Earnings Release • Nov 6, 2007
Earnings Release
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Record units shipped and record profits
| (unaudited) (in € millions) |
Q3'07 | Q2'07 | Change | Q3'06 | Change | YTD '07 |
YTD '06 |
Change |
|---|---|---|---|---|---|---|---|---|
| Revenue | 427 | 380 | 12% | 353 | 21% | 1,103 | 886 | 24% |
| Gross profit | 208 | 169 | 23% | 154 | 35% | 496 | 360 | 38% |
| Gross margin | 48.8% | 44.6% | 43.5% | 45.0% | 40.7% | |||
| Operating profit | 133 | 93 | 43% | 101 | 33% | 283 | 215 | 32% |
| Operating margin | 31.3% | 24.5% | 28.5% | 25.7% | 24.2% | |||
| Net profit | 99 | 68 | 44% | 73 | 36% | 211 | 142 | 49% |
| EPS (fully diluted in €) | 0.83 | 0.58 | 42% | 0.62 | 33% | 1.78 | 1.21 | 47% |
* percentages are based on non-rounded figures
"TomTom delivered a strong set of results this quarter with record units shipped, record profits and record cash flow in a market that continues to grow rapidly.
Following successful tests of our real time traffic solution in the Netherlands we will launch our new service in November. Discussions with mobile phone operators in other European countries are progressing and we expect to make further announcements shortly.
Ahead of the fourth quarter we have launched important new products which have been received positively by the market. The amount of customer feedback we have received since the introduction of Map Share™ is also encouraging. We are confident that with our strong product line-up, supported by advertising campaigns and promotional activity TomTom will be able to defend its market position in Europe and to grow market share in the US."
The PND market continues to show strong growth, especially in the US. We have therefore increased our market expectations for Europe and the US to between 15 and 16 million units (2006: 8.5 million) and between 8 and 9 million units (2006: 3.0 million) respectively.
For the full year, we have increased our PND unit guidance to between 9 and 10 million units worldwide and we have narrowed the range of our revenue outlook to between €1.7 billion and €1.8 billion. We continue to expect good profitability for the rest of the year. During the holiday season as expected the investment in marketing will increase significantly and there will be promotional activity in retail. For the full year the gross margin will be more than 40% and the operating margin will be well in excess of 20%.
On 23 July 2007, TomTom announced that it intended to make a cash offer of €21.25 per ordinary share for Tele Atlas N.V. The tender offer was announced on 2 October with the acceptance period commencing on 3 October 2007 and ending on 4 December 2007, unless extended.
On 15 October 2007, TomTom and Tele Atlas were advised that the initial 15-day waiting period required by the US Hart Scott Rodino Antitrust Improvements Act (as amended) for TomTom's proposed acquisition of Tele Atlas had been terminated early without the issuance of a request for additional information or documentary material.
Following referral by the national competition authorities in the relevant EU member states to the European Commission as announced on 24 September 2007, the parties have notified the transaction with the European Commission in accordance with the planned time table.
TomTom and Tele Atlas are aiming to obtain approval of the transaction by the EC competition authorities by 4 December 2007, but it cannot be excluded that the competition proceedings will continue after that date. In this scenario, TomTom expects to extend its tender period.
In the third quarter the European market grew by approximately 80% compared to the same period last year to 3.7 million units. In the same period the US market more than tripled to 1.8 million units.
In the quarter TomTom introduced its latest entry level device, the TomTom ONE 3rd EDITION, which offers ease of use with quality navigation at a very affordable price. The new GO range also shipped in volume for the first time.
TomTom also announced its new high-end model, the TomTom GO 920 T. Both new devices have Map Share™ technology. TomTom Map Share™ enables users to share map improvements, daily, automatically and easily via TomTom HOME – TomTom's free software application.
The announcement that the latest Toyota Yaris will come with the option to include a TomTom portable navigation device as part of the Yaris' built-in radio system is a first step for TomTom in executing its strategy to develop solutions for the in-dash navigation market. We are continuing our discussions with other car manufacturers.
