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Good day, ladies and gentlemen. Welcome to TomTom's third quarter 2025 results conference call. At this time, all participants are in a listen-only mode. We will be facilitating a question and answer session towards the end of today's prepared remarks, at which time, if you would like to ask a question, you may do so by pressing star 11 on your telephone keypad, where you will hear an automated message advising your hand is raised. If you are calling in via Microsoft Teams, please ensure you press star 11 from the keypad where the call is made and not from your Teams screen in order to enter the queue. Please note that this conference is being recorded. I will now turn the call over to your host for today's conference, Claudia Janssen, Group Controller, Head of Investor Relations. You may begin.

Thank you, Mel, and good afternoon, everyone, and welcome to our conference call. In today's call, we will discuss the third quarter 2025 operational highlights and financial results with CEO Harold Ferrein and CFO Taco Tizia. Harold will begin with an update on strategic developments. Taco will then provide an overview of financial performance and outlook. After their prepared remarks, we will open the line for your questions. As always, please note that safe harbor applies. And with that, Harold, let me pass it over to you.

Well, thank you very much, Claudia, and good afternoon, everyone. Appreciate you joining us today. I'll give you a short strategic and operational update for the third quarter, and then I'll hand over to Taco for the financials. So this quarter we launched our next generation automotive navigation application, which is a ready-to-use but also configurable application. and integrated solutions for OEMs that enables quick deployment of high-quality navigation systems. The product sets a new benchmark for user experience, quality, and flexibility in the industry, and we see the products generating strong interest. The release is an important milestone in our quest to deliver a standardized product portfolio. The automotive market remains dynamic But we are encouraged by several promising developments. We announced the expansion of our partnership with Hyundai, and we secured a multi-year agreement to provide real-time traffic and speed camera services for the vehicles across Europe. But also promising discussions around automated driving use cases and our continued investment in mapping and next-generation solution positions as well, to support our partners as the industry evolves. We are encouraged by the progress we're making and we remain confident in our long-term prospect within the automotive sector. Enterprise is progressing, though adoption is building more gradually with US dollar currency movements adding some pressure. We continue adding new customers and broadening the customer base. We will make it easier for developers and for businesses to access our data. And this will be a key driver of future growth. Taco will now walk you through the financial. So with that, I hand it over to you, Taco. Thank you. Thank you, Harold. Before discussing our outlook, I'll walk you through our financial results and highlight a few key developments. After my prepared remarks, we'll open the line for your questions. Group revenue for the third quarter was €137 million from €141 million in the same period last year, and location technology revenue totaled €180 million. Let me briefly touch on performance business by business, starting with automotive. Automotive operational revenue saw a strong year-on-year increase of 22% to €85 million. This increase can be attributed to multiple factors, the ramp-up of new vehicle lines we supply, a recovery in automotive production volumes, especially within the United States, and certain royalty reports related to previous periods, which amounted to roughly 5 million euro. Automotive IFRS revenue came in at 80 million, a 2% increase compared with the same period last year. The difference between the operational reported trend is partly due to royalty reports from prior periods, that will be recognized later. And like mentioned in previous quarter already, on a year-to-year basis, the trends of automotive IFRS and operational revenue are much more aligned, as IFRS revenue typically shows a more stable pattern, while operational revenues can be influenced by periodic savings that are neutralized when looking at longer periods of time. Enterprise revenue was €39 million just for constant currency, we maintained stable revenue quarter on quarter. We realized a strong gross margin of 89% up from 87% last year. The year-on-year increase in gross marketing primarily reflects a greater share of high-margin content and software revenue within our overall revenue mix. Our operating expenses were $140 million, reflecting a marked year-on-year decrease. This decrease was mainly driven by strong cost discipline the capitalization of our mapping development costs, and lower amortization charges. Free cash flow was an inflow of €17 million in the quarter, compared with €50 million last year. For completeness, the €70 million is excluding €14 million restructuring charges paid during the quarter. We expect the majority of the remaining €11 million we provided for will be paid out in the next two quarters. Our net cash position at the quarter end was €267 million, equal to the end of last quarter and up from €264 million at the end of 2024. Having covered our results, let me touch on our outlook. Revenue performance this year so far was solid. Currently, we are increasing our expectations. We now forecast that both full-year group revenue and location technology revenue we'll approach the upper end of our previously communicated guidance range. Free cash flow is expected at around 5% of group revenue. Our business fundaments are strong. We are beginning to see how the stronger emphasis on our product approach is positioning us well for long-term growth. And with that, we're now ready to take your questions. Mel, please start the Q&A session.

