Earnings Release • Oct 14, 2020
Earnings Release
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"Market conditions continue to improve and we are pleased that our Automotive business shows robust sequential operational revenue growth.
Deal activity was strong despite COVID-19. We are especially excited to announce a multi-year expansion and extension of our Uber contract, supplying both maps and traffic. Uber will also become a map editing partner, deepening our relationship and enhancing our mapping ecosystem.
Research and development remain a priority, with further developments to our mapmaking platform, connected navigation product and our Maps APIs, laying the foundations for future success."
| (€ in millions) | Q3 '20 | Q2 '20 | q.o.q change |
Q3 '19 | y.o.y. change |
YTD '20 | YTD '19 | y.o.y. change |
|---|---|---|---|---|---|---|---|---|
| Location Technology | 105.6 | 93.8 | 13 % | 96.5 | 9 % | 290.7 | 315.6 | -8 % |
| Consumer | 42.3 | 29.9 | 41 % | 67.7 | -38 % | 112.1 | 228.9 | -51 % |
| Revenue | 147.9 | 123.7 | 20 % | 164.2 | -10 % | 402.8 | 544.5 | -26 % |
| Gross profit | 112.0 | 105.8 | 6 % | 127.9 | -12 % | 320.3 | 391.2 | -18 % |
| Gross margin | 76% | 86% | 78% | 80% | 72% | |||
| EBITDA | 3.9 | 7.3 | 15.9 | 5.7 | 65.6 | |||
| EBITDA margin | 3% | 6% | 10% | 1% | 12% | |||
| Net result1 | -67.0 | -62.0 | -43.4 | -191.7 | 701.8 | |||
| Free cash flow (FCF) | -20.0 | -54.0 | 22.7 | -60.3 | 18.2 | |||
| FCF as a % of revenue | -14% | -44% | 14% | -15% | 3% |
1All figures presented in the table above relate to continuing operations, except for the YTD'19 Net result.
This report includes the following non-GAAP measures: operational revenue; gross margin; EBITDA (margin); free cash flow and net cash, which are further explained at the end of this report.
"Sequential operational improvements in car production translated into 24% quarter on quarter revenue growth in Automotive. For Q4, we expect that Automotive operational revenue continues to show strong sequential growth. Full year reported revenue for the Group is expected to be around €530 million.
The start of new car lines in Automotive reduced gross margin this quarter. But we expect our gross margin for the full year to be around 80%.
Free cash flow in the quarter was in line with expectations. Seasonal customer receipts, combined with further improvements in Automotive operational revenue, will lead to positive free cash flow in Q4 '20 of around €30 million.
Although there have been notable sales improvements in recent months, we feel that the economic circumstances remain too uncertain to resume our share buyback program at the moment."
Revenue for the third quarter amounted to €148 million, an increase of 20% sequentially (Q2 '20: €124 million) and a decrease of 10% year on year (Q3 '19: €164 million).
| (€ in millions) | Q3 '20 | Q2 '20 | q.o.q change |
Q3 '19 | y.o.y. change |
YTD '20 | YTD '19 | y.o.y. change |
|---|---|---|---|---|---|---|---|---|
| Automotive | 65.9 | 51.6 | 28 % | 55.4 | 19 % | 167.3 | 196.5 | -15 % |
| Enterprise | 39.7 | 42.2 | -6 % | 41.1 | -4 % | 123.3 | 119.1 | 4 % |
| Revenue | 105.6 | 93.8 | 13 % | 96.5 | 9 % | 290.7 | 315.6 | -8 % |
| Automotive | ||||||||
| Reported revenue | 65.9 | 51.6 | 28 % | 55.4 | 19 % | 167.3 | 196.5 | -15 % |
| Movement of deferred and unbilled |
-6.6 | -3.7 | 32.9 | 25.2 | 68.2 | |||
| Operational revenue | 59.4 | 47.9 | 24 % | 88.3 | -33 % | 192.6 | 264.6 | -27 % |
Location Technology revenue was €106 million, an increase of 13% sequentially (Q2 '20: €94 million) and an increase of 9% year on year ( Q3 '19: €97 million), resulting from an increase in Automotive revenue.
