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TomTom Reports Second Quarter 2017 Results

AMSTERDAM — (BUSINESS WIRE) — July 18, 2017 — TomTom (AEX:TOM2)

Financial summary Q2 '17

Operational summary Q2 '17

New share buy-back program

TomTom intends to repurchase ordinary TomTom shares for an amount up to €50 million, representing 2.5% of total issued share capital.2

Outlook 2017

Full year revenue outlook updated; we now expect to deliver full year revenue around the lower end of our guidance of between €925 million and €950 million.

Outlook for adjusted EPS1 of around €0.25 is unchanged.

Key figures

(€ in millions, unless stated
otherwise)

  Q2 '17   Q2 '16  

y.o.y.
change

  H1 '17   H1 '16  

y.o.y.
change

                         
Automotive & Licensing   87.0   68.1   28%   161.1   131.5   23%
Telematics 40.1 39.9 0% 80.7 77.0 5%
Consumer   126.3   157.2   -20%   224.3   273.9   -18%
REVENUE   253.4   265.2   -4%   466.2   482.4   -3%
                         
GROSS RESULT 160.6 145.3 11% 293.0 268.6 9%
Gross margin   63%   55%       63%   56%    
                         
EBITDA 45.2 43.7 4% 73.2 69.3 6%
EBITDA margin   18%   16%       16%   14%    
                         
OPERATING RESULT (EBIT) -159.5 12.8 -164.4 8.4
EBIT margin   -63%   5%       -35%   2%    
                         
NET RESULT -160.1 12.2 -164.6 17.0
ADJUSTED NET RESULT   21.0   23.2   -10%   28.0   30.7   -9%
                         
EPS, € fully diluted -0.68 0.05 -0.70 0.07

Adjusted EPS1, € fully diluted

  0.09   0.10   -11%   0.12   0.13   -10%

Change percentages and totals calculated before rounding.

This report includes the following non-GAAP measures: gross margin, EBIT (margin), EBITDA (margin), adjusted net result, adjusted EPS and net cash, which are further explained on page 22 of this report.

TomTom's Chief Executive Officer, Harold Goddijn

“Our strategy is to build on our navigation technologies to provide location-based content, software, and services to business customers, with high margins and recurring income. Combined Automotive, Licensing and Telematics revenue grew by 18% year on year in the quarter, ahead of expectations.”

Outlook 2017 updated

Hardware revenues were lower than planned because of disappointing Sports sales. The wearables market has fallen short of expectations. Because of this and because we want to focus on our Automotive, Licensing and Telematics businesses, we are reviewing strategic options for Sports.

As a result, we are updating our revenue outlook. We now expect to deliver full year revenue around the lower end of our guidance of between €925 million and €950 million. Adjusted EPS3 of around €0.25 remains unchanged.

We expect the combined revenue of the Automotive, Licensing and Telematics businesses to grow around 15% year on year in 2017.

We expect the level of investments (both CAPEX and OPEX) to show a modest increase compared with 20164, excluding acquisitions.

Goodwill impairment

The difficult market circumstances combined with lower sales than planned for the second quarter has resulted in a downward revision in the future profitability projections for Consumer Sports. As a result, TomTom recorded a full impairment charge against the goodwill of the Consumer segment of €169 million in the second quarter 2017. This non-cash impairment charge is included within operating income (loss). The goodwill that was impaired was originally recorded at the time of the acquisition of Tele Atlas in 2008.

New share buy-back program

TomTom intends to repurchase ordinary TomTom shares on Euronext Amsterdam for an amount up to €50 million. Based on the closing price of the TomTom share on Euronext Amsterdam on 18 July 2017, the repurchase represents approximately 2.5% of TomTom’s issued share capital. TomTom aims to start the repurchase in the second half of 2017.

The repurchase will be executed within the limits of relevant laws and regulations and the existing authority granted by the Annual General Meeting on 24 April 2017. TomTom will inform the market about the actual start of the repurchase and the progress made in the execution of this program through a press release and corporate website. The share buy-back will be used to cover TomTom’s commitments arising from its stock option and share plans.

Financial and business review Q2 2017

Revenue for the second quarter amounted to €253 million, 4% lower compared with the same quarter last year (Q2 '16: €265 million). Automotive, Licensing and Telematics jointly grew by 18% year on year, which was offset by lower Consumer revenue. Our gross margin for the quarter equalled to 63% (Q2 '16: 55%). The net result for the quarter was a loss of €160 million. Excluding the impairment charge, our net result for the quarter was €8.6 million. Adjusted EPS3 in Q2 '17 was €0.09, compared with €0.10 in the same quarter last year.

Automotive & Licensing

(€ in millions)   Q2 '17   Q2 '16  

y.o.y.
change

  H1 '17   H1 '16  

y.o.y.
change

                         
Automotive   48.4   34.9   39%   89.5   64.6   39%
Licensing   38.6   33.2   16%   71.6   66.9   7%
Total Automotive & Licensing revenue   87.0   68.1   28%   161.1   131.5   23%

Change percentages and totals calculated before rounding.

 

Automotive & Licensing combined revenue in the quarter was €87 million (Q2 '16: €68 million). Automotive generated revenue of €48 million in the quarter, representing a 39% increase year on year. This increase mainly came from the ramp-up of a new contract that went live last year. Licensing revenue in Q2 '17 was €39 million compared with €33 million in the same quarter last year. The year on year increase in Licensing included a catch-up of content delivered in earlier quarters for which revenue recognition criteria were not yet met.

In the quarter, we completed the expansion of the TomTom HD Map product to cover all highways in Western Europe. That’s 175,000 kilometres of highways across 19 European countries, bringing the total coverage of TomTom’s HD Map and RoadDNA to 360,000 kilometres, including the US. The geo-expansion of TomTom Traffic continued with countries in Eastern Europe and the Middle East, bringing the total to 64 countries.

We also announced that weekly global map database updates, delivered by our transactional mapmaking platform, are now available for business customers. The industry norm for global automotive grade maps is quarterly map releases; TomTom moved beyond this in 2016 with monthly updates and has now taken a step further by introducing weekly map updates.

