Earnings Release • Oct 14, 2021
Earnings Release
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"The first nine months of 2021 have delivered both positives and negatives. Enterprise continues to perform solidly. But the recovery of Automotive has lagged expectations because industrywide semiconductor supply chain issues are hampering car production volumes.
Encouragingly, the way we engage with our customers is evolving from a traditional supplier relationship to a partner approach. This is leading to longer-term partnerships, customer intimacy, productive software engineering collaborations and better products."
| (€ in millions) | Q3 '21 | Q3 '20 | y.o.y. change |
YTD '21 | YTD '20 | y.o.y. change |
|---|---|---|---|---|---|---|
| Location Technology | 95.4 | 105.6 | -10 % | 303.4 | 290.7 | 4 % |
| Consumer | 32.1 | 42.3 | -24 % | 88.4 | 112.1 | -21 % |
| Revenue | 127.5 | 147.9 | -14 % | 391.8 | 402.8 | -3 % |
| Gross result | 103.6 | 112.0 | -7 % | 312.9 | 320.3 | -2 % |
| Gross margin | 81% | 76% | 80% | 80% | ||
| EBITDA | -5.3 | 3.9 | -0.4 | 5.7 | ||
| EBITDA margin | -4% | 3% | 0% | 1% | ||
| Operating result (EBIT) | -22.5 | -67.6 | -57.8 | -209.6 | ||
| Operating margin | -18% | -46% | -15% | -52% | ||
| Net result | -20.8 | -67.0 | -55.9 | -191.7 | ||
| Free cash flow (FCF) | -13.5 | -20.0 | -33.2 | -60.3 | ||
| FCF as a % of revenue | -11% | -14% | -8% | -15% |
This report includes the following non-GAAP measures which are further explained at the end of this report: operational revenue; gross margin; EBITDA (margin); EBIT (margin); free cash flow; net cash and gross deferred revenue.
"Location Technology revenue declined 10% compared with the previous year as semiconductor supply chain issues limited car production volumes, and therefore Automotive revenue. Enterprise performed solidly with 8% growth compared to the previous year, because of contract expansions from previous periods.
We reiterate our revenue guidance, though we anticipate full year revenue will be at the low end of the range because supply chain issues will continue to limit car production volumes. This has a direct impact on our operational revenue and thus on our cash flow. Consequently, we are lowering our full year 2021 FCF guidance as a percentage of group revenue to around 2%."
| (€ in millions, unless stated otherwise) | Updated Outlook 2021 |
Previous Outlook 2021 |
Actual 2020 |
|---|---|---|---|
| Revenue | 500 - 530 | 500 - 530 | 528 |
| Of which Location Technology | 400 - 430 | 400 - 430 | 392 |
| FCF as % of group revenue | Around 2% | Around 5% | -5% |
Revenue for the third quarter amounted to €127 million, a decrease of 14% year on year (Q3 '20: €148 million).
| (€ in millions) | Q3 '21 | Q3 '20 | y.o.y. change |
YTD '21 | YTD '20 | y.o.y. change |
|---|---|---|---|---|---|---|
| Automotive | 52.4 | 65.9 | -21 % | 176.0 | 167.3 | 5 % |
| Enterprise | 43.0 | 39.7 | 8 % | 127.4 | 123.3 | 3 % |
| Revenue | 95.4 | 105.6 | -10 % | 303.4 | 290.7 | 4 % |
Automotive operational revenue is calculated as follows:
| (€ in millions) | Q3 '21 | Q3 '20 | y.o.y. change |
YTD '21 | YTD '20 | y.o.y. change |
|---|---|---|---|---|---|---|
| Automotive revenue | 52.4 | 65.9 | -21 % | 176.0 | 167.3 | 5 % |
| Movement of Automotive deferred revenue | 5.8 | 4.1 | 19.7 | 22.0 | ||
| Automotive operational revenue | 58.2 | 70.0 | -17 % | 195.7 | 189.3 | 3 % |
Location Technology revenue was €95 million, a decrease of 10% year on year (Q3 '20: €106 million), resulting from a decrease in Automotive revenue.
Automotive generated revenue of €52 million in the quarter, a decrease of 21% compared with the same quarter last year (Q3 '20: €66 million). Automotive operational revenue was €58 million in the quarter, a year-on-year decrease of 17% (Q3 '20: €70 million).
