TomTom : Q4 2022 Results

Amsterdam

3 February 2023 | TOM2

FOURTH QUARTER AND FULL YEAR 2022 RESULTS

Strong Automotive performance drives Q4 and 2022 revenue growth

TOMTOM'S CHIEF EXECUTIVE OFFICER, HAROLD GODDIJN

"We recorded top-line growth for the full year. Our Automotive business consistently outperformed the market trend throughout the year, while Enterprise performed in line with our expectations. I am happy with the progress we made in 2022, which is underpinned by the introduction of the new TomTom Maps Platform and a record €2.4 billion Automotive backlog.

The rollout of our new platform and improved maps in 2023 will provide customers with wider geographical coverage, more detail, and faster updates. This will support further growth of our Location Technology revenue. Our recently announced collaboration with Amazon Web Services, Meta, and Microsoft is expected to help set a global standard for maps, benefiting customers of our Maps Platform."

OPERATIONAL SUMMARY

• We introduced our newmaps, which will offer significant improvements in quality and will therefore be able to power a wider variety of use cases for our customers.
• We announced anew global dealto provide our maps, navigation software, and connected services to Stellantis' next-generation digital cockpit platform
• We co-founded the Overture Maps Foundationwith Amazon Web Services, Meta, and Microsoft to establish an open standard for interoperable map data

FINANCIAL SUMMARY FOURTH QUARTER 2022

• Group revenue increased by 21% to €139 million (Q4 '21: €115 million)
• Location Technology revenue increased by 30% to €118 million (Q4 '21: €91 million)
• Automotive operational revenue increased by 16% to €82 million (Q4 '21: €71 million)
• Free cash flow1 is an outflow of €15 million (Q4 '21: inflow of €57 million)

FINANCIAL SUMMARY FULL YEAR 2022

• Group revenue of €536 million (FY '21: €507 million)
• Location Technology revenue increased by 11% to €436 million (FY '21: €394 million)
• Automotive operational revenue increased by 11% to €296 million (FY '21: €266 million)
• Free cash flow1 is an outflow of €29 million (FY '21: inflow of €24 million)
• Net cash of €304 million (FY '21: €356 million)

KEY FIGURES

			y.o.y.			y.o.y.
(€ in millions)	Q4 '22	Q4 '21	change	FY '22	FY '21	change
Location Technology	117.6	90.6	30 %	436.4	394.0	11 %
Consumer	21.4	24.6	-13 %	99.9	112.9	-11 %
Revenue	139.0	115.2	21%	536.3	506.9	6%
Gross result	120.9	94.2	28%	449.7	407.1	10%
Gross margin	87%	82%		84%	80%
Operating expenses	125.4	129.6	-3 %	547.3	500.3	9 %
Operating result (EBIT)	-4.5	-35.3		-97.6	-93.2
Operating margin	-3%	-31%		-18%	-18%
Net result	-8.8	-38.8		-102.7	-94.7
Free cash flow1 (FCF)	-14.6	56.7		-29.2	23.5
FCF1 as a % of revenue	-10%	49%		-5%	5%

• Free cash flow excludes restructuring charges related to the Maps realignment announced in June 2022.

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

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2/10

FINANCIAL AND BUSINESS REVIEW

TOMTOM'S CHIEF FINANCIAL OFFICER, TACO TITULAER

"Fourth-quarter Automotive reported revenue increased sharply year on year, in part resulting from the evolution of our products, leading to a change in how we recognize revenue from new map subscription contracts. Automotive operational revenue increased by 16% year on year, outperforming the trend of car production volumes in our core markets. Enterprise exhibited an anticipated revenue decline.

Full-year group revenue increased in 2022. For 2023, we expect group revenue growth to continue, with a strong increase in Automotive revenues offsetting declines in both our Consumer and Enterprise businesses. We envision our Enterprise business to show growth from Q4 2023 onward.

In the fourth quarter, free cash flow was negatively affected by movements in working capital. We recorded an outflow of €29 million for full year 2022. In 2023, we expect to generate positive free cash flow1 of between 0% and +5% of group revenue, supported by growing revenues."

OUTLOOK

(€ in millions, unless stated otherwise)

Revenue

Of which Location Technology

FCF1 as % of group revenue

Outlook 2023	Actual 2022
540 - 580	536
455 - 485	436
0% - +5%	-5%

Our Automotive products have evolved into API-based updates and services in combination with an initial onboard map, from a predominantly onboard offering including updates. As a result of this change, the timing of IFRS revenue recognition for new map subscription contracts changed from Q4 2022 onward. In the fourth quarter of 2022, the impact on reported revenue was a positive effect of €9.6 million, and we expect the positive impact on full-year 2023 revenue to be around €40 million.