We announced several partnerships, supporting Autonomous Driving and Smarter Mobility, with industry leaders.

We have joined forces with Baidu to develop global HD maps for Autonomous Driving, creating a globally unified HD map service for OEMs and technology companies who are working on the future of driving. The collaboration combines our expertise in HD mapmaking and artificial intelligence (AI). Baidu will use our mapmaking platform to improve HD map-related technologies utilised in China.

Together with Bosch, we will create an HD map with integrated Radar Road Signature layer for the localisation of vehicles in Autonomous Driving. The Radar Road Signature layer will allow automated vehicles to determine their exact location on a road down to a few centimetres, working in conjunction with the TomTom HD Map. This additional localisation layer greatly increases the robustness of localisation under all circumstances.

In addition, we are developing ultra-fast lane-level traffic technology. Research will be done in cooperation with Cisco to use roadside data captured by Cisco’s array of sensors, routers and controllers to create the next generation of traffic information technology. With this project, we are connecting road infrastructure, vehicles, drivers and road authorities, enabling them to exchange information in near real time. This cooperation is expected to reduce latency and increase accuracy of real time traffic services, while reducing the costs of traffic monitoring infrastructure.

Telematics

(€ in millions, unless stated otherwise)   Q2 '17   Q2 '16  

y.o.y.
change

  H1 '17   H1 '16  

y.o.y.
change1

                         
Subscriptions   31.3   29.2   7%   62.0   58.1   7%
Hardware and other services²   8.8   10.7   -17%   18.7   18.9   -1%
Total Telematics revenue   40.1   39.9   0%   80.7   77.0   5%
                         
Monthly revenue per subscription (€) 14.0 15.0 -7% 14.2 15.4 -8%
Subscriber installed base (# in thousands)   762   652   17%   762   652   17%

1 Change percentages and totals calculated before rounding.

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

 

Telematics revenue for the quarter was €40 million, flat compared with the same quarter last year. The recurring subscription revenue for the quarter increased by 7% year on year to €31 million (Q2 '16: €29 million). Hardware revenue decreased by 17% year on year in the second quarter, mainly due to high volumes of connected car shipments in Q2 '16. Monthly revenue per subscription decreased by 7% year on year, mainly due to a mix effect caused by growing aftermarket connected car volumes, which are priced at lower levels compared with the traditional fleet management services.

At the end of Q2 '17, Telematics surpassed 762,000 connected car and fleet management subscriptions. This represents a 17% year on year increase, from 652,000 subscriptions at the end of Q2 '16.

In the quarter, Telematics started providing leasing companies in Europe with connected car services, designed to monitor and manage fleets.

Consumer

(€ in millions)   Q2 '17   Q2 '16  

y.o.y.
change

  H1 '17   H1 '16  

y.o.y.
change

                         
Consumer products   113.1   138.2   -18%   198.4   235.3   -16%
Automotive hardware   13.2   19.0   -31%   25.9   38.6   -33%
Total Consumer revenue   126.3   157.2   -20%   224.3   273.9   -18%

Change percentages and totals calculated before rounding.

 

Consumer revenue for the quarter decreased by 20% year on year to €126 million (Q2 '16: €157 million), reflecting a decrease in both Consumer products as well as Automotive hardware revenue. The decrease in Consumer products is partly driven by an anticipated decline in the PND market as well as unexpected difficult market circumstances for our Sports products in the second quarter.

Data, software & services and Hardware revenue split

(€ in millions)   Q2 '17   Q2 '16  

y.o.y.
change

  H1 '17   H1 '16  

y.o.y.
change

                         
Data, software & services   141.8   122.0   16%   268.8   237.6   13%
Hardware   111.6   143.2   -22%   197.4   244.8   -19%
Total revenue   253.4   265.2   -4%   466.2   482.4   -3%

Change percentages and totals calculated before rounding.

 

Data, software & services revenue in the quarter was €142 million, 16% higher compared with €122 million in Q2 '16, mainly due to increase in Automotive & Licensing revenue. Data, software & services accounted for 56% of the revenue in Q2 '17 compared with 46% in Q2 '16. Hardware revenue for the quarter was €112 million, 22% lower compared with €143 million in Q2 '16.

Gross result

Our gross result increased by 11% to €161 million in the quarter compared with €145 million in Q2 '16. The gross margin for the quarter was 63%, which is 8 percentage points higher compared with 55% in Q2 '16, reflecting the shift of revenue mix towards higher margin data, software & services revenue.

Operating expenses

Excluding the impairment charge, total operating expenses for the quarter were €151 million, €18 million higher compared with €133 million in the same quarter last year. Operating expenses in the same quarter last year included a one-off gain from a pending customs case. Excluding this one-off gain, operating expense for the quarter increased by 8% year on year mainly reflecting higher expense on our long-term employee incentive plans and higher amortisation expenses.

FX sensitivity

(€ in millions, unless stated otherwise)   Q2 '17
actual 		  Q2 '17
recalculated at
Q2 '16

FX rates1

  H1 '17
actual 		  H1 '17
recalculated at
H1 '16

FX rates1

                 
Revenue   253.4   253.7   466.2   467.1
 
Gross result 160.6 162.8 293.0 297.2
Gross margin 63% 64% 63% 64%
 
EBIT (excl. impairment charge) 9.2 11.2 4.3 8.0
EBIT margin (excl. impairment charge) 4% 4% 1% 2%
                 
FX RATES (IN €) Q2 '17 Q2 '16 H1 '17 H1 '16
US dollar 1.09 1.13 1.08 1.11
GB pound   0.85   0.78   0.85   0.77

¹The Q2 '17/H1 '17 income and expense in US dollar and GB pound have been converted to euro using Q2 '16 / H1 '16
average exchange rates. All other foreign currencies have not been converted.