Automotive generated revenue of €66 million in the quarter, an increase of 28% compared with last quarter (Q2 '20: €52 million) and an increase of 19% compared with the same quarter last year (Q3 '19: €55 million). Automotive operational revenue was €59 million in the quarter, a sequential increase of 24% (Q2 '20: €48 million) and a year on year decrease of 33% (Q3 '19: €88 million).
Enterprise revenue decreased to €40 million in Q3 '20, 6% lower than last quarter (Q2 '20: €42 million) and 4% lower than the same quarter last year (Q3 '19: €41 million) resulting mainly from unfavorable foreign exchange movements.
Within Automotive, we announced that we will provide our full stack solution of maps, navigation software and connected services for the all-new Maserati Intelligent Assistant in-vehicle infotainment system. Maserati drivers will benefit from our premium user interface and connected on-line in vehicle services, also allowing for automatic map updates in the background.
We also launched RoadCheck, a product that further contributes to improving road safety. It allows carmakers to decide where it is safe for drivers to activate their vehicles' automated driving functions.
Our Enterprise business announced a multiyear extension of our relationship with Uber, providing maps, traffic data, and Maps APIs across Uber's global platform. In addition, Uber will serve as a trusted map editing partner to TomTom, leading to even more accurate navigation and location experiences, routing, fares, and arrival time estimates. This will benefit customers, drivers, and delivery people on Uber's platform, and other TomTom customers.
| (€ in millions) | Q3 '20 | Q2 '20 | q.o.q change |
Q3 '19 | y.o.y. change |
YTD '20 | YTD '19 | y.o.y. change |
|---|---|---|---|---|---|---|---|---|
| Consumer products | 38.4 | 27.9 | 38 % | 63.3 | -39 % | 101.4 | 199.5 | -49 % |
| Automotive hardware | 3.9 | 2.0 | 95 % | 4.4 | -10 % | 10.7 | 29.5 | -64 % |
| Consumer revenue | 42.3 | 29.9 | 41 % | 67.7 | -38 % | 112.1 | 228.9 | -51 % |
Consumer reported revenue of €42 million for the quarter, a sequential increase of 41% (Q2 '20: €30 million) and a decrease of 38% compared with the same quarter last year (Q3 '19: €68 million).
The gross margin for the quarter was 76% compared with 78% in Q3 '19.
While underlying gross margin continues to improve, reflecting higher proportions of data, software and services in our sales mix, this quarter gross margin was 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), lowering the gross margin in Q3 '20. Furthermore, in Q3'19 gross profit was positively influenced by one-offs; excluding these one-offs gross margin was 74% in Q3 '19.
Operating result (EBIT) in the quarter was a loss of €68 million (Q3 '19: loss of €57 million). Total operating expenses in the quarter were €180 million, a decrease of €5 million compared with the same quarter last year (Q3 '19: €185 million). The year on year decrease, reflected in marketing and selling, general and administrative expenses, shows the effect of discretionary cost control measures.
Total financial result, for the quarter was an expense of €4 million (Q3 '19: income of €1 million), which consisted primarily of foreign exchange losses from the revaluation of monetary balance sheet items.
The income tax gain for the quarter was €4 million compared with a gain of €13 million in Q3 '19. The amortization of acquisition-related intangible assets results in a release of deferred tax assets and liabilities, contributing to the tax gain.
Other intangible assets decreased to €181 million from €380 million at the end of 2019 mainly due to amortization of map database. Cash balances, including fixed-term deposits were €346 million at the end of the quarter (Q4 '19: €437 million). The decrease during the year is from a combination of lower operational revenue, working capital movements and the share buyback in Q1 '20.
