Quarterly Report • Oct 16, 2019
Quarterly Report
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We reiterate our FCF guidance of around 9% as a percentage of Group revenue; Updated Group revenue guidance of around €700 million, of which Location Technology revenue of around €425 million.
"We recently held our Capital Markets Day, where we showcased the key opportunities shaping our industry and our strategy to capture growth through our core technologies. We also presented our mid-term financial outlook, where we expect our Location Technology revenue to increase with a CAGR of around 10% between 2018 and 2021, supported by an Automotive backlog of €1.6 billion.
Developing cutting-edge technology has helped us to build strong relationships with leading technology companies. We integrated our navigation technology with Microsoft's connected vehicle platform, and in combination, offer the full stack of the end car-user experience through the cloud, including data analytics possibilities for OEMs. It's a very promising partnership that will develop over the years."
| (€ in millions, unless stated otherwise) | Q3 '19 | Q3 '18 | y.o.y. change |
YTD '19 | YTD '18 | y.o.y. change |
|---|---|---|---|---|---|---|
| Location Technology | 96.5 | 93.3 | 4 % | 315.6 | 265.7 | 19 % |
| Consumer | 67.7 | 83.0 | -18 % | 228.9 | 247.1 | -7 % |
| Revenue | 164.2 | 176.3 | -7% | 544.5 | 512.8 | 6% |
| Gross result | 127.9 | 126.1 | 1% | 391.2 | 358.0 | 9% |
| Gross margin | 78% | 71% | 72% | 70% | ||
| EBITDA | 15.9 | 43.8 | -64% | 65.6 | 114.3 | -43% |
| EBITDA margin | 10% | 25% | 12% | 22% | ||
| Net result1 | -43.4 | 17.2 | 701.8 | 43.3 | ||
| Adjusted EPS2 , € fully diluted |
0.33 | 0.10 | 0.23 | 0.22 | ||
| Free cash flow (FCF) | 22.7 | 15.2 | 50% | 18.2 | 23.7 | -23% |
| FCF as a % of revenue | 14% | 9% | 3% | 5% |
1All figures presented in the table above relate to continuing operations, except for the figures presented for Net result.
2 Adjusted earnings per share is calculated as the net result from continuing operations attributed to equity holders adjusted for movement of deferred/unbilled revenue, impairments and acquisition-related amortization on a post-tax basis divided by the weighted average number of diluted shares over the period.
This report includes the following non-GAAP measures: Automotive operational revenue; gross margin; EBIT (margin); EBITDA (margin); adjusted net result; adjusted EPS; Automotive backlog; free cash flow and net cash, which are further explained on page 9 of this report.
We are updating our full-year guidance.
| (€ in millions, unless stated otherwise) | Updated Outlook 2019 |
Previous Outlook 2019 |
Actuals 2018 |
|---|---|---|---|
| Revenue | ~700 | >700 | 687 |
| Of which Location Technology | 425 | 435 | 372 |
| FCF as % of Group revenue | 9% | 9% | 13% |
| Adjusted EPS1 2, € fully diluted | 0.20 | 0.15 | 0.32 |
We are updating our revenue guidance to around €700 million for the Group and to around €425 million for Location Technology. As the reported revenue reduction relates primarily to accounting treatments and not to today's operational cash flows, our FCF guidance of around 9% of Group revenue remains unchanged.
The adjusted EPS is now expected to be around €0.20 partly due to higher gross margin. We expect a gross margin of at least 70% in the year.
During our Capital Markets Day held on the 24th of September, we introduced Automotive backlog as a new KPI, with the aim of giving better visibility on our Automotive revenue. Our Automotive backlog is currently around €1.6 billion, which represents the sum of the total expected IFRS revenue from all existing awarded Automotive deals. We will give an update of this metric on an annual basis during our full-year results.
We also presented our medium-term guidance during the event. We expect our Location Technology business, comprised of Automotive and Enterprise, to grow its revenue to around €500 million by 2021, which represents a CAGR of around 10% for the period between 2018 and 2021.