The change in revenue recognition resulting from these products will also have an impact on 2024 and 2025 revenue, though the 2025 impact is expected to be negligible. We reiterate our mid-term Location Technology revenue ambition of €600 million in 2025, in combination with a free cash flow generation target of 10% of group revenue.

Our outlook is supported by an Automotive backlog2 of around €2.4 billion at the end of 2022, up from €1.9 billion at the end of 2021. This increase is the result of a record order intake in 2022.

• Free cash flow excludes restructuring charges related to the Maps realignment announced in June 2022.
  2 Automotive backlog is the cumulative expected IFRS revenue from all awarded Automotive deals.

REVENUE

Revenue for the fourth quarter amounted to €139 million, an increase of 21% year on year (Q4 '21: €115 million).

Location Technology

			y.o.y.			y.o.y.
(€ in millions)	Q4 '22	Q4 '21	change	FY '22	FY '21	change
Automotive	77.1	47.1	64 %	260.0	223.1	17 %
Enterprise	40.5	43.5	-7 %	176.4	170.9	3 %
Revenue	117.6	90.6	30%	436.4	394.0	11%
Segment EBITDA				-15.6	-32.6	52%
EBITDA margin (%)				-4%	-8%
Segment EBIT				-71.2	-105.2	32%
EBIT margin (%)				-16%	-27%

Location Technology revenue was €118 million in the fourth quarter, an increase of 30% year on year (Q4 '21: €91 million). Sharp revenue growth in Automotive revenue offset the anticipated decline in Enterprise revenue this quarter.

3/10

Increased car production volumes and a further ramp up of some contracts led Automotive to generate revenues of €77 million in the quarter, an increase of 64% compared with the same quarter last year (Q4 '21: €47 million). Normalized for the positive impact from the change in how we recognize revenue for new map subscription contracts, the year-on-year increase in Automotive revenue was 43%. In part, this considerable increase can be explained by the comparatively low reported revenue in Q4 2021, which reflected the impact of downward adjustments in total contract values.

Automotive operational revenue was €82 million in the quarter, a year-on-year increase of 16% (Q4 '21: €71 million) outperforming the development of car production volumes in Europe and North America.

Automotive operational revenue is calculated as follows:

			y.o.y.			y.o.y.
(€ in millions)	Q4 '22	Q4 '21	change	FY '22	FY '21	change
Automotive revenue	77.1	47.1	64 %	260.0	223.1	17 %
Movement of Automotive deferred revenue	5.0	23.6		36.3	43.2
Automotive operational revenue	82.1	70.7	16%	296.3	266.3	11%

Enterprise revenue decreased to €40 million in Q4 '22, 7% lower than the same quarter last year (Q4 '21: €44 million), as some contract renewals reflect decreased usage and therefore lower contract values.

Full-year Location Technology segment EBITDA improved year on year resulting from the increase in revenue, partly offset by continued investments in our application layer and sales & marketing activities.

During the quarter, we extended our longstanding partnership with Stellantis, providing our connected suite of navigation services to their next-generation digital cockpit platform, STLA SmartCockpit. TomTom's maps, navigation software, and real-time traffic information will power all Stellantis brands globally. The award was one of multiple significant Automotive contracts we closed

in 2022, leading to a record Automotive backlog of €2.4 billion.

We announced that we will introduce significantly improved maps in the course of 2023, build on the new TomTom Maps Platform. The platform combines TomTom's own data with new 'super' sources such as sensor-derived observations and open-source data. The new maps will offer broader geographical coverage, an extended set of supported data types, and faster update cycles. This will enable us to build on our success in the Automotive market, scaling products and applications to a broader variety of customers.

Together with Amazon Web Services, Meta, and Microsoft we have founded the Overture Maps Foundation. To support industry demands, the pooling of resources and the creation of a global map standard is needed. The Overture Maps Foundation is a collaborative effort that intends to develop interoperable open map data through a global entity reference system and structured data schema. Our common initiative will facilitate an ecosystem of users and contributors to share map data in an efficient way and on a global scale.

						4/10
Consumer
			y.o.y.			y.o.y.
(€ in millions)	Q4 '22	Q4 '21	change	FY '22	FY '21	change
Consumer products	18.8	23.3	-19 %	92.7	105.0	-12 %
Automotive hardware	2.6	1.3	108 %	7.2	7.9	-9 %
Consumer revenue	21.4	24.6	-13%	99.9	112.9	-11%
Segment EBITDA				7.4	18.7	-61%
EBITDA margin (%)				7%	17%
Segment EBIT				6.5	17.7	-63%
EBIT margin (%)				7%	16%

Consumer reported revenue of €21 million for the quarter, a decrease of 13% compared with the same quarter last year (Q4 '21: €25 million).