Thank you. We will now begin the question and answer session. If you have a question, please press star one one on your telephone keypad where you will hear an automated message advising your hand is raised. If you are calling in via Microsoft Teams, please ensure you press star one one on your phone keypad where the call is made and not from your team screen in order to enter the queue. Our first question comes from the line of Mark Heflink from ING. Please go ahead. Your line is open.

Yes. Thanks for taking the question.

First on automotive, quite a good momentum, especially if you take into account the weakness in auto end markets.

You can understand that there's a difference between the auto end markets and the production levels. but it also seems that you're getting some share there, and you also point out the automated driving opportunity. Do you maybe point towards the building blocks that we have discussed before, as in how much share gains part of the building blocks, how much is adoption rates because of maybe automated driving functions? Maybe if you can talk about these separate parts, please. Yeah, so I think it's a bit of a mix, to be honest. So in the third quarter, we saw indeed ramp-ups of curtain car lines that included existing customers, but also some new customers. But there were also some ramp-downs of customer contracts. So I think the increase that you are experiencing is probably most likely attribute to the adoption rate. So the overall car market is stable at best. Market shares, we do gain here and there, but I don't think that is reflected in Q3 yields. The main driver for a little bit stronger performance than the car market overall is you need to look towards adoption rates. For the AV, so you have the EV opportunity, and of course that is a further increase in adoption rates. You also have AV, so automated vehicles. I think that is not significant in today's P&L results, but it is a huge part of the order intake that we see coming in.

Okay, so you're already seeing those orders coming in? Yeah, for sure.

Yeah, for sure. But that is probably two, three years out before that will contribute to our P&O. Okay. Okay, clear. Thanks. Then enterprise. I think you have very strong momentum last year. This year, if you try to like the like currency, it's still a bit slower.

I would have expected with the initial ramp up with Orbis that you would gradually see this picking up.

And then also maybe what you said before, maybe some of the bigger clients which have longer lead times coming through. Is that still what you expect? And why is it a bit slower than the initial expectations? Yeah, it's a bit slower. You're right. And it's also a bit slower than I had hoped. There's a lot going on. It's not that there's no activity. And I think we will continue to grow the enterprise segment. We see in the mix two things. We see a decline of one larger customer. I think that's well documented. That's been filled in by a number of smaller customers. So the overall customer base is growing. There's quite a lot in the pipeline that will probably fall either end of this year or beginning of next year. But if we want to enable the next generation of growth, also things need to happen on the product portfolio. The access to our products needs to be made easier. That's all planned for the beginning of next year. and we are confident that the enterprise segment will continue to grow in the mid-term. Okay, thanks. And then the final question I have is on the gross margin. I think that is clearly a good mix effect, but also less customization and structure going forward. eventually location technology will be almost like 100% gross margin business given that you're selling the same product to all the clients or am I missing something there? Well, there is in some cases there are license costs that are not massive. That's a small percentage of sales revenue. But what you will see increasingly is the cost served when it is concerned online solutions. So there's a cloud cost element coming in, and that will grow over time. Not massively, but it will grow. You're right that it will start with a nine very soon, starting next year probably. So it will continue to grow, but it will not reach the 100%.

Okay, thank you.

Thank you. We'll now move on to our next question. Our next question comes from the line of Robert Vink from Kepter Chivre. Please go ahead, your line is open.

Yeah, thank you very much. I have a question about the outlook, encouraging that TomTom improves its outlook to the upper end of the previously tightened reins. I'll be interested to hear why you've decided to kind of maintain the upper range of your revenue outlook as you are approaching it and why you have not decided to maybe increase the upper limit of the guided revenue rate for fiscal year 25. Maybe second question, bigger picture question on self-driving. How do you see your automotive customers using TomTom's HD maps for self-driving type of applications? Of course, we see the emergence of players like Wavy, which are pursuing a more autonomous, learning-based type of approach, maybe a different way of interacting with maps. Yeah, is that maybe transforming how these autonomous players are interacting with your map technology? Yeah, do you maybe see more of an emphasis on certain functionalities over others? Yeah, so maybe how is that picture of autonomous driving and how that interacts with your technology, how is it evolving from your perspective?