Revenue for the third quarter amounted to €164 million, a 7% decrease compared with the same quarter last year (Q3 '18: €176 million).
| (€ in millions) | Q3 '19 | Q3 '18 | y.o.y. change |
YTD '19 | YTD '18 | y.o.y. change |
|---|---|---|---|---|---|---|
| Automotive | 55.4 | 59.4 | -7 % | 196.5 | 171.7 | 14 % |
| Enterprise | 41.1 | 33.9 | 21 % | 119.1 | 94.0 | 27 % |
| Location Technology revenue | 96.5 | 93.3 | 4% | 315.6 | 265.7 | 19% |
Location Technology revenue in the quarter increased by 4% to €97 million (Q3 '18: €93 million).
Automotive generated revenue of €55 million in the quarter, representing a 7% decrease year on year, while Automotive operational revenue increased by 23% to €88 million (Q3 '18: €72 million). The increase in operational revenue reflects higher volumes in connection with contracts which started at the end of last year. In the quarter, a larger portion of our operational revenue had to be deferred versus the same quarter last year, resulting in a year on year revenue decline in reported revenue.
Enterprise revenue in Q3 '19 was €41 million, 21% higher than the same quarter last year (Q3 '18: €34 million), mainly due to an extension of a partnership.
During this year's IAA in Frankfurt, Automotive announced a new partnership with Microsoft to integrate our navigation technology into the Microsoft Connected Vehicle Platform. Navigation usage
and diagnostics data can be sent to Microsoft Azure where the data can be used by automakers to generate data-driven insights both for navigation applications and autonomous driving vehicles.
We recently launched our fully autonomous testing vehicle, named Trillian, to further advance our automated driving solutions. This vehicle will allow us to test and improve our autonomous technologies and services. Multiple laser scanners, cameras and radars are built into the vehicle. Moreover, we started a collaboration with HELLA Aglaia, which will allow us to update our HD Maps in real-time with camera data from vehicles equipped with their software.
Furthermore, the volume of ADAS enabled vehicles that are powered by our maps has doubled and is currently at over 1 million passenger and commercial vehicles. Our technology allows for better path planning, improving safety and fuel efficiency.
Within Enterprise, we launched the TomTom Long Distance Electric Vehicle (EV) Routing API and the TomTom EV Charging Stations Availability API to help developers build applications for EV drivers that will lead to a reliable and stress-free driving experience. Our continued innovation within the EV technology space has recently been recognized as we were awarded the TaaS Technology Award 2019.
We also launched the TomTom Map Styler, a new tool that allows developers to customize every element of a map - giving them full control to design their map their way. The TomTom Map Styler further enhances our capabilities for the developer community.
At the TechCrunch Disrupt San Francisco conference, we announced a new collaboration with Verizon focused on making intersections safer for emergency vehicles. The initiative uses our HD maps and Verizon's 5G network to enable the sharing of location information for a given intersection with emergency vehicles in near real-time.
| (€ in millions) | Q3 '19 | Q3 '18 | y.o.y. change |
YTD '19 | YTD '18 | y.o.y. change |
|---|---|---|---|---|---|---|
| Consumer products | 63.3 | 75.0 | -16 % | 199.5 | 215.9 | -8 % |
| Automotive hardware | 4.4 | 8.0 | -46 % | 29.5 | 31.2 | -6 % |
| Total Consumer revenue | 67.7 | 83.0 | -18% | 228.9 | 247.1 | -7% |
Consumer revenue for the quarter decreased year on year by 18% to €68 million (Q3 '18: €83 million), reflecting a decrease in both Consumer products as well as Automotive hardware revenue.
The gross margin for the quarter was 78% compared with 71% in Q3 '18. The year on year improvement is mainly the result of a change in estimates of certain provisions and a higher proportion of high margin software & content revenue. Excluding the change in provisions, gross margin for the quarter would have been 74%.
Operating result (EBIT) in the quarter was a loss of €57 million (Q3 '18: profit of €10 million).
Total operating expenses in the quarter was €185 million, an increase of €69 million compared with the same quarter last year (Q3 '18: €116 million), mainly due to the change in the estimated remaining useful life of our map database, which resulted in an increased amortization expense. Additionally, R&D expenses increased due to lower capitalization of tools and content as well as higher personnel costs incurred to support our growing Location Technology business.