Enterprise revenue increased to €43 million in Q3 '21, 8% higher than the same quarter last year (Q3 '20: €40 million) resulting mainly from higher revenue from existing customers.
Within Automotive, the new Jeep Grand Cherokee and the Jeep Compass were launched including our full stack solution of navigation software, over-the-air-updated maps and connected services. Additionally, Fiat launched its new Ducato, Europe's best-selling light commercial vehicle. The new Ducato, which is also offered as a campervan, utilizes our full stack navigation, extensive connected services and ADAS to ensure safety and avoid roads not suited for the vehicle.
One of the announcements we want to highlight in the Enterprise segment is the extension of our long-term partnership with Precisely, to which we will continue to provide map and traffic data. Precisely incorporates our data into their location and enrichment products. These products are used by insurance, telecommunications, retail and financial companies that rely on highly accurate data to make business decisions. Furthermore, we worked together with Greater Than on a proof of concept to create safer roads and assess the potential to globally predict where, when and why road accidents occur.
| (€ in millions) | Q3 '21 | Q3 '20 | y.o.y. change |
YTD '21 | YTD '20 | y.o.y. change |
|---|---|---|---|---|---|---|
| Consumer products | 30.6 | 38.4 | -20 % | 81.7 | 101.4 | -19 % |
| Automotive hardware | 1.5 | 3.9 | -62 % | 6.6 | 10.7 | -38 % |
| Consumer revenue | 32.1 | 42.3 | -24 % | 88.4 | 112.1 | -21 % |
Consumer reported revenue of €32 million for the quarter, a decrease of 24% compared with the same quarter last year (Q3 '20: €42 million).
The gross margin for the quarter was 81% compared with 76% in Q3 '20. The Q3 '20 gross margin was negatively impacted by the start of production of new software platforms in Automotive. The start of production triggers the release of capitalized contract costs associated with customized non recurring engineering (NRE).
Operating result (EBIT) in the quarter was a loss of €23 million (Q3 '20: loss of €68 million). Total operating expenses in the quarter were €126 million, a decrease of €53 million compared with the same quarter last year (Q3 '20: €180 million). The year-on-year decrease in total operating expenses, reflected in Research and development (R&D) associated with our geographic data, is mainly from lower Depreciation and amortization (D&A) as the Tele Atlas databases were fully amortized during 2020.
Excluding the impact of D&A, operating expenses increased by 1% mainly from increases in R&D associated with our Application layer, partly offset by a decline in Sales and marketing.
| (€ in millions) | Q3 '21 | Q3 '20 | y.o.y. change |
YTD '21 | YTD '20 | y.o.y. change |
|---|---|---|---|---|---|---|
| R&D - Geographic data | 45.3 | 47.7 | -5 % | 130.7 | 138.0 | -5 % |
| R&D - Application layer | 35.5 | 31.2 | 14 % | 101.4 | 89.4 | 13 % |
| Sales and marketing | 11.0 | 12.4 | -12 % | 32.5 | 38.7 | -16 % |
| General and administrative | 17.2 | 16.9 | 2 % | 48.7 | 48.5 | 0 % |
| Operating expenses excluding D&A | 109.0 | 108.1 | 1 % | 313.2 | 314.6 | 0 % |
| Depreciation and amortization | 17.2 | 71.5 | -76 % | 57.5 | 215.3 | -73 % |
| Operating expenses | 126.2 | 179.6 | -30 % | 370.7 | 529.9 | -30 % |
A reconciliation of operating expenses excluding D&A is presented below:
Total financial result, for the quarter was an income of €2 million (Q3 '20: expense of €4 million), which consisted primarily of foreign exchange gains from the revaluation of monetary balance sheet items.
The income tax expense for the quarter was €0.5 million compared with a gain of €4 million in Q3 '20. The tax gain in Q3 '20 resulted from a release in deferred tax assets and liabilities, which was driven by the amortization of acquisition-related intangible assets.
Other intangible assets decreased to €81 million from €117 million at the end of 2020 mainly due to amortization of map database. Cash balances, including fixed-term deposits were €302 million at the end of the quarter (Q4 '20: €372 million). The decrease during the year is from share repurchases under the share buyback program and negative cash flow from operating activities.
