Earnings Release • Apr 27, 2011
Earnings Release
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| (in € millions) | Q1 '11 | Q1 '10 | y.o.y. change |
Q4 '10 | q.o.q. change |
|---|---|---|---|---|---|
| Revenue | 265 | 268 | -1% | 516 | -49% |
| Gross result Gross margin |
141 53% |
144 54% |
-2% | 237 46% |
-40% |
| EBITDA EBITDA margin |
44 17% |
44 16% |
1% | 95 18% |
-53% |
| EBIT result EBIT margin |
18 7% |
17 6% |
7% | 65 13% |
-72% |
| Net result | 11 | 3 | 243% | 52 | -80% |
| EPS, € diluted Adjusted EPS2 , € diluted |
0.05 0.10 |
0.01 0.07 |
240% 40% |
0.23 0.29 |
-80% -65% |
1 For the outlook on earnings per share for 2011 we used an estimate of the average diluted share count of 226 million shares
2 Operating expenses include restructuring charges of €0.6 million in Q1 2011, €1.4 million in Q1 2010 and €1.3 million in Q4 2010
"Our newer revenue lines continue to make good progress; our Automotive unit grew strongly and more than one third of our revenue came from Content & Services. We also shipped our first sports watch, which has been well received.
We are in a phase of transition but the PND market remains important. The European market developed more or less in line with our expectations. The North American market however showed a more negative trend towards the end of the quarter. The new full year revenue guidance reflects lower expectations for PND revenue.
We are executing our strategy as planned and we are investing in our technology platforms to enable us to deliver innovative new products and services, and return to growth in the years to come."
Due to recent PND market developments, we now expect PND revenue to be lower than previously assumed. It is unlikely that this decrease can be fully compensated by increased Automotive sales and further growth of Content & Services revenue compared to last year. As a result, we now expect full year revenue of between €1,425 million and €1,475 million.
The increased relative size of Content & Services in our revenue mix will support a strong gross margin. We will continue to invest in our development and commercial activities as we evolve our technologies and capabilities to accelerate our growth in the Automotive and Business Solutions segments. At the same time we will align discretionary spending with revenue development. As a result we maintain our guidance for broadly flat earnings per share compared to 2010.
| (€ millions based on non-rounded figures) | Q1 '11 | Q1 '10 | y.o.y. change |
Q4 '10 | q.o.q. change |
|---|---|---|---|---|---|
| Consumer | 157 | 186 | -16% | 406 | -61% |
| Automotive | 60 | 39 | 53% | 55 | 10% |
| Licensing | 34 | 31 | 11% | 39 | -13% |
| Business Solutions | 14 | 12 | 17% | 16 | -11% |
| Hardware | 169 | 188 | -10% | 418 | -60% |
| Content & Services | 96 | 80 | 20% | 98 | -2% |
The market size in Europe for PNDs was 2.4 million units compared to 2.7 million units in the same quarter of last year. Our market share remained stable year over year at 47%. The North American market size was 2.1 million units compared to 2.6 million units in the same quarter of the prior year. Our market share grew from 22% to 24%. The European and North American markets combined declined by 15% year over year.
In the quarter we announced our premium range connected GO LIVE series and launched the mid range VIA products for the US market. We introduced our live HD Traffic website which enables people to plan their journeys in advance, taking into account current and expected traffic congestion. Just after the quarter end we started shipping our GPS sports watch which we developed with Nike. The watch has been received well by the market because of its innovative design, ease of use and connectivity to Nikeplus.com.
In Automotive we were able to expand sales within all of our existing relationships. In the quarter we announced that our integrated connected navigation solution will now be included in the Lancia Ypsilon. More than half of the products we are selling to Renault are now connected products and dealers have started selling LIVE Services subscriptions.
Licensing announced an agreement to supply Route 66 with maps and enhanced content. We launched Traffic Stats, an online portal for governments and enterprises to access historical travel times and speeds for any given road. We entered into multiple partnership agreements with yellow pages companies across Europe to enrich our business listings content and expand our suite of Points of Interest. We also made our Speed Cameras database available to third parties. The latest map release includes coverage of 34 million kilometres (21 million miles) and 103 countries.
Business Solutions launched new products for the professional market with 5" (13 cm) screen versions of the existing PRO range. In the quarter, the number of WEBFLEET subscriptions grew by 9,000 to 143,000, a year over year increase of 39,000 or 37%.
The group generated €265 million revenue for the quarter, a decrease of 1% compared to the same quarter last year (Q1 2010: €268 million) and a 49% decrease sequentially (Q4 2010: €516 million). Year on year, revenue for Consumer declined and this decline was almost fully offset by an increase in revenue in the other three business units.
