Earnings Release • Feb 3, 2023
Earnings Release
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"We recorded top-line growth for the full year. Our Automotive business consistently outperformed the market trend throughout the year, while Enterprise performed in line with our expectations. I am happy with the progress we made in 2022, which is underpinned by the introduction of the new TomTom Maps Platform and a record €2.4 billion Automotive backlog.
The rollout of our new platform and improved maps in 2023 will provide customers with wider geographical coverage, more detail, and faster updates. This will support further growth of our Location Technology revenue. Our recently announced collaboration with Amazon Web Services, Meta, and Microsoft is expected to help set a global standard for maps, benefiting customers of our Maps Platform."
| (€ in millions) | Q4 '22 | Q4 '21 | y.o.y. change |
FY '22 | FY '21 | y.o.y. change |
|---|---|---|---|---|---|---|
| Location Technology | 117.6 | 90.6 | 30 % | 436.4 | 394.0 | 11 % |
| Consumer | 21.4 | 24.6 | -13 % | 99.9 | 112.9 | -11 % |
| Revenue | 139.0 | 115.2 | 21 % | 536.3 | 506.9 | 6 % |
| Gross result | 120.9 | 94.2 | 28 % | 449.7 | 407.1 | 10 % |
| Gross margin | 87% | 82% | 84% | 80% | ||
| Operating expenses | 125.4 | 129.6 | -3 % | 547.3 | 500.3 | 9 % |
| Operating result (EBIT) | -4.5 | -35.3 | -97.6 | -93.2 | ||
| Operating margin | -3% | -31% | -18% | -18% | ||
| Net result | -8.8 | -38.8 | -102.7 | -94.7 | ||
| Free cash flow1 (FCF) |
-14.6 | 56.7 | -29.2 | 23.5 | ||
| FCF1 as a % of revenue |
-10% | 49% | -5% | 5% |
1 Free cash flow excludes restructuring charges 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; Automotive backlog; gross margin; EBITDA (margin); EBIT (margin); free cash flow; net cash; and gross deferred revenue.
"Fourth-quarter Automotive reported revenue increased sharply year on year, in part resulting from the evolution of our products, leading to a change in how we recognize revenue from new map subscription contracts. Automotive operational revenue increased by 16% year on year, outperforming the trend of car production volumes in our core markets. Enterprise exhibited an anticipated revenue decline.
Full-year group revenue increased in 2022. For 2023, we expect group revenue growth to continue, with a strong increase in Automotive revenues offsetting declines in both our Consumer and Enterprise businesses. We envision our Enterprise business to show growth from Q4 2023 onward.
In the fourth quarter, free cash flow was negatively affected by movements in working capital. We recorded an outflow of €29 million for full year 2022. In 2023, we expect to generate positive free cash flow1 of between 0% and +5% of group revenue, supported by growing revenues."
| (€ in millions, unless stated otherwise) | Outlook 2023 | Actual 2022 |
|---|---|---|
| Revenue | 540 - 580 | 536 |
| Of which Location Technology | 455 - 485 | 436 |
| FCF1 as % of group revenue |
0% - +5% | -5% |
Our Automotive products have evolved into API-based updates and services in combination with an initial onboard map, from a predominantly onboard offering including updates. As a result of this change, the timing of IFRS revenue recognition for new map subscription contracts changed from Q4 2022 onward. In the fourth quarter of 2022, the impact on reported revenue was a positive effect of €9.6 million, and we expect the positive impact on full-year 2023 revenue to be around €40 million.
The change in revenue recognition resulting from these products will also have an impact on 2024 and 2025 revenue, though the 2025 impact is expected to be negligible. We reiterate our mid-term Location Technology revenue ambition of €600 million in 2025, in combination with a free cash flow generation target of 10% of group revenue.
Our outlook is supported by an Automotive backlog2 of around €2.4 billion at the end of 2022, up from €1.9 billion at the end of 2021. This increase is the result of a record order intake in 2022.
1 Free cash flow excludes restructuring charges related to the Maps realignment announced in June 2022.
2Automotive backlog is the cumulative expected IFRS revenue from all awarded Automotive deals.