At the end of the quarter, inventory was €28 million, a €2 million increase from the end of last year mostly relating to automotive hardware. Trade receivables were €110 million in Q3 '20 compared with €100 million at the end of 2019.
Current liabilities, excluding deferred revenue, were €125 million, compared with €177 million at the end of 2019. The decrease is mainly due to decreases in accruals and other liabilities, reflecting lower personnel-related accruals, and trade payables.
Deferred revenue represents upfront payments received from customers for content and service deliveries over multiple years (such as map updates and traffic services), while unbilled revenue is revenue earned but not yet invoiced. Combining reported revenue with the movement of deferred and unbilled revenue provides operational revenue, giving insight into operational performance.
Further detail of deferred revenue and the net movement of deferred and unbilled revenue is provided below.
| (€ in millions) | 30 Sep 2020 |
30 Jun 2020 |
31 Dec 2019 |
|---|---|---|---|
| Automotive | 307.5 | 310.5 | 278.3 |
| Enterprise | 43.6 | 9.8 | 23.3 |
| Consumer | 45.9 | 51.6 | 67.7 |
| Deferred revenue | 397.0 | 371.9 | 369.3 |
Total deferred revenue was €397 million at the end of Q3 '20. The increase compared with previous quarter and 31 December 2019 is mainly driven by seasonal timing of invoicing and increase of operational revenue in Location Technology offset by releases in Consumer.
| (€ in millions) | Q3 '20 | Q2 '20 | Q3 '19 | YTD '20 | YTD '19 |
|---|---|---|---|---|---|
| Automotive | -6.6 | -3.7 | 32.9 | 25.2 | 68.2 |
| Enterprise | 33.6 | -21.9 | 33.3 | 2.2 | 4.2 |
| Consumer | -5.7 | -8.1 | -5.5 | -21.8 | -15.8 |
| Net movement of deferred and unbilled revenue | 21.3 | -33.7 | 60.6 | 5.6 | 56.5 |
The sequential movement of deferred and unbilled revenue is explained by the timing of invoicing of certain Enterprise customers. The net movement for the quarter compared with the same quarter last year, is explained by lower operational revenue for both Automotive and Consumer.
In Q3 '20, free cash flow (FCF) was an outflow of €20 million versus an outflow of €54 million last quarter and an inflow of €23 million in the same quarter last year. The FCF reflects mainly the sequential and year on year development of revenue from Automotive and Consumer.
Our cash flow from investing activities includes an inflow of fixed-term deposits that matured during the quarter. Excluding this, cash flows from investing activities shows a year-on-year decline in capitalized research and development projects.
The cash flow from financing activities for the quarter was an outflow of €4 million and mainly relates to the payment of lease liabilities. During the quarter 12 thousand options relating to our long-term employee incentive programs were exercised (Q3 '19: 379 thousand).
On 30 September 2020, the Group had no outstanding bank borrowings and reported a net cash position of €346 million (Q3 '19: net cash of €393 million). The year on year decrease in net cash is explained by lower free cash flows and the share buyback in the first quarter.
