Earnings Release • Apr 14, 2022
Earnings Release
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"We had a solid start to the year with all our businesses performing in line with our expectations. Deal activity continues to be strong, with several high-quality deals on the table. Furthermore, we secured important partnerships that help enrich our services.
We are reiterating our revenue and FCF guidance. However, we should recognize the uncertainties that emerged over the past months, such as the war in Ukraine and increasing inflation. These could impact supply chains, cost levels, and general economic activity. We closely monitor the situation to ensure we can react swiftly and decisively. We believe in the strength of our business, financial position, and strategy, and are proceeding with investments as planned."
| (€ in millions) | Q1 '22 | Q1 '21 | y.o.y. change |
|---|---|---|---|
| Location Technology | 105.2 | 104.8 | 0 % |
| Consumer | 23.2 | 26.4 | -12 % |
| Revenue | 128.4 | 131.2 | -2 % |
| Gross result | 109.1 | 106.5 | 2 % |
| Gross margin | 85% | 81% | |
| Operating expenses | 129.0 | 120.8 | 7 % |
| Operating result (EBIT) | -19.8 | -14.2 | |
| Operating margin | -15% | -11% | |
| Net result | -21.5 | -11.5 | |
| Free cash flow (FCF) | -23.2 | -3.9 | |
| FCF as a % of revenue | -18% | -3% |
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.
"Location Technology revenue was roughly flat year on year. Enterprise revenues exhibited growth, while Automotive revenues decreased slightly. Automotive operational revenue showed a year-onyear decline, in line with declining car production volumes in our core markets.
Our operating result decreased versus the same quarter last year, gross margin improvements were offset by a year-on-year increase in operating expenses. These higher expenses combined with a lower trade receivable starting position compared with the same quarter last year, resulted in a decrease in our free cash flow year on year.
We do expect that our increased expenses, which center around investments in our application layer and the further automation of our mapmaking platform, will lead to lower spend levels from 2023 onwards."
| Actual | Outlook | Outlook | |
|---|---|---|---|
| (€ in millions, unless stated otherwise) | 2021 | 2022 | 2023 |
| Revenue | 507 | 470 - 510 | 500 - 550 |
| Of which Location Technology | 394 | 380 - 420 | 425 - 475 |
| FCF as % of Group revenue | 5% | Around -5% | At least 5% |
Revenue for the first quarter amounted to €128 million, a decrease of 2% year on year (Q1 '21: €131 million).
| (€ in millions) | Q1 '22 | Q1 '21 | y.o.y. change |
|---|---|---|---|
| Automotive | 60.5 | 62.7 | -3 % |
| Enterprise | 44.7 | 42.1 | 6 % |
| Revenue | 105.2 | 104.8 | 0 % |
Automotive operational revenue is calculated as follows:
| (€ in millions) | Q1 '22 | Q1 '21 | y.o.y. change |
|---|---|---|---|
| Automotive revenue | 60.5 | 62.7 | -3 % |
| Movement of Automotive deferred revenue | 7.9 | 11.7 | |
| Automotive operational revenue | 68.4 | 74.4 | -8 % |
Location Technology revenue was €105 million, remaining flat year on year (Q1 '21: €105 million), a modest decrease in Automotive revenue was offset by an increase in Enterprise.
Automotive revenue in the quarter was €61 million, a decrease of 3% compared with the same quarter last year (Q1 '21: €63 million). Automotive operational revenue was €68 million in the quarter, a year-on-year decrease of 8% (Q1 '21: €74 million). This trend is in line with declining car production volumes in our core markets.
Enterprise revenue increased to €45 million in Q1 '22, 6% higher than the same quarter last year (Q1 '21: €42 million), benefiting from a stronger US dollar and higher revenue from existing customers.
We moved forward with the advancement of our core Location Technology business during the quarter, securing key partnerships and further enriching our map and services. We have teamed up with the MIH Consortium to build the next generation of electric vehicle, autonomous driving, and mobility service applications. TomTom is the first and only global mapmaker and navigation supplier to join this partnership, to which we will contribute our extensive knowledge in digital cockpit and navigation user experience for EV drivers.
In Enterprise, we have combined forces with Webfleet Solutions to offer an integrated mobile service for professional drivers and fleet managers. Together, we will offer workforce management features, best-in-class navigation for all vehicle types, up-to-date maps with live traffic information, reliable ETAs, and more.