The revenue of the Consumer business unit over the past quarter amounted to €157 million which is a €30 million decrease compared to the same quarter of last year (Q1 2010: €186 million). The year on year decrease is a result of a decline in the PND market, partially compensated by an increase in LIVE Services revenue.
Automotive revenue grew by €21 million or 53% to €60 million compared to the same quarter last year (Q1 2010: €39 million). This growth was driven by increased system sales as our solutions were offered in more models within existing customers, as well as by increased demand for our maps. Sequentially revenue increased by 10% (Q4 2010: €55 million); the first quarter is seasonally a strong one for Automotive.
Licensing revenue grew year on year by €3.4 million or 11% to €34 million and decreased by €5.1 million sequentially (Q1 2010: €31 million, Q4 2010: €39 million). The Q1 result includes a positive correction of €4 million to previously reported royalties. Mix wise we saw a strengthening of our internet and wireless sales which was offset by a decline in revenue in the PND segment.
Business Solutions revenue increased by €2.0 million or 17% year on year to €14 million (Q1 2010: €12 million) driven by new subscriptions revenue. Sequentially revenue decreased by €1.8 million (Q4 2010: €16 million).
Hardware revenue for the quarter was €169 million across the group, a decrease of 10% year on year (Q1 2010: €188 million) and a decrease compared to the fourth quarter of 60% (Q4 2010: €418 million).
Content & Services revenue was €96 million for the quarter compared to €80 million in Q1 2010, an increase of 20%. Consumer and Automotive were the main contributors to the increase. Sequentially, Content & Services revenue for the quarter decreased by 2%, mainly as a result of seasonally lower PND map revenue in Licensing. Content & Services revenue represented 36% of total revenue (Q1 2010: 30%; Q4 2010: 19%).
The gross margin for the group was 53% compared to 54% in the same quarter last year and was up sequentially by 7 percentage points from 46%. The year on year decline partly results from foreign exchange rates. The sequential increase was the result of a change in the product mix of Consumer products sold in the first quarter versus the fourth quarter.
Total operating expenses for the quarter amounted to €123 million, a decrease of €4.5 million, or 3.5% compared to the same quarter last year (Q1 2010: €127 million). The year on year decrease was mainly the result of lower marketing expenditure. Compared to Q4 2010, operating expenses decreased by €49 million or 29% (Q4 2010: €172 million), mainly in marketing. As a percentage of revenue, operating expenses for the quarter were 46% compared to 47% in Q1 2010 and 33% in Q4 2010.
R&D expenses for the quarter were €42 million, a decrease of €2.4 million compared to the previous quarter (Q4 2010: €44 million) and an increase of €0.7 million year on year (Q1 2010: €41 million). The sequential decrease is mainly the result of the timing of development projects.
Amortisation of technology and databases for the quarter was €19 million (Q1 2010: €17 million, Q4 2010: €23 million). The sequential decrease is mainly attributable to accelerated amortisation of certain redundant intangible assets in Q4 2010.
Marketing expenses decreased by €4.9 million (32%) year on year to €10 million (Q1 2010: €15 million) and by €38 million (79%) sequentially (Q4 2010: €48 million). The sequential decrease mainly reflects seasonality. Total marketing expenses represented 7% of Consumer revenue, a decrease of 5 percentage points sequentially and 1 percentage point year on year (Q4 2010: 12%; Q1 2010: 8%).
Selling, general and administrative (SG&A) expenses for the quarter amounted to €49 million, representing a year on year decrease of 3% and a sequential decrease of 8% (Q4 2010: €54 million; Q1 2010: €51 million). The year on year decrease results from lower professional services expenses. The sequential decrease is explained by some seasonality in our sales expenses. SG&A expenses represented 19% of current quarter group revenue, compared to 10% in the previous quarter and 19% in the same quarter last year.
Stock compensation expenses for the quarter were €2.8 million, which is flat year on year (Q1 2010: €2.8 million) and nearly that sequentially (Q4 2010: €2.9 million).
The operating result for the quarter was €18 million, a year on year increase of 7% (Q1 2010: €17 million) and a sequential decrease of €47 million or 72% (Q4 2010: €65 million). As a percentage of revenue, the operating profit was 7%, an increase of 1 percentage point compared with the same quarter last year (Q1 2010: 6%) and down by 6 percentage points sequentially (Q4 2010: 13%).
The total interest charge for the quarter was €6.0 million (Q1 2010: €8.5 million, Q4 2010: €8.1 million). Interest expense on the term loan and revolving credit for the quarter amounted to €5.0 million. The amortisation of the transaction costs related to the facility amounted to €1.6 million. The interest expense was partially offset by an interest income of €0.5 million on cash balances.