Free cash flow is reconciled to the cash flow statement as follows:
| (€ in millions) | Q3 '20 | Q2 '20 | Q3 '19 | YTD '20 | YTD '19 |
|---|---|---|---|---|---|
| Cash flow from operating activities | -19.0 | -52.1 | 27.1 | -55.3 | 42.4 |
| Investments in intangible assets | 0.0 | 0.0 | -1.6 | 0.0 | -10.0 |
| Investments in property, plant and equipment | -1.0 | -1.8 | -2.9 | -5.0 | -10.5 |
| Free cash from flow total operations | -20.0 | -54.0 | 22.7 | -60.3 | 21.9 |
| Free cash flow from discontinued operations | 0.0 | 0.0 | 0.0 | 0.0 | -3.9 |
| Free cash flow from continuing operations | -20.0 | -54.0 | 22.7 | -60.3 | 18.1 |
| Q3 '20 | Q3 '19 | YTD '20 | YTD '19 | |
|---|---|---|---|---|
| (€ in thousands) | Unaudited Unaudited Unaudited Unaudited | |||
| Revenue | 147,851 | 164,206 | 402,750 | 544,536 |
| Cost of sales | 35,861 | 36,277 | 82,413 | 153,309 |
| Gross profit | 111,990 | 127,929 | 320,337 | 391,227 |
| Research and development expenses | 80,155 | 80,272 | 231,405 | 231,610 |
| Amortization of technology and databases | 64,293 | 65,038 | 193,348 | 196,073 |
| Marketing expenses | 5,825 | 7,057 | 17,625 | 20,434 |
| Selling, general and administrative expenses | 29,327 | 32,647 | 87,514 | 96,346 |
| Total operating expenses | 179,600 | 185,014 | 529,892 | 544,463 |
| Operating result | -67,610 | -57,085 -209,555 -153,236 | ||
| Financial (expense)/income and result of associate | -3,716 | 785 | -1,094 | -1,082 |
| Result before tax | -71,326 | -56,300 -210,649 -154,318 | ||
| Income tax gain | 4,358 | 12,871 | 18,914 | 30,310 |
| Net result from continuing operations | -66,968 | -43,429 -191,735 -124,008 | ||
| Result after tax from discontinued operations | 0 | 0 | 0 | 18,615 |
| Result on business disposal | 0 | 0 | 0 | 807,237 |
| Net result from discontinued operations | 0 | 0 | 0 | 825,852 |
| Net result1 | -66,968 | -43,429 -191,735 | 701,844 | |
| Earnings per share (in €): | ||||
| Basic | -0.51 | -0.33 | -1.47 | 3.81 |
| Diluted | -0.51 | -0.33 | -1.47 | 3.77 |
| Earnings per share from continuing operations (in €): | ||||
| Basic | -0.51 | -0.33 | -1.47 | -0.67 |
| Diluted | -0.51 | -0.33 | -1.47 | -0.67 |
1Fully attributable to the equity holders of the parent
| 30 September 2020 | 31 December 2019 | |
|---|---|---|
| (€ in thousands) | Unaudited | Audited |
| Goodwill | 192,294 | 192,294 |
| Other intangible assets | 181,458 | 380,160 |
| Property, plant and equipment | 23,899 | 28,588 |
| Lease assets | 39,363 | 32,667 |
| Other contract related assets | 7,962 | 2,489 |
| Other investments | 6,595 | 4,573 |
| Deferred tax assets | 4,586 | 5,626 |
| Total non-current assets | 456,157 | 646,397 |
| Inventories | 27,611 | 25,315 |
| Trade receivables | 110,105 | 99,776 |
| Unbilled receivables | 56,400 | 34,374 |
| Other contract related assets | 17,902 | 21,434 |
| Other receivables and prepayments | 35,016 | 45,351 |
| Fixed-term deposits | 150,000 | 222,579 |
| Cash and cash equivalents | 196,463 | 213,941 |
| Total current assets | 593,497 | 662,770 |
| Total assets | 1,049,654 | 1,309,167 |
| Total equity | 450,503 | 665,932 |
| Lease liabilities | 27,328 | 22,531 |
| Deferred tax liability | 7,527 | 27,283 |
| Provisions | 42,281 | 46,746 |
| Deferred revenue Total non-current liabilities |
220,639 297,775 |
216,378 312,938 |
| Trade payables | 22,169 | 47,085 |
| Lease liabilities | 12,815 | 11,737 |
| Provisions | 12,425 | 8,274 |
| Deferred revenue | 176,315 | 152,939 |
| Other contract related liabilities | 19,274 | 26,745 |
| Income taxes | 13,978 | 14,701 |
| Accruals and other liabilities | 44,400 | 68,816 |
| Total current liabilities | 301,376 | 330,297 |