Yeah, let me touch on your first question and then I hand over to Harold for your second question. Yeah, the guidance, if you look at the three revenue generating units, there will be some sequential improvement expected both from automotive and enterprise, although for both cases will be modest. And then the last one, consumer, will decline as it is doing for the last period. So if you add it all up, then I think we are still within the provided range, and that's also how we guide it. Yeah, so let me handle the self-driving part of the business. So we see car makers now fully preparing for next generation of level of self-driving. We expect it to come to market in 26, 27, higher level of automation in all the use cases that we know of. provides two different functions. First, it's providing an extra data source to the self-driving robot. And that means that you can achieve a higher degree of reliability, less interference of the driver. So an important measure is human interference per kilometer or per thousand kilometers. With a map you can improve that number Map becomes a safety device as much as an active input into self-driving behavior. And the second important part where the map is used is to explain to the driver what the robot is doing and why it's doing it, what it is seeing around it, why it makes a certain decision. And that is an important input for the driver to understand what's happening. and that provides comfort, but also safety as well. So those two functions that the map are used, and we see interest for the users that map across the range, across the whole ecosystem. So both from the OEMs, but also from the software makers, whether based in the US or in Europe or in China, all builders of self-driving software are looking to use a map in one way or another, with the notable exception, as you said, of Wave. That's a UK outfit. Everybody else seems to be relying on maps to give it extra level of security and safety and predictability.

Okay. Thank you very much.

Yeah, and I think on top of that, we have quite an innovative approach to building those maps. We're coming out of a period of HDD thinking that didn't quite work. It was too expensive. It didn't scale. But with new technologies and new data available to us, we can now construct those maps at scale, at quality, and at detail for the whole road network. And that's a different way of looking at those maps as well. They become more economic to build and to maintain, and their application is over a much wider set of use cases. So technology is really progressing quickly here.

Yeah, thank you. Thank you. Maybe a different question on regions in general across the location technology segment. Of course, with Auburn's maps, you have kind of improved your offering globally, particularly in some emerging markets. I think many of your customers are global, but in some cases you only service them in certain regions like Europe or North America. Do you maybe see some momentum maybe in your conversations to service customers more globally? Is that something which is happening or is that more still early stage?

Well, I think so the quality of our map is really starting to shine across three dimensions. So coverage, detail, freshness. We put a lot of effort in that. And now we also start to get feedback from the market that we have superior maps product. And we hear that from customers who are testing those maps and doing independent verification in order to make buying decisions for the future. So we will, you know, I think that strategy is working And we start to get some recognition for that as well, and that gives us confidence for order intake, mid-term revenue growth in the automotive segment as well.

Perfect.

Thank you. Thank you. Once again, if you have a question, please press star 11 on your telephone keypad where you will hear an automated message advising your hand is raised. If you're calling in via Microsoft Teams, please ensure you press star 11 from the keypad where the call is made and not from your Teams screen in order to enter the queue. We'll now move on to our next question. Our next question comes from the line of Wim Giel from ABN AMRO OdoBHF. Please go ahead. Your line is open.

Good afternoon. Let me see what I have left. I think the first question would be on an accounting one. You started to capitalize some of the R&D and intangibles earlier this year, which is essentially related to a change in your kind of map philosophy with HD maps becoming the factor standard and the standard definition, not the derivative. And the question here is when will we actually see tangible increase in HD revenues in your financials, in your revenues? And is this also the moment when you will start to amortize on the capitalized R&D again? So is this something we need to build in for 2026 already, or is it more 2027 story? The second question I would have is more of a commercial one on the enterprise side. Obviously, the dollar had quite a bit of a negative impact. So in the line, you're close to being kind of, you know, neutral, flat, whatever. Still not having any organic growth in the enterprise segment is quite disappointing. So I would like to have a bit more feeling about the commercial momentum here. So what's the churn amongst clients, if that is an issue at all? Which type of new clients are you adding at the moment? Is it still maybe smaller OSM users or are you already converting Google and here users? So where are we on that spectrum? What's the momentum that you have with Orbis Maps in the government vertical, which is the transaction you had last year with the Australian government? And when can we see kind of more conversions for basically larger customers that have been testing the product for a long time now? Obviously, larger customers have way longer sales cycles, but are we getting any closer to you know, announcing some bigger deals. That's it.

Yeah, let me take the first question and then I'll hand it off to Harold for the second question. For on capitalization on this new way of AV mapping as of automated driving that indeed started this year. I expect revenue to start coming in as of H2 2027, so that's still two years away. Significant revenue that is 2028, but the amortization will start towards the end of 2027. Okay, Wim, and then your questions on the enterprise side. So Churn, I think there is a well documented case of a large customer that is building off the partnership. They have built their own map in the meantime. We're filling that gap, but we're not outgrowing it. So the customer base is broadening. We have more customers, but smaller customers. And that map, it's a, it's flatlining. There is a lot of movement, though, a lot of opportunity. One sector that stands out is government and intelligence sector. We have quite a bit of RFQs and RFIs outstanding there, and we, you know, we feel that we're well placed to win at least a proportion of those opportunities. And there are also larger opportunities as well. So the government and intelligence potential contracts are significant revenue opportunities. So I'm not too worried. It is a bit disappointing that we haven't been able to show growth in this quarter. But I feel that we are strengthening our position, that we are broadening our customer base. and that we will continue to grow the segment over time.

