TomTom Reports Third Quarter 2013 Results

AMSTERDAM--()--

Financial summary

  • Group revenue of €244 million (Q3 '12: €274 million)
  • Gross margin of 56% (Q3 '12: 55%)
  • EBIT margin of 6% (Q3 '12: 12%)
  • Adjusted1 EPS of €0.10 (Q3 '12: €0.14)
  • Cash flow from operating activities of €71 million (Q3 '12: €50 million)
  • Net cash position of €52 million (Q3 '12: net debt of €153 million)

Operational summary

  • New generation of PNDs widely available in Europe
  • Successful roll-out of our GPS sports watches, now available in 21 countries
  • TomTom’s real-time traffic in more Daimler models
  • Renault R-Link ranked by independent study as the best in-dash infotainment system
  • Business Solutions acquires Coordina, the Spanish market leader in Fleet Management Solutions

2013 outlook

We expect to deliver full year revenue towards the upper end of our guidance of between €900 and €950 million and we expect adjusted¹ EPS of around €0.25 (previously around €0.20).

Key figures

(in € millions)     Q3 '13     Q3 '12    

y.o.y.
change

    YTD '13     YTD '12    

y.o.y.
change

                                     
Revenue     244     274     -11%     696     768     -9%
                                     
Gross result     137     150     -9%     378     400     -6%
Gross margin     56%     55%           54%     52%      
                                     
EBITDA 41 58 -30% 110 128 -14%
EBITDA margin     17%     21%           16%     17%      
                                     
EBIT result 14 32 -57% 21 46 -53%
EBIT margin     6%     12%           3%     6%      
                                     
Net result     11     22     -49%     17     30     -43%
                                     
EPS, € diluted 0.05 0.10 -50% 0.07 0.13 -45%
Adjusted1 EPS, € diluted     0.10     0.14     -32%     0.20     0.27     -26%

Change percentages are based on non-rounded figures

TomTom’s Chief Executive Officer, Harold Goddijn

“Our new PND ranges became fully available in the European market and our first TomTom branded sports watches shipped in all of our major global markets. On the back of this we have started a communications campaign that will run well into the fourth quarter.

We continue to make inroads into the Automotive market although revenue is affected by ongoing low car sales.

We reported a solid set of results despite challenging market conditions and generated significant cash from operations.”

Business review

The PND market size in Europe was 2.3 million units in the third quarter, 15% lower compared to Q3 '12, in line with expectations and the trend seen in the first half of the year. Our Q3 '13 PND revenue in Europe was flat compared to the same quarter last year as the decline in the PND market was partially offset by an increase in our market share to more than 50% and by a strengthening of our ASP. We made the new generation of PNDs fully available across Europe.

The PND market in size in North America was 1.1 million units in the third quarter, 28% lower compared to Q3 ’12. We have chosen not to participate in highly discounted promotional activities and this resulted in a market share of 17% in the quarter.

After initial introduction earlier this year, Consumer started shipping our new GPS sports watches in the US in July, accompanied by a communication campaign launched in September. Following a wider geographical roll-out, our sports watches are now available in 21 countries globally.

In Automotive, we entered into a partnership with Ford, where future TomTom iOS and Android navigation applications will connect to Ford’s SYNC in-dash multimedia system. In September, we started shipping our navigation application into Sony’s second generation in-dash infotainment system and our real-time traffic information service was added to additional Daimler Mercedes-Benz lines. In addition, the Renault R-Link built-in infotainment system was ranked as the best infotainment system available in a study performed by SBD, an independent automotive research consultancy firm. The R-Link system received consistently high scores for its balance of simplicity and feature-richness.

In the third quarter, we made our speed camera service available for integration into third-party connected navigation solutions. This allows vehicle manufacturers and their suppliers to enhance their own navigation offerings.

Business Solutions acquired Coordina, the number one Fleet Management Service provider in Spain. Coordina has a broad local sales network and a well-established local service hub. More than two thirds of Business Solutions revenue is recurring subscription based revenue, generated by the installed base of 310,000 WEBFLEET-subscribers.