Full-year revenue decreased by 11% compared with 2021, as a consequence segment EBITDA decreased as well year on year.

GROSS MARGIN

The gross margin for the quarter was 87% compared with 82% in Q4 '21. The improvement in gross margin is the result of a higher proportion of higher-margin software and content revenue.

OPERATING RESULT

Operating result (EBIT) in the quarter was a loss of €5 million (Q4 '21: loss of €35 million). Total operating expenses in the quarter were €125 million, a decrease of €4 million compared with the same quarter last year (Q4 '21: €130 million) as a result of lower personnel expenses in our Maps unit.

Excluding the impact of D&A and restructuring, operating expenses in the quarter decreased by 1% mainly due to lower R&D - Geographic data, partly offset by increased investments in our application layer and in our sales team to support revenue growth.

A reconciliation of operating expenses excluding D&A and restructuring charges1 is presented below:

			y.o.y.			y.o.y.
(€ in millions)	Q4 '22	Q4 '21	change	FY '22	FY '21	change
R&D - Geographic data	36.6	45.5	-20 %	173.0	176.2	-2 %
R&D - Application layer	42.1	37.3	13 %	168.6	138.7	21 %
Sales and marketing	14.2	12.6	12 %	50.3	45.1	12 %
General and administrative	18.9	17.9	6 %	72.9	66.6	10 %
Total excl. D&A and restructuring1	111.8	113.4	-1%	464.8	426.6	9%
Depreciation and amortization	13.3	16.2	-18 %	56.7	73.7	-23 %
Restructuring1	0.4	-		25.9	-
Operating expenses	125.4	129.6	-3%	547.3	500.3	9%

FINANCIAL RESULT AND INCOME TAX

Total financial result for the quarter was a loss of €1 million (Q4 '21: gain of €1 million), which consisted primarily of foreign exchange losses from the revaluation of monetary balance sheet items.

The income tax expense for the quarter was €3 million compared with an expense of €5 million in Q4 '21.

BALANCE SHEET

Other intangible assets decreased to €43 million from €70 million at the end of 2021 mainly due to amortization of our map database. Cash balances, including fixed-term deposits, were €304 million at the end of the quarter (Q4 '21: €356 million).

At the end of the quarter, inventory was €15 million, a €5 million decrease from the end of last year. Trade receivables were €66 million at the end of Q4 '22 compared with €56 million at the end of 2021 as a result of higher operational revenue this quarter.

• Restructuring charges are related to the Maps realignment announced in June 2022.

5/10

Current liabilities, excluding deferred revenue, were €122 million, compared with €110 million at the end of 2021. The increase is mainly related to an increase in personnel-related accruals, partly offset by a relatively low trade payable position.

DEFERRED REVENUE

Deferred revenue of €439 million was relatively flat compared with €441 million at the end of last year. The movement reflects a decrease in deferred revenue of Enterprise and Consumer offset by an increase in the deferred revenue position of Automotive. Automotive deferred revenue is impacted by the aforementioned change in the way we treat the performance obligations of map subscriptions, which resulted in less revenue being deferred.

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

(€ in millions)	31 December 2022	31 December 2021
Automotive	431.2	395.0
Enterprise	11.6	41.5
Consumer	20.7	25.5
Gross deferred revenue	463.6	461.9
Less: Netting adjustment to unbilled revenue	24.9	21.2
Deferred revenue	438.6	440.7

CASH FLOW

In Q4 '22, free cash flow was an outflow of €21 million versus an inflow of €57 million in the same quarter last year. The year-on-year decrease is the result of lower cash collection from customers and some unfavorable movements in working capital.

The cash flow from financing activities for the quarter was an outflow of €4 million and relates to the payment of lease liabilities. During the quarter there were no stock options exercises related to our long-term employee incentive programs (Q4 '21: 12 thousand).

On 31 December 2022, the Group had no outstanding bank borrowings and reported a net cash position of €304 million (Q4 '21: net cash of €356 million).

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

(€ in millions)	Q4 '22	Q4 '21	FY '22	FY '21
Cash flow from operating activities	-19.5	61.5	-31.4	36.8
Investments in intangible assets	-0.1	0.0	-5.3	0.0
Investments in property, plant and equipment	-1.5	-4.8	-4.9	-13.3
Free cash flow	-21.1	56.7	-41.6	23.5
Restructuring-related cash flow1	6.5	-	12.4	-
Free cash flow excl. restructuring1	-14.6	56.7	-29.2	23.5

• Restructuring charges are related to the Maps realignment announced in June 2022.
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