Earnings Release • Oct 13, 2023
Earnings Release
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"Last quarter marked a pivotal moment with the launch of our new maps in core markets.
Our vision is clear. We are pioneering a unified map standard, empowering both companies and developers to harness consistent specifications for location data. It's exciting to see so many technology firms adopt this standard so quickly.
The new maps are built on this standard and leverage all relevant data sources including open data, making them stand out in terms of coverage, richness, and freshness.
We can now tap deeper into the ever-expanding location technology market, and we are encouraged by the initial feedback from our customers and prospects."
| (€ in millions, unless stated otherwise) | Q3 '23 | Q3 '22 | y.o.y. change |
YTD '23 | YTD '22 | y.o.y. change |
|---|---|---|---|---|---|---|
| Location Technology | 119.2 | 108.3 | 10% | 365.5 | 318.9 | 15% |
| Automotive | 82.5 | 62.4 | 32% | 254.5 | 182.9 | 39% |
| Enterprise | 36.8 | 45.9 | -20% | 111.0 | 136.0 | -18% |
| Consumer | 24.9 | 28.0 | -11% | 75.9 | 78.5 | -3% |
| Revenue | 144.1 | 136.3 | 6% | 441.4 | 397.3 | 11% |
| Gross result | 118.9 | 109.9 | 8% | 368.9 | 328.8 | 12% |
| Gross margin | 83% | 81% | 84% | 83% | ||
| Operating expenses | 127.7 | 127.7 | 0% | 378.5 | 421.9 | -10% |
| Operating result (EBIT) | -8.7 | -17.8 | -9.6 | -93.1 | ||
| Operating margin | -6% | -13% | -2% | -23% | ||
| Net result | -7.9 | -17.5 | -9.4 | -94.0 | ||
| Free cash flow1 (FCF) |
12.9 | 8.5 | 26.5 | -14.6 | ||
| FCF1 as a % of revenue |
9% | 6% | 6% | -4% |
1Free cash flow excludes restructuring payments related to the Maps realignment announced in June 2022.
This report includes the following non-GAAP measures which are further explained at the end of this report: operational revenue; gross margin; EBIT; free cash flow; net cash and gross deferred revenue.
"We performed well in the third quarter, with our Location Technology business recording sustained year-on-year growth. Enterprise revenue was in line with our expectations and our Automotive business showed healthy underlying performance. For yet another successive quarter, year-on-year Automotive operational revenue growth outperformed car production trends in our core markets.
Continued revenue growth and a stable cost base enabled us to achieve operating leverage, increasing our free cash flow1 in the third quarter.
For full year 2023, we reiterate our guidance and expect Group revenue to grow to between €570 million and €600 million, with Location Technology revenue between €480 million and €505 million. Free cash flow1 is expected to be around +5% of Group revenue."
| Outlook | Actual | |
|---|---|---|
| (€ in millions, unless stated otherwise) | 2023 | 2022 |
| Revenue | 570 - 600 | 536 |
| Of which Location Technology | 480 - 505 | 436 |
| FCF1 as % of Group revenue |
Around +5% | -5% |
Automotive revenue is positively impacted due to a change in timing of IFRS revenue recognition for new map subscription contracts, which started in Q4 2022. We expect the 2023 full-year impact to be around €40 million.
1Free cash flow excludes restructuring payments related to the Maps realignment announced in June 2022.
Revenue for the third quarter amounted to €144 million, a year-on-year increase of 6% (Q3 '22: €136 million).
Location Technology revenue was €119 million, a year-on-year increase of 10% (Q3 '22: €108 million).
Automotive revenue in the quarter was €82 million, an increase of 32% compared with the same quarter last year (Q3 '22: €62 million). Automotive operational revenue in the quarter was €85 million, a year-on-year increase of 13% (Q3 '22: €75 million). This increase marks an outperformance as compared to the growth in car production volumes across our core markets, as a consequence of increasing take rates and market share gains.
