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TomTom Reports Second Quarter 2015 Results


    Financial summary Q2 ´15

    • Revenue of €265 million (Q2 ´14: €252 million)
    • Gross margin of 51% (Q2 ´14: 56%)
    • EBITDA of €28 million (Q2 ´14: €37 million)
    • Net result of €3 million (Q2 ´14: €9 million)
    • Adjusted EPS1 of €0.05 (Q2 ´14: €0.08)
    • Net cash position of €77 million (Q2 ´14: €51 million)

    Operational summary Q2 ´15

    • Consumer launched the TomTom Bandit Action Camera
    • MyDrive portal and apps introduced, connecting best-in-class traffic-dependent routing service to PNDs
    • Test map data for Highly Automated Driving launched in Metro Detroit
    • Global agreement with Apple for maps and related information renewed and extended
    • Map footprint extended to Australia with the acquisition of Location Navigation from Sensis
    • Telematics passes milestone of 500,000 subscribed vehicles

    Outlook 2015

    • Full year outlook re-iterated; Revenue expected of around €1 billion and adjusted EPS1 expected of around €0.20

    Key figures

                                            (€ in millions, unless stated otherwise)     Q2 ´15     Q2 ´14    

    y.o.y.
    change

        H1 ´15     H1 ´14    

    y.o.y.
    change

                                              Consumer     164.9     168.5     -2%     286.6     293.6     -2%   Automotive     26.0     30.6     -15%     49.6     59.8     -17%   Licensing     38.6     27.2     42%     67.6     53.2     27%   Telematics     35.1     25.6     37%     66.1     50.7     30%   REVENUE     264.6     252.0     5%     469.9     457.3     3%                                           GROSS RESULT     134.6     139.9     -4%     244.5     257.2     -5%   Gross margin     51%     56%           52%     56%                                                 EBITDA     27.8     36.9     -25%     49.3     66.6     -26%   EBITDA margin     11%     15%           10%     15%                                                 OPERATING RESULT (EBIT)     0.6     10.2     -94%     -4.5     11.7     -138%   EBIT margin     0%     4%           -1%     3%                                                 NET RESULT     2.5     8.9     -71%     -4.4     16.4     -127%   ADJUSTED NET RESULT     12.4     18.4     -33%     14.9     35.8     -58%                                           EPS, € fully diluted     0.01     0.04     -72%     -0.02     0.07     -126%   Adjusted EPS1, € fully diluted     0.05     0.08     -36%     0.06     0.16     -60%  

    Change percentages are based on non-rounded figures.

                                                                                 

    1 Earnings per share adjusted for acquisition-related amortisation on a post-tax basis.

    TomTom’s Chief Executive Officer, Harold Goddijn

    “We reported revenue growth in the second quarter and overall a solid set of results.

    Our Consumer business continued to broaden its revenue base with new products in the sports category, and we continued our strong growth path in Telematics and passed the 500,000 subscriptions milestone.

    Our Automotive revenue contracted as anticipated, however we continued to book new business at levels which will support a growing business from next year onwards; Licensing delivered double-digit revenue growth in the quarter.

    We expect to have fully replaced our map-making system with a transaction-based platform that will enable near real-time maps, in the second half of 2015. With this technological innovation, TomTom is well positioned to address the need for accurate and up-to-date maps, for navigation applications and driver assistance applications, including Highly Automated Driving.”

    Outlook 2015

    We are re-iterating our guidance for revenue and adjusted EPS for the full year. We expect revenue to grow to around €1 billion, and adjusted EPS1 is expected of around €0.20. We now expect the level of investment (both CAPEX and OPEX) in our core technologies to be modestly higher than last year.

    Financial and business review

    We generated revenue of €265 million in the second quarter, 5% higher compared with the same quarter last year (Q2 ´14: €252 million). Our growing Telematics, Licensing and sports businesses more than counterbalanced the reduction in PND and Automotive revenue.

    We reported a gross margin of 51% in the second quarter (Q2 ´14: 56%). The stronger dollar caused the year on year decline of 5 percentage points.

    The net result for the quarter was a gain of €3 million, which translates to adjusted earnings per share of €0.05.