Revenue for the fourth quarter amounted to €139 million, an increase of 21% year on year (Q4 '21: €115 million).
| (€ in millions) | Q4 '22 | Q4 '21 | y.o.y. change |
FY '22 | FY '21 | y.o.y. change |
|---|---|---|---|---|---|---|
| Automotive | 77.1 | 47.1 | 64 % | 260.0 | 223.1 | 17 % |
| Enterprise | 40.5 | 43.5 | -7 % | 176.4 | 170.9 | 3 % |
| Revenue | 117.6 | 90.6 | 30 % | 436.4 | 394.0 | 11 % |
| Segment EBITDA | -15.6 | -32.6 | 52% | |||
| EBITDA margin (%) | -4% | -8% | ||||
| Segment EBIT | -71.2 | -105.2 | 32% | |||
| EBIT margin (%) | -16% | -27% |
Location Technology revenue was €118 million in the fourth quarter, an increase of 30% year on year (Q4 '21: €91 million). Sharp revenue growth in Automotive revenue offset the anticipated decline in Enterprise revenue this quarter.
Increased car production volumes and a further ramp up of some contracts led Automotive to generate revenues of €77 million in the quarter, an increase of 64% compared with the same quarter last year (Q4 '21: €47 million). Normalized for the positive impact from the change in how we recognize revenue for new map subscription contracts, the year-on-year increase in Automotive revenue was 43%. In part, this considerable increase can be explained by the comparatively low reported revenue in Q4 2021, which reflected the impact of downward adjustments in total contract values.
Automotive operational revenue was €82 million in the quarter, a year-on-year increase of 16% (Q4 '21: €71 million) outperforming the development of car production volumes in Europe and North America.
Automotive operational revenue is calculated as follows:
| (€ in millions) | Q4 '22 | Q4 '21 | y.o.y. change |
FY '22 | FY '21 | y.o.y. change |
|---|---|---|---|---|---|---|
| Automotive revenue | 77.1 | 47.1 | 64 % | 260.0 | 223.1 | 17 % |
| Movement of Automotive deferred revenue | 5.0 | 23.6 | 36.3 | 43.2 | ||
| Automotive operational revenue | 82.1 | 70.7 | 16 % | 296.3 | 266.3 | 11 % |
Enterprise revenue decreased to €40 million in Q4 '22, 7% lower than the same quarter last year (Q4 '21: €44 million), as some contract renewals reflect decreased usage and therefore lower contract values.
Full-year Location Technology segment EBITDA improved year on year resulting from the increase in revenue, partly offset by continued investments in our application layer and sales & marketing activities.
During the quarter, we extended our longstanding partnership with Stellantis, providing our connected suite of navigation services to their next-generation digital cockpit platform, STLA SmartCockpit. TomTom's maps, navigation software, and real-time traffic information will power all Stellantis brands globally. The award was one of multiple significant Automotive contracts we closed in 2022, leading to a record Automotive backlog of €2.4 billion.
We announced that we will introduce significantly improved maps in the course of 2023, build on the new TomTom Maps Platform. The platform combines TomTom's own data with new 'super' sources such as sensor-derived observations and open-source data. The new maps will offer broader geographical coverage, an extended set of supported data types, and faster update cycles. This will enable us to build on our success in the Automotive market, scaling products and applications to a broader variety of customers.
Together with Amazon Web Services, Meta, and Microsoft we have founded the Overture Maps Foundation. To support industry demands, the pooling of resources and the creation of a global map standard is needed. The Overture Maps Foundation is a collaborative effort that intends to develop interoperable open map data through a global entity reference system and structured data schema. Our common initiative will facilitate an ecosystem of users and contributors to share map data in an efficient way and on a global scale.
| (€ in millions) | Q4 '22 | Q4 '21 | y.o.y. change |
FY '22 | FY '21 | y.o.y. change |
|---|---|---|---|---|---|---|
| Consumer products | 18.8 | 23.3 | -19 % | 92.7 | 105.0 | -12 % |
| Automotive hardware | 2.6 | 1.3 | 108 % | 7.2 | 7.9 | -9 % |
| Consumer revenue | 21.4 | 24.6 | -13 % | 99.9 | 112.9 | -11 % |
| Segment EBITDA | 7.4 | 18.7 | -61% | |||
| EBITDA margin (%) | 7% | 17% | ||||
| Segment EBIT | 6.5 | 17.7 | -63% | |||
| EBIT margin (%) | 7% | 16% |
Consumer reported revenue of €21 million for the quarter, a decrease of 13% compared with the same quarter last year (Q4 '21: €25 million).