Total financial result, including results from associate, for the quarter was an income of €0.8 million (Q3 '18: income of €0.1 million), which consisted primarily of foreign exchange gains from the revaluation of monetary balance sheet items.
The net income tax gain for the quarter was €13 million compared with an expense of €6 million in Q3 '18. The tax gain is mainly the result of a release of deferred tax liability in line with the increased amortization of acquisition-related intangible assets.
| (€ in millions, unless stated otherwise) | Q3 '19 | Q3 '18 | YTD '19 | YTD '18 |
|---|---|---|---|---|
| Net result from continuing operations | -43.4 | 4.5 | -124.0 | 6.3 |
| Movement of deferred and unbilled revenue | 60.6 | 13.0 | 56.5 | 24.4 |
| Acquisition-related amortization | 51.8 | 11.6 | 155.5 | 34.9 |
| Tax impact | -24.7 | -5.7 | -45.6 | -13.7 |
| Adjusted net result | 44.3 | 23.4 | 42.3 | 51.9 |
| Adjusted EPS, € fully diluted | 0.33 | 0.10 | 0.23 | 0.22 |
The net result from continuing operations for the quarter was a loss of €43 million compared with a gain of €5 million in Q3 '18. Adjusted net result for the quarter was a gain of €44 million, which translates to a fully diluted adjusted EPS of €0.33 (Q3 '18: €0.10).
The adjusted net result year to date was a gain of €42 million, translating into an adjusted EPS of €0.23. Due to the share consolidation that occurred in May 2019, the weighted average number of diluted shares year to date significantly deviates from the weighted average number of diluted shares per quarter. As a result, the sum of the adjusted EPS of Q1, Q2 and Q3 '19 does not equal the adjusted EPS YTD '19.
| (€ in millions) | Q3 '19 | Q3 '18 | YTD '19 | YTD '18 |
|---|---|---|---|---|
| Automotive | 32.9 | 12.4 | 68.2 | 48.8 |
| Enterprise | 33.3 | 10.4 | 4.2 | -5.4 |
| Consumer | -5.5 | -9.8 | -15.8 | -19.0 |
| Total | 60.6 | 13.0 | 56.5 | 24.4 |
The higher net movement for the quarter, compared with the same quarter last year, is explained by higher deferrals of Automotive revenue and the timing of invoicing of certain Enterprise customers. The increase in deferred revenue of Location Technology is partly offset by a decrease in Consumer deferred revenue as PND business continues to decline.
Trade receivables were €137 million in Q3 '19 compared with €93 million at the end of 2018, mainly reflecting the timing of invoicing. The inventory level at the end of the quarter was €27 million, a €1 million increase from the end of last year.
Current liabilities, excluding deferred revenue and assets held for sale, were €199 million, compared with €230 million at the end of 2018. The decrease is mainly due to a decrease in 'Accruals and other liabilities' reflecting payments of personnel-related accruals in the first half of the year.
| (€ in millions) | 30 September 2019 | 31 December 2018 |
|---|---|---|
| Automotive | 235.5 | 172.1 |
| Enterprise | 37.1 | 17.4 |
| Consumer | 75.6 | 91.4 |
| Total | 348.2 | 280.9 |
Total deferred revenue was €348 million at the end of Q3 '19, compared with €281 million at the end of 2018. The increase is driven by an increase of Location Technology deferred revenue, offset by releases of deferred revenue in Consumer.
In Q3 '19, the free cash flow (FCF) from continuing operations was an inflow of €23 million versus an inflow of €15 million in the same quarter last year. This is mainly due to higher automotive operational revenue, as reflected by the increase in deferred revenue.
The cash flow used in investing activities for continuing operations in the quarter was €4 million, a €22 million decrease compared with the same quarter last year. The decrease reflects lower capitalization of tools and content.
The cash flow from financing activities for the quarter was an outflow of €2.2 million (Q3 '18: outflow of €5.3 million) mainly relating to lease liability payments offset by the cash inflow from options exercises. In the quarter, 379 thousand options relating to our long-term employee incentive programs were exercised (Q3 '18: 166 thousand options).