Our expanded agreement with Maxar Technologies, meanwhile, will enable us to integrate highresolution global satellite imagery in our products and services. This provides end-users and our Automotive and Enterprise software platform customers with a photorealistic map.
| (€ in millions) | Q1 '22 | Q1 '21 | y.o.y. change |
|---|---|---|---|
| Consumer products | 21.6 | 23.5 | -8 % |
| Automotive hardware | 1.6 | 2.9 | -45 % |
| Consumer revenue | 23.2 | 26.4 | -12 % |
Consumer reported revenue of €23 million for the quarter, a decrease of 12% compared with the same quarter last year (Q1 '21: €26 million).
The gross margin for the quarter was 85% compared with 81% in Q1 '21. The year-on-year improvement was the result of lower contract costs included in cost of sales.
Operating result (EBIT) in the quarter was a loss of €20 million (Q1 '21: loss of €14 million). Total operating expenses in the quarter were €129 million, an increase of €8 million compared with the same quarter last year (Q1 '21: €121 million).
Excluding the impact of D&A, operating expenses increased by 15%. The increase mainly relates to increases in R&D, both in our geographic data and application layer, to support our product roadmap.
A reconciliation of operating expenses excluding D&A is presented below:
| (€ in millions) | Q1 '22 | Q1 '21 | y.o.y. change |
|---|---|---|---|
| R&D - Geographic data | 47.4 | 41.4 | 14 % |
| R&D - Application layer | 38.4 | 32.3 | 19 % |
| Sales and marketing | 10.5 | 10.2 | 3 % |
| General and administrative | 17.5 | 15.3 | 14 % |
| Operating expenses excluding D&A | 113.8 | 99.2 | 15 % |
| Depreciation and amortization | 15.2 | 21.5 | -29 % |
| Operating expenses | 129.0 | 120.7 | 7 % |
Total financial result, for the quarter was an expense of €0.3 million (Q1 '21: income of €4 million). Q1 '21 included a gain from revaluation of cash balances.
The income tax expense for the quarter was €1.4 million compared with an expense of €1.6 million in Q1 '21.
Other intangible assets decreased to €67 million from €70 million at the end of 2021 mainly due to amortization of map databases, partially offset by capitalized investments in source material with a perpetual license. Cash balances, including fixed-term deposits were €331 million at the end of the quarter (Q4 '21: €356 million).
At the end of the quarter, inventory was €19 million, a €1 million decrease from the end of last year. Trade receivables were €66 million at the end of Q1 '22 compared with €56 million at the end of 2021.
Current liabilities, excluding deferred revenue, were €107 million, compared with €110 million at the end of 2021. The decrease is mainly due to decreases in trade payables and accruals.
Deferred revenue slightly decreased to €440 million from €441 million at the end of 2021 due to the release of deferred revenue in Enterprise and Consumer, partly offset by an increased position in Automotive.
The following table presents the deferred revenue including the effect of netting:
| (€ in millions) | 31 March 2022 | 31 December 2021 |
|---|---|---|
| Automotive | 402.8 | 395.0 |
| Enterprise | 30.5 | 41.5 |
| Consumer | 22.7 | 25.5 |
| Gross deferred revenue | 456.0 | 461.9 |
| Less: Netting adjustment to unbilled revenue | 16.2 | 21.2 |
| Deferred revenue | 439.8 | 440.7 |
In Q1 '22, free cash flow was an outflow of €23 million versus an outflow of €4 million in the same quarter last year. The opening trade receivables balance in 2022 was lower than the trade receivables balance at the beginning of 2021, resulting in lower cash collection during the first quarter. This, combined with higher operating expenses and investment in intangible assets, resulted in the decrease in free cash flow.
The cash flow from financing activities for the quarter was an outflow of €2 million which comprised of payments of lease liabilities partly offset by proceeds from the exercises of stock options. In the quarter 187 thousand options relating to our long-term employee incentive programs were exercised (Q1 '21: 108 thousand).
On 31 March 2022, the Group had no outstanding bank borrowings and reported a net cash position of €331 million (Q4 '20: net cash of €356 million).
- END -
| Q1 '22 | Q1 '21 | |
|---|---|---|
| (€ in thousands) | Unaudited | Unaudited |
| Revenue | 128,449 | 131,191 |
| Cost of sales | 19,313 | 24,681 |
| Gross profit | 109,136 | 106,510 |
| Research and development expenses - Geographic data | 56,531 | 53,268 |
| Research and development expenses - Application layer | 39,365 | 34,831 |
| Sales and marketing expenses | 10,506 | 10,230 |
| General and administrative expenses | 22,567 | 22,421 |
| Total operating expenses | 128,969 | 120,750 |
| Operating result | -19,833 | -14,240 |
| Financial result | -279 | 4,400 |
| Result before tax | -20,112 | -9,840 |
| Income tax expense | -1,378 | -1,641 |
| Net result1 | -21,490 | -11,481 |
| Earnings per share (in €): | ||
| Basic | -0.17 | -0.09 |
| Diluted2 | -0.17 | -0.09 |
1Fully attributable to the equity holders of the parent.
