Earnings Release • Oct 14, 2022
Earnings Release
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"We recorded better-than-expected revenue in the third quarter, driven by our Location Technology business. In addition both Automotive and Enterprise secured key commercial awards. An important milestone is our new partnership with Hyundai Motor Group, which sees all cars in Europe come equipped with our maps and traffic.
We are satisfied with the operational and strategic progress we have made so far this year. During the quarter we finalized the realignment of our Maps organization. Our focus on transforming the mapmaking process to a highly automated platform, paves the way toward a new era in mapmaking. We look forward to providing an update about what this means for our Enterprise and Automotive businesses at our Capital Markets Day on the 2nd of November."
| (€ in millions) | Q3 '22 | Q3 '21 | y.o.y. change |
YTD '22 | YTD '21 | y.o.y. change |
|---|---|---|---|---|---|---|
| Location Technology | 108.3 | 95.4 | 14 % | 318.9 | 303.4 | 5 % |
| Consumer | 28.0 | 32.1 | -13 % | 78.5 | 88.4 | -11 % |
| Revenue | 136.3 | 127.5 | 7 % | 397.3 | 391.8 | 1 % |
| Gross result | 109.9 | 103.6 | 6 % | 328.8 | 312.9 | 5 % |
| Gross margin | 81% | 81% | 83% | 80% | ||
| Operating expenses | 127.7 | 126.2 | 1 % | 421.9 | 370.7 | 14 % |
| Operating result (EBIT) | -17.8 | -22.5 | -93.1 | -57.8 | ||
| Operating margin | -13% | -18% | -23% | -15% | ||
| Net result | -17.5 | -20.8 | -94.0 | -55.9 | ||
| Free cash flow1 (FCF) |
8.5 | -13.5 | -14.6 | -33.2 | ||
| FCF1 as a % of revenue |
6% | -11% | -4% | -8% |
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; gross margin; EBIT (margin); free cash flow; net cash and gross deferred revenue.
"We are very pleased with the performance this quarter, especially with the development of our Automotive revenue. Strong revenues translated into a better-than-expected free cash flow.
For full year 2022, we expect our revenue, both on group level as well as for Location Technology, to outperform our initial guidance.1 Free cash flow excluding restructuring is expected to be around -2% of group revenue, an improvement compared with the guidance provided at the beginning of the year.
Macroeconomic uncertainties and inflationary pressures have an impact on global car production as well as our cost levels. For 2023, we reiterate our revenue guidance, but lower the free cash flow guidance to break-even.2 "
| (€ in millions, unless stated otherwise) | Actual 2021 |
Updated Outlook 2022 |
Updated Outlook 2023 |
|---|---|---|---|
| Group revenue | 507 | 505 - 520 | 500 - 550 |
| Of which Location Technology | 394 | 410 - 425 | 425 - 475 |
| FCF as % of group revenue | 5% | -2 % | 0% |
Free cash flow (FCF) guidance excludes restructuring charges related to the Maps realignment, which was announced in June 2022. Throughout 2022 and 2023, we will report FCF excluding these restructuring charges.
1 Our initial outlook for 2022 was Group revenue between €470 million and €510 million, Location Technology revenue between €380 million and €420 million and FCF as % of Group revenue of around -5%.
2 Our initial outlook for 2023 was Group revenue between €500 million and €550 million, Location Technology revenue between €425 million and €475 million and FCF as % of Group revenue of at least 5%.
Revenue for the third quarter amounted to €136 million, an increase of 7% year on year (Q3 '21: €127 million).
| (€ in millions) | Q3 '22 | Q3 '21 | y.o.y. change |
YTD '22 | YTD '21 | y.o.y. change |
|---|---|---|---|---|---|---|
| Automotive | 62.4 | 52.4 | 19 % | 182.9 | 176.0 | 4 % |
| Enterprise | 45.9 | 43.0 | 7 % | 136.0 | 127.4 | 7 % |
| Revenue | 108.3 | 95.4 | 14 % | 318.9 | 303.4 | 5 % |
Automotive operational revenue is calculated as follows:
| (€ in millions) | Q3 '22 | Q3 '21 | y.o.y. change |
YTD '22 | YTD '21 | y.o.y. change |
|---|---|---|---|---|---|---|
| Automotive revenue | 62.4 | 52.4 | 19 % | 182.9 | 176.0 | 4 % |
| Movement of Automotive deferred revenue | 12.9 | 5.8 | 31.3 | 19.7 | ||
| Automotive operational revenue | 75.3 | 58.2 | 29 % | 214.2 | 195.7 | 9 % |
Location Technology revenue was €108 million, an increase of 14% year on year (Q3 '21: €95 million).