At the end of the quarter, inventory was €19 million, a €7 million decrease from the end of last year, mainly due to supply constraints. Trade receivables were €130 million at the end of Q3 '21 compared with €80 million at the end of 2020. The increase is due to the seasonality of invoicing.
Current liabilities, excluding deferred revenue, were €106 million, compared with €116 million at the end of 2020. The decrease is mainly due to decreases in trade payables and provisions.
Deferred revenue increased to €433 million from €404 million at the end of 2020 due to increased deferrals in Automotive and Enterprise, partly offset by the release of deferred revenue in Consumer.
The following table presents the deferred revenue including the effect of netting:
| (€ in millions) | 30 September 2021 | 31 December 2020 |
|---|---|---|
| Automotive | 371.4 | 351.7 |
| Enterprise | 54.2 | 34.9 |
| Consumer | 27.4 | 39.7 |
| Gross deferred revenue | 452.9 | 426.3 |
| Less: Netting adjustment to unbilled revenue | 19.7 | 22.6 |
| Deferred revenue | 433.2 | 403.7 |
In Q3 '21, free cash flow (FCF) was an outflow of €14 million versus an outflow of €20 million in the same quarter last year. The improved FCF reflects the timing of cash receipts from customers.
The cash flow from financing activities for the quarter was an outflow of €4 million and relates to the payment of lease liabilities. No options relating to our long-term employee incentive programs were exercised during the quarter (Q3 '20: 12 thousand).
On 30 September 2021, the Group had no outstanding bank borrowings and reported a net cash position of €302 million (Q4 '20: net cash of €372 million).
Free cash flow is reconciled to the cash flow statement as follows:
| (€ in millions) | Q3 '21 | Q3 '20 | YTD '21 | YTD '20 |
|---|---|---|---|---|
| Cash flow from operating activities | -10.9 | -19.0 | -24.7 | -55.3 |
| Investments in property, plant and equipment | -2.6 | -1.0 | -8.5 | -5.0 |
| Free cash flow | -13.5 | -20.0 | -33.2 | -60.3 |
- END -
| Q3 '21 | Q3 '20 | YTD '21 | YTD '20 | |
|---|---|---|---|---|
| (€ in thousands) | Unaudited Unaudited Unaudited Unaudited | |||
| Revenue | 127,469 | 147,851 | 391,762 | 402,750 |
| Cost of sales | 23,842 | 35,861 | 78,890 | 82,413 |
| Gross profit | 103,627 | 111,990 | 312,872 | 320,337 |
| Research and development expenses - Geographic data | 55,822 | 109,177 | 164,350 | 323,793 |
| Research and development expenses - Application layer | 37,040 | 35,271 | 107,710 | 100,959 |
| Sales and marketing expenses | 10,994 | 13,536 | 32,536 | 42,124 |
| General and administrative expenses | 22,315 | 21,616 | 66,120 | 63,016 |
| Total operating expenses | 126,171 | 179,600 | 370,716 | 529,892 |
| Operating result | -22,544 | -67,610 | -57,844 -209,555 | |
| Financial result | 2,213 | -3,716 | 4,850 | -1,094 |
| Result before tax | -20,331 | -71,326 | -52,994 -210,649 | |
| Income tax (expense)/gain | -452 | 4,358 | -2,884 | 18,914 |
| Net result1 | -20,783 | -66,968 | -55,878 -191,735 | |
| Earnings per share (in €): | ||||
| Basic | -0.16 | -0.51 | -0.44 | -1.47 |
| Diluted2 | -0.16 | -0.51 | -0.44 | -1.47 |
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.