 

Depreciation, amortisation and impairment

(€ in millions)   Q2 '17   Q2 '16  

y.o.y.
change

  H1 '17   H1 '16  

y.o.y.
change

                         
Cost of sales   3.4   2.3   49%   6.0   4.3   39%
Research and development 3.2 3.1 5% 6.2 5.8 8%
Amortisation of technology & databases 24.4 21.1 15% 46.8 41.7 12%
Marketing 0.1 0.1 0% 0.2 0.2 0%
Selling, general and administration 4.9 4.3 13% 9.7 8.8 9%
Impairment charge   168.7           168.7        
Total   204.7   30.9       237.6   60.8    
Of which acquisition-related   182.6   13.7       196.5   27.4    

Change percentages and totals calculated before rounding.

 

Excluding the impairment charge, total depreciation and amortisation costs amounted to €36 million compared with €31 million in Q2 '16. This increase is mainly due to amortisation of several technology platforms that were taken into use in the quarter and earlier this year.

Financial income and expenses

The net interest charge for the quarter was €0.3 million versus a net interest charge of €0.4 million in Q2 '16. The other financial result for the quarter was a gain of €1.5 million (Q2 '16: loss of €1.2 million).

Income tax

The net income tax for the quarter was €1.9 million versus a net income tax gain of €0.9 million in Q2 '16.

Net result and adjusted EPS

(€ in millions, unless stated
otherwise)

  Q2 '17   Q2 '16  

y.o.y.
change

  H1 '17   H1 '16  

y.o.y.
change

                         

Net result

  -160.1   12.2       -164.6   17.0    

Net result attributed to equity
holders

  -159.9   12.1     -164.5   16.9  

Remeasurement of deferred tax
liability

-7.6
Impairment charge 168.7 168.7
Acquisition-related expenses 15.7 13.7 14% 30.5 27.4 11%
Tax effect of adjustments   -3.5   -2.6   34%   -6.7   -6.0   12%
Adjusted net result   21.0   23.2   -10%   28.0   30.7   -9%
                         
Adjusted EPS, € fully diluted   0.09   0.10   -11%   0.12   0.13   -10%

Change percentages and totals calculated before rounding.

 

The net result for the quarter was a loss of €160 million compared with a gain of €12 million in Q2 '16. The adjusted net result for the quarter was €21 million compared with €23 million in Q2 '16.

Adjusted EPS for the quarter was €0.09, compared with €0.10 in the same quarter last year.

Balance sheet

Our goodwill balance decreased sequentially by €169 million to an amount of €255 million following the impairment charge recorded in Consumer. The remaining goodwill is allocated to Automotive, Licensing and Telematics.

At the end of the quarter, trade receivables plus other receivables totalled €216 million compared with €231 million at the end of Q2 '16. The inventory level at the end of the quarter was €54 million, compared with €51 million at the end of the same quarter last year. Cash and cash equivalents at the end of the quarter were €85 million versus €136 million at the end of Q2 '16.

Current liabilities excluding deferred revenue were €248 million compared with €278 million at the end of Q2 '16.

Deferred revenue was €220 million at the end of Q2 '17, compared with €188 million at the end of the same quarter last year. The year on year increase reflects increased Automotive deferred revenue position on contracts with upfront payments for multi-year service offerings.

At 30 June 2017, we reported a net cash position of €82 million (Q2 '16: net cash of €58 million). Net cash is the sum of the cash and cash equivalents at the end of the period (€85 million) minus the nominal amount of the borrowings (€3 million).

Cash flow

The cash flow from operating activities for the quarter was €29 million compared with €33 million in Q2 '16. The year on year decrease in operating cash flow was mainly driven by lower operating results.

The cash flow used in investing activities during the quarter increased by €3 million year on year to €33 million (Q2 '16: €30 million) mainly reflecting increase of our investments in our digital map content.

The cash flow from financing activities was an inflow of €6.3 million, mainly reflecting cash inflow from the exercises of employee stock options offset by repayment of credit facility and borrowings. In the quarter, 1.8 million options (Q2 '16: 1.5 million options) were exercised resulting in a €8.8 million cash inflow (Q2 '16: €6.4 million).

- END –

TOMTOM NV

INTERIM FINANCIAL REPORT

30 JUNE 2017

(Unaudited)

Contents:

Semi-annual financial report
Consolidated condensed statement of income
Consolidated condensed statement of comprehensive income
Consolidated condensed balance sheet
Consolidated condensed statements of cash flows
Consolidated condensed statement of changes in equity
Notes to the consolidated interim financial statements

Semi-annual financial report

Introduction

TomTom NV (the ‘Company’) and its subsidiaries (together referred to as ‘the group’) is the world’s leading provider of location and navigation solutions. TomTom has more than 4,700 employees (FTE) working in its offices across all continents. The commercial activities of the group are carried out through four customer facing business units – Automotive, Licensing, Telematics and Consumer. Automotive and Licensing are engaged in developing and selling similar location-based application components such as maps, online services (e.g. traffic) and navigation software to customers in different market segments. Automotive serves automotive customers (mainly OEMs and Tier1 head unit vendors) while Licensing serves a wide range of non-Automotive customers. Telematics provides a wide range of telematics services and related products to fleet owners including sale and/or rental of hardware products associated with the services. Consumer generates revenue mainly from the sale of consumer electronics devices, such as PNDs and sports watches.

Market and TomTom outlook 2017

Within the Automotive & Licensing business we aim to grow through technology leadership in mapmaking information systems, traffic and navigation software. To achieve leadership we will invest in automation, modularity and industry standard interfaces. We are targeting new growth opportunities in ADAS and Autonomous Driving, investing in our HD map and RoadDNA technologies. Our Telematics business strategy is to continue to profitably grow our fleet management business and to diversify to other Connected Car services such as vehicle leasing.

Hardware revenues were lower than planned because of disappointing Sports sales. The wearables market has fallen short of expectations. Because of this and because we want to focus on our Automotive, Licensing and Telematics businesses, we are reviewing strategic options for Sports.

As a result, we are updating our revenue outlook. We now expect to deliver full year revenue around the lower end of our guidance of between €925 million and €950 million. Adjusted EPS5 of around €0.25 remains unchanged.

We expect the combined revenue of the Automotive, Licensing and Telematics businesses to grow around 15% year on year in 2017.

