TomTom Reports Third Quarter 2009 Results

TomTom (Amsterdam:TOM2)

	Excluding restructuring charges ¹
(in € millions)	Q3'09	Q3'08	y.o.y. change	Q2'09	q.o.q. change

Revenue	365	429	-15%	368	-1%

Gross result	191	240	-20%	188	2%
Gross margin	52%	56%		51%

EBITDA	96	119	-20%	88	9%
EBITDA margin	26%	28%		24%

Operating result	70	93	-25%	59	19%
Operating margin	19%	22%		16%

Net result	31	58	-48%	21	42%
EPS, € diluted	0.14	0.39	-63%	0.14	0%
Adjusted EPS ², € diluted	0.20	0.47	-58%	0.22	-12%

	Reported
(in € millions)	Q3'09	Q3'08	y.o.y. change	Q2'09	q.o.q. change

Revenue	365	429	-15%	368	-1%

Gross result	191	240	-20%	188	2%
Gross margin	52%	56%		51%

EBITDA	96	118	-19%	85	12%
EBITDA margin	26%	28%		23%

Operating result	70	92	-24%	57	23%
Operating margin	19%	21%		15%

Net result	31	58	-47%	20	53%
EPS, € diluted	0.14	0.38	-63%	0.13	8%
Adjusted EPS ², € diluted	0.20	0.47	-58%	0.22	-12%

Third quarter 2009 financial highlights ¹

Revenue of €365 million
Operating result of €70 million, operating margin of 19%
Operating expenses reduced by €26 million, 17% year on year
Net cash flow from operating activities of €79 million
Net debt of €599 million (Q2 2009: €1,006 million)

Third quarter 2009 operational highlights

Launch of TomTom application for Apple iPhone
TomTom solution for Fiat Punto Evo launched
Further roll-out of LIVE Services in Portugal and Belgium
New PND ranges: TomTom XXL and TomTom Start
Tele Atlas leadership team fully in place

¹ For comparative reasons the restructuring charges of €2.1 million in Q2 2009 and €0.7 million in Q3 2008 have been excluded.

² Earnings per share adjusted for acquisition related amortisation, non-cash goodwill impairment and restructuring charges on a post tax basis.

TomTom’s Chief Executive Officer, Harold Goddijn

“We delivered strong profitability and cash flow in the third quarter as a result of our continued focus on cost and cash management. At the same time we are broadening our revenue base. In the past twelve months we were able to increase the contribution of non PND revenue from 20 percent to 30 percent of group revenue.’’

Market and TomTom outlook 2009

End user demand continued to develop in line with our expectations in both Europe and North America. For the full year 2009, the European and North American PND market sizes are expected to be approximately 15 million and 17 million units respectively.

We are ahead of schedule to achieve our €90 million operating expenses savings target when comparing operating expenses in 2009 to the 2008 full year pro forma operating expenses of €627 million.

Operational review

Key figures TomTom (excluding Tele Atlas)

(in € millions)	Q3'09	Q3'08	y.o.y. change	Q2'09	q.o.q. change

Revenue	318	377	-16%	322	-1%
- of which PNDs	255	343	-26%	276	-7%
- of which Other	63	34	85%	47	34%

# of PNDs sold (in 000s)	2,581	2,526	2%	2,458	5%
ASP	99	136	-27%	112	-12%

In the third quarter the market showed a stable PND end user demand on a sequential basis. Year over year the market decreased in Europe in the quarter by 7% from 4.1 million to 3.8 million units. In North America the market increased by 3% from 3.3 million to 3.4 million units during the same period. Our market shares in both geographies remained fairly stable at 44% in Europe and 18% in North America.

In the quarter the Consumer business unit refreshed our premium range with the TomTom GO X50 series, including a series of devices with LIVE Services. At the end of the quarter we also introduced a connected volume product in the USA, the TomTom XL LIVE. To address a broader range of customers we added two new PND ranges to our offering, the TomTom XXL and Start, catering to individual preferences and needs.

Halfway through the quarter we launched our iPhone application. The initial demand was strong and overall the reception of the application was positive. In the quarter close to 80 thousand downloads were registered.

