Tomtom Nv Unsp/Adr

Good afternoon, everyone, and welcome to our conference call. In today's call, we will discuss the fourth quarter and full year 2025 operational highlights and financial results with CEO Harold Goduin and CFO Taco Titelaar. Harold will begin with an update on strategic developments. Taco will then provide further insight into our financial results, our automotive backlog, and our 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 hand it over to you.

Yeah, thank you very much, Claudia. And good morning, good afternoon, everybody. 2025 was an important year for TomTom as our product strategy clearly matured and we gained commercial traction. We introduced several new products with our lane model map standing out as a major milestone. Orbit lane model maps provide lane level intelligence, including geometry, lane markings, but at a true urban scale. And by leveraging our AI powered map factory, we can now produce lane accurate maps with exceptional efficiency and freshness. And this has been proven to be a differentiating capability. A strong validation is that we secured a record amount of new business. And that includes a collaboration with Carriot where Tontum Orbis lane model maps were selected as a core component of the automated driving system supporting the Volkswagen group brands. In enterprise, Orbis maps broadened and diversified our customer base. In the beginning of 2025, we announced a new cooperation with Esri through which we provide maps, traffic data to support businesses and governments with location intelligence addressing various use cases for maintaining critical infrastructure to analyzing traffic flows. And more recently, we deepened our global partnership with Uber, expanding our collaboration to enhance on-demand travel experiences worldwide. Looking ahead to 2026, I'm confident that continued advancements in our product portfolio will further strengthen our commercial traction across both our automotive and enterprise business. supporting top-line growth over time. We will continue to expand and enhance our product offering, and we will make it easier for developers and for businesses to access our data, which will support future growth. We see meaningful commercial opportunities emerging in automated driving and infotainment, as well as in high-potential verticals such as insured tech and state and local government. Thank you very much. This is my part of the presentation. I'm handing over to Taco. Thank you, Harold.

I will cover our financial performance, the key trends. We're seeing an update on our automotive backlog and our outlook. After which, we'll take your questions. Automotive average revenue for the fourth quarter amounted to $77 million, down 3% year-on-year. Automotive operational revenue was 12% lower compared to Q4 last year. The enterprise business delivered 39 million, a 10% decline versus the same quarter last year. Approximately half of this decline is explained by the weaker US dollar versus the Euro year on year, as around three quarters of our enterprise revenue are US dollar denominated. The remainder of the decline reflects a continued phased out of a large customer, partly offset by a bouldering of our customer base over the course of the year. Growth margin was 89% in the fourth quarter, a 2% percentage point improvement compared with Q4 2024, mainly driven by a lower proportion of hardware in our revenue mix. Operating expenses were 110 million, a reduction of 21 million compared with the same period last year, reflecting the combined effect capitalizing development costs associated with our lane mobile maps and disciplined cost management. For the full year 2025, we recorded group revenue of 555 million, 3% lower than in 2024. Automotive IFRS revenue was 323 million, down 2% from last year due to lower car volumes at some customers and the phase out of certain car lines, partly balanced by new model starting productions. Operational revenue in automotive dropped 1%, staying largely stable versus 2024. Our enterprise revenue for the year was 159 million, 2% lower year on year. For the full year, the picture is similar as in the quarter, normalized for the currency fluctuation. Enterprise revenue showed a marginal increase compared with last year. For the full year, gross margin was 88%, an improvement compared with 2024. This continued shift away from consumer hardware structurally strengthens our gross margin, 85% in 2024 to 88% in 2025, and we expect it to move north of 90% in 2026. Operating expenses decreased to $489 million, a $90 million reduction, same as for the Q4 trend. This reduction was due to capitalization of our MAP investment, lower amortization charges, and reduced personnel costs from the second half of 2025, partly offset by the reorganization charge booked in Q2 2025. Looking ahead, The quarterly OPEX run rate entering in 2026 will likely be a few million euros higher than what we saw in Q4. But for the year as a whole, we expect the total operating expenses to remain below 2025 in 2026. Free cash flow, excluding the cost for the reorganization we announced halfway in the year, 90 million. This was an inflow of 32 million compared with a 4 million outflow last year. Having covered our results, let's move on the automotive backlog. Our automotive backlog at the end of the year reached 2.4 billion, a net increase of 300 million compared with the end of 2024. Our automotive backlog represents the expected IFRS revenue from all awarded deals. Accordingly, the backlog decreases as revenue is recognized and increases when new deals are won. Its value can also fluctuate when customers revise their vehicle production forecast and with Forex revaluations. The increase in backlog this year was driven by record-level new deals. Our book-to-bill ratio was well above 2 last year, partly offset by negative impact from Forex revaluations. which has a more pronounced than usual effect on the backlog valuation. A large portion of the automotive revenue we expect to report in 2026-2027 is already covered by the backlog generated from prior years' order intake. The majority of the value from 2025 order intake is expected to start being recognized from 2028 onwards. From a product perspective, we see automotive RFQs increasingly gravitating towards lane model maps. The maps that enable autonomous driving functionality and support a growing range of advanced safety features. The products accounted for approximately half of last year's order intake. We expect this year to continue to grow. OEMs are clearly increasing their product and engineering focus in this area, as lane model maps enable both improved vehicle performance and meaningful differentiation. Our strong positioning in this area reflects a decade of sustained investment in these capabilities, and we're now seeing those investments translate into tangible commercial results. An additional benefit is that securing lane model maps deals opens the door to road model map awards for the navigation use cases, supporting further market share gains. Now let's move to the 2026 outlook. Looking ahead to 2026, our revenue will reflect the transition of some customers. However, this impact is temporary. 2026 group revenue is projected to be between $495 and $555 million, with location technology contributing $435 to $485 million. We expect our operating results to improve year on year while free cash flow is expected to turn temporarily negative due to the sustained investment in our lane model maps. Operating margin is expected to be around 3% of group revenue. A return to top line growth is foreseen in 2027. Higher revenues combined with disciplined cost control are set to drive further step up in operating margin as well. To conclude, let me summarize our prepared remarks. We closed 2025 with a strong strategic momentum marked by a record automotive order intake and an expansion into automated driving. Despite modest top-line declines driven by market conditions and customer transitions, EBIT and cash generation improved meaningfully. With an expanded 2.4 billion automotive backlog, new product launches, and strengthening commercial partnerships, Tontom answers 2026 well positions for a return to growth in 2027. And with that, we are ready to take your questions. Please, operator, please start the Q&A session.