By Eric Smith
With nearly 70 percent of TomTom’s revenue derived from data, software and services, the Dutch company’s huge boost in gross margin helped overcome a disappointing 28 percent decline in consumer segment sales in the first-quarter.
Gross margin increased 7 percent compared to first quarter of 2017, Harold Goddijn noted on an earnings call with analysts, which was one of the few bright spots for the company in Q1.
Companywide, sales fell 10 percent to €191.9 million from the year-ago period. Within the consumer segment, consumer products sales dropped 31 percent to €57 million and automotive hardware dipped 4 percent to €12.2 million.
TomTom’s two other segments are automotive & enterprise and telematics.
Net earnings reached €6.4 million, or €3 cents a share, against a loss of €2.2 million, or 1 cent, a year ago. On an adjusted basis, earnings were €22.6 million, or €10 cents a share, against a loss of €6.8 million, or €3 cents, a year ago. Adjusted earnings reflect movement of deferred revenue, unbilled revenue and deferred cost of sales on a post-tax basis. EBITDA was €44 million, up 29.4 percent from €34 million in the same period a year ago.
The company also maintained its full-year outlook of expected revenue around €800 million and adjusted earnings per share of around €0.25. The full quarterly earnings report can be found here.
Gross margin improvement wasn’t the only good news for the company in Q1. Better-than-expected earnings in Q1 bumped shares upward Tuesday, while the company saw some positive development in its automotive segment, with automotive operational revenue increasing by 42 percent in the quarter.
Also, the company made additional Connected Car Services to Hyundai and Kia; TomTom On-Street Parking reached coverage in 100 European cities and its telematics installed base increased by 14 percent year over year, reaching more than 826,000 subscriptions.
When asked about market share in the telematics, CFO Taco Titulaer said that while it’s hard to gauge because “independent research is bit lacking in this industry and so often very late,” the company likes its position here.
“It takes now close to 12 to 18 months before we get market share data from the research houses that monitor this market,” he said. “Based on that data, we’re definitely not losing market share, I think there is some consolidation happening in the market, that’s true. … The list of players is getting shorter; that said, we are by far a dominant player … .”
TomTom remains bullish on its telematics segment as one of its customers plans to “launch a product that is dependent on maps,” Goddijn said.
“It’s not high volume but it’s kind of indicative of things happening,” he added. “So in this particular case, our maps are used in a truck and then the map is used for cruise control and the idea is that if you know exactly what the route looks like and where you need to stop them … .”
The company addressed one question about the recent rumors that it was seeking a buyer.
According to a Reuters report from March, “TomTom engaged Deutsche Bank to help seek a buyer for some or all of the company. After initially declining comment, TomTom said it has not mandated an adviser for a sale of the whole company.”
During Tuesday’s earnings call, Goddijn responded to a question about the news that TomTom was looking for “opportunities” to sell.
“So I’d like to stress that normally, rumors we don’t comment on,” Goddijn said. “This time it was very specific, the steady share price doesn’t move so we had to come out with a statement. But the fact of the matter is that those rumors were not based on fact and not true.”
Reuters reported today that TomTom Chairman Peter Wakkie said at the annual investors meeting: That “doesn’t mean that TomTom is not open to partnerships of whatever kind: there is no objection to that from within TomTom, in principle.”
Photo courtesy TomTom
[author] [author_image timthumb=’on’]https://s.gravatar.com/avatar/dec6c8d990a5a173d9ae43e334e44145?s=80[/author_image] [author_info]Eric Smith is Senior Business Editor at SGB Media. Reach him at eric@sgbonline.com or 303-578-7008. Follow on Twitter or connect on LinkedIn.[/author_info] [/author]