And what about the kind of, you know, current customers that you are onboarding? I assume, looking at the numbers, that we're still talking about smaller OSM users.

Well, it's not only smaller OSM users. It's real business and real customers and insured tech and critical logistics. and traffic is doing well. So we have launched a number of new traffic products and traffic analytics because we are market leader in that segment. It seems to be accelerating. There's quite a lot of underlying developments going on. It's a little bit obscured by the decrease of revenue coming from a particular one customer.

And that large customer that started building their own maps in 2012, I think it was? 15. 15. How big is that customer still in your revenue base? Are we talking about a few percentage points? As you know, Wim, we don't quantify that, but it will...

will remain to contribute to our revenue up until H2 2026. All right, confirmed.

Thank you. Once again, if you have a question, please press star 11 on your telephone keypad where you will hear an automated message Advising your hand is raised. If you are calling in via Microsoft Teams, please ensure you press star 1 1 from the keypad where the call is made and not from your Teams screen in order to enter the queue. We'll now move on to our next question. Our next question comes from the line of Andrew Heyman from Independent Minds. Please go ahead, your line is open.

Yep, just on... OpenStreetMap for Orbis, but I was just wondering, do you see open source vehicle routing software as becoming a viable competitor to you?

Yeah, routing software?

Yeah, open source routing software. Is it making any headway whatsoever?

Well, I mean, it's often used as a starting point for companies who want to do their own routing algorithm. They start with an open source program and then tune it to their needs. So it is a factor in the market. But none of those initiatives will match the reliability and efficiency of the real commercial route planners and routing algorithms from us or from Google or from Apple. That's a different level of sophistication.

Okay. Thank you. And then maybe just another question. When you were launching the new auto-navigation app, I was looking at your promotional videos, and there was a big emphasis on how quick it could be rolled out, for example, from the drawing board to the dashboard in 12 weeks. I mean, how does that compare to your competitors, and is that one of the key selling points of it?

Well, I think the key selling point is the UI and the overall user experience is the key selling point. It's a high-quality program with good search and good easy routing, routing, great map display. That's a unique selling point. But to also meet the requirements for cost-effective integration, we've built up in such a way that that's possible. And that's not the main segment of the market, but if you want, you can get it up and running in 12 weeks. And that tells you something about the quality and the completeness of that product. If you want to go beyond that, you also have a lot of possibilities to do that and tune it completely to your own requirements. But the fact that it is a standard but also configurable application is in itself an important message for the market. And certainly if you look at the history of those programs, they have always been long and expensive and ultimately disappointing in what they offer the end user. And with this, we give a clear signal to the market. It's possible to break that doom loop of high-cost, long development cycles and mediocre products.

Good. Thank you very much.

Thank you. We'll now move on to our next question. We have a follow-up question from the line of Wim Jill from ABN AMRO AutoBHF. Please go ahead. Your line is open.

Yes, a follow-up question indeed related to automotive and some of the commercial momentum we see there. In the past, you always indicated that 2025 was a year where there was quite an active year with regards to RFPs and what have you. So there were a lot of contract renewables in the market. How are you feeling about that today? I am acutely aware that you will be giving the new order book numbers next quarter, but Can you give us a bit of a sense on the direction here? How are you feeling about wind rates and how are you feeling about that big opportunity for RFPs in the market? Did they materialize or are OEMs pushing them out to 2026? Thanks.

Yeah, so... I think we're well positioned. I think it is indeed, it's going to be a big year, I think, 2025, to this total opportunity. The year is not over, and it's easy for those things to slip over into January. The direction of travel is quite clear. Carmakers have postponed decisions for quite a while, feel they can no longer do that, need to act, even in certain times. We see that happening. And as a result, the quoting in the RFI, RFQ activity has gone up. And I think in many cases, we are very well positioned to get a big chunk of those available opportunities in our way.

So would you say, based on kind of the numbers and the data that you, and the win rate that you see today, that after this round, your market share will go up or go down?

It's a bit early, and there's always a delay effect, of course, of winning and losing and what not. It can take up to three, four years before you start seeing the actual market changes and the market changing. We'll give you, I think, a better feel in February when we give an outlook and the order intake number for 2025. with a bit of a feel of how that will play out over the coming years. But it is, to add to that, it's a mix of renewals. In your question, you spoke about renewals, but it is a mix of renewals and new opportunities. Yeah. It's both renewals and market share gains that we're after, obviously.

All right. Thank you. Okay. As there seems to be no additional questions, I want to thank you all for joining us today. operator, you may now close the call.

Thank you. This concludes today's presentation. Thank you for participating. You may now disconnect.