| Q3 '20 | Q3 '19 | YTD '20 | YTD '19 | |
|---|---|---|---|---|
| (€ in thousands) | Unaudited Unaudited Unaudited Unaudited | |||
| Operating result from continuing operations | -67,610 | -57,085 | -209,555 | -153,236 |
| Operating result from discontinued operations | 0 | 0 | 0 | 19,016 |
| Operating result | -67,610 | -57,085 -209,555 -134,220 | ||
| Financial (losses)/gains | -2,249 | 1,424 | -3,163 | 779 |
| Depreciation and amortization | 71,465 | 72,939 | 215,281 | 218,852 |
| Change in provisions | -1,610 | -14,104 | -4,834 | -17,966 |
| Equity-settled stock compensation expenses | 1,688 | 1,496 | 4,561 | 3,398 |
| Changes in working capital: | ||||
| Change in inventories | 3,782 | -5,134 | -3,688 | 458 |
| Change in receivables and prepayments | -52,925 | -18,936 | -24,320 | -53,049 |
| Change in liabilities (excluding provisions)1 | 29,958 | 47,501 | -21,670 | 35,006 |
| Cash flow from operations | -17,501 | 28,101 | -47,388 | 53,258 |
| Interest received | 266 | 339 | 946 | 829 |
| Interest paid | -353 | -262 | -1,537 | -1,902 |
| Corporate income taxes paid | -1,399 | -1,062 | -7,335 | -9,765 |
| Cash flow from operating activities | -18,987 | 27,116 | -55,314 | 42,420 |
| Investments in intangible assets | 0 | -1,573 | 0 | -9,954 |
| Investments in property, plant and equipment | -1,027 | -2,872 | -4,987 | -10,526 |
| Net cash inflow from business disposal | 0 | 0 | 0 | 873,439 |
| Dividends received | 0 | 0 | 162 | 174 |
| Decrease in fixed-term deposits | 37,367 | 0 | 71,432 | 0 |
| Cash flow from investing activities | 36,340 | -4,445 | 66,607 | 853,133 |
| Payment of lease liabilities | -4,087 | -4,082 | -11,368 | -11,157 |
| Repayment of capital | 0 | 0 | 0 | -750,949 |
| Proceeds on issue of ordinary shares | 91 | 1,851 | 2,337 | 6,752 |
| Purchase of treasury shares | 0 | 0 | -16,569 | 0 |
| Cash flow from financing activities | -3,996 | -2,231 | -25,600 -755,354 | |
| Net increase/(decrease) in cash and cash equivalents | 13,357 | 20,440 | -14,307 | 140,199 |
| Cash and cash equivalents at the beginning of period2 | 186,058 | 372,030 | 213,941 | 252,112 |
| Exchange rate changes on foreign cash balances | -2,952 | 395 | -3,171 | 554 |
| Total cash and cash equivalents at the end of the period2 | 196,463 | 392,865 | 196,463 | 392,865 |
| Cash held in short term fixed deposits | 150,000 | 0 | 150,000 | 0 |
| Net cash at the end of the period | 346,463 | 392,865 | 346,463 | 392,865 |
1Includes movements in the non-current portion of deferred revenue presented under non-current liabilities.
2 Cash and cash equivalents at the beginning of 2019 includes cash classified as held for sale of €4 million.
The condensed consolidated financial information for the three- and nine- month period ended 30 September 2020 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 2019.
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 deferred and unbilled revenue
Gross margin is calculated as gross profit divided by revenue
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 continuing operating activities minus capital expenditure (investments in intangible assets and property, plant and equipment) of continuing operations
Net cash is cash and cash equivalents, including cash classified as held for sale, plus cash held in fixed-term deposits minus the nominal value of our outstanding bank borrowings
TomTom Investor Relations
Email: [email protected]
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Date and time: October 14, 2020 at 14:00 CET
https://corporate.tomtom.com/investors/financial-publications/quarterly-results
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