After entering Taiwan and South Africa earlier this year, we expanded our geographical presence in the third quarter by launching our products in New Zealand.
| (unaudited) (in € millions) |
Q3'07 | Q2'07 | Change | Q3'06 | Change | YTD '07 |
YTD '06 |
Change |
|---|---|---|---|---|---|---|---|---|
| Revenue | ||||||||
| PNDs | 398 | 352 | 13% | 336 | 18% | 1,021 | 826 | 24% |
| PDA/smartphone | 6 | 7 | -24% | 3 | 67% | 21 | 21 | 0% |
| solutions | ||||||||
| Other | 23 | 21 | 6% | 14 | 67% | 61 | 39 | 57% |
| Total | 427 | 380 | 12% | 353 | 21% | 1,103 | 886 | 24% |
| Number of units sold (in 000s) |
||||||||
| PNDs | 2,160 | 1,807 | 20% | 1,180 | 83% | 5,296 | 2,772 | 91% |
| PDA/smartphone solutions |
107 | 216 | -51% | 49 | 118% | 508 | 222 | 129% |
| Total | 2,267 | 2,023 | 12% | 1,229 | 84% | 5,804 | 2,994 | 94% |
| Average selling price | ||||||||
| PNDs (in €) | 184 | 195 | -5% | 285 | -35% | 193 | 298 | -35% |
| PDA/smartphone solutions (in €) |
52 | 34 | 53% | 68 | -23% | 41 | 94 | -56% |
* percentages are based on non-rounded figures
Revenue for the third quarter was €427 million, an increase of 12% sequentially (Q2 2007: €380 million) and 21% year on year (Q3 2006: €353 million).
Revenue from PND sales represented 93% of total revenue in the quarter (Q2 2007: 93%; Q3 2006: 95%) and increased by €46 million or 13% compared to the second quarter, to €398 million (Q3 2006: €336 million).
Europe represented 86% of total revenue for the quarter (Q2 2007: 82%; Q3 2006: 88%), revenues from North America were 10% of total revenue (Q2 2007: 15%; Q3 2006: 8%) and revenues from the rest of the world were 4% of total revenue (Q2 2007: 3%; Q3 2006: 4%).
Other revenues increased to €23 million for the quarter, up from €21 million in the second quarter of 2007 mainly driven by an increase in accessory sales following the availability of new accessories for the GO range. Compared to Q3 2006 (€14 million) other revenues increased by 67%.
For the first time TomTom shipped over 2 million PND units in a quarter, a sequential increase of 20% (Q2 2007: 1.8 million) and a growth of 83% year on year (Q3 2006: 1.2 million).
The average selling price for PNDs in Q3 was €184, a decrease of 5% compared to the previous quarter (€195). The sequential decrease in ASP results from planned price drops across the value line, partly offset by shipments of the new GO range.
We ended the quarter with channel inventories owned by retailers at an appropriate level. Channel inventory grew modestly because of new availability of the GO 520 and 720 and to prepare the channel for the important fourth quarter.
The gross margin was 48.8%, an increase of 4.2 percentage points sequentially (Q2 2007: 44.6%) and 5.3 percentage points year on year (Q3 2006: 43.5%). The strong product margin is driven by continued cost savings, particularly on newly engineered products.
Total operating expenses for the quarter decreased by 1.7% or €1.3 million to €74.8 million compared to the second quarter (Q2 2007: €76.1 million). The decline in total operating expenses was caused by the seasonal decrease in marketing spend (€12.2 million) offset by increased R&D and SG&A expenses. Year on year there was a 40.7% (€21.6 million) increase in total operating expenses (Q3 2006: €53.2 million). Operating expenses (excluding stock compensation expenses) as a proportion of revenue for the quarter decreased 2.6 percentage points to 15.4% (Q2 2007: 18%) and slightly increased year on year (Q2 2006: 13.6%).
The research and development (R&D) expenses for the quarter increased sequentially by 22% to €16.5 million (Q2 2007: €13.5 million), and year on year by 90% (Q3 2006: €8.6 million). This increase in R&D expenditure was driven by investment in new products and services to deliver our roadmaps in PNDs, content, automotive and traffic. R&D expenses represented 3.9% of revenue compared to 3.6% in the previous quarter and 2.4% in the third quarter of last year.