    Consumer

                                            (€ in millions, unless stated otherwise)     Q2 ´15     Q2 ´14    

    y.o.y.
    change

        H1 ´15     H1 ´14    

    y.o.y.
    change

                                              Consumer products     147.8     149.1     -1%     248.6     253.8     -2%   Automotive hardware     17.1     19.4     -12%     38.0     39.8     -5%   Total Consumer revenue     164.9     168.5     -2%     286.6     293.6     -2%                                           Key PND market data                                      

    Europe2

                                          Market size (# units sold in millions)     1.7     1.8     -7%                     TomTom market share     52%     52%                          

    North America

                                          Market size (# units sold in millions)     0.8     1.0     -19%                     TomTom market share     17%     15%                          

    Change percentages are based on non-rounded figures.

                                                                                 

    2 Europe refers to EMEA17: AT, CH, DE, BE, NL, FR, IT, GB, ES, PT, TR, CZ, PL, DK, SE, FI and ZA.

    Total Consumer revenue for the quarter was €165 million, a decline of 2% compared with the same quarter last year (Q2 ´14: €169 million). Consumer products revenue in Q2 ´15 was roughly flat year on year. This was driven by a single digit decline of PND and related content & services revenue, offset by a mid double-digit increase of sports revenue. The Automotive hardware revenue decline was due to the phasing out of our automotive hardware contracts.

    In Q2 ´15, we saw a unit decline of 7% in the European PND market, whilst the North American market declined by 19%. Our market share in both Europe and North America was flat. We strengthened our ASP, as our product mix in the quarter was skewed towards more expensive models.

    In the quarter, we launched the TomTom Bandit action camera, which makes editing and sharing videos quick and easy. The TomTom Bandit is the first with a built-in media server, which eliminates the need to download footage before being able to edit it. The camera works with a companion app, making it possible to create and share videos in a matter of minutes. The TomTom Bandit started to ship in May.

    We continued to broaden our offering in the PND category with the introduction of new GO PND devices with lifetime world maps and lifetime speed cameras. We also launched TomTom MyDrive, a portal and app designed to seamlessly connect our best-in-class traffic-dependent routing service to PNDs. With TomTom MyDrive, drivers can use their smartphone, tablet or PC to review real-time traffic information, plan routes and send destinations to their TomTom GO, before they get in the car.

    We also further expanded our Consumer product offering to the B2B market with the introduction of the TRUCKER 6000. TRUCKER 6000 is specifically designed for drivers of large vehicles and includes information such as customised routes for the user’s specific vehicle type, size, weight, cargo and speed.

    Automotive

    Our Automotive business generated revenue of €26 million in the quarter, compared with €31 million in Q2 ´14. This decline is mainly due to the phasing out of hardware-based contracts.

    In the quarter, we extended our longstanding partnership with Fiat to deliver our maps, LIVE services and connected navigation in the Uconnect™ infotainment systems in the new Fiat 500. We also announced a partnership with Luxoft to integrate our TomTom NavKit engine as a navigation solution in its Award-winning AllView automotive infotainment solution.

    We expect to have fully replaced our map-making system with the transaction-based platform this year. Our new map-making platform is updated continuously using transactions with automatic quality checks. An update is available to customer applications as soon as the transaction has completed. This helps us to dramatically reduce the time between change detection and publishing a new map, which we can also do incrementally to deliver “real-time maps”. Some customer applications such as automated driving place a high premium on being up-to-date with the latest real-world changes.

    We also released HAD map content in the metro Detroit area. OEMs and Tier 1’s can use our HAD maps for precise vehicle positioning which enables future self-driving cars to see beyond their sensors.

    Licensing

    Our Licensing revenue was €39 million in Q2 ´15, 42% higher compared with the same quarter last year (Q2 ´14: €27 million). The year on year increase of €12 million included a €5 million catch-up of content delivered in the first quarter.

    In the quarter, we announced that our global agreement for maps and related information with Apple was renewed and extended. We also announced a partnership with Mozilla and Telefónica to bring our Maps Online and Nav Online apps to HTML5 powered Firefox OS smartphone devices.