The other financial result for the quarter of €1.7 million comprised interest income of €1.2 million as a result of a tax refund and a foreign exchange gain of €0.5 million mainly attributable to the positive effect of the depreciating US dollar on our payable position.
The income tax charge was €3.0 million in the quarter (Q1 2010: €0.9 million, Q4 2010: €10 million). The effective tax rate in the first quarter was 22.1% (Q1 2010: 22.6%; Q4 2010: 16.5%). The low tax rate in the previous quarter was influenced by the one-off impact of the transfer of a content database from the US to the Netherlands.
On 31 March 2011, the carrying value of our borrowings amounted to €589 million, an increase of €1.4 million compared to the previous quarter which mainly results from our amortised transaction costs which are added back to the borrowings over the life time of the borrowings (Q4 2010: €588 million). Excluding transaction costs, which are netted against the borrowings, our outstanding borrowings amounted to €598 million (Q4 2010: €598 million).
Our net debt as of 31 March 2011 increased slightly to €309 million from €294 million at the end of the previous quarter. Net debt is the sum of the borrowings (€598 million), minus cash and cash equivalents at the end of the period (€289 million) plus our financial lease commitments (€0.8 million).
On 1 April 2011, TomTom signed a forward start facilities agreement comprising of a €250 million term loan facility and a €150 million revolving credit facility that will extend the maturity of the existing bank facilities that the company has in place. The new facilities will provide TomTom with financial resources for ongoing strategic and operational requirements beyond the term of the existing facilities. The facilities agreement start date is 31 December 2012 and it will mature on 31 March 2016. €75 million of the term loan is repayable on each of 31 December 2013 and 31 December 2014, with a final repayment of €100 million payable on 31 March 2016.
As at the end of Q1 2011, accounts receivable plus other receivables amounted to €177 million. This is a decrease of €26 million year on year and a decrease of €171 million sequentially. The inventory level was €99 million, an increase of €38 million year on year and an increase of €4.8 million in comparison to the previous quarter. Cash and cash equivalents at the end of the quarter were €289 million.
Current liabilities were €635 million compared to €605 million at the end of the same quarter last year and €834 million in the previous quarter. The sequential decrease was mainly caused by a decrease of €98 million in trade payables and €82 million in other liabilities and accruals.
During the quarter, we recorded a cash inflow from operations of €5.5 million which was mainly driven by our EBITDA (€44 million) and changes in working capital (-€36 million).
The cash flow used in investing activities during the quarter increased to €17 million from €15 million in Q1 2010, mainly due to the increased investment in new product development in Automotive.
| (in € thousands) | Q1 '11 | Q1 '10 |
|---|---|---|
| Revenue | 265,146 | 268,356 |
| Cost of sales | 124,224 | 124,105 |
| Gross result | 140,922 | 144,251 |
| Research and development expenses | 41,729 | 40,965 |
| Amortisation of technology & databases | 18,620 | 17,413 |
| Marketing expenses | 10,248 | 15,123 |
| Selling, general and administrative expenses | 49,320 | 50,988 |
| Stock compensation expense | 2,847 | 2,761 |
| Total operating expenses | 122,764 | 127,250 |
| Operating result | 18,158 | 17,001 |
| Interest result | -6,043 | -8,486 |
| Other finance result | 1,665 | -5,655 |
| Result associates | -332 | 929 |
| Result before tax | 13,448 | 3,789 |
| Income tax | -2,977 | -858 |
| Net result | 10,471 | 2,931 |
| Minority interests | -109 | -156 |
| Net result attributed to the group | 10,580 | 3,087 |
| Basic number of shares (in millions) | 221.8 | 221.7 |
| Diluted number of shares (in millions) | 224.1 | 222.1 |
| EPS, € basic | 0.05 | 0.01 |
| EPS, € diluted | 0.05 | 0.01 |
| (in € thousands) | 31 March 2011 | 31 Dec 2010 |
|---|---|---|
| Goodwill | 854,713 | 854,713 |
| Other intangible assets | 937,920 | 946,263 |
| Property, plant and equipment | 37,830 | 38,977 |
| Deferred tax assets | 18,614 | 22,265 |
| Investments | 7,561 | 7,720 |
| Total non-current assets | 1,856,638 | 1,869,938 |
| Inventories | 98,651 | 93,822 |
| Trade receivables | 129,054 | 305,821 |
| Other receivables and prepayments | 47,696 | 41,853 |
| Other financial assets | 2,461 | 5,724 |
| Cash and cash equivalents | 289,316 | 305,600 |
| Total current assets | 567,178 | 752,820 |
| Total assets | 2,423,816 | 2,622,758 |
| Share capital | 44,375 | 44,362 |
| Share Premium | 975,104 | 974,554 |
| Other reserves | 38,359 | 45,757 |
| Stock compensation reserve | 74,348 | 71,662 |