Full-year revenue decreased by 11% compared with 2021, as a consequence segment EBITDA decreased as well year on year.
The gross margin for the quarter was 87% compared with 82% in Q4 '21. The improvement in gross margin is the result of a higher proportion of higher-margin software and content revenue.
Operating result (EBIT) in the quarter was a loss of €5 million (Q4 '21: loss of €35 million). Total operating expenses in the quarter were €125 million, a decrease of €4 million compared with the same quarter last year (Q4 '21: €130 million) as a result of lower personnel expenses in our Maps unit.
Excluding the impact of D&A and restructuring, operating expenses in the quarter decreased by 1% mainly due to lower R&D - Geographic data, partly offset by increased investments in our application layer and in our sales team to support revenue growth.
A reconciliation of operating expenses excluding D&A and restructuring charges1 is presented below:
| (€ in millions) | Q4 '22 | Q4 '21 | y.o.y. change |
FY '22 | FY '21 | y.o.y. change |
|---|---|---|---|---|---|---|
| R&D - Geographic data | 36.6 | 45.5 | -20 % | 173.0 | 176.2 | -2 % |
| R&D - Application layer | 42.1 | 37.3 | 13 % | 168.6 | 138.7 | 21 % |
| Sales and marketing | 14.2 | 12.6 | 12 % | 50.3 | 45.1 | 12 % |
| General and administrative | 18.9 | 17.9 | 6 % | 72.9 | 66.6 | 10 % |
| Total excl. D&A and restructuring1 | 111.8 | 113.4 | -1 % | 464.8 | 426.6 | 9 % |
| Depreciation and amortization | 13.3 | 16.2 | -18 % | 56.7 | 73.7 | -23 % |
| Restructuring1 | 0.4 | — | 25.9 | — | ||
| Operating expenses | 125.4 | 129.6 | -3 % | 547.3 | 500.3 | 9 % |
Total financial result for the quarter was a loss of €1 million (Q4 '21: gain of €1 million), which consisted primarily of foreign exchange losses from the revaluation of monetary balance sheet items.
The income tax expense for the quarter was €3 million compared with an expense of €5 million in Q4 '21.
Other intangible assets decreased to €43 million from €70 million at the end of 2021 mainly due to amortization of our map database. Cash balances, including fixed-term deposits, were €304 million at the end of the quarter (Q4 '21: €356 million).
At the end of the quarter, inventory was €15 million, a €5 million decrease from the end of last year. Trade receivables were €66 million at the end of Q4 '22 compared with €56 million at the end of 2021 as a result of higher operational revenue this quarter.
1 Restructuring charges are related to the Maps realignment announced in June 2022.
Current liabilities, excluding deferred revenue, were €122 million, compared with €110 million at the end of 2021. The increase is mainly related to an increase in personnel-related accruals, partly offset by a relatively low trade payable position.
Deferred revenue of €439 million was relatively flat compared with €441 million at the end of last year. The movement reflects a decrease in deferred revenue of Enterprise and Consumer offset by an increase in the deferred revenue position of Automotive. Automotive deferred revenue is impacted by the aforementioned change in the way we treat the performance obligations of map subscriptions, which resulted in less revenue being deferred.
The following table presents the deferred revenue including the effect of netting:
| (€ in millions) | 31 December 2022 | 31 December 2021 |
|---|---|---|
| Automotive | 431.2 | 395.0 |
| Enterprise | 11.6 | 41.5 |
| Consumer | 20.7 | 25.5 |
| Gross deferred revenue | 463.6 | 461.9 |
| Less: Netting adjustment to unbilled revenue | 24.9 | 21.2 |
| Deferred revenue | 438.6 | 440.7 |
In Q4 '22, free cash flow was an outflow of €21 million versus an inflow of €57 million in the same quarter last year. The year-on-year decrease is the result of lower cash collection from customers and some unfavorable movements in working capital.