On 30 September 2019, the Group had no outstanding bank borrowings and reported a net cash position of €393 million (Q3 '18: net cash of €179 million).
- END -
| Q3 '19 | Q3 '18 | YTD '19 | YTD '18 | |
|---|---|---|---|---|
| (€ in thousands) | Unaudited | Unaudited | Unaudited | Unaudited |
| Revenue | 164,206 | 176,330 | 544,536 | 512,797 |
| Cost of sales | 36,277 | 50,275 | 153,309 | 154,832 |
| Gross profit | 127,929 | 126,055 | 391,227 | 357,965 |
| Research and development expenses | 80,272 | 50,637 | 231,610 | 148,951 |
| Amortization of technology and databases | 65,038 | 27,126 | 196,073 | 77,000 |
| Marketing expenses | 7,057 | 7,570 | 20,434 | 20,576 |
| Selling, general and administrative expenses | 32,647 | 30,521 | 96,346 | 95,787 |
| Total operating expenses | 185,014 | 115,854 | 544,463 | 342,314 |
| Operating result | -57,085 | 10,201 | -153,236 | 15,651 |
| Financial income/(expense) and result of associate | 785 | 149 | -1,082 | 1,687 |
| Result before tax | -56,300 | 10,350 | -154,318 | 17,338 |
| Income tax gain/(expense) | 12,871 | -5,815 | 30,310 | -11,017 |
| Net result from continuing operations | -43,429 | 4,535 | -124,008 | 6,321 |
| Net after tax profit from discontinued operations | 0 | 12,625 | 18,615 | 37,015 |
| Result on business disposal | 0 | 0 | 807,237 | 0 |
| Total net result from discontinued operations | 0 | 12,625 | 825,852 | 37,015 |
| Net result | -43,429 | 17,160 | 701,844 | 43,336 |
| Attributable to: | ||||
| Equity holders of the parent | -43,429 | 17,160 | 701,844 | 43,433 |
| Non-controlling interests | 0 | 0 | 0 | -97 |
| Net result | -43,429 | 17,160 | 701,844 | 43,336 |
| Earnings per share (in €): | ||||
| Basic | -0.33 | 0.07 | 3.81 | 0.19 |
| Diluted | -0.33 | 0.07 | 3.77 | 0.19 |
| Earnings per share from continuing operations (in €): | ||||
| Basic | -0.33 | 0.02 | -0.67 | 0.03 |
| Diluted | -0.33 | 0.02 | -0.67 | 0.03 |
| 30 September 2019 | 31 December 2018 | |
|---|---|---|
| (€ in thousands) | Unaudited | Audited |
| Goodwill | 192,294 | 192,294 |
| Other intangible assets | 444,646 | 634,728 |
| Property, plant and equipment | 29,325 | 26,380 |
| Lease assets | 32,552 | 35,393 |
| Other contract related assets | 11,364 | 10,426 |
| Investments in associates | 4,285 | 3,899 |
| Deferred tax assets | 5,963 | 5,296 |
| Total non-current assets | 720,429 | 908,416 |
| Inventories | 27,483 | 26,400 |
| Trade receivables | 136,755 | 92,530 |
| Unbilled receivables | 33,359 | 22,512 |
| Other contract related assets | 12,315 | 14,071 |
| Other receivables and prepayments | 59,435 | 54,998 |
| Cash and cash equivalents | 392,865 | 247,675 |
| 662,212 | 458,186 | |
| Assets held for sale | 0 | 128,323 |
| Total current assets | 662,212 | 586,509 |
| Total assets | 1,382,641 | 1,494,925 |
| Total equity | 735,016 | 774,109 |
| Lease liabilities | 23,554 | 25,558 |
| Deferred tax liability | 42,764 | 80,436 |
| Provisions | 34,251 | 48,220 |
| Deferred revenue | 187,136 | 155,875 |
| Total non-current liabilities | 287,705 | 310,089 |
| Trade payables | 46,651 | 51,076 |
| Lease liabilities | 11,118 | 13,172 |
| Provisions | 22,558 | 26,192 |
| Deferred revenue | 161,094 | 125,035 |
| Other contract related liabilities | 37,692 | 38,665 |
| Income taxes | 18,602 | 17,609 |
| Accruals and other liabilities | 62,205 | 83,571 |
| 359,920 | 355,320 | |
| Liabilities associated with assets held for sale | 0 | 55,407 |
| Total current liabilities | 359,920 | 410,727 |
| Total equity and liabilities | 1,382,641 | 1,494,925 |
| Q3 '19 | Q3 '18 | YTD '19 | YTD '18 | |
|---|---|---|---|---|
| (€ in thousands) | Unaudited | Unaudited | Unaudited | Unaudited |