We expect the level of investments (both CAPEX and OPEX) to show a modest increase compared with 20166, excluding acquisitions.

Financial review for the six-month period ended 30 June 2017

In the first half of 2017, the Group generated revenue of €466 million, which is €16 million less compared with €482 million in the same period of 2016. Our year on year revenue development reflects growth in Automotive, Licensing and Telematics revenue offset by the revenue decline in Consumer. The Group’s gross margin for H1 '17 was 63% (H1 '16: 56%) and the operating result for H1 '17 was a loss of €164 million (H1 '16: €8.4 million) as we recorded an impairment charge of €169 million on the goodwill of our Consumer segment.

Revenue

Automotive & Licensing generated revenue of €161 million in H1 '17, an increase of 23% compared with €132 million in H1 '16. Automotive generated revenue of €90 million in H1 '17, an increase of 39% compared with €65 million in H1 '16. This increase is mainly the result of the ramp up of revenue from a contract that went live at the end of H1 '16. Licensing revenue in H1 '17 was €72 million compared with €67 million in H1 '16. This increase is driven by a catch-up of revenue for content delivered in the earlier quarters but the revenue recognition criteria were not yet fulfilled.

Telematics revenue increased by 5% year on year from €77 million in H1 '16 to €81 million in H1 '17. The increase was mainly driven by growing recurring service revenue.

Consumer revenue for H1 '17 declined year on year by 18% to €224 million, driven by difficult market circumstances in Sports, a declining PND market in line with expectations and phasing out of Automotive hardware contracts which are included in the Consumer segment.

Gross result

The gross profit for H1 '17 was €293 million, an increase of €24 million compared with the same period last year (H1 '16: €269 million). The gross margin in H1 '17 was 63% compared with 56% in H1 '16, mainly reflecting the shift of our revenue mix towards higher margin data, software & services revenue.

Goodwill impairment

The difficult market circumstances combined with lower sales than planned for the second quarter has resulted in a downward revision in the future profitability projections for Consumer Sports. As a result, TomTom recorded a full impairment charge against the goodwill of the Consumer segment of €169 million in the second quarter 2017. This non-cash impairment charge is included within operating income (loss). The goodwill that was impaired was originally recorded at the time of the acquisition of Tele Atlas in 2008.

Operating expenses

Excluding the impairment charge, operating expenses in H1 '17 were €289 million compared with €260 million in H1 '16. The operating expenses in H1 '16 included a one-off gain relating to a pending customs case. Excluding this one-off gain, the underlying operating expenses increased by €22 million year on year. This increase mainly came from higher expenses on our long-term employee incentive program and amortisation.

Operating result

The operating result for H1 '17 was a loss of €164 million compared with a gain of €8.4 million in H1 '16.

Financial result

The group recorded €0.5 million interest expenses in H1 '17 compared with €0.7 million in the same period of 2016. The other financial result in H1 '17 was a gain of €1.9 million versus a gain of €0.5 million in H1 '16, mainly driven by a gain on foreign exchange revaluation of our monetary balance sheet items.

Income taxes

In H1 '17, the group recorded an income tax expense of €2.0 million versus a gain of €8.3 million in the same period last year. The gain in 2016 was mainly the result of the remeasurement of our deferred tax positions as the result of application of innovation box facility in the Netherlands.

Cash flow

The cash flow from operating activities was €27 million, an increase of €12 million compared with €15 million in the same period last year. The increase is mainly due to lower working capital utilisation in H1 '17.

Excluding acquisition-related cash flows and dividends received, the cash flow used in investing activities during H1 '17 was €62 million, an increase of €3 million compared with €59 million in the same period last year.

The cash flow from financing activities includes a cash inflow of €11 million from the exercise of 2.2 million options related to our long-term employee incentive programmes during H1 '17.

Related party transactions

For related party transactions please refer to note 9 of our interim financial report.

Principal risks and uncertainties H1 2017

The risks associated with building a multi-product Consumer business were acknowledged in TomTom’s Group Risk Profile (see 2016 Annual Report). The weaker than expected Sports revenue is a partial realisation of this risk.

Taking the decision to evaluate our strategic options for Consumer Sports gives rise to a change in this risk. The most significant changes are the possible negative impact on our brand name, the unnecessary loss of talented people employed by our organisation and the negative market response to the TomTom Sports business itself.

We have anticipated these risks and prepared appropriate risk responses that include investigating the strategic options for Consumer Sports as well as proactively engaging stakeholders to minimise TomTom organisational and product market disruption.

All other group risks mentioned in the Group Risk Profile section of TomTom’s 2016 Annual Report are still relevant and deemed incorporated and repeated in this report by reference.

Responsibility statement

With reference to the statement within the meaning of article 5:25d (2c) of the Financial Supervision Act, the Management Board hereby declares that, to the best of their knowledge:

Amsterdam, 19 July 2017

The Management Board

Harold Goddijn / Chief Executive Officer
Taco Titulaer / Chief Financial Officer
Alain De Taeye / Member of the Management Board

Consolidated condensed statement of income

(€ in thousands)  

Q2 '17
Unaudited

 

Q2 '16
Unaudited

 

H1 '17
Unaudited

 

H1 '16
Unaudited

                 
Revenue   253,442   265,225   466,153   482,380
Cost of sales   92,833   119,967   173,174   213,817
Gross result   160,609   145,258   292,979   268,563
                 
Research and development expenses 53,539 45,675 103,765 90,208
Amortisation of technology and databases 24,373 21,107 46,802 41,733
Marketing expenses 21,768 21,545 36,023 36,603
Selling, general and administrative expenses 51,743 44,179 102,056 91,580
Impairment charge   168,687   0   168,687   0
Total operating expenses   320,110   132,506   457,333   260,124
                 
Operating result   -159,501   12,752   -164,354   8,439
                 
Interest result -318 -377 -493 -682
Other financial result 1,458 -1,233 1,856 478
Result of associates   228   134   353   461
Result before tax   -158,133   11,276   -162,638   8,696
                 