The cash flow from financing activities for the quarter was an outflow of €4 million and relates to the payment of lease liabilities. During the quarter there were no stock options exercises related to our long-term employee incentive programs (Q4 '21: 12 thousand).
- END -
On 31 December 2022, the Group had no outstanding bank borrowings and reported a net cash position of €304 million (Q4 '21: net cash of €356 million).
Free cash flow is reconciled to the cash flow statement as follows:
| (€ in millions) | Q4 '22 | Q4 '21 | FY '22 | FY '21 |
|---|---|---|---|---|
| Cash flow from operating activities | -19.5 | 61.5 | -31.4 | 36.8 |
| Investments in intangible assets | -0.1 | 0.0 | -5.3 | 0.0 |
| Investments in property, plant and equipment | -1.5 | -4.8 | -4.9 | -13.3 |
| Free cash flow | -21.1 | 56.7 | -41.6 | 23.5 |
| Restructuring-related cash flow1 | 6.5 | — | 12.4 | — |
| Free cash flow excl. restructuring1 | -14.6 | 56.7 | -29.2 | 23.5 |
1 Restructuring charges are related to the Maps realignment announced in June 2022.
| Q4 '22 | Q4 '21 | FY '22 | FY '21 | |
|---|---|---|---|---|
| (€ in thousands) | Unaudited Unaudited Unaudited | Audited | ||
| Revenue | 139,013 | 115,164 | 536,343 | 506,926 |
| Cost of sales | 18,100 | 20,931 | 86,619 | 99,821 |
| Gross profit | 120,913 | 94,233 | 449,724 | 407,105 |
| Research and development expenses - Geographic data | 43,736 | 55,457 | 205,760 | 219,808 |
| Research and development expenses - Application layer | 42,713 | 38,499 | 171,504 | 146,209 |
| Sales and marketing expenses | 14,202 | 12,645 | 50,353 | 45,181 |
| General and administrative expenses1 | 24,791 | 22,979 | 119,720 | 89,098 |
| Total operating expenses | 125,442 | 129,580 | 547,337 | 500,296 |
| Operating result | -4,529 | -35,347 | -97,613 | -93,191 |
| Financial result | -889 | 1,480 | 2,818 | 6,329 |
| Result before tax | -5,418 | -33,867 | -94,795 | -86,862 |
| Income tax expense | -3,367 | -4,907 | -7,940 | -7,791 |
| Net result2 | -8,785 | -38,774 -102,735 | -94,653 | |
| Earnings per share (in €): | ||||
| Basic | -0.07 | -0.31 | -0.80 | -0.74 |
| Diluted3 | -0.07 | -0.31 | -0.80 | -0.74 |
1Includes a €0.4 million expense in restructuring for Q4 '22 and a total restructuring charge of €26 million for FY '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.
| 31 December 2022 | 31 December 2021 | |
|---|---|---|
| (€ in thousands) | Unaudited | Audited |
| Goodwill | 192,294 | 192,294 |
| Other intangible assets | 42,917 | 70,478 |
| Property, plant and equipment | 21,645 | 26,241 |
| Lease assets | 35,815 | 31,488 |
| Other contract-related assets | 23,737 | 18,769 |
| Other investments | 13,814 | 17,982 |
| Deferred tax assets | 1,158 | 4,115 |
| Total non-current assets | 331,380 | 361,367 |
| Inventories | 14,660 | 19,585 |
| Trade receivables | 65,743 | 56,179 |
| Unbilled receivables | 48,298 | 67,311 |
| Other contract-related assets | 6,890 | 5,049 |
| Other receivables and prepayments | 36,803 | 25,429 |
| Fixed-term deposits | 171,000 | 150,000 |
| Cash and cash equivalents | 132,729 | 205,820 |
| Total current assets | 476,123 | 529,373 |
| Total assets | 807,503 | 890,740 |
| Total equity | 199,606 | 282,723 |
| Lease liabilities | 26,654 | 20,004 |
| Deferred tax liability | 2,404 | 3,934 |
| Provisions | 18,237 | 33,484 |
| Deferred revenue | 263,043 | 259,628 |
| Total non-current liabilities | 310,338 | 317,050 |
| Trade payables | 6,102 | 14,022 |
| Lease liabilities | 11,071 | 13,335 |
| Provisions | 11,020 | 6,537 |
| Deferred revenue | 175,607 | 181,099 |
| Other contract-related liabilities | 18,921 | 19,782 |
| Income taxes | 3,133 | 1,273 |