| Operating result from continuing operations | -57,085 | 10,201 | -153,236 | 15,651 |
| Operating result from discontinued operations | 0 | 13,581 | 19,016 | 39,907 |
| Operating result | -57,085 | 23,782 | -134,220 | 55,558 |
| Financial gains | 1,424 | 523 | 779 | -1,151 |
| Depreciation and amortization | 72,939 | 38,654 | 218,852 | 114,522 |
| Change in provisions | -14,104 | 1,271 | -17,966 | -7,423 |
| Equity-settled stock compensation expenses | 1,496 | 1,298 | 3,398 | 4,242 |
| Changes in working capital: | ||||
| Change in inventories | -5,134 | 378 | 458 | 5,294 |
| Change in receivables and prepayments | -18,936 | -15,077 | -53,049 | -32,152 |
| Change in liabilities (excluding provisions)1 | 47,501 | 7,312 | 35,006 | 9,878 |
| Cash generated from operations | 28,101 | 58,141 | 53,258 | 148,768 |
| Interest received | 339 | 187 | 829 | 397 |
| Interest paid | -262 | -506 | -1,902 | -1,076 |
| Corporate income taxes paid | -1,062 | -1,407 | -9,765 | -6,389 |
| Cash generated from operating activities | 27,116 | 56,415 | 42,420 | 141,700 |
| Investments in intangible assets | -1,573 | -22,149 | -9,954 | -59,355 |
| Investments in property, plant and equipment | -2,872 | -5,841 | -10,526 | -15,576 |
| Net cash flow on disposal of subsidiaries and businesses | 0 | 0 | 873,439 | 0 |
| Dividends received | 0 | 75 | 174 | 150 |
| Cash (used in)/generated from investing activities | -4,445 | -27,915 | 853,133 | -74,781 |
| Change in lease liabilities | -4,082 | -4,754 | -11,157 | -12,096 |
| Change in non-controlling interest | 0 | -1,400 | 0 | -1,545 |
| Capital repayment | 0 | 0 | -750,949 | 0 |
| Proceeds on issue of ordinary shares | 1,851 | 847 | 6,752 | 3,527 |
| Cash used in financing activities | -2,231 | -5,307 | -755,354 | -10,114 |
| Net increase in cash and cash equivalents | 20,440 | 23,193 | 140,199 | 56,805 |
| Cash and cash equivalents at the beginning of period | 372,030 | 155,292 | 252,112 | 120,850 |
| Exchange rate changes on cash balances held in foreign currencies |
395 | 37 | 554 | 867 |
| Total cash and cash equivalents at the end of the period | 392,865 | 178,522 | 392,865 | 178,522 |
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 2019 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 2018.
Unless otherwise indicated, the quarterly condensed consolidated information in this press release is unaudited 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.
Automotive operational revenue is IFRS Automotive revenue adjusted for the movement of deferred and unbilled 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 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
Adjusted net result is calculated as the net result from continuing operations attributed to equity holders adjusted for movement of deferred/unbilled revenue, impairments and acquisition-related amortization on a post-tax basis
Adjusted EPS is calculated as adjusted net result divided by the weighted average number of diluted shares over the period
Automotive backlog is the cumulative expected IFRS revenue from all awarded Automotive deals
Free cash flow is cash flow before financing from continuing operations
Net cash is defined as our cash and cash equivalents including cash classified as held-for-sale (IFRS 5) minus the nominal value of our outstanding bank borrowings
TomTom Investor Relations
Email: [email protected]
+31 20 757 5194
The information for our audio webcast is as follows:
Date and time: October 16, 2019 at 14:00 CET
https://corporate.tomtom.com/investors/financial-publications/quarterly-results
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