| 30 September 2021 | 31 December 2020 | |
|---|---|---|
| (€ in thousands) | Unaudited | Audited |
| Goodwill | 192,294 | 192,294 |
| Other intangible assets | 80,771 | 117,475 |
| Property, plant and equipment | 23,585 | 22,220 |
| Lease assets | 33,248 | 43,609 |
| Other contract-related assets | 17,909 | 19,130 |
| Other investments | 18,533 | 8,733 |
| Deferred tax assets | 4,400 | 4,273 |
| Total non-current assets | 370,740 | 407,734 |
| Inventories | 18,815 | 26,146 |
| Trade receivables | 130,234 | 79,661 |
| Unbilled receivables | 65,925 | 58,313 |
| Other contract-related assets | 4,348 | 6,950 |
| Other receivables and prepayments | 23,330 | 26,765 |
| Fixed-term deposits | 60,000 | 140,930 |
| Cash and cash equivalents | 242,187 | 231,520 |
| Total current assets | 544,839 | 570,285 |
| Total assets | 915,579 | 978,019 |
| Total equity | 317,477 | 387,616 |
| Lease liabilities | 21,662 | 28,801 |
| Deferred tax liability | 1,342 | 1,344 |
| Provisions | 35,862 | 41,014 |
| Deferred revenue | 242,272 | 238,793 |
| Total non-current liabilities | 301,138 | 309,952 |
| Trade payables | 15,374 | 21,998 |
| Lease liabilities | 13,513 | 14,872 |
| Provisions | 5,518 | 7,918 |
| Deferred revenue | 190,956 | 164,913 |
| Other contract-related liabilities | 18,506 | 19,084 |
| Income taxes | 2,676 | 1,893 |
| Accruals and other liabilities | 50,421 | 49,773 |
| Total current liabilities | 296,964 | 280,451 |
| Q3 '21 | Q3 '20 | YTD '21 | YTD '20 | |
|---|---|---|---|---|
| (€ in thousands) | Unaudited Unaudited Unaudited Unaudited | |||
| Operating result | -22,544 | -67,610 | -57,844 -209,555 | |
| Financial gains/(losses) | 2,753 | -2,249 | 4,867 | -3,163 |
| Depreciation and amortization | 17,210 | 71,465 | 57,486 | 215,281 |
| Change in provisions | -2,166 | -1,610 | -5,684 | -4,834 |
| Equity-settled stock compensation expenses | 955 | 1,688 | 4,008 | 4,561 |
| Other non-cash movement | 2 | 0 | -152 | 0 |
| Changes in working capital: | ||||
| Change in inventories | 4,969 | 3,782 | 9,205 | -3,688 |
| Change in receivables and prepayments | -61,340 | -52,925 | -52,095 | -24,320 |
| Change in liabilities (excluding provisions)1 | 50,777 | 29,958 | 20,401 | -21,670 |
| Cash flow from operations | -9,384 | -17,501 | -19,808 | -47,388 |
| Interest received | 14 | 266 | 320 | 946 |
| Interest paid | -418 | -353 | -1,324 | -1,537 |
| Corporate income taxes paid | -1,109 | -1,399 | -3,923 | -7,335 |
| Cash flow from operating activities | -10,897 | -18,987 | -24,735 | -55,314 |
| Investments in property, plant and equipment | -2,612 | -1,027 | -8,461 | -4,987 |
| Dividends received | 228 | 0 | 228 | 162 |
| Decrease in fixed-term deposits | 0 | 37,367 | 82,930 | 71,432 |
| Cash flow from investing activities | -2,384 | 36,340 | 74,697 | 66,607 |
| Payment of lease liabilities | -3,741 | -4,087 | -11,107 | -11,368 |
| Proceeds on issue of ordinary shares | 0 | 91 | 4,468 | 2,337 |
| Purchase of treasury shares | 0 | 0 | -33,431 | -16,569 |
| Cash flow from financing activities | -3,741 | -3,996 | -40,070 | -25,600 |
| Net increase/(decrease) in cash and cash equivalents | -17,022 | 13,357 | 9,892 | -14,307 |
| Cash and cash equivalents at the beginning of period | 258,908 | 186,058 | 231,520 | 213,941 |
| Exchange rate changes on foreign cash balances | 301 | -2,952 | 775 | -3,171 |
| Total cash and cash equivalents at the end of the period | 242,187 | 196,463 | 242,187 | 196,463 |
| Cash held in short term fixed deposits | 60,000 | 150,000 | 60,000 | 150,000 |
| Net cash at the end of the period | 302,187 | 346,463 | 302,187 | 346,463 |
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 2021 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 2020.
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 minus the nominal value of our outstanding bank borrowings
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 October 2021 at 14:00 CET
https://corporate.tomtom.com/investors/financial-publications/quarterly-results
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