Income tax (expense) / gain   -1,923   911   -1,974   8,257
Net result   -160,056   12,187   -164,612   16,953
 
Net result attributable to:                
Equity holders of the parent -159,902 12,066 -164,512 16,858
Non-controlling interests -154 121 -100 95
Net result   -160,056   12,187   -164,612   16,953
                 
Basic number of shares (in thousands) 234,417 231,193 233,749 230,902
Diluted number of shares (in thousands)   238,124   234,522   237,520   234,687
                 
EPS, € basic -0.68 0.05 -0.70 0.07

EPS, € diluted7

  -0.68   0.05   -0.70   0.07
 

Consolidated condensed statement of comprehensive income

(€ in thousands)  

Q2 '17
Unaudited

 

Q2 '16
Unaudited

 

H1 '17
Unaudited

 

H1 '16
Unaudited

                 
Net result   -160,056   12,187   -164,612   16,953

 

               
Other comprehensive income:        
Items that will not be reclassified to profit or loss:
Actuarial (losses) on defined benefit obligations 0 -384 0 -384

Items that may be subsequently reclassified to
profit or loss:

Currency translation differences -6,454 3,684 -4,229 -3,783
Other comprehensive income for the period -6,454 3,300 -4,229 -4,167

 

Total comprehensive income for the period   -166,510   15,487   -168,841   12,786

 

Attributable to:                
Equity holders of the parent -166,320 15,375 -168,697 12,757
Non-controlling interests -190 112 -144 29
Total comprehensive income for the period   -166,510   15,487   -168,841   12,786

The items in the statement above are presented net of tax.

 

Consolidated condensed balance sheet

(€ in thousands)   30 June 2017

Unaudited

  31 December 2016

Audited

         
Goodwill   254,899   400,318
Other intangible assets 795,196 795,771
Property, plant and equipment 37,835 40,398
Deferred tax assets 10,039 12,046
Investment in associates   4,055   3,941
Total non-current assets   1,102,024   1,252,474
         
Inventories 54,301 54,078
Trade receivables 134,977 132,424
Other receivables and prepayments 80,978 46,115
Other financial assets 114 1,210
Cash and cash equivalents   85,041   142,527
Total current assets   355,411   376,354
         
Total assets   1,457,435   1,628,828
         
Share capital 47,027 46,577
Share premium 1,067,277 1,051,890
Other reserves 265,562 234,502
Accumulated deficit   -538,463   -338,138
Equity attributable to equity holders of the parent   841,403   994,831
Non-controlling interests   1,748   1,906
Total equity   843,151   996,737
         
Borrowings 2,752 9,586
Deferred tax liability 95,821 97,282
Provisions 47,441 54,406
Deferred revenue   122,932   107,151
Total non-current liabilities   268,946   268,425
         
Trade payables 75,288 76,630
Income taxes 1,406 1,289
Other taxes and social security 13,388 9,383
Provisions 33,696 36,410
Deferred revenue 97,186 97,256
Accruals and other liabilities   124,374   142,698
Total current liabilities   345,338   363,666
         
Total equity and liabilities   1,457,435   1,628,828
 

Consolidated condensed statements of cash flows

(€ in thousands)  

Q2 '17
Unaudited

 

Q2 '16
Unaudited

 

H1 '17
Unaudited

 

H1 '16
Unaudited

                 
Operating result   -159,501   12,752   -164,354   8,439
Financial (losses) / gains -1,519 -553 397 401
Depreciation, amortisation and impairment 204,742 30,941 237,550 60,811
Change in provisions -2,969 4,805 -8,270 1,588
Equity-settled stock compensation expenses 2,635 987 4,402 1,934
Changes in working capital:
Change in inventories 7,750 6,020 -502 -2,112
Change in receivables and prepayments -23,694 -58,744 -33,515 -47,072

Change in liabilities (excluding provisions)8

  4,620   38,499   -3,300   -5,547
Cash generated from operations   32,064   34,707   32,408   18,442
                 
Interest received 44 44 151 86
Interest (paid) -276 -338 -476 -602
Corporate income taxes (paid)   -3,163   -1,151   -5,231   -3,021
Cash flows from operating activities   28,669   33,262   26,852   14,905
                 
Investments in intangible assets -29,159 -25,678 -54,673 -46,982
Investments in property, plant and equipment -4,255 -4,558 -7,358 -12,293

Acquisition of subsidiaries and other businesses

0 0 -24,493 -2,331
Dividends received   0   80   0   80
Cash flows from investing activities   -33,414   -30,156   -86,524   -61,526
                 
Change in utilisation of credit facility -2,000 13,000 -7,000 33,000
Repayment of borrowings -382 0 -708 -4,287
Change in non-controlling interest -123 0 -123 0
Dividends paid 0 -271 0 -127
Proceeds on issue of ordinary shares   8,809   6,433   10,980   7,668
Cash flows from financing activities   6,304   19,162   3,149   36,254
                 

Net increase / (decrease) in cash and cash
equivalents

1,559 22,268 -56,523 -10,367

Cash and cash equivalents at beginning of
period

84,427 114,630 142,527 147,565

Exchange rate changes on cash balances held
in foreign currencies

  -945   -507   -963   -807
Cash and cash equivalents at end of period   85,041   136,391   85,041   136,391
 

Consolidated condensed statement of changes in equity

(€ in thousands)   Share capital  

Share
premium

 

Other
reserves¹

  Acc. (deficit)  

Shareholders’
equity

 

Non-
controlling
interest

  Total
                             
Balance as at 1 January 2016   46,099   1,035,451   228,216   -340,956   968,810   1,723   970,533
Comprehensive income              
Result for the period 0 0 0 16,858 16,858 95 16,953
Other comprehensive income
Currency translation differences 0 0 -3,717 0 -3,717 -66 -3,783