Marketing expenses were seasonally low at €21.1 million (Q2 2007: €33.3 million). Year on year marketing expenses increased by 36.4% (Q3 2006: €15.5 million). They represented 4.9% of revenue, down from 8.8% in the previous quarter and up from 4.4% in the third quarter of last year.
Selling, general and administrative (SG&A) expenses for the quarter increased by 32.0% to €28.3 million sequentially (Q2 2007: €21.5 million) and increased by 18.3% year on year (Q3 2006: €24.0 million). The sequential increase can be explained by the growth of our company in general. SG&A costs represented 6.6% of revenue compared to 5.6% in the previous quarter. In comparison with Q3 2006 SG&A costs were stable at 6.8%.
Stock compensation expenses for the quarter increased by 14.7% sequentially to €8.9 million (Q2 2007: €7.8 million; Q3 2006: €5.1 million). The stock compensation expenses for the quarter included €1.6 million of expenses for the share based incentive plan that was introduced in the second quarter and which has replaced the share option plan going forward.
The operating profit for the quarter was €133 million or 31.3% of revenue which was 6.8 percentage points higher than in the second quarter of 2007 and 2.8 percentage points higher than in the third quarter of 2006.
Financial income and expenses consisted of an income of €0.3 million compared to a loss of €0.4 million in the second quarter of 2007 and an income of €3.3 million in the third quarter of 2006.
The income results from a €6.0 million interest income which was offset by a €5.7 million loss on foreign exchange hedge instruments and on the revaluation of noneuro denominated assets and liabilities as a result of the weakening of the US Dollar against the Euro during the quarter.
Income tax increased by 43.1% to €35.2 million compared to the second quarter of 2007 (Q2 2007: €24.6 million) and increased by 12.8% compared to the third quarter of 2006 (Q3 2006: €31.2 million). The effective tax rate for the quarter was 26.3% (Q2 2007: 26.5%; Q2 2006: 30.1%).
In the third quarter €178 million of cash was generated from operations mainly driven by the operating profit of €133 million in combination with a working capital decrease of €27 million. Net cash increased by €153 million.
At the end of the third quarter, shareholder's equity had increased to €784 million, up from €679 million at the beginning of the quarter. Cash and cash equivalents at the end of the period amounted to €709 million (Q2 2007: €556 million).
Inventory increased by €58 million to €124 million as we prepared for the important fourth quarter. Our warranty and intellectual property related provisions increased by €10 million in the quarter which together with the increase of other liabilities reflected the growth of the business. Trade payables increased, in line with our increased stock level, to €88 million from €65 million at the start of the quarter.
The information for our third quarter results audio web cast is as follows: Time: Wednesday 24 October 2007 at 14:00 CET Place:http://investors.tomtom.com/tomtom/presentations/
ISIN: NL0000387058 Symbol: TOM2
TomTom NV is the world's largest navigation solution provider. TomTom's products are developed with an emphasis on innovation, quality, ease of use, safety and value. TomTom's products include all-in-one navigation devices which enable customers to navigate right out of the box; these are the award-winning TomTom GO range, the TomTom ONE XL, TomTom ONE and the TomTom RIDER. TomTom PLUS, is the location-based content and services offering for TomTom's navigation products easily available through TomTom HOME. TomTom also provides navigation software products which integrate with third party devices; the TomTom NAVIGATOR software for PDAs and smartphones. TomTom WORK combines industry leading communication and smart navigation technology with leading edge tracking and tracing expertise. TomTom's products are sold through a network of leading retailers in 30 countries and online. TomTom was founded in 1991 in Amsterdam and has offices in Europe, North America and Asia Pacific. TomTom is listed at Euronext, Amsterdam Stock Exchange in The Netherlands. For more information, go to http://www.tomtom.com.