Financial review

Revenue

(in € millions)     Q3 '13     Q3 '12    

y.o.y.
change

    YTD '13     YTD '12    

y.o.y.
change

                                     
Group     244     274     -11%     696     768     -9%
Consumer     151     172     -12%     402     452     -11%
Automotive 44 49 -11% 147 168 -13%
Licensing 28 33 -17% 87 95 -8%
Business Solutions     21     19     11%     60     53     15%
                                     
Hardware 151 169 -11% 416 466 -11%
Content & Services     93     105     -11%     280     302     -7%

Change percentages are based on non-rounded figures

Group revenue for the quarter was €244 million, 11% lower compared to €274 million in Q3 '12.

Consumer revenue for the quarter was €151 million, 12% lower compared to €172 million in Q3 '12. PND revenue in Europe was flat as the decline in the PND market was partially offset by the increase in our market share and by a strengthening of our ASP. PND revenue in North America decreased year on year mainly because of the smaller market size. Revenue from fitness products showed a strong growth compared to the same quarter last year.

Revenue from Automotive was €44 million, a decrease of 11% compared to €49 million in Q3 '12, reflecting the on-going lower demand for in-dash devices from our automotive partners as the result of weak car sales in Europe.

Licensing revenue for the quarter was €28 million compared to €33 million in Q3 '12. The decline came mainly from lower GIS Licensing revenue.

Business Solutions generated revenue of €21 million in the quarter, which represents 11% growth compared to €19 million in Q3 '12. Q3 '13 revenue of Business Solutions includes two months revenue from the recently acquired Coordina group. The installed base of WEBFLEET subscribers increased by 39% to 310,000 from 223,000 at the end of Q3 ’12.

Hardware revenue was €151 million for the quarter (Q3 '12: €169 million). Content & Services revenue was €93 million in Q3 '13, €12 million lower compared to Q3 '12, mainly due to lower Licensing revenue. Content & Services revenue represented 38% of total revenue for the quarter (Q3 '12: 38%).

Gross margin

The gross margin was 56% and increased by 1 percentage point compared to 55% in Q3 '12. Both in Q3 '13 and in Q3 '12, the gross margin included some one-off releases in our provisions. Excluding these one-off effects, the gross margin would have been 54% in Q3 '13 compared to 52% in Q3 '12. The year on year increase was mainly due to the change in geographical revenue mix.

Operating expenses

Total operating expenses increased by €5.4 million year on year. We saw an increase in SG&A (€4.5 million) and stock compensation expenses (€1.9 million) partially driven by the increase of our share price. Marketing expenses were slightly down year on year (€2.2 million), as investments were phased to support a planned communication campaign in the fourth quarter.

Financial income and expenses

The net interest charge for the quarter was €0.8 million (Q3 '12: €3.2 million). The other financial result for the quarter was a gain of €0.4 million (Q3 '12: charge of €0.2 million) which consisted primarily of foreign exchange gains on the revaluation of USD denominated monetary balance sheet items.

Income tax

The net income tax charge was €2.0 million in Q3 '13, a decrease of €4.5 million compared to €6.6 million in Q3 '12. The effective tax rate (ETR) in the third quarter was 15.0% compared to 22.7% in Q3 '12. The ETR year to date equals 16.7% (YTD '12: 22.8%). The lower ETR for the quarter was mainly caused by releases of tax provisions.

Net result and adjusted¹ EPS

The net result for the quarter was €11 million compared to €22 million in Q3 '12, which represents adjusted¹ EPS of €0.10 and €0.14 respectively.

Balance sheet

At the end of the quarter, trade receivables amounted to €136 million compared to €171 million at the end of Q3 '12. The inventory level was €56 million, a decrease of €3.6 million year on year. Cash and cash equivalents at the end of the quarter were €228 million versus €137 million at the end of Q3 '12.

The carrying value of our borrowings as at 30 September 2013 was €174 million (Q3 '12: €289 million). Excluding transaction costs, which are netted against the borrowings, our outstanding borrowings amounted to €176 million (Q3 '12: €290 million).

