course, hygiene and the cost discipline, as we mentioned during the presentation, but we don't expect a large reduction in the R and D. However, R and D as a percentage of revenue should go to a more market standard level as soon as we have the revenue growth expected for the future.
We are constantly benchmark, and we know that today, at current revenue level, it's still a bit high, but that will be addressed with our revenue growth.
Okay. Thanks, Camilla. Just one last question, if I may. On the orders that have doubled for ADAS and robotics, Wondering if you can give any color on kind of how material that is in ADAS in particular. I think you previously said that you have around USD 100,000,000 lifetime value of ADAS design wins.
It'd be helpful if you could mention kind of what that figure is now. Yes, how that's impacted by the orders that came through this quarter?
Harry, thanks for this question. Actually, it's an important point for us to set proof points that we execute on our strategy and that our assumptions are true. On autonomous driving, overall, revenues are still low, and we don't break this one down. But we want to show the trend here very clearly where we see the order entry, not design wins, real order entry, customers order something for the next quarters. And there, we saw a significant increase.
Okay. Got it. Thanks, Stefan. Steph, thanks,
So far, there are no further questions. Back over to you for any closing remarks.
Perfect. So thank you very much for participating in the call. If you have anything else, we'll be here for any further questions.
Thank you.
Thank you.
Thank you.
Bye.
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