Automotive operational revenue is calculated as follows:
| (€ in millions, unless stated otherwise) | Q3 '23 | Q3 '22 | y.o.y. change |
YTD '23 | YTD '22 | y.o.y. change |
|---|---|---|---|---|---|---|
| Automotive revenue | 82.5 | 62.4 | 32 % | 254.5 | 182.9 | 39 % |
| Movement of Automotive deferred revenue | 3.0 | 12.9 | 5.1 | 31.3 | ||
| Automotive operational revenue | 85.4 | 75.3 | 13 % | 259.6 | 214.2 | 21 % |
Enterprise revenue decreased, in line with our expectations, to €37 million in Q3 '23, 20% lower than the same quarter last year (Q3 '22: €46 million). Some contract renewals reflect decreased usage and therefore lower contract values.
We launched our new maps across our core markets of North America and Europe during the quarter. The maps are being tested and validated with prospects and partners and they are seeing meaningful results, such as increased support for new use cases, enhanced operational efficiency, and an improved ability to focus engineering resources on differentiation. Over the coming period, we will use the input from our partners to further improve the product, reduce cycle times, and improve platform scalability and efficiency. We expect to significantly expand the coverage of the maps before the end of the year.
In Enterprise, we secured a Traffic deal in the US, with StreetLight now integrating TomTom historical and real-time traffic data. Streetlight executes thousands of monthly analyses for transportation professionals and will integrate our global data into its growing line of cloud-based products. The partnership clearly exhibits the value our data and technologies can bring to location intelligence use cases, supporting reliable and scalable global mobility measurements that deliver insights and solutions to complex transportation problems.
In Automotive, the introduction of the new Peugeot E-3008 marks a new highlight in our long-standing relationship with Stellantis. The all-new electric fastback SUV is built on Stellantis' next-generation platform and features TomTom's full stack of products. Our latest connected services include over-the-air map updates, real-time traffic, and live speed camera information, as well as online search and routing, street parking information, and live weather updates.
On the back of recent advances in generative artificial intelligence (AI), and large language models (LLM) in particular, we are working on conversational interfaces that make driving safer and easier to customize. During the quarter, we launched the TomTom plugin for ChatGPT. This first-of-its-kind LLM plugin for location technology enables subscribers of ChatGPT Plus to use AI to plan trips and discover and explore new places.
Consumer reported revenue of €25 million for the quarter, compared with €28 million in the same quarter last year.
The gross margin for the quarter was 83% compared with 81% in Q3 '22. The year-on-year improvement in gross margin resulted from a higher proportion of higher-margin content and software revenue in our revenue mix.
Operating result (EBIT) in the quarter was a loss of €9 million (Q3 '22: loss of €18 million). Total operating expenses in the quarter were €128 million, flat compared with the same quarter last year (Q3 '22: €128 million). Excluding depreciation and amortization and restructuring effects related to the Maps realignment, underlying operating expenses decreased year on year by €1.4 million. Specifically in the third quarter of 2023, an exceptionally high subsidy contribution lowered our operating expenses.
Total financial result for the quarter was an income of €3.4 million, mainly resulting from interest income on our fixed-term deposits (Q3 '22: income of €1.8 million).
The income tax expense for the quarter was €2.5 million compared with an expense of €1.5 million in Q3 '22.
In Q3 '23, free cash flow was an inflow of €12 million versus an inflow of €3 million in the same quarter last year. Excluding the impact of restructuring charges related to the Maps realignment, free cash flow for the quarter was an inflow of €13 million (Q3 '22: inflow of €8 million).