| (unaudited) | ||||
|---|---|---|---|---|
| (in € thousands) | Q3'07 | Q3'06 | YTD '07 | YTD '06 |
| Revenue | 426,657 | 353,175 | 1,102,800 | 886,182 |
| Cost of sales | 218,363 | 199,414 | 606,859 | 525,838 |
| Gross profit | 208,294 | 153,761 | 495,941 | 360,344 |
| Operating expenses | ||||
| Research & development | 16,460 | 8,641 | 40,647 | 23,443 |
| Marketing | 21,113 | 15,480 | 75,212 | 56,203 |
| Selling, general and administrative | 28,324 | 23,951 | 72,411 | 51,387 |
| Stock compensation | 8,928 | 5,120 | 24,259 | 14,806 |
| Total operating expenses | 74,825 | 53,192 | 212,529 | 145,839 |
| Operating profit | 133,469 | 100,569 | 283,412 | 214,505 |
| Net financial income and (expenses) | 300 | 3,315 | 3,034 | -13,416 |
| Profit before tax | 133,769 | 103,884 | 286,446 | 201,089 |
| Income tax | 35,227 | 31,243 | 75,813 | 59,340 |
| Net profit | 98,542 | 72,641 | 210,633 | 141,749 |
| Average number of shares outstanding | ||||
| Basic (in 000s) | 113,422 | 110,734 | 113,122 | 109,646 |
| Diluted (in 000s) | 119,189 | 117,047 | 118,064 | 117,022 |
| Earnings Per Share, basic (in €) | 0.87 | 0.66 | 1.86 | 1.29 |
| Earnings Per Share, diluted (in €) | 0.83 | 0.62 | 1.78 | 1.21 |
| (unaudited) (in € thousands) |
30 Sep 2007 | 31 Dec 2006 |
|---|---|---|
| Non-current assets | ||
| Intangible assets | 56,544 | 39,183 |
| Property, plant and equipment | 14,296 | 7,926 |
| Deferred tax assets | 18,435 | 12,061 |
| Total non-current assets | 89,275 | 59,170 |
| Current Assets | ||
| Inventories | 124,143 | 123,005 |
| Trade receivables | 256,151 | 265,990 |
| Other receivables and prepayments | 18,801 | 16,320 |
| Other financial assets | 4,734 | 682 |
| Cash and cash equivalents | 708,844 | 437,801 |
| Total current assets | 1,112,673 | 843,798 |
| Total assets | 1,201,948 | 902,968 |
| Equity and liabilities | ||
| Shareholders' equity | ||
| Share capital | 22,696 | 22,584 |
| Share Premium | 115,973 | 115,075 |
| Legal reserves | 5,239 | 2,804 |
| Stock compensation reserve | 54,119 | 32,364 |
| Retained earnings | 586,026 | 377,963 |
| Total equity | 784,053 | 550,790 |
| Provisions | 76,890 | 43,785 |
| Deferred tax liability | 900 | 1,300 |
| Current liabilities | ||
| Trade payables | 87,610 | 66,744 |
| Tax and social security | 72,107 | 72,557 |
| Accruals | 80,678 | 88,683 |
| Other liabilities | 99,710 | 79,109 |
| Total current liabilities | 340,105 | 307,093 |
| Total equity and liabilities | 1,201,948 | 902,968 |
| (unaudited) (in € thousands) |
Q3'07 | Q3'06 | YTD 2007 |
YTD 2006 |
|---|---|---|---|---|
| Cash flow from operating activities Operating profit |
133,469 | 100,569 | 283,412 | 214,505 |
| Financial losses | (5,609) | (5,065) | (17,284) | (13,079) |
| Depreciation and amortization | 6,224 | 4,532 | 16,605 | 13,135 |
| Change to provisions | 10,204 | 10,299 | 33,135 | 16,075 |
| Change to stock compensation reserve | 6,788 | 5,120 | 21,412 | 14,571 |
| Changes in working capital: | ||||
| Increase in inventories | (58,234) | (58,674) | (1,138) | (5,486) |
| Decrease/(Increase) in receivables and prepayments | 5,687 | (46,696) | 6,811 | (118,211) |
| Increase in current liabilities | 79,425 | 107,347 | 37,688 | 138,703 |
| Cash generated from operations | 177,954 | 117,432 | 380,641 | 260,213 |
| Interest received | 6,030 | 2,671 | 14,831 | 5,851 |
| Corporate income taxes paid | (24,851) | (19,029) | (84,673) | (36,619) |
| Net cash flow from operating activities | 159,133 | 101,074 | 310,799 | 229,445 |
| Investments in intangible assets | (1,448) | (2,351) | (28,880) | (19,986) |