Current liabilities were €415 million compared to €717 million at the end of Q3 '12. The year on year decrease is mainly caused by the fact that our outstanding borrowings were presented as current in Q3 '12 as they fell due for repayment in December 2012. Trade payables amounted to €89 million, €6.6 million lower compared to Q3 '12. Tax and social security amounted to €42 million, €13 million higher compared to Q3 '12 mainly due to timing of corporate income tax payments.

Deferred revenue for the quarter ended at €115 million (Q3 '12: €93 million). The main reason for the year on year increase is a combination of an increase of deferred revenue related to our lifetime maps and traffic in PNDs and higher deferred revenue on Licensing contracts.

At 30 September 2013 we reported a net cash position of €52 million (Q3 '12: net debt of €153 million). Net cash is the sum of the cash and cash equivalents at the end of the period (€228 million) minus the borrowings (€176 million).

Cash flow

Cash flow from operating activities for the quarter was €71 million compared to €50 million in Q3 '12. The increase was mainly driven by higher working capital from other liabilities.

The cash flow used in investing activities during the quarter increased by €12 million year on year to €24 million. Maps continue to be our largest area of investment and we saw increased activity in customer specific Automotive projects and in navigation software development. Additionally we acquired the Coordina group in Spain.

- END -

Consolidated condensed statement of income

(in € thousands)     Q3 '13     Q3 '12     YTD '13     YTD '12
                         
Revenue     244,056     273,561     695,889     768,124
Cost of sales     106,573     123,286     318,081     367,721
Gross result     137,483     150,275     377,808     400,403
                         
Research and development expenses 40,276 40,154 122,084 121,058
Amortisation of technology & databases 20,962 19,900 59,262 62,234
Marketing expenses 12,758 14,933 34,695 43,066
Selling, general and administrative expenses 46,207 41,723 133,012 123,017
Stock compensation expense     3,665     1,742     7,445     5,417
Total operating expenses     123,868     118,452     356,498     354,792
                         
Operating result     13,615     31,823     21,310     45,611
                         
Interest result -765 -3,187 -2,145 -9,711
Other finance result 358 -169 -1,936 1,932
Result associates     166     356     2,979     590
Result before tax     13,374     28,823     20,208     38,422
                         
Income tax     -2,009     -6,554     -3,373     -8,743
Net result     11,365     22,269     16,835     29,679
 
Net result attributable to:                        
Equity holders of the parent 11,248 22,283 16,281 29,612
Non-controlling interests 117 -14 554 67
Net result     11,365     22,269     16,835     29,679
                         
Basic number of shares (in thousands) 221,940 221,895 221,913 221,895
Diluted number of shares (in thousands)     223,871     222,023     222,751     221,983
                         
EPS, € basic 0.05 0.10 0.07 0.13
EPS, € diluted     0.05     0.10     0.07     0.13
 

Consolidated condensed balance sheet

(in € thousands)     30 September 2013     31 December 2012
             
Goodwill     381,569     381,569
Other intangible assets 812,246 821,233
Property, plant and equipment 24,253 26,770
Deferred tax assets 12,117 13,610
Investments in associates     2,782     3,880
Total non-current assets     1,232,967     1,247,062
             
Inventories 55,514 44,383
Trade receivables 136,344 149,834
Other receivables and prepayments 38,798 118,262
Other financial assets 64 444
Cash and cash equivalents     227,538     164,459
Total current assets     458,258     477,382
             
Total assets     1,691,225     1,724,444
             
Share capital 44,388 44,379
Share premium 975,482 975,260
Other reserves 178,094 159,011
Accumulated deficit -347,832 -342,875
Equity attributable to equity holders of the parent     850,132     835,775
Non-controlling interests     2,466     2,642
Total equity     852,598     838,417
             
Borrowings 173,864 173,437
Deferred tax liability 167,106 170,909
Provisions 51,608 48,268

Other liabilities2

    31,012     18,130
Total non-current liabilities     423,590     410,744
             
Borrowings 106 73,703
Trade payables 88,537 84,162
Tax and social security 41,995 33,263
Provisions 29,369 33,192
Other liabilities and accruals2     255,030     250,963
Total current liabilities     415,037     475,283
             