Automotive generated revenue of €62 million in the quarter, an increase of 19% compared with the same quarter last year (Q3 '21: €52 million). Automotive operational revenue was €75 million in the quarter, a year-on-year increase of 29% (Q3 '21: €58 million). The significant year-on-year growth in Automotive operational revenue resulted from increased car production volumes in our core markets and the ramp-up of some new contracts.
Enterprise revenue increased to €46 million in Q3 '22, 7% higher than the same quarter last year (Q3 '21: €43 million), mainly benefiting from a stronger US dollar.
We deepened our partnership with Hyundai Motor Group in the quarter, securing an important award to support its entire vehicle lineup in Europe with maps and real-time traffic. Over the coming years, millions of vehicles will come equipped with this technology as standard, establishing a 100% takerate. Our maps will enable advanced driver assistance systems (ADAS) to better anticipate the road ahead. In addition, we provide highly accurate, verified map content for all speed limit types across Europe, helping with intelligent speed assistance (ISA) regulation compliance.
In Enterprise we matured our Maps APIs portfolio, making it more complete for developers in our key markets. Next to continuous performance and functionality improvements, three APIs were launched. Built with fleet and logistics, ride-hailing, and food delivery markets in mind they enable the optimization of logistics operations. The new APIs support use cases such as complex dispatch for commercial fleets, dynamic multi-stop routing, and post-drive analysis through route reconstruction.
Together with PTV Group we are providing German transport authorities with the data and tools needed to improve road safety on German roads. Our real-time travel times, based on the measurement of the movement of millions of vehicles, enable authorities to intervene operationally with appropriate traffic control measures.
| (€ in millions) | Q3 '22 | Q3 '21 | y.o.y. change |
YTD '22 | YTD '21 | y.o.y. change |
|---|---|---|---|---|---|---|
| Consumer products | 26.2 | 30.6 | -14 % | 73.9 | 81.7 | -10 % |
| Automotive hardware | 1.8 | 1.5 | 20 % | 4.6 | 6.6 | -31 % |
| Consumer revenue | 28.0 | 32.1 | -13 % | 78.5 | 88.4 | -11 % |
Consumer reported revenue of €28 million for the quarter, a decrease of 13% compared with the same quarter last year (Q3 '21: €32 million).
The gross margin for the quarter was 81% equal to Q3 '21 (81%). Both for this quarter as well as for the same quarter last year, gross margin did not include exceptional items.
Operating result (EBIT) in the quarter was a loss of €18 million (Q3 '21: loss of €23 million). Total operating expenses in the quarter were €128 million, an increase of €2 million compared with the same quarter last year (Q3 '21: €126 million). Operating expenses in Q3 '22 include a €5 million gain from a partial release of the restructuring provision as some of the impacted employees have been successfully redeployed. Excluding the impact of the restructuring charges and D&A, operating expenses increased by 9% mainly from increases in our R&D Application layer and our sales and marketing activities.
A reconciliation of operating expenses excluding D&A is presented below:
| (€ in millions) | Q3 '22 | Q3 '21 | y.o.y. change |
YTD '22 | YTD '21 | y.o.y. change |
|---|---|---|---|---|---|---|
| R&D - Geographic data | 42.7 | 45.3 | -6 % | 136.4 | 130.7 | 4 % |
| R&D - Application layer | 45.1 | 35.5 | 27 % | 126.5 | 101.4 | 25 % |
| Sales and marketing | 13.6 | 11.0 | 23 % | 36.1 | 32.5 | 11 % |
| General and administrative | 17.8 | 17.2 | 3 % | 54.1 | 48.7 | 11 % |
| Total excluding D&A and restructuring | 119.2 | 109.0 | 9 % | 353.1 | 313.2 | 13 % |
| Depreciation and amortization | 13.7 | 17.2 | -20 % | 43.3 | 57.5 | -25 % |
| Restructuring | -5.2 | — | 25.5 | — | ||
| Operating expenses | 127.7 | 126.2 | 1 % | 421.9 | 370.7 | 14 % |
Total financial result, for the quarter was an income of €1.8 million (Q3 '21: income of €2.2 million), which consisted primarily of foreign exchange gains from the revaluation of monetary balance sheet items.