| Investments in property, plant and equipment | (5,543) | (2,075) | (11,456) | (6,190) |
| Total cash flow used in investing activities | (6,991) | (4,426) | (40,336) | (26,176) |
| Proceeds on issue of shares | 396 | 42 | 1,022 | 262 |
| Total cash flow from financing activities | 396 | 42 | 1,022 | 262 |
| Net increase in cash and cash equivalents | 152,538 | 96,690 | 271,485 | 203,531 |
| Cash and Cash equivalents at beginning of period | 556,438 | 281,282 | 437,801 | 178,377 |
| Exchange rate effect on cash balances held in foreign currencies |
(132) | (2) | (442) | (3,938) |
Cash and Cash equivalents at end of period 708,844 377,970 708,844 377,970
| (unaudited) (in € thousands) |
Share capital |
Share premium |
Legal reserves |
Stock compens. reserve |
Retained earnings |
Total |
|---|---|---|---|---|---|---|
| 31 Dec 2006 | 22,584 | 115,075 | 2,804 | 32,364 | 377,963 | 550,790 |
| Translation differences Transfer to legal reserves |
(135) 2,570 |
(2,570) | (135) 0 |
|||
| Net income (expense) recognised directly in equity |
0 | 0 | 2,435 | 0 | (2,570) | (135) |
| Profit for the year | 210,633 | 210,633 | ||||
| Total recognised income and expense |
0 | 0 | 2,435 | 0 | 208,063 | 210,498 |
| Stock compensation reserve Issue of Share Capital |
112 | 898 | 22,344 (589) |
0 | 22,344 421 |
|
| 30 Sep 2007 | 22,696 | 115,973 | 5,239 | 54,119 | 586,026 | 784,053 |
The condensed consolidated financial statements for the three-month period ended 30 September 2007 with related comparative information have been prepared using International Financial Reporting Standards (IFRS). Accounting policies and methods of computation followed in the interim financial statements, for the period ended 30 September 2007, are the same as those followed in the Financial Statements for the year ended 31 December 2006. Further disclosures as required under IFRS for a complete set of consolidated financial statements are not included in the condensed consolidated financial statements.
TomTom offers PNDs and navigation solutions for PDAs and smartphones. The Company generates sales across different geographical regions.
| (unaudited) (in € millions) |
Q3'07 | Q3'06 | YTD '07 | YTD '06 |
|---|---|---|---|---|
| Revenues per Region | ||||
| Europe | 366,072 | 312,192 | 931,468 | 794,839 |
| North America | 44,372 | 27,840 | 137,381 | 71,475 |
| Rest of world | 16,213 | 13,143 | 33,951 | 19,868 |
| Total | 426,657 | 353,175 | 1,102,800 | 886,182 |
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 forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those 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 the Company's relationship with third party suppliers, and its ability to accurately forecast the volume and timing of sales. Additional factors could cause future results to differ materially from those in the forward-looking statements.
This includes an announcement of TomTom N.V. ("TomTom") which is required pursuant to the provisions of section 9b paragraph 1 of the Dutch Securities Markets Supervision Decree 1995 (Besluit toezicht effectenverkeer 1995) in connection with the recommended public offer by TomTom for all outstanding shares in the share capital of Tele Atlas. This announcement and related materials do not constitute an offer to purchase nor a solicitation of an offer to sell shares. Any offer will be made only by means of the Offer Memorandum as defined below. Not for release, distribution or publication, in whole or in part to Australia, Canada or Japan.