Total equity and liabilities     1,691,225     1,724,444
 

Consolidated condensed statements of cash flows

(in € thousands)     Q3 '13     Q3 '12     YTD '13     YTD '12
                         
Operating result     13,615     31,823     21,310     45,611
Financial (losses)/ gains -323 -134 -4,576 3,442
Depreciation and amortisation 27,416 26,577 88,336 82,142
Change in provisions -5,361 -6,615 -6,578 -8,500
Equity-settled stock compensation expenses 1,557 1,281 4,469 4,490
Changes in working capital:
Change in inventories -6,959 3,116 -9,113 958
Change in receivables and prepayments 842 -11,074 11,503 14,602

Change in liabilities (excl. Provisions)3

    44,094     8,009     24,075     -54,458
Cash flow from operations     74,881     52,983     129,426     88,287
                         
Interest received 73 433 1,068 983
Interest paid -607 -1,715 -2,114 -6,442
Corporate income taxes received/(paid)     -3,389     -1,466     80,289     -6,781
Cash flow from operating activities     70,958     50,235     208,669     76,047
                         
Investments in intangible assets -21,841 -10,843 -59,977 -31,915
Investments in property, plant and equipment -2,663 -1,779 -10,286 -5,792
Dividend received     45     0     1,001     1,447
Cash flow from investing activities     -24,459     -12,622     -69,262     -36,260
                         
Repayment of borrowings 0 -50,000 -75,000 -98,000
Dividends paid 0 0 -204 0
Proceeds on issue of ordinary shares     0     0     157     0
Cash flow from financing activities     0     -50,000     -75,047     -98,000
                         
Net increase/(decrease) in cash and cash equivalents 46,499 -12,387 64,360 -58,213
Cash and cash equivalents at beginning of period 181,139 148,910 164,459 193,579
Exchange rate effect on cash balances held in foreign currencies     -100     5     -1,281     1,162
Cash and cash equivalents at end of period     227,538     136,528     227,538     136,528
 

Accounting policies - basis of accounting

The condensed consolidated financial information for the three-month period ended 30 September 2013 with related comparative information have been prepared using accounting policies which are based on International Financial Reporting Standards (IFRS). Accounting policies and methods of computation followed in the condensed consolidated financial information, for the period ended 30 September 2013, are the same as those followed in the Financial Statements for the year ended 31 December 2012. Further disclosures as required under IFRS for a complete set of consolidated financial statements are not included in the condensed consolidated financial information. The quarterly condensed consolidated information in this press release is unaudited.

Audio webcast third quarter 2013 results

The information for our third quarter results audio webcast is as follows:
Date and time: 30 October 2013 at 14.00 CET
http://corporate.tomtom.com/events.cfm

TomTom is listed at NYSE Euronext Amsterdam in the Netherlands
ISIN: NL0000387058 / Symbol: TOM2

About TomTom

Founded in 1991, TomTom (TOM2) provides map-based components and consumer and business products, in many cases integrating its own components.

The map-based components include map content, online map-based services, real-time traffic, and navigation software. Our consumer products include PNDs, navigation apps, and GPS sports watches. Our main business products are custom in-dash navigation systems and a fleet management system, which is offered to fleet owners as an online service with integrated in-vehicle cellular devices.

Headquartered in Amsterdam, TomTom has 3,500 employees worldwide and sells its products in over 35 countries.

For further information, please visit www.tomtom.com

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 suggested 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 its relations with third party suppliers, and its ability to accurately forecast the volume and timing of sales. Additional presently unknown factors could also cause future results to differ materially from those in the forward-looking statements.

1 Earnings per share adjusted for acquisition-related amortisation & gain on a post-tax basis
2 Non-current and current “Other liabilities” include deferred revenue totalling €115,150 (31 December 2012: €95,256)
3 Includes the movement of non-current deferred revenue

Contacts

Taco Titulaer
TomTom Investor Relations
ir@tomtom.com
+31 20 757 5194

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Contacts

Taco Titulaer
TomTom Investor Relations
ir@tomtom.com
+31 20 757 5194