The AUTO business unit announced that together with Fiat Group Automobiles we have developed an integrated portable navigation solution, which will be sold as an option in the Fiat Punto Evo. The collaboration offers Fiat the opportunity to integrate our solutions into multiple car models. During the quarter, the Carminat-TomTom solution was rolled out over multiple car models within Renault.

The WORK business unit announced the fully portable TomTom GO 9000 which is aimed at fleets where drivers and vehicles change frequently or where subcontractors are used. Early in October we announced the TomTom GO 7000 TRUCK, a product specifically designed for trucks and large vehicles. In the quarter the net number of subscribers grew by six thousand to 87 thousand.

Key figures Tele Atlas ¹

(in € millions)	Q3'09	Q3'08	y.o.y. change	Q2'09	q.o.q. change

Revenue	47	52	-8%	46	3%
- of which PNDs (external)	11	14	-17%	8	35%
- of which Automotive (external)	13	13	-4%	13	-6%
- of which Other	24	25	-5%	24	-3%

# of map licenses (external, in 000s) ²	1,249	1,520	-18%	1,017	22%
¹ excluding restructuring charges
² PND and automotive maps

Tele Atlas made clear progress in processing community input to further improve its map database. By using more community input to update, validate and realign or extend the data in our map database we have been able to further improve the freshness and accuracy of our maps at lower cost.

Tele Atlas signed an agreement with Vodafone to supply digital maps and location-based content, marked 20 years of collaboration with GIS modelling and mapping software leader ESRI and signed on with consumer electronics developer Nextar. We also expanded our digital map coverage in Argentina and Uruguay, working jointly with Datamap.

Tele Atlas’ leadership team was completed with the appointments of the Chief Technology Officer and the Executive Vice President of Sales and Marketing.

Financial review

For ease of comparison restructuring charges are excluded from the financial review.

Revenue

Revenue for the group was €365 million for the quarter, a slight decrease of 0.8% sequentially (Q2 2009: €368 million) and a decrease of 15% compared with last year (Q3 2008: €429 million). The year on year decline reflects the continued impact of the weak economic environment on our business. The rate of year on year revenue decline slowed this quarter.

The revenue of the TomTom business (excluding the Tele Atlas business) over the past quarter amounted to €318 million, a decrease of 1.4% sequentially (Q2 2009: €322 million) and a decline of 16% compared to the previous year (Q3 2008: €377 million).

PND sales amounted to €255 million, representing 70% of group revenue in the quarter (Q2 2009: €276 million and 75%; Q3 2008: €343 million and 80%).

Other revenue, which consists of WORK, AUTO, services and other consumer revenue, increased by 34% sequentially to €63 million from €47 million in the second quarter of the year (Q3 2008: €34 million). The increase in other revenue was mainly driven by a strong increase in automotive sales and the new iPhone application.

Tele Atlas revenue (excluding inter company) was €47 million for the quarter, an increase of 3.2% sequentially (Q2 2009: €46 million) and a decline of 8.3% compared to the same quarter of last year (Q3 2008: €52 million). The year over year revenue decline was mainly the result of lower PND map sales.

Volumes and average selling prices

We shipped 2.58 million PND units in the quarter, an increase of 5.0% sequentially (Q2 2009: 2.46 million) and an increase of 2.2% year on year (Q3 2008: 2.53 million).

The average selling price for PNDs in the second quarter was €99, a decrease of 12% compared to the previous quarter (Q2 2009: €112) and a decrease of 27% compared to the third quarter of 2008 (Q3 2008: €136). The decline was driven by price decreases across a number of products, partly in anticipation of promotional activities in the fourth quarter. We continue to expect that the rate of ASP decline for the full year will be slower than in 2008.

Gross margin

The gross margin for the group was strong at 52%, which represents an increase of one percentage point sequentially (Q2 2009: 51%) and a decrease of four percentage points compared to the third quarter of last year (Q3 2008: 56%).

Operating expenses

In the quarter, total operating expenses amounted to €122 million, which represents a decrease of 5.7% or €7.3 million compared to the second quarter (Q2 2009: €129 million). The decrease in operating expenses was the result of reduced costs across all operating expense categories. Year on year pro forma operating expenses decreased by 17% for the quarter (Q3 2008: €147 million). Operating