TomTom : Q1 2022 results press release

Amsterdam

14 April 2022 | TOM2

FIRST QUARTER 2022 RESULTS

TomTom has a solid start to the year, in line with expectations

TOMTOM'S CHIEF EXECUTIVE OFFICER, HAROLD GODDIJN

"We had a solid start to the year with all our businesses performing in line with our expectations. Deal activity continues to be strong, with several high-quality deals on the table. Furthermore, we secured important partnerships that help enrich our services.

We are reiterating our revenue and FCF guidance. However, we should recognize the uncertainties that emerged over the past months, such as the war in Ukraine and increasing inflation. These could impact supply chains, cost levels, and general economic activity. We closely monitor the situation to ensure we can react swiftly and decisively. We believe in the strength of our business, financial position, and strategy, and are proceeding with investments as planned."

OPERATIONAL SUMMARY

• - We have partnered with the Foxconn-initiated MIH Consortium to develop the next generation of smart electric vehicles

• - We teamed up with Webfleet Solutions to combine our maps, traffic, and navigation with a range of workforce management features in a single mobile offering for fleet managers and drivers

• - Our technology supports the Nissan Ariya, the brand's latest flagship electric crossover that is set to be launched with advanced infotainment and driver assistance features

FINANCIAL SUMMARY FIRST QUARTER 2022

• - Group revenue decreased by 2% to €128 million (Q1 '21: €131 million)

• - Location Technology revenue of €105 million equal to last year (Q1 '21: €105 million)

• - Automotive operational revenue decreased by 8% to €68 million (Q1 '21: €74 million)

• - Free cash flow is an outflow of €23 million (Q1 '21: outflow of €4 million)

• - Net cash of €331 million (Q4 '21: €356 million)

KEY FIGURES

(€ in millions)	Q1 '22	Q1 '21	y.o.y. change
Location Technology	105.2	104.8	0%
Consumer	23.2	26.4	-12 %
Revenue	128.4	131.2	-2%
Gross result	109.1	106.5	2%
Gross margin	85%	81%
Operating expenses	129.0	120.8	7%
Operating result (EBIT)	-19.8	-14.2
Operating margin	-15%	-11%
Net result	-21.5	-11.5
Free cash flow (FCF)	-23.2	-3.9
FCF as a % of revenue	-18%	-3%

This report includes the following non-GAAP measures which are further explained at the end of this report: operational revenue; gross margin; EBIT (margin); free cash flow; net cash and gross deferred revenue.

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FINANCIAL AND BUSINESS REVIEW

TOMTOM'S CHIEF FINANCIAL OFFICER, TACO TITULAER

"Location Technology revenue was roughly flat year on year. Enterprise revenues exhibited growth, while Automotive revenues decreased slightly. Automotive operational revenue showed a year-on-year decline, in line with declining car production volumes in our core markets.

Our operating result decreased versus the same quarter last year, gross margin improvements were offset by a year-on-year increase in operating expenses. These higher expenses combined with a lower trade receivable starting position compared with the same quarter last year, resulted in a decrease in our free cash flow year on year.

We do expect that our increased expenses, which center around investments in our application layer and the further automation of our mapmaking platform, will lead to lower spend levels from 2023 onwards."

OUTLOOK 2022

(€ in millions, unless stated otherwise) Actual 2021	Outlook 2022 Outlook 2023
Revenue 507	470 - 510 500 - 550
Of which Location Technology 394	380 - 420 425 - 475
FCF as % of Group revenue 5%	Around -5% At least 5%

REVENUE

Revenue for the first quarter amounted to €128 million, a decrease of 2% year on year (Q1 '21: €131 million).

Location Technology

(€ in millions)	Q1 '22	Q1 '21 y.o.y. change
Automotive	60.5	62.7 -3 %
Enterprise	44.7	42.1 6%
Revenue	105.2	104.8 0%

Automotive operational revenue is calculated as follows:

(€ in millions)	Q1 '22	Q1 '21 y.o.y. change
Automotive revenue	60.5	62.7 -3 %
Movement of Automotive deferred revenue	7.9	11.7
Automotive operational revenue	68.4	74.4 -8%

Location Technology revenue was €105 million, remaining flat year on year (Q1 '21: €105 million), a modest decrease in Automotive revenue was offset by an increase in Enterprise.

Automotive revenue in the quarter was €61 million, a decrease of 3% compared with the same quarter last year (Q1 '21: €63 million). Automotive operational revenue was €68 million in the quarter, a year-on-year decrease of 8% (Q1 '21: €74 million). This trend is in line with declining car production volumes in our core markets.

Enterprise revenue increased to €45 million in Q1 '22, 6% higher than the same quarter last year (Q1 '21: €42 million), benefiting from a stronger US dollar and higher revenue from existing customers.

We moved forward with the advancement of our core Location Technology business during the quarter, securing key partnerships and further enriching our map and services. We have teamed up with the MIH Consortium to build the next generation of electric vehicle, autonomous driving, and mobility service applications. TomTom is the first and only global mapmaker and navigation supplier to join this partnership, to which we will contribute our extensive knowledge in digital cockpit and navigation user experience for EV drivers.