A reconciliation from operating result to free cash flow, to net cash movement is presented below:
| (€ in millions) | Q3 '23 | Q3 '22 | YTD '23 | YTD '22 |
|---|---|---|---|---|
| Operating result | -8.7 | -17.8 | -9.6 | -93.1 |
| Depreciation and amortization | 9.8 | 13.7 | 33.5 | 43.3 |
| Equity-settled stock compensation expenses | 2.6 | 3.1 | 9.2 | 7.6 |
| Other non-cash items | 1.4 | -22.3 | -1.1 | 12.7 |
| Movements in working capital (excl. deferred revenue) | 9.1 | 18.4 | -5.9 | 17.3 |
| Movements in deferred revenue | 2.0 | 10.4 | 1.3 | 3.9 |
| Interest and tax payments | 0.1 | -1.6 | -3.0 | -3.7 |
| Investments in property, plant and equipment, and intangible assets | -4.3 | -1.3 | -8.6 | -8.6 |
| Free cash flow | 12.0 | 2.6 | 15.8 | -20.5 |
| Lease payments | -2.9 | -3.6 | -9.5 | -10.8 |
| Cash flow from other investing and financing activities | 0.0 | 0.9 | 15.3 | 4.3 |
| Exchange rate differences on cash and fixed-term deposits | 0.3 | 0.5 | 0.1 | 1.0 |
| Net cash movement | 9.4 | 0.4 | 21.7 | -26.0 |
Free cash flow saw a year-on-year increase of €9.4 million. Excluding the impact of restructuring charges related to the Maps realignment, the year-on-year increase was €4.5 million. The increase in free cash flow mainly reflects higher operating results corrected for amortization and depreciation.
Working capital movement was significantly impacted by restructuring-related effects in Q3 '22. Excluding these effects, the movement in working capital was more favorable than last year, due to higher cash collection from customers.
Our deferred revenue position has stayed relatively flat throughout the year. During the third quarter, the deferred revenue position increased by €2.0 million, from €438 million to €440 million, driven by both Automotive and Consumer. Year to date, deferred revenue showed an increase of €1.3 million (Q4 2022: €439 million).
The following table presents the deferred revenue including the effect of netting:
| (€ in millions) | 30 September 2023 | 30 June 2023 | 31 December 2022 |
|---|---|---|---|
| Automotive | 436.3 | 433.4 | 431.2 |
| Enterprise | 12.3 | 13.6 | 11.6 |
| Consumer | 20.7 | 19.2 | 20.7 |
| Gross deferred revenue | 469.3 | 466.2 | 463.6 |
| Less: Netting adjustment to unbilled revenue | 29.4 | 28.2 | 24.9 |
| Deferred revenue | 439.9 | 438.0 | 438.7 |
Investments in property, plant and equipment in the quarter increased compared with the same quarter last year mainly due to higher investments in leasehold improvements.
Cash flow from other investing and financing activities was nil in the quarter, as no stock options relating to our long-term employee incentive programs were exercised (Q3 '22: 120 thousand).
On 30 September 2023, the Group had no outstanding bank borrowings and reported a net cash position of €325 million (Q2 '23: €316 million).
- END -
| Q3 '23 | Q3 '22 | YTD '23 | YTD '22 | |
|---|---|---|---|---|
| (€ in thousands) | Unaudited | Unaudited | Unaudited | Unaudited |
| Revenue | 144,114 | 136,303 | 441,381 | 397,330 |
| Cost of sales | 25,175 | 26,381 | 72,481 | 68,519 |
| Gross profit | 118,939 | 109,922 | 368,900 | 328,811 |
| Research and development expenses - Geographic data | 43,661 | 50,548 | 131,639 | 162,024 |
| Research and development expenses - Application layer | 47,263 | 45,768 | 139,134 | 128,791 |
| Sales and marketing expenses | 14,180 | 13,568 | 41,320 | 36,151 |
| General and administrative expenses1 | 22,573 | 17,823 | 66,455 | 94,929 |
| Total operating expenses | 127,677 | 127,707 | 378,548 | 421,895 |
| Operating result | -8,738 | -17,785 | -9,648 | -93,084 |
| Financial result | 3,371 | 1,826 | 5,668 | 3,707 |
| Result before tax | -5,367 | -15,959 | -3,980 | -89,377 |
| Income tax expense | -2,523 | -1,525 | -5,392 | -4,573 |
| Net result2 | -7,890 | -17,484 | -9,372 | -93,950 |
| Earnings per share (in €): | ||||
| Basic | -0.06 | -0.14 | -0.07 | -0.74 |
| Diluted3 | -0.06 | -0.14 | -0.07 | -0.74 |
1Includes a €5 million gain in restructuring for Q3 '22 and a total restructuring charge of €26 million for YTD '22.