The income tax expense for the quarter was €1.5 million compared with an expense of €0.5 million in Q3 '21.
Other intangible assets decreased to €50 million from €70 million at the end of 2021 mainly due to amortization of our map database. Cash balances, including fixed-term deposits were €330 million at the end of the quarter (Q4 '21: €356 million) reflecting cash consumed during the year.
At the end of the quarter, inventory was €14 million, a €6 million decrease from the end of last year. Trade receivables were €76 million at the end of Q3 '22 compared with €56 million at the end of 2021 resulting from higher operational revenue this quarter versus Q4 '21.
Current liabilities, excluding deferred revenue, were €138 million, compared with €110 million at the end of 2021. The increase is mainly related to restructuring-related accruals and provisions as well as other personnel-related accruals.
Deferred revenue increased to €445 million from €441 million at the end of 2021 due to increased deferrals in Automotive, partly offset by the release of deferred revenue in Enterprise and Consumer.
The following table presents the deferred revenue including the effect of netting:
| (€ in millions) | 30 September 2022 | 31 December 2021 |
|---|---|---|
| Automotive | 426.2 | 395.0 |
| Enterprise | 14.9 | 41.5 |
| Consumer | 22.7 | 25.5 |
| Gross deferred revenue | 463.8 | 461.9 |
| Less: Netting adjustment to unbilled revenue | 19.2 | 21.2 |
| Deferred revenue | 444.6 | 440.7 |
In Q3 '22, free cash flow (FCF) excluding restructuring was an inflow of €8 million versus an outflow of €14 million in the same quarter last year. The improved FCF is mainly the result of higher operational revenue.
The cash flow from financing activities for the quarter was an outflow of €3 million and relates to the payment of lease liabilities offset by proceeds from issuance of shares. In the quarter 120 thousand options relating to our long-term employee incentive programs were exercised (Q3 '21: nil).
- END -
At the end of Q3 '22, the Group had no outstanding bank borrowings and reported a net cash position of €330 million (Q4 '21: net cash of €356 million).
Free cash flow is reconciled to the cash flow statement as follows:
| (€ in millions) | Q3 '22 | Q3 '21 | YTD '22 | YTD '21 |
|---|---|---|---|---|
| Cash flow from operating activities | 3.9 | -10.9 | -11.9 | -24.7 |
| Investments in intangible assets | -0.1 | — | -5.2 | — |
| Investments in property, plant and equipment | -1.1 | -2.6 | -3.4 | -8.5 |
| Free cash flow | 2.6 | -13.5 | -20.5 | -33.2 |
| Restructuring-related cash flow | 5.8 | — | 5.8 | — |
| Free cash flow excluding restructuring | 8.5 | -13.5 | -14.6 | -33.2 |
| Q3 '22 | Q3 '21 | YTD '22 | YTD '21 | |
|---|---|---|---|---|
| (€ in thousands) | Unaudited Unaudited Unaudited Unaudited | |||
| Revenue | 136,303 | 127,469 | 397,330 | 391,762 |
| Cost of sales | 26,381 | 23,842 | 68,519 | 78,890 |
| Gross profit | 109,922 | 103,627 | 328,811 | 312,872 |
| Research and development expenses - Geographic data | 50,548 | 55,822 | 162,024 | 164,350 |
| Research and development expenses - Application layer | 45,768 | 37,040 | 128,791 | 107,710 |
| Sales and marketing expenses | 13,568 | 10,994 | 36,151 | 32,536 |
| General and administrative expenses1 | 17,823 | 22,315 | 94,929 | 66,120 |
| Total operating expenses | 127,707 | 126,171 | 421,895 | 370,716 |
| Operating result | -17,785 | -22,544 | -93,084 | -57,844 |
| Financial result | 1,826 | 2,213 | 3,707 | 4,850 |
| Result before tax | -15,959 | -20,331 | -89,377 | -52,994 |
| Income tax expense | -1,525 | -452 | -4,573 | -2,884 |
| Net result2 | -17,484 | -20,783 | -93,950 | -55,878 |
| Earnings per share (in €): | ||||
| Basic | -0.14 | -0.16 | -0.74 | -0.44 |
| Diluted3 | -0.14 | -0.16 | -0.74 | -0.44 |
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 2022 | 31 December 2021 | |
|---|---|---|
| (€ in thousands) | Unaudited | Audited |