Actuarial losses on defined benefit
obligations

0 0 0 -384 -384 0 -384
Total other comprehensive income 0 0 -3,717 -384 -4,101 -66 -4,167
Total comprehensive income 0 0 -3,717 16,474 12,757 29 12,786
Transactions with owners
Change in non-controlling interest 0 0 0 -127 -127 0 -127
Stock compensation related movements 355 13,023 -3,321 -981 9,076 0 9,076
Other movement
Transfer to legal reserves   0   0   13,267   -13,267   0   0   0
Balance as at 30 June 2016 (Unaudited)   46,454   1,048,474   234,445   -338,857   990,516   1,752   992,268
                             
Balance as at 1 January 2017   46,577   1,051,890   234,502   -338,138   994,831   1,906   996,737
Comprehensive income
Result for the period 0 0 0 -164,512 -164,512 -100 -164,612
Other comprehensive income
Currency translation differences 0 0 -4,185 0 -4,185 -44 -4,229

Actuarial losses on defined benefit
obligations

0 0 0 0 0 0 0
Total other comprehensive income 0 0 -4,185 0 -4,185 -44 -4,229
Total comprehensive income 0 0 -4,185 -164,512 -168,697 -144 -168,841
Transactions with owners
Change in non-controlling interest 0 0 0 -109 -109 -14 -123
Stock compensation related movements 450 15,387 -983 524 15,378 0 15,378
Other movements
Transfer to legal reserves   0   0   36,228   -36,228   0   0   0
Balance as at 30 June 2017 (Unaudited)   47,027   1,067,277   265,562   -538,463   841,403   1,748   843,151

1Other reserves include Legal reserve and the Stock compensation reserve

 

Notes to the consolidated interim financial statements

1. General

TomTom NV (‘the company’) has its statutory seat and headquarters in Amsterdam, the Netherlands. The consolidated interim financial statements comprise the financial information of the Company and its subsidiaries (together referred to as ‘the group’) and have been prepared by the Management Board and authorised for issue on 19 July 2017.

The consolidated interim financial statements have neither been reviewed nor audited.

2. Summary of significant accounting policies

The principal accounting policies and method of computations applied in these consolidated interim financial statements are consistent with those applied in the annual financial statements for the year ended 31 December 2016, except as described below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

Basis of preparation

The consolidated interim financial statements for the six months ended 30 June 2017 have been prepared in accordance with IAS 34 ‘Interim Financial Reporting’ as endorsed by the EU. As permitted by IAS 34, the consolidated interim financial statements do not include all of the information required for full annual financial statements and the notes to these consolidated interim financial statements are presented in a condensed format. Accordingly, the condensed consolidated interim financial statements should be read in conjunction with the annual financial statements for the year ended 31 December 2016, which have been prepared in accordance with International Financial Reporting Standards (IFRS) and IFRIC interpretations as adopted by the European Union. The presentation currency of the group is the euro (€).

Other new accounting standards and developments

To the extent relevant, all IFRS standards and interpretations including amendments that were in issue and effective from 1 January 2017, have been adopted by the group from 1 January 2017.

These standards and interpretations had no material impact for the group.

All IFRS standards and interpretations that were in issue but not yet effective for reporting periods beginning on 1 January 2017 have not yet been adopted. Standards that are expected to have material impact to the group are IFRS 15 and IFRS 16 as disclosed in the 2016 annual financial statements. We are on track with our transition process, amongst others in setting up policy under the new standard, reviewing individual contracts in order to quantify impact, implementing a new accounting tool and providing internal training to the relevant stakeholders. The Telematics revenue will primarily be impacted in the area of assessing whether the control unit sold to the customer as enabler to receive the fleet management service is a distinct performance obligation, while Automotive and Licensing will primarily be impacted by the specific licensing guidance in the standard and the application of the royalty constraint as well as the general requirement to estimate upfront the total consideration of certain types of contract / performance obligations. Consumer will primarily be impacted by the classification of the cash consideration given to customers and to a lesser extent in the area of multiple element arrangements.

Use of estimates

The preparation of these interim financial statements requires management to make certain assumptions, estimates and judgements that affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities as of the date of the interim financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of revision and the future periods if the revision affects both current and future periods. For areas involving a higher degree of judgement or areas where assumptions and estimates are significant to the (interim) financial statements, reference is made to note 3 of the Consolidated financial statements in the 2016 Annual Report.

Change in estimates

To better reflect the pace of technological change in the sector, the group has changed the expected useful life of its database content in 2017. All content created from 1 January 2017 onwards will be amortised over 12, 8 or 4 years depending on the type of content, while previously all content is amortised over 20 years.

TomTom historically focused on creating the foundation for maps, which was mainly related to content with a long useful life like road networks, geometry and address points. Customer needs and requirements are changing (e.g. because of Autonomous Driving) and more accurate and detailed map content is required. TomTom is at the forefront of these changes with its new mapmaking platform and the map content we expect to create in the future relates to elements that have a shorter economic life.

The change of this useful life will have limited impact to the group amortisation charge in 2017 as the database that exists on 31 December 2016 will remain at a useful life of 20 years.

3. Segment reporting

The operating segments are identified and reported on the basis of internal reports about components of the group that are regularly reviewed by the Management Board to assess the performance of the segments.

The group's internal management reporting is structured primarily on the basis of the market segments in which the four operating segments - Automotive, Licensing, Telematics and Consumer - operate. Automotive and Licensing are engaged in developing and selling similar location-based application components such as maps, online services (e.g. traffic) and navigation software to customers in different market segments. Automotive serves automotive customers (mainly OEMs and Tier1 head unit vendors) while Licensing serves a wide range of non-Automotive customers. Telematics provides a wide range of telematics services and related products to fleet owners including sale and/or rental of hardware products associated with the services. Consumer generates revenue mainly from the sale of consumer electronics devices, such as PNDs and sports watches.

Management assesses the performance of segments based on the measures of revenue and operating result (EBIT), whereby the EBIT measure includes allocations of expenses from supporting functions within the group. Such allocations have been determined based on relevant measures that reflect the level of benefits of these functions to each of the operating segments. As the four operating segments serve only external customers, there is no inter-segment revenue. The effects of non-recurring items such as goodwill impairment are excluded from management's measurement basis. Interest income and expenses and tax are not allocated to the segments. There is no measure of segment (non-current) assets and/or liabilities provided to the Management Board. The non-current assets within the group include a significant portion of the carrying value of the step up resulting from the Tele Atlas acquisition in 2008. As this step up is not geographically allocated to the respective regions for internal management reporting, we believe that disclosure of geographic allocation would be highly judgemental and would not give a true representation of geographical spread of the group's assets.

