TomTom : Q3 2020 Results

Amsterdam

14 October 2020 | TOM2

THIRD QUARTER 2020 RESULTS

TomTom achieves 20% quarter on quarter revenue growth

TOMTOM'S CHIEF EXECUTIVE OFFICER, HAROLD GODDIJN

"Market conditions continue to improve and we are pleased that our Automotive business shows robust sequential operational revenue growth.

Deal activity was strong despite COVID-19. We are especially excited to announce a multi-year expansion and extension of our Uber contract, supplying both maps and traffic. Uber will also become a map editing partner, deepening our relationship and enhancing our mapping ecosystem.

Research and development remain a priority, with further developments to our mapmaking platform, connected navigation product and our Maps APIs, laying the foundations for future success."

OPERATIONAL SUMMARY

• Amulti-yearcontract extensionto provide maps, traffic and Maps APIs to Uber
• Anew global dealto provide maps, navigation and traffic to Maserati
• Anew product launch, RoadCheck, allowing for safer activation of automated driving functions

FINANCIAL SUMMARY THIRD QUARTER 2020

Compared with Q2 '20

• Group revenue increased by 20% (Q2 '20: €124 million)
• Location Technology increased by 13% (Q2 '20: €94 million)
• Automotive operational revenue increased by 24% to €59 million (Q2 '20: €48 million)
• Free cash flow is an outflow of €20 million (Q2 '20: outflow of €54 million)

Compared with Q3 '19

• Group revenue decreased by 10% (Q3 '19: €164 million)
• Location Technology increased by 9% (Q3 '19: €97 million)
• Automotive operational revenue decreased by 33% to €59 million (Q3 '19: €88 million)
• Free cash flow is an outflow of €20 million (Q3 '19: inflow of €23 million)
• Net cash of €346 million (Q3 '19: €393 million)

KEY FIGURES

			q.o.q		y.o.y.			y.o.y.
(€ in millions)	Q3 '20	Q2 '20	change	Q3 '19	change	YTD '20	YTD '19	change
Location Technology	105.6	93.8	13 %	96.5	9 %	290.7	315.6	-8 %
Consumer	42.3	29.9	41 %	67.7	-38 %	112.1	228.9	-51 %
Revenue	147.9	123.7	20%	164.2	-10%	402.8	544.5	-26%
Gross profit	112.0	105.8	6%	127.9	-12%	320.3	391.2	-18%
Gross margin	76%	86%		78%		80%	72%
EBITDA	3.9	7.3		15.9		5.7	65.6
EBITDA margin	3%	6%		10%		1%	12%
Net result1	-67.0	-62.0		-43.4		-191.7	701.8
Free cash flow (FCF)	-20.0	-54.0		22.7		-60.3	18.2
FCF as a % of revenue	-14%	-44%		14%		-15%	3%

• All figures presented in the table above relate to continuing operations, except for the YTD'19 Net result.

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

Investor Relations
Phone | [phone]
Email | [e-mail]	www.tomtom.com

2/9

FINANCIAL AND BUSINESS REVIEW

TOMTOM'S CHIEF FINANCIAL OFFICER, TACO TITULAER

"Sequential operational improvements in car production translated into 24% quarter on quarter revenue growth in Automotive. For Q4, we expect that Automotive operational revenue continues to show strong sequential growth. Full year reported revenue for the Group is expected to be around €530 million.

The start of new car lines in Automotive reduced gross margin this quarter. But we expect our gross margin for the full year to be around 80%.

Free cash flow in the quarter was in line with expectations. Seasonal customer receipts, combined with further improvements in Automotive operational revenue, will lead to positive free cash flow in Q4 '20 of around €30 million.

Although there have been notable sales improvements in recent months, we feel that the economic circumstances remain too uncertain to resume our share buyback program at the moment."

REVENUE

Revenue for the third quarter amounted to €148 million, an increase of 20% sequentially (Q2 '20: €124 million) and a decrease of 10% year on year (Q3 '19: €164 million).

