Release Date: July 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- TomTom NV (TMOAF, Financial) launched TomTom Orbis Maps with global coverage, enhancing their product offering.
- Microsoft adopted TomTom Orbis Maps for various applications, indicating strong product endorsement.
- Secured a contract with the Australian government, expanding their market presence in the public sector.
- Enterprise revenue grew by 11% year-on-year, driven by new contracts.
- Operating expenses decreased by 5% year-on-year, reflecting cost management efforts.
Negative Points
- Group revenue decreased by 3% year-on-year to EUR152 million.
- Automotive operational revenue declined by 2% year-on-year.
- Consumer revenue decreased by 17% year-on-year, with expectations of further contraction.
- Gross margin dropped to 80% from 83% in the same quarter last year due to non-recurring engineering costs.
- Free cash flow was an outflow of EUR5 million, compared to an inflow of EUR3 million in the same quarter last year.
Q & A Highlights
Q: My first question is on enterprise. You mentioned that the ramp-up is going slower than expected. Do you still expect an aggressive ramp at a later stage, or will it be more gradual growth over the next few years?
A: (Harold Goddijn, CEO) Everything we hoped for is happening, but translating it into revenue is taking longer than initially planned. The fundamentals look good, but it will take a bit longer to see the results.
Q: Is the slower sales cycle due to the need to finish some parts of your product? Should sales cycles be quicker now?
A: (Harold Goddijn, CEO) The launch of the global product was slightly delayed, which impacted the start of sales cycles. Transitioning to new map-making methods is complex, but we are progressing as expected.
Q: Can you talk about the new RFQs and competitive dynamics in the automotive sector?
A: (Harold Goddijn, CEO) Short-term downward revisions in car production and delays in new product introductions are affecting us. However, our market position is strengthening, and we see significant interest in our next-generation ADAS and self-driving products.
Q: Why did you lower the free cash flow guidance more significantly than the revenue guidance?
A: (Harold Goddijn, CEO) Our business is highly leveraged, so small changes in top-line revenue can significantly impact cash flow. The lower revenue is resulting in weaker-than-anticipated cash generation.
Q: Can you elaborate on the competitive dynamics, specifically why Toyota chose Mapbox over TomTom?
A: (Harold Goddijn, CEO) Mapbox has a strong position in map rendering but not in map content. We focus on having a superior map and a standardized technology stack. Our engagements with major carmakers are healthy, and we see significant interest in our products.
Q: How have the sales cycles within enterprise changed?
A: (Taco Titulaer, CFO) The time between initial engagement and revenue generation is around six to nine months. The product has matured, enabling these sales cycles to happen more efficiently.
Q: Can you provide an update on your sales funnel?
A: (Taco Titulaer, CFO) We are engaging with hundreds of prospects. Some start small but have the potential to grow into larger contracts over time. It takes time to develop these relationships.
Q: Can you give insights into the working capital movements and their impact on free cash flow?
A: (Taco Titulaer, CFO) Working capital movements are hard to predict and can vary. There is nothing structurally different this year; it's just normal seasonal patterns.
Q: What other factors affected profitability and led to the lower guidance?
A: (Harold Goddijn, CEO) Gross margin was impacted by one-off costs. Excluding these, the gross margin would be around 85-86%. We expect positive free cash flow in the third and fourth quarters.
Q: You mentioned aiming for a 90% gross margin. Can you elaborate?
A: (Taco Titulaer, CFO) As the consumer segment, which has lower margins, becomes a smaller part of the mix, the overall gross margin will increase. We are targeting a higher gross margin as the business mix shifts.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