(€ in millions)       H1 '17

Unaudited

      H1 '16

Unaudited

                 
Revenue       466.2       482.4
Automotive & Licensing       161.1       131.5

- Automotive

89.5 64.6

- Licensing

71.6 66.9
Telematics 80.7 77.0
Consumer       224.3       273.9
                 
EBIT       7.5       12.0
Automotive & Licensing -9.7 -6.2

- Automotive

-10.1 -9.1

- Licensing

0.4 2.9
Telematics 20.5 22.6
Consumer       -3.3       -4.4
                 
EBITDA       76.4       72.9
Automotive & Licensing 48.4 44.5

- Automotive

25.7 23.7

- Licensing

22.7 20.8
Telematics 28.3 29.6
Consumer       -0.3       -1.2
 

The effects of non-recurring items, such as goodwill impairments (if any) are excluded from management’s measurement basis. Interest income and expenses, and tax are not allocated to segments. A reconciliation of the segments’ performance measure (EBIT) to the group’s result before tax is presented below.

(in € millions)       H1 '17

Unaudited

      H1 '16

Unaudited

                 
Total segment EBIT       7.5       12.0
Unallocated expenses       -3.2       -3.6
Impairment charge -168.7 0.0
Interest result -0.5 -0.7
Other finance result 1.9 0.5
Result associates       0.4       0.5
Result before tax       -162.6       8.7
 

Measures of (non-current) assets and/or liabilities are not provided internally to the chief operating decision maker and hence, no measure of segment assets and/or liabilities is reported.

4. Earnings per share

The calculation of basic and diluted earnings per share is based on the following data:

    H1 '17

Unaudited

  H1 '16

Unaudited

         
Earnings (€ in thousands)    
Earnings (net result attributable to equity holders) -164,512 16,858
 
Number of shares (in thousands)
Weighted average number of ordinary shares for basic EPS 233,749 230,902
 
Effect of dilutive potential ordinary shares (in thousands)
Share options and restricted stocks 3,771 3,785
Weighted average number of ordinary shares for diluted EPS   237,520   234,687
 

5. Goodwill

The Group performs its goodwill impairment test at least annually in December and when circumstances indicate the carrying value may be impaired. The Group’s impairment test for goodwill is based on fair value less cost of disposal calculations. The key assumptions used to determine the recoverable amount for the different operating segments were disclosed in the annual consolidated financial statements for the year ended 31 December 2016.

Contrary to historical growth trends and the expectations that we had at the end of 2016 based on the information then available, our Consumer Sports business faced difficult market circumstances. In the first quarter revenues were broadly in line with expectations but this significantly deteriorated in the course of the second quarter, resulting in an unanticipated year on year decline in revenue. As a result of these developments we are reviewing strategic options for our Sports business.

These adverse developments triggered us to perform an impairment test on 30 June 2017 for our Consumer operating segment. The other operating segments being Automotive, Licensing and Telematics are performing in line with expectations and hence no triggering event was identified.

Consistent with the approach in our year end impairment testing, the recoverable amount of the Consumer segment was determined based on fair value less costs of disposal method as this resulted in a higher recoverable amount than the value in use. The calculations of fair value less costs of disposal are based on post-tax cash flow projections which amongst others reflect our latest estimates of the declining Sports revenue, and a post-tax discount rate of 9% (31 December 2016: 9%). The financial forecast covers a period of ten years and incorporates assumptions on the expected revenue developments, gross margin and operating margin after allocation of operating expenses from shared units, taking into account management's expectation of further developments and plans. We do not expect material cash flows beyond the forecasted period and hence these have not been forecasted. All other assumptions remained consistent with those disclosed in the annual financial statements for the year ended 31 December 2016.

As a result of this analysis, management recognised an impairment charge of €169 million against goodwill, which results in a full write off of the goodwill of the Consumer operating segment. The impairment charge is recorded as a separate line item within operating expenses.

6. Shareholders’ equity

    30 June 2017   30 June 2017

(in € thousands)

Unaudited

  31 Dec 2016   31 Dec 2016

(in € thousands)

Audited

                 
Ordinary shares   600,000,000   120,000   600,000,000   120,000
Preferred shares 300,000,000 60,000 300,000,000 60,000
Total authorised 900,000,000 180,000 900,000,000 180,000
 

Issued and fully paid
ordinary shares

  235,135,716   47,027   232,886,736   46,577
 

All shares have a par value of €0.20 per share.

In H1 '17 2,248,980 shares were issued following the exercise of share options by employees (H1 '16: 1,775,105).

7. Share-based compensation

Share-based compensation expenses amounted to €8.0 million in H1 '17 versus an income €1.6 million in the same period last year. In H1 '17 a total number of 2.2 million stock options have been exercised.

In May 2017, the group granted 0.7 million stock options under the stock option plan of which 350,000 stock options were granted to Management Board members. The purpose of the share-based compensation is to attract and retain management and employees and align the interests of management and eligible employees with those of shareholders, by providing additional incentives to improve the group's performance on a long-term basis.

In addition to the stock option grant, the group also granted phantom shares to certain groups of employees. The phantom share plan is classified as a cash-settled plan. The plan has a three-year service period as the only vesting condition.

As part of the acquisition of Autonomos GmbH restricted stock units have been granted to certain employees of Autonomos.

For further information on our share-based compensation, reference is made to note 7 and note 33 in our 2016 Annual Report.

8. Business Combination

On 17 January 2017, the group acquired 100% of the shares of Autonomos GmbH for €26.2 million of which €24.8 million is paid in cash and the remainder in TomTom shares. The company is a Berlin-based autonomous driving start-up.

We have acquired a vast amount of technical expertise that will be of value in the further development of our location technologies. Specifically, the acquisition will give us a fuller understanding of the autonomous driving stack and real-time computer vision technology and allow us to improve quality of our products like TomTom HD Map, RoadDNA localisation technology, navigation, traffic and other cloud services.