The Offer is not being made, and the Shares will not be accepted for purchase from or on behalf of any Shareholder, in any jurisdiction in which the making or acceptance thereof would not be in compliance with the securities or other laws or regulations of such jurisdiction or would require any registration, approval or filing with any regulatory authority not expressly contemplated by the terms of this Offer Memorandum. Persons obtaining the Offer Memorandum are required to take due note and observe all such restrictions and obtain any necessary authorisations, approvals or consents. Neither the Offeror, nor Tele Atlas, nor any of their advisers accepts any liability for any violation by any person of any such restriction. Any person (including, without limitation, custodians, nominees and trustees) who would or otherwise intend to forward the Offer Memorandum or any related document to any jurisdiction outside The Netherlands should carefully read Section 1 (Restrictions and Important Information) of the Offer Memorandum before taking any action. The distribution of the Offer Memorandum in jurisdictions other than The Netherlands may be restricted by law and therefore persons into whose possession the Offer Memorandum comes should inform themselves about and observe such restrictions. Any failure to comply with any such restrictions may constitute a violation of the law of any such jurisdiction.
To the extent permitted by applicable law, in accordance with normal Dutch practice and pursuant to exemptive relief granted by the Staff of the Division of Market Regulation of the SEC (the "Staff") from Rule 14e-5 of the US Securities Exchange Act of 1934 ("Rule 14e-5"), the Offeror or its nominees or brokers (acting as agents) may from time to time make certain purchases of, or arrangements to purchase, Shares otherwise than under the Offer, such as in open market or privately negotiated purchases outside the United States during the period in which the Offer remains open for acceptance. In addition, in accordance with Dutch law and with exemptive relief granted by the Staff from Rule 14e-5, Goldman Sachs, serving as financial advisor to the Offeror, or its affiliates and separately identifiable departments may make purchases of, or arrangements to purchase, Shares outside of the Offer or engage in trading activities involving Shares and various related derivative transactions in the normal and ordinary course of their business. In accordance with the requirements of Rule 14e-5 and exemptive relief granted by the SEC, any such transactions outside of the Offer must comply with Dutch law. Any information about purchases by the Offeror will be notified forthwith (onverwijld) to the Dutch Authority for the Financial Markets. In accordance with applicable Dutch law, only in certain instances will purchases, or arrangements to purchase, of Shares outside the Offer be publicly disclosed and such public disclosure will be available on the website of The Netherlands Authority for the Financial Markets (Stichting Autoriteit Financiële Markten) (www.afm.nl http://www.afm.nl/ ). Information regarding transactions in the Shares will also be publicly disclosed in the United States to the extent that such information is made public in The Netherlands.
This announcement does not constitute an offer to purchase any securities, nor a solicitation of any offer, proxy, consent or authorization to buy or subscribe for any securities of Tele Atlas or any other securities, nor shall it (or any part of it) form the basis of, or be relied upon in connection with, any contract therefore. In the event that an offer is made, details of the offer will be set out in an offer memorandum, which will contain the full terms and conditions of the offer including how the offer can be accepted, and which will be made available to all holders of securities of Tele Atlas free of charge.
This announcement is a press release and not a prospectus and holders of ordinary shares in Tele Atlas should not make any decisions except on the basis of the information contained in the offer memorandum to be published in due course.
Statements in this document regarding the proposed transaction between Tele Atlas and TomTom, the expected timing for completing the transaction, future financial and operating results, benefits and synergies of the transaction, future opportunities for the combined company and any other statements about Tele Atlas or TomTom managements' future expectations, beliefs, goals, plans, or prospects constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements that are not statements of historical fact (including statements containing the words "believes," "will," "plans," "anticipates," "expects" and similar expressions) should also be considered to be forward-looking statements. There are a number of important factors that could cause actual results or events to differ materially from those indicated by such forward-looking statements, including: the ability to consummate the transaction, the ability of TomTom to successfully integrate Tele Atlas' operations and employees; the ability to realize anticipated synergies and cost-savings; the receipt of regulatory clearances; and other factors described in TomTom's and Tele Atlas' most recent respective annual reports for the year ended 2006. TomTom and Tele Atlas each disclaim any intention or obligation to update any forward-looking statements as a result of developments after the date of this announcement.
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