| Retained earnings/(deficit) | 10,389 | -222 |
| Minority interests | 5,044 | 5,416 |
| Total equity | 1,147,619 | 1,141,529 |
| Borrowings | 384,853 | 384,011 |
| Provisions | 48,947 | 51,051 |
| Long-term liability | 2,213 | 926 |
| Deferred tax liability | 205,527 | 211,014 |
| Total non-current liabilities | 641,540 | 647,002 |
| Trade payables | 120,793 | 218,419 |
| Borrowings | 204,139 | 203,586 |
| Tax and social security | 16,471 | 35,443 |
| Provisions | 56,864 | 58,237 |
| Other liabilities and accruals | 236,390 | 318,542 |
| Total current liabilities | 634,657 | 834,227 |
| Total equity and liabilities | 2,423,816 | 2,622,758 |
| (in € thousands) | Q1 '11 | Q1 '10 |
|---|---|---|
| Operating result | 18,158 | 17,001 |
| Financial losses | -3,194 | -10,188 |
| Depreciation of property, plant and equipment | 3,514 | 4,598 |
| Amortisation of intangible assets | 22,808 | 22,268 |
| Change in provisions | -2,818 | -5,513 |
| Change in stock compensation reserve | 2,685 | 2,730 |
| Changes in working capital: | ||
| Change in inventories | -5,488 | 5,632 |
| Change in receivables and prepayments | 170,924 | 117,980 |
| Change in current liabilities | -201,088 | -177,249 |
| Cash generated from operations | 5,501 | -22,741 |
| Interest received | 438 | 158 |
| Interest paid | -5,063 | -5,865 |
| Corporate income taxes received/paid | 1,588 | -12,747 |
| Net cash flow from operating activities | 2,464 | -41,195 |
| Investments in intangible assets | -12,469 | -11,304 |
| Investments in property, plant and equipment | -4,367 | -3,455 |
| Total cash flow used in investing activities | -16,836 | -14,759 |
| Proceeds on issue of ordinary shares | 564 | 0 |
| Total cash flow from financing activities | 564 | 0 |
| Net decrease in cash and cash equivalents | -13,808 | -55,954 |
| Cash and cash equivalents at beginning of period | 305,600 | 368,403 |
| Exchange rate effect on cash balances held in foreign currencies | -2,476 | 1,046 |
| Cash and cash equivalents at end of period | 289,316 | 313,495 |
The condensed consolidated financial information for the three-month period ended 31 March 2011 with related comparative information have been prepared using accounting policies which are based on International Financial Reporting Standards (IFRS). Accounting policies and methods of computation followed in the condensed consolidated financial information, for the period ended 31 March 2011, are the same as those followed in the Financial Statements for the year ended 31 December 2010. Further disclosures as required under IFRS for a complete set of consolidated financial statements are not included in the condensed consolidated financial information.
TomTom Investor Relations [email protected] +31 20 757 5194
The information for our first quarter results audio webcast is as follows: Date and time: 27 April 2011 at 14:00 CET http://corporate.tomtom.com/events.cfm
TomTom is listed at NYSE Euronext Amsterdam in the Netherlands ISIN: NL0000387058 / Symbol: TOM2
Founded in 1991, TomTom (AEX:TOM2) is the world's leading supplier of location and navigation products and services focused on providing all drivers with the world's best navigation experience. Headquartered in Amsterdam, TomTom has over 3,500 employees and sells its products in more than 40 countries.
Our products include portable navigation devices, in-dash infotainment systems, fleet management solutions, maps and real-time services, including the award winning TomTom HD Traffic.
For the world's most up-to-date route planner, including live traffic information please visit www.routes.tomtom.com
For further information, please visit www.tomtom.com
This document contains certain forward-looking statements relating to the business, financial performance and results of the Company and the industry in which it operates. These statements are based on the Company's current plans, estimates and projections, as well as its expectations of external conditions and events. In particular the words "expect", "anticipate", "estimate", "may", "should", "believe" and similar expressions are intended to identify forwardlooking statements. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those suggested in the forward-looking statements. These include, but are not limited to: the level of consumer acceptance of existing and new and upgraded products and services; the growth of overall market demand for the Company's products or for personal navigation products generally; the Company's ability to sustain and effectively manage its recent rapid growth and its relations with third party suppliers, and its ability to accurately forecast the volume and timing of sales. Additional presently unknown factors could also cause future results to differ materially from those in the forward-looking statements.
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