9. Related party transactions

Reference is made to note 7 for stock options granted to the members of the Management Board during H1 '17.

In the normal course of business, the group receives map development and support services from its associate Cyient Ltd. Such transactions take place at the normal market conditions and the total payments made for these services in H1 '17 amounted to €7.7 million (H1 '16: €7.8 million).

Transactions and balances with other associates are not material and hence are not disclosed.

10. Seasonality

In the 12 months ended June 2017, the group had revenue of €971 million compared with revenue of €1,019 million for the 12 months period ending June 2016.

The group’s sales within the Consumer segment are traditionally higher in the second half of the year due to the holiday sales in the fourth quarter and traditionally low sales in the first quarter. This trend has become less apparent in recent years. In the 12 months ended 30 June 2017, Consumer had revenue of €514 million compared with €611 million in the same period ended 30 June 2016.

Other operating segments’ revenue is generally not materially affected by seasonality.

Besides the normal market seasonality, the group revenue can also be affected by new product launches.

11. Commitments and contingent liabilities

In the first half of 2017, there were no material changes to the group’s commitments and contingent liabilities from those disclosed in note 32 of our 2016 Annual Report.

12. Fair value and fair value estimation

The fair values of our monetary assets and liabilities as at 30 June 2017 are estimated to approximate their carrying value. There has been no change in the fair value estimation technique and hierarchy of the input used to measure the financial assets/liabilities carried at fair value through profit or loss compared with the method and hierarchy disclosed in our 2016 Annual Report.

13. Subsequent events

There has been no subsequent event from 30 June 2017 to the date of issue that affect the consolidated interim financial statements.

- END -

Accounting policies - basis of accounting

The condensed consolidated financial information for the three-month and six-month period ended 30 June 2017 with related comparative information has been prepared using accounting policies which are based on International Financial Reporting Standards (IFRS) as endorsed by the EU. Accounting policies and methods of computation followed in the condensed consolidated financial information, for the period ended 30 June 2017, are the same as those followed in the Financial Statements for the year ended 31 December 2016. 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 and interim condensed consolidated information in this press release is unaudited.

Non-GAAP measures

The financial information in this report includes measures, which are not defined by generally accepted accounting principles (GAAP) such as IFRS. We believe this information, along with comparable GAAP measurements, gives insight to investors because it provides a basis for evaluating our operational performance. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP. Wherever appropriate and practical, we provide reconciliations to relevant GAAP measures.

Gross margin is calculated as gross result divided by revenue

EBIT is equal to our operating result

EBIT margin is calculated as operating result divided by revenue

EBITDA is equal to our operating result plus depreciation, amortisation and impairment charges

EBITDA margin is calculated as operating result plus depreciation, amortisation and impairment charges divided by revenue

Adjusted net result is calculated as net result attributed to equity holders adjusted for acquisition-related expenses and gains and material restructuring costs on a post-tax basis

Adjusted EPS is calculated as adjusted net result divided by the weighted average number of diluted shares over the period

Net cash is defined as our cash and cash equivalents minus the nominal value of our outstanding borrowings

Audio webcast second quarter 2017 results

The information for our audio webcast is as follows:
Date and time: 19 July 2017 at 14:00 CET
corporate.tomtom.com/presentations.cfm

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

About TomTom

TomTom (TOM2) empowers movement. Every day millions of people around the world depend on TomTom to make smarter decisions. We design and develop innovative products that make it easy for people to keep moving towards their goals. Our map-based components include map content, online map-based services, traffic, and navigation software. Our consumer products include PNDs, navigation apps, and 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. Our business consists of four customer facing business units: Automotive, Licensing, Telematics and Consumer. Founded in 1991 and headquartered in Amsterdam, we have more than 4,700 employees worldwide. For further information, please visit www.tomtom.com.

Forward-looking statements/Important notice

This document contains certain forward-looking statements with respect to the financial position and results of TomTom’s activities. We have based these forward-looking statements on our current expectations and projections about future events, including numerous assumptions regarding our present and future business strategies, operations and the environment in which we will operate in the future. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements, and you should not place undue reliance on them. Many of these risks and uncertainties relate to factors that are beyond TomTom’s ability to control or estimate precisely, such as levels of customer spending in major economies, changes in consumer preferences, the performance of the financial markets, the levels of marketing and promotional expenditures by TomTom and its competitors, costs of raw materials, employee costs, exchange-rate and interest-rate fluctuations, changes in tax rates, changes in law, acquisitions or disposals, the rate of technological changes, political developments in countries where the company operates and the risk of a downturn in the market. Statements regarding market share, including the company's competitive position, contained in this document are based on outside sources such as specialised research institutes, industry and dealer panels in combination with management estimates.

The forward-looking statements contained herein speak only as of the date they are made. We do not assume any obligation to update any public information or forward-looking statement in this document to reflect events or circumstances after the date of this document, except as may be required by applicable laws.

This document contains inside information as meant in clause 7 of the Market Abuse Regulation.

1 Earnings per fully diluted share count adjusted for acquisition-related expenses & gains and material restructuring costs on a post-tax basis.
2 Based on the closing price of TomTom (TOM2) share on Euronext Amsterdam on 18 July 2017 of €8.72.
3 Earnings per fully diluted share count adjusted for acquisition-related expenses & gains and material restructuring costs on a post-tax basis.
4 In 2016, CAPEX was €118 million and OPEX was €557 million. Year to date in 2017 we spent €24.5 million on acquisition related CAPEX.
5 Earnings per fully diluted share count adjusted for acquisition-related expenses & gains and material restructuring costs on a post-tax basis.
6 In 2016, CAPEX was €118 million and OPEX was €557 million. Year to date in 2017 we spent €24.5 million on acquisition related CAPEX.
7 In 2017, no additional shares from assumed conversion are taken into account as the effect would be anti-dilutive.
8 Includes movements in the non-current portion of deferred revenue presented under Non-Current liabilities.


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