    Telematics

                                            (€ in millions, unless stated otherwise)     Q2 ´15     Q2 ´14    

    y.o.y.
    change

        H1 ´15     H1 ´14    

    y.o.y.
    change

                                              Hardware and other services revenue1     11.0     7.7     43%     19.5     15.7     24%   Subscription revenue     24.1     18.0     34%     46.7     35.1     33%   Total Telematics revenue     35.1     25.6     37%     66.1     50.7     30%                                           Monthly subscription ARPU (€)     16.2     16.2     0%                     Subscriber installed base (# in thousands)     507     395     28%                    

    Change percentages are based on non-rounded figures.

                                         

    1Other services revenue comprises installation services and separately purchased traffic service and/or map content.

    Telematics revenue for the quarter was €35 million, a 37% increase compared with €26 million in Q2 ´14. The recurring subscription revenue for the quarter increased by 34% year on year to €24 million (Q2 ´14: €18 million).

    In June, Telematics held its annual international developers’ conference for WEBFLEET.connect development partners in Amsterdam. IT professionals and software developers joined forces to encourage innovation in connected apps and integrations built around our WEBFLEET platform. To date we have more than 600 third party solutions and apps connected to our WEBFLEET platform.

    We made good progress with our TomTom LINK 100 device. The dongle plugs into the vehicle’s OBD port to connect this vehicle and a driver’s smartphone via Bluetooth. A diversity of tailored applications gives drivers real-time feedback and reports on their driving style. The number of connected applications using the TomTom LINK 100 device increased with our recently launched TomTom CURFER, a product that allows you to visualise your driving style in real-time, and new product developments from our insurance customers.

    Hardware and Content & Services revenue split

                                            (€ in millions, unless stated otherwise)     Q2 ´15     Q2 ´14    

    y.o.y.
    change

        H1 ´15     H1 ´14    

    y.o.y.
    change

                                              Hardware revenue     149.4     147.6     1%     255.4     253.5     1%   Content & Services revenue     115.2     104.4     10%     214.5     203.8     5%   Total revenue     264.6     252.0     5%     469.9     457.3     3%  

    Change percentages are based on non-rounded figures

                                         

    Content & Services revenue for the quarter was €115 million or 44% of total revenue (Q2 ´14: 41%).

    Gross margin

    The gross margin for the quarter was 51%, which is 5 percentage points lower compared with 56% in Q2 ´14. The year on year decrease was due to the weakening of the euro against the US dollar. At constant currency rates for the US dollar and GB pound, our Q2 ´15 gross margin and operating result were relatively flat.

    Operating expenses

    Total operating expenses for the quarter were €134 million, €4 million higher compared with the same quarter last year (Q2 ´14: €130 million). The year on year increase was mainly driven by higher R&D and marketing expenses partially offset by lower amortisation of technology and databases. Total operating expenses include a positive one-off as a result of a litigation settlement, partly offset by FX and the higher costs related to the share based employee-incentive programme. Overall, for the year these trends are expected to result in modestly higher R&D expenses (both in OPEX and CAPEX).

    FX sensitivity

                                Actual key Q2 ´15 / H1 ´15 financials recalculated based on last year (Q2 ´14 / H1 ´14) FX rates
    (€ in millions, unless stated otherwise)    

    Q2 ´15

    actual
    reported

        Q2 ´15
    recalculated at
    Q2 ´14

    FX rates1

        H1 ´15

    actual
    reported     H1 ´15
    recalculated at
    H1 ´14

    FX rates1

                                  Revenue     264.6     252.8     469.9     451.4                               Gross result     134.6     143.1     244.5     257.9   Gross margin     51%     57%     52%     57%                               EBIT     0.6     12.0     -4.5     15.5   EBIT margin     0%     5%     -1%     3%                               P&L RATES IN €     Q2 ´15     Q2 ´14     H1 ´15     H1 ´14   US dollar     1.10     1.38     1.13     1.37   GP pound     0.72     0.82     0.74     0.82  

    ¹The Q2 ´15 / H1 ´15 income and expense in US dollar and GB pound have been converted to euro using Q2 ´14 / H1 ´14 average rates. All other foreign currencies have not been converted.

    Depreciation and amortisation