| Goodwill | 192,294 | 192,294 |
| Other intangible assets | 50,147 | 70,478 |
| Property, plant and equipment | 23,584 | 26,241 |
| Lease assets | 25,737 | 31,488 |
| Other contract-related assets | 23,097 | 18,769 |
| Other investments | 14,934 | 17,982 |
| Deferred tax assets | 3,219 | 4,115 |
| Total non-current assets | 333,012 | 361,367 |
| Inventories | 13,653 | 19,585 |
| Trade receivables | 75,813 | 56,179 |
| Unbilled receivables | 57,572 | 67,311 |
| Other contract-related assets | 5,232 | 5,049 |
| Other receivables and prepayments | 20,814 | 25,429 |
| Fixed-term deposits | 216,000 | 150,000 |
| Cash and cash equivalents | 113,808 | 205,820 |
| Total current assets | 502,892 | 529,373 |
| Total assets | 835,904 | 890,740 |
| Total equity | 208,491 | 282,723 |
| Lease liabilities | 15,579 | 20,004 |
| Deferred tax liability | 2,665 | 3,934 |
| Provisions | 26,706 | 33,484 |
| Deferred revenue | 272,679 | 259,628 |
| Total non-current liabilities | 317,629 | 317,050 |
| Trade payables | 11,820 | 14,022 |
| Lease liabilities | 11,824 | 13,335 |
| Provisions | 10,937 | 6,537 |
| Deferred revenue | 171,930 | 181,099 |
| Other contract-related liabilities | 22,169 | 19,782 |
| Income taxes | 2,180 | 1,273 |
| Accruals and other liabilities | 78,924 | 54,919 |
| Total current liabilities | 309,784 | 290,967 |
| Q3 '22 | Q3 '21 | YTD '22 | YTD '21 | |
|---|---|---|---|---|
| (€ in thousands) | Unaudited Unaudited Unaudited Unaudited | |||
| Operating result | -17,785 | -22,544 | -93,084 | -57,844 |
| Financial gains | 4,340 | 2,753 | 10,306 | 4,867 |
| Depreciation and amortization | 13,720 | 17,210 | 43,333 | 57,486 |
| Change in provisions | -26,674 | -2,166 | 2,481 | -5,684 |
| Equity-settled stock compensation expenses | 3,113 | 955 | 7,600 | 4,008 |
| Other non-cash movement | — | 2 | -42 | -152 |
| Changes in working capital: | ||||
| Change in inventories | -306 | 4,969 | 5,203 | 9,205 |
| Change in receivables and prepayments | -924 | -61,340 | -11,083 | -52,095 |
| Change in liabilities (excluding provisions)1 | 30,005 | 50,777 | 27,095 | 20,401 |
| Cash flow from operations | 5,489 | -9,384 | -8,191 | -19,808 |
| Interest received | 9 | 14 | 78 | 320 |
| Interest paid | -247 | -418 | -919 | -1,324 |
| Corporate income taxes paid | -1,376 | -1,109 | -2,828 | -3,923 |
| Cash flow from operating activities | 3,875 | -10,897 | -11,860 | -24,735 |
| Investments in intangible assets | -116 | — | -5,193 | — |
| Investments in property, plant and equipment | -1,141 | -2,612 | -3,397 | -8,461 |
| Dividends received | — | 228 | 224 | 228 |
| Change in fixed-term deposits | -80,000 | — | -66,000 | 82,930 |
| Cash flow from investing activities | -81,257 | -2,384 | -74,366 | 74,697 |
| Payment of lease liabilities | -3,635 | -3,741 | -10,820 | -11,107 |
| Proceeds on issue of ordinary shares | 937 | — | 4,051 | 4,468 |
| Purchase of treasury shares | — | — | — | -33,431 |
| Cash flow from financing activities | -2,698 | -3,741 | -6,769 | -40,070 |
| Net increase/(decrease) in cash and cash equivalents | -80,080 | -17,022 | -92,995 | 9,892 |
| Cash and cash equivalents at the beginning of period | 193,364 | 258,908 | 205,820 | 231,520 |
| Exchange rate changes on foreign cash balances | 524 | 301 | 983 | 775 |
| Total cash and cash equivalents at the end of the period | 113,808 | 242,187 | 113,808 | 242,187 |
| Cash held in short term fixed deposits | 216,000 | 60,000 | 216,000 | 60,000 |
| Net cash at the end of the period | 329,808 | 302,187 | 329,808 | 302,187 |
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 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 2021.
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
EBIT margin is calculated as operating result divided by IFRS 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
1 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.
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