In Enterprise, we have combined forces with Webfleet Solutions to offer an integrated mobile service for professional drivers and fleet managers. Together, we will offer workforce management features, best-in-class navigation for all vehicle types, up-to-date maps with live traffic information, reliable ETAs, and more.

Our expanded agreement with Maxar Technologies, meanwhile, will enable us to integrate high-resolution global satellite imagery in our products and services. This provides end-users and our Automotive and Enterprise software platform customers with a photorealistic map.

Consumer

(€ in millions)	Q1 '22	Q1 '21 y.o.y. change
Consumer products	21.6	23.5 -8 %
Automotive hardware	1.6	2.9 -45 %
Consumer revenue	23.2	26.4 -12%

Consumer reported revenue of €23 million for the quarter, a decrease of 12% compared with the same quarter last year (Q1 '21: €26 million).

GROSS MARGIN

The gross margin for the quarter was 85% compared with 81% in Q1 '21. The year-on-year improvement was the result of lower contract costs included in cost of sales.

OPERATING RESULT

Operating result (EBIT) in the quarter was a loss of €20 million (Q1 '21: loss of €14 million). Total operating expenses in the quarter were €129 million, an increase of €8 million compared with the same quarter last year (Q1 '21: €121 million).

Excluding the impact of D&A, operating expenses increased by 15%. The increase mainly relates to increases in R&D, both in our geographic data and application layer, to support our product roadmap.

A reconciliation of operating expenses excluding D&A is presented below:

(€ in millions)	Q1 '22	Q1 '21 y.o.y. change
R&D - Geographic data	47.4	41.4 14 %
R&D - Application layer	38.4	32.3 19 %
Sales and marketing	10.5	10.2 3%
General and administrative	17.5	15.3 14 %
Operating expenses excluding D&A	113.8	99.2 15%
Depreciation and amortization	15.2	21.5 -29 %
Operating expenses	129.0	120.7 7%

FINANCIAL INCOME, EXPENSES AND INCOME TAX

Total financial result, for the quarter was an expense of €0.3 million (Q1 '21: income of €4 million). Q1 '21 included a gain from revaluation of cash balances.

The income tax expense for the quarter was €1.4 million compared with an expense of €1.6 millionin Q1 '21.

BALANCE SHEET

Other intangible assets decreased to €67 million from €70 million at the end of 2021 mainly due to amortization of map databases, partially offset by capitalized investments in source material with a perpetual license. Cash balances, including fixed-term deposits were €331 million at the end of the quarter (Q4 '21: €356 million).

At the end of the quarter, inventory was €19 million, a €1 million decrease from the end of last year. Trade receivables were €66 million at the end of Q1 '22 compared with €56 million at the end of 2021.

Current liabilities, excluding deferred revenue, were €107 million, compared with €110 million at the end of 2021. The decrease is mainly due to decreases in trade payables and accruals.

DEFERRED REVENUE

Deferred revenue slightly decreased to €440 million from €441 million at the end of 2021 due to the release of deferred revenue in Enterprise and Consumer, partly offset by an increased position in Automotive.

The following table presents the deferred revenue including the effect of netting:

(€ in millions)	31 March 2022	31 December 2021
Automotive	402.8	395.0
Enterprise	30.5	41.5
Consumer	22.7	25.5
Gross deferred revenue Less: Netting adjustment to unbilled revenue	456.0 16.2	461.9 21.2
Deferred revenue	439.8	440.7

CASH FLOW

In Q1 '22, free cash flow was an outflow of €23 million versus an outflow of €4 million in the same quarter last year. The opening trade receivables balance in 2022 was lower than the trade receivables balance at the beginning of 2021, resulting in lower cash collection during the first quarter. This, combined with higher operating expenses and investment in intangible assets, resulted in the decrease in free cash flow.

The cash flow from financing activities for the quarter was an outflow of €2 million which comprised of payments of lease liabilities partly offset by proceeds from the exercises of stock options. In the quarter 187 thousand options relating to our long-term employee incentive programs were exercised (Q1 '21: 108 thousand).

On 31 March 2022, the Group had no outstanding bank borrowings and reported a net cash position of €331 million (Q4 '20: net cash of €356 million).

- END -

CONSOLIDATED CONDENSED STATEMENT OF INCOME

(€ in thousands)	Q1 '22 Unaudited	Q1 '21 Unaudited
Revenue	128,449	131,191
Cost of sales	19,313	24,681
Gross profit	109,136	106,510
Research and development expenses - Geographic data	56,531	53,268
Research and development expenses - Application layer	39,365	34,831
Sales and marketing expenses	10,506	10,230
General and administrative expenses	22,567	22,421
Total operating expenses	128,969	120,750
Operating result	-19,833	-14,240
Financial result	-279	4,400
Result before tax	-20,112	-9,840
Income tax expense	-1,378	-1,641
Net result1	-21,490	-11,481
Earnings per share (in €):
Basic	-0.17	-0.09
Diluted2	-0.17	-0.09

1 2

Fully attributable to the equity holders of the parent.

When the net result is a loss, no additional shares from assumed conversion are taken into account as the effect would be anti-dilutive.