2When the net result is a loss, no additional shares from assumed conversion are taken into account as the effect would be anti-dilutive.
| 31 March 2022 | 31 December 2021 | |
|---|---|---|
| (€ in thousands) Goodwill |
Unaudited 192,294 |
Audited 192,294 |
| Other intangible assets | 66,521 | 70,478 |
| Property, plant and equipment | 25,199 | 26,241 |
| Lease assets | 28,148 | 31,488 |
| Other contract-related assets | 20,335 | 18,769 |
| Other investments | 16,541 | 17,982 |
| Deferred tax assets | 4,066 | 4,115 |
| Total non-current assets | 353,104 | 361,367 |
| Inventories | 18,872 | 19,585 |
| Trade receivables | 65,575 | 56,179 |
| Unbilled receivables | 64,472 | 67,311 |
| Other contract-related assets | 5,447 | 5,049 |
| Other receivables and prepayments | 28,051 | 25,429 |
| Fixed-term deposits | 150,000 | 150,000 |
| Cash and cash equivalents | 180,652 | 205,820 |
| Total current assets | 513,069 | 529,373 |
| Total assets | 866,173 | 890,740 |
| Total equity | 265,960 | 282,723 |
| Lease liabilities | 17,356 | 20,004 |
| Deferred tax liability | 3,561 | 3,934 |
| Provisions | 32,791 | 33,484 |
| Deferred revenue | 266,195 | 259,628 |
| Total non-current liabilities | 319,903 | 317,050 |
| Trade payables | 12,677 | 14,022 |
| Lease liabilities | 12,555 | 13,335 |
| Provisions | 7,600 | 6,537 |
| Deferred revenue | 173,600 | 181,099 |
| Other contract-related liabilities | 19,695 | 19,782 |
| Income taxes | 2,511 | 1,273 |
| Accruals and other liabilities | 51,672 | 54,919 |
| Total current liabilities | 280,310 | 290,967 |
| Total equity and liabilities | 866,173 | 890,740 |
| Q1 '22 | Q1 '21 | |
|---|---|---|
| (€ in thousands) | Unaudited | Unaudited |
| Operating result | -19,833 | -14,241 |
| Financial gains | 1,392 | 3,084 |
| Depreciation and amortization | 15,244 | 21,520 |
| Change in provisions | -590 | 759 |
| Equity-settled stock compensation expenses | 1,774 | 1,596 |
| Changes in working capital: | ||
| Change in inventories | 2,876 | 3,217 |
| Change in receivables and prepayments | -10,311 | -3,447 |
| Change in liabilities (excluding provisions)1 | -6,018 | -11,135 |
| Cash flow from operations | -15,466 | 1,353 |
| Interest received | 5 | 39 |
| Interest paid | -365 | -437 |
| Corporate income taxes paid | -1,107 | -1,736 |
| Cash flow from operating activities | -16,933 | -781 |
| Investments in intangible assets | -5,053 | 0 |
| Investments in property, plant and equipment | -1,258 | -3,117 |
| Decrease in fixed-term deposits | 0 | 21,465 |
| Cash flow from investing activities | -6,311 | 18,348 |
| Payment of lease liabilities | -3,586 | -3,814 |
| Proceeds on issue of ordinary shares | 1,464 | 577 |
| Purchase of treasury shares | 0 | -17,294 |
| Cash flow from financing activities | -2,122 | -20,531 |
| Net decrease in cash and cash equivalents | -25,366 | -2,964 |
| Cash and cash equivalents at the beginning of period | 205,820 | 231,520 |
| Exchange rate changes on foreign cash balances | 198 | 2,100 |
| Total cash and cash equivalents at the end of the period | 180,652 | 230,656 |
| Cash held in short term fixed deposits | 150,000 | 121,313 |
| Net cash at the end of the period | 330,652 | 351,970 |
1Includes movements in the non-current portion of deferred revenue presented under non-current liabilities.
Free cash flow is reconciled to the cash flow statement as follows:
| Cash flow from operating activities | -16,933 | -780 |
|---|---|---|
| Investments in intangible assets | -5,053 | 0 |
| Investments in property, plant and equipment | -1,258 | -3,117 |
| Free cash flow | -23,244 | -3,897 |
The condensed consolidated financial information for the three-month period ended 31 March 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
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.
TomTom Investor Relations
Email: [email protected]
+31 20 757 5194
The information for our audio webcast is as follows:
Date and time: 14 April 2022 at 14:00 CET
https://corporate.tomtom.com/investors/financial-publications/quarterly-results
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ISIN: NL0013332471 / Symbol: TOM2
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