| Accruals and other liabilities | 71,705 | 54,919 |
| Total current liabilities | 297,559 | 290,967 |
| Q4 '22 | Q4 '21 | FY '22 | FY '21 | |
|---|---|---|---|---|
| (€ in thousands) | Unaudited Unaudited Unaudited | Audited | ||
| Operating result | -4,529 | -35,347 | -97,613 | -93,191 |
| Foreign exchange adjustments | -3,933 | 3,037 | 6,373 | 7,904 |
| Depreciation and amortization | 13,339 | 16,185 | 56,672 | 73,671 |
| Change in provisions | -4,953 | -1,790 | -2,472 | -7,474 |
| Equity-settled stock compensation expenses | 2,932 | 1,926 | 10,532 | 5,934 |
| Other non-cash movement | -27 | 106 | -69 | -46 |
| Changes in working capital: | ||||
| Change in inventories | -117 | -433 | 5,086 | 8,772 |
| Change in receivables and prepayments | 1,919 | 69,978 | -9,164 | 17,883 |
| Change in liabilities (excluding provisions)1 | -21,971 | 11,888 | 5,124 | 32,289 |
| Cash flow from operations | -17,340 | 65,550 | -25,531 | 45,742 |
| Interest received | 311 | 6 | 389 | 326 |
| Interest paid | -264 | -392 | -1,183 | -1,716 |
| Corporate income taxes paid | -2,255 | -3,646 | -5,083 | -7,569 |
| Cash flow from operating activities | -19,548 | 61,518 | -31,408 | 36,783 |
| Investments in intangible assets | -78 | 0 | -5,271 | 0 |
| Investments in property, plant and equipment | -1,498 | -4,813 | -4,895 | -13,274 |
| Dividends received | 168 | 138 | 392 | 366 |
| Change in fixed-term deposits | 45,000 | -90,000 | -21,000 | -7,070 |
| Cash flow from investing activities | 43,592 | -94,675 | -30,774 | -19,978 |
| Payment of lease liabilities | -3,549 | -3,678 | -14,369 | -14,785 |
| Proceeds on issue of ordinary shares | 0 | 93 | 4,051 | 4,561 |
| Purchase of treasury shares | 0 | 0 | 0 | -33,431 |
| Cash flow from financing activities | -3,549 | -3,585 | -10,318 | -43,655 |
| Net (decrease)/increase in cash and cash equivalents | 20,495 | -36,742 | -72,500 | -26,850 |
| Cash and cash equivalents at the beginning of period | 113,808 | 242,187 | 205,820 | 231,520 |
| Exchange rate changes on foreign cash balances | -1,574 | 375 | -591 | 1,150 |
| Total cash and cash equivalents at the end of the period | 132,729 | 205,820 | 132,729 | 205,820 |
| Cash held in short term fixed deposits | 171,000 | 150,000 | 171,000 | 150,000 |
| Net cash at the end of the period | 303,729 | 355,820 | 303,729 | 355,820 |
1Includes movements in the non-current portion of deferred revenue presented under non-current liabilities.
The condensed consolidated financial information for the three- and twelve- month period ended 31 December 2022 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
EBITDA is equal to our operating result plus depreciation and amortization charges
EBITDA margin is calculated as operating result plus depreciation and amortization charges divided by revenue
Free cash flow is cash from operating activities minus capital expenditure (investments in intangible assets and property, plant and equipment)
Net cash is cash and cash equivalents, plus cash held in fixed term deposits
Gross deferred revenue is deferred revenue1 before the netting of unbilled receivables
Automotive backlog is the cumulative expected IFRS revenue from all awarded Automotive deals.
1 Deferred revenue reflects amounts not yet recognized as revenue as services still need to be delivered. Unbilled receivables 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.
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Date and time: 3 February 2023 at 13:00 CET
https://corporate.tomtom.com/investors/financial-publications/quarterly-results
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ISIN: NL0013332471 / Symbol: TOM2
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