Location Technology

			q.o.q		y.o.y.			y.o.y.
(€ in millions)	Q3 '20	Q2 '20	change	Q3 '19	change	YTD '20	YTD '19	change
Automotive	65.9	51.6	28 %	55.4	19 %	167.3	196.5	-15 %
Enterprise	39.7	42.2	-6 %	41.1	-4 %	123.3	119.1	4 %
Revenue	105.6	93.8	13%	96.5	9%	290.7	315.6	-8%
Automotive
Reported revenue	65.9	51.6	28 %	55.4	19 %	167.3	196.5	-15 %
Movement of deferred and	-6.6	-3.7		32.9		25.2	68.2
unbilled
Operational revenue	59.4	47.9	24%	88.3	-33%	192.6	264.6	-27%

Location Technology revenue was €106 million, an increase of 13% sequentially (Q2 '20: €94 million)

and an increase of 9% year on year ( Q3 '19: €97 million), resulting from an increase in Automotive revenue.

Automotive generated revenue of €66 million in the quarter, an increase of 28% compared with last quarter (Q2 '20: €52 million) and an increase of 19% compared with the same quarter last year (Q3 '19: €55 million). Automotive operational revenue was €59 million in the quarter, a sequential increase of 24% (Q2 '20: €48 million) and a year on year decrease of 33% (Q3 '19: €88 million).

Enterprise revenue decreased to €40 million in Q3 '20, 6% lower than last quarter (Q2 '20: €42

million) and 4% lower than the same quarter last year (Q3 '19: €41 million) resulting mainly from unfavorable foreign exchange movements.

Within Automotive, we announced that we will provide our full stack solution of maps, navigation software and connected services for the all-new Maserati Intelligent Assistant in-vehicle infotainment system. Maserati drivers will benefit from our premium user interface and connected on-line in vehicle services, also allowing for automatic map updates in the background.

We also launched RoadCheck, a product that further contributes to improving road safety. It allows carmakers to decide where it is safe for drivers to activate their vehicles' automated driving functions.

Our Enterprise business announced a multiyear extension of our relationship with Uber, providing maps, traffic data, and Maps APIs across Uber's global platform. In addition, Uber will serve as a trusted map editing partner to TomTom, leading to even more accurate navigation and location experiences, routing, fares, and arrival time estimates. This will benefit customers, drivers, and delivery people on Uber's platform, and other TomTom customers.

								3/9
Consumer
			q.o.q		y.o.y.			y.o.y.
(€ in millions)	Q3 '20	Q2 '20	change	Q3 '19	change	YTD '20	YTD '19	change
Consumer products	38.4	27.9	38 %	63.3	-39 %	101.4	199.5	-49 %
Automotive hardware	3.9	2.0	95 %	4.4	-10 %	10.7	29.5	-64 %
Consumer revenue	42.3	29.9	41%	67.7	-38%	112.1	228.9	-51%

Consumer reported revenue of €42 million for the quarter, a sequential increase of 41% (Q2 '20: €30 million) and a decrease of 38% compared with the same quarter last year (Q3 '19: €68 million).

GROSS PROFIT

The gross margin for the quarter was 76% compared with 78% in Q3 '19.

While underlying gross margin continues to improve, reflecting higher proportions of data, software and services in our sales mix, this quarter gross margin was impacted by the start of production of new software platforms in Automotive. The start of production triggers the release of capitalized contract costs associated with customized non recurring engineering (NRE), lowering the gross margin in Q3 '20. Furthermore, in Q3'19 gross profit was positively influenced by one-offs; excluding these one-offs gross margin was 74% in Q3 '19.

OPERATING RESULT

Operating result (EBIT) in the quarter was a loss of €68 million (Q3 '19: loss of €57 million). Total operating expenses in the quarter were €180 million, a decrease of €5 million compared with the same quarter last year (Q3 '19: €185 million). The year on year decrease, reflected in marketing and selling, general and administrative expenses, shows the effect of discretionary cost control measures.

FINANCIAL INCOME, EXPENSES AND INCOME TAX

Total financial result, for the quarter was an expense of €4 million (Q3 '19: income of €1 million), which consisted primarily of foreign exchange losses from the revaluation of monetary balance sheet items.