2Fully attributable to the equity holders of the parent.
3When the net result is a loss, no additional shares from assumed conversion are taken into account as the effect would be anti-dilutive.
| 30 September 2023 | 31 December 2022 | |
|---|---|---|
| (€ in thousands) | Unaudited | Audited |
| Goodwill | 192,294 | 192,294 |
| Other intangible assets | 25,170 | 42,917 |
| Property, plant and equipment | 23,829 | 21,645 |
| Lease assets | 46,432 | 35,815 |
| Other contract-related assets | 25,850 | 23,737 |
| Other investments | 0 | 13,814 |
| Deferred tax assets | 1,007 | 1,158 |
| Total non-current assets | 314,582 | 331,380 |
| Inventories | 14,140 | 14,660 |
| Trade receivables | 77,096 | 65,743 |
| Unbilled receivables | 47,458 | 48,298 |
| Other contract-related assets | 7,628 | 6,890 |
| Prepayments and other receivables | 26,117 | 36,803 |
| Fixed-term deposits | 235,854 | 171,000 |
| Cash and cash equivalents | 89,573 | 132,729 |
| Total current assets | 497,866 | 476,123 |
| Total assets | 812,448 | 807,503 |
| Total equity | 202,829 | 199,606 |
| Lease liabilities | 39,956 | 26,654 |
| Deferred tax liability | 427 | 2,404 |
| Provisions | 18,107 | 18,237 |
| Deferred revenue | 278,533 | 263,043 |
| Total non-current liabilities | 337,023 | 310,338 |
| Trade payables | 10,471 | 6,102 |
| Lease liabilities | 8,183 | 11,071 |
| Provisions | 6,944 | 11,020 |
| Deferred revenue | 161,375 | 175,607 |
| Other contract-related liabilities | 19,715 | 18,921 |
| Income taxes | 3,012 | 3,133 |
| Accruals and other liabilities | 62,896 | 71,705 |
| Total current liabilities | 272,596 | 297,559 |
| Total equity and liabilities | 812,448 | 807,503 |
| Q3 '23 | Q3 '22 | YTD '23 | YTD '22 | |
|---|---|---|---|---|
| (€ in thousands) | Unaudited | Unaudited | Unaudited | Unaudited |
| Operating result | -8,738 | -17,785 | -9,648 | -93,084 |
| Foreign exchange adjustments | 1,118 | 4,340 | 129 | 10,306 |
| Depreciation and amortization | 9,837 | 13,720 | 33,525 | 43,333 |
| Change in provisions | 308 | -26,674 | -844 | 2,481 |
| Equity-settled stock compensation expenses | 2,627 | 3,113 | 9,179 | 7,600 |
| Other non-cash movement | 0 | 0 | -341 | -42 |
| Changes in working capital: | ||||
| Change in inventories | -1,583 | -306 | 1,444 | 5,203 |
| Change in receivables and prepayments | 11,682 | -924 | -1,270 | -11,083 |
| Change in liabilities (excluding provisions)1 | 1,005 | 30,005 | -4,809 | 27,095 |
| Cash flow from operations | 16,256 | 5,489 | 27,365 | -8,191 |
| Interest received | 2,755 | 9 | 6,626 | 78 |
| Interest paid | -498 | -247 | -1,255 | -919 |
| Corporate income taxes paid | -2,197 | -1,376 | -8,404 | -2,828 |
| Cash flow from operating activities | 16,316 | 3,875 | 24,332 | -11,860 |
| Investments in intangible assets | 0 | -116 | 0 | -5,193 |
| Investments in property, plant and equipment | -4,337 | -1,141 | -8,576 | -3,397 |
| Proceeds from sale of investments | 0 | 0 | 14,965 | 0 |
| Dividends received | 0 | 0 | 0 | 224 |
| Change in fixed-term deposits | -108,109 | -80,000 | -64,854 | -66,000 |
| Cash flow from investing activities | -112,446 | -81,257 | -58,465 | -74,366 |
| Payment of lease liabilities | -2,918 | -3,635 | -9,487 | -10,820 |
| Proceeds on issue of ordinary shares | 0 | 937 | 368 | 4,051 |
| Cash flow from financing activities | -2,918 | -2,698 | -9,119 | -6,769 |
| Net decrease in cash and cash equivalents | -99,048 | -80,080 | -43,252 | -92,995 |
| Cash and cash equivalents at the beginning of period | 188,314 | 193,364 | 132,729 | 205,820 |
| Exchange rate changes on foreign cash balances | 307 | 524 | 96 | 983 |
| Total cash and cash equivalents at the end of the period | 89,573 | 113,808 | 89,573 | 113,808 |
| Cash held in short term fixed deposits | 235,854 | 216,000 | 235,854 | 216,000 |
| Net cash at the end of the period | 325,427 | 329,808 | 325,427 | 329,808 |
1Includes movements in the non-current portion of deferred revenue presented under non-current liabilities.
The condensed consolidated financial information for the three- and nine- month period ended 30 September 2023 and the related comparative information has been prepared using accounting policies and methods of computation which are based on International Financial Reporting Standards (IFRS) as disclosed in the Financial Statements for the year ended 31 December 2022.
Unless otherwise indicated, the quarterly condensed consolidated information in this press release is neither audited nor reviewed. Due to rounding, amounts may not add up precisely to totals. All change percentages are calculated before rounding.
The financial information in this report includes measures which are not defined by generally accepted accounting principles (GAAP) such as IFRS. We believe this information, along with comparable GAAP measurements, gives insight to investors as it provides a basis for evaluating our operational performance. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP. Wherever appropriate and practical, we provide reconciliations to relevant GAAP measures.
Operational revenue is IFRS revenue adjusted for the movement of gross deferred revenue
Gross margin is calculated as gross profit divided by revenue
EBIT is equal to our operating result
Free cash flow is cash from operating activities minus investments in intangible assets and property, plant and equipment
| (€ in thousands) | Q3 '23 | Q3 '22 | YTD '23 | YTD '22 |
|---|---|---|---|---|
| Cash flow from operating activities | 16,316 | 3,875 | 24,332 | -11,860 |
| Investments in intangible assets | 0 | -116 | 0 | -5,193 |
| Investments in property, plant and equipment | -4,337 | -1,141 | -8,576 | -3,397 |
| Free cash flow | 11,979 | 2,618 | 15,756 | -20,450 |
| Restructuring-related cash flow1 | 944 | 5,849 | 10,779 | 5,849 |
| Free cash flow excl. restructuring1 | 12,923 | 8,467 | 26,535 | -14,601 |
Net cash is cash and cash equivalents, plus cash held in fixed term deposits
1 Restructuring-related cash flows are related to the Maps realignment announced in June 2022.
2 Deferred revenue reflects amounts not yet recognized as revenue as services still need to be delivered. Unbilled revenue represents amounts accrued for when a contractual right to invoice exists. When a single contract has both an accrual, based on contractual invoicing terms, and a deferral, because the underlying services are not yet fully delivered, the unbilled and the deferred positions are netted for presentation on the balance sheet.
TomTom Investor Relations Email: [email protected] +31 20 757 5194
The information for our audio webcast is as follows:
Date and time: 13 October 2023 at 13:00 CEST
https://corporate.tomtom.com/investors/financial-publications/quarterly-results
TomTom is listed at NYSE Euronext Amsterdam in the Netherlands
ISIN: NL0013332471 / Symbol: TOM2
Billions of data points. Millions of sources. Hundreds of communities.
We are the mapmaker bringing it all together to build the world's smartest map. We provide location data and technology to drivers, carmakers, businesses, and developers. Our application-ready maps, routing, real-time traffic, APIs and SDKs enable the dreamers and doers to shape the future of mobility.
Headquartered in Amsterdam with 3,800 employees around the globe, TomTom has been helping people find their way in the world for over 30 years.
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