The income tax gain for the quarter was €4 million compared with a gain of €13 million in Q3 '19. The amortization of acquisition-related intangible assets results in a release of deferred tax assets and liabilities, contributing to the tax gain.

BALANCE SHEET

Other intangible assets decreased to €181 million from €380 million at the end of 2019 mainly due to amortization of map database. Cash balances, including fixed-term deposits were €346 million at the end of the quarter (Q4 '19: €437 million). The decrease during the year is from a combination of lower operational revenue, working capital movements and the share buyback in Q1 '20.

At the end of the quarter, inventory was €28 million, a €2 million increase from the end of last year mostly relating to automotive hardware. Trade receivables were €110 million in Q3 '20 compared with €100 million at the end of 2019.

Current liabilities, excluding deferred revenue, were €125 million, compared with €177 million at the end of 2019. The decrease is mainly due to decreases in accruals and other liabilities, reflecting lower personnel-related accruals, and trade payables.

4/9

DEFERRED, UNBILLED AND OPERATIONAL REVENUE

Deferred revenue represents upfront payments received from customers for content and service deliveries over multiple years (such as map updates and traffic services), while unbilled revenue is revenue earned but not yet invoiced. Combining reported revenue with the movement of deferred and unbilled revenue provides operational revenue, giving insight into operational performance.

Further detail of deferred revenue and the net movement of deferred and unbilled revenue is provided below.

(€ in millions)	30 Sep	30 Jun	31 Dec
2020	2020	2019
Automotive	307.5	310.5	278.3
Enterprise	43.6	9.8	23.3
Consumer	45.9	51.6	67.7
Deferred revenue	397.0	371.9	369.3

Total deferred revenue was €397 million at the end of Q3 '20. The increase compared with previous quarter and 31 December 2019 is mainly driven by seasonal timing of invoicing and increase of operational revenue in Location Technology offset by releases in Consumer.

(€ in millions)	Q3 '20	Q2 '20	Q3 '19	YTD '20	YTD '19
Automotive	-6.6	-3.7	32.9	25.2	68.2
Enterprise	33.6	-21.9	33.3	2.2	4.2
Consumer	-5.7	-8.1	-5.5	-21.8	-15.8
Net movement of deferred and unbilled revenue	21.3	-33.7	60.6	5.6	56.5

The sequential movement of deferred and unbilled revenue is explained by the timing of invoicing of certain Enterprise customers. The net movement for the quarter compared with the same quarter last year, is explained by lower operational revenue for both Automotive and Consumer.

CASH FLOW

In Q3 '20, free cash flow (FCF) was an outflow of €20 million versus an outflow of €54 million last quarter and an inflow of €23 million in the same quarter last year. The FCF reflects mainly the sequential and year on year development of revenue from Automotive and Consumer.

Our cash flow from investing activities includes an inflow of fixed-term deposits that matured during the quarter. Excluding this, cash flows from investing activities shows a year-on-year decline in capitalized research and development projects.

The cash flow from financing activities for the quarter was an outflow of €4 million and mainly relates to the payment of lease liabilities. During the quarter 12 thousand options relating to our long-term employee incentive programs were exercised (Q3 '19: 379 thousand).

On 30 September 2020, the Group had no outstanding bank borrowings and reported a net cash position of €346 million (Q3 '19: net cash of €393 million). The year on year decrease in net cash is explained by lower free cash flows and the share buyback in the first quarter.

Free cash flow is reconciled to the cash flow statement as follows:

(€ in millions)	Q3 '20	Q2 '20	Q3 '19	YTD '20	YTD '19
Cash flow from operating activities	-19.0	-52.1	27.1	-55.3	42.4
Investments in intangible assets	0.0	0.0	-1.6	0.0	-10.0
Investments in property, plant and equipment	-1.0	-1.8	-2.9	-5.0	-10.5
Free cash from flow total operations	-20.0	-54.0	22.7	-60.3	21.9
Free cash flow from discontinued operations	0.0	0.0	0.0	0.0	-3.9
Free cash flow from continuing operations	-20.0	-54.0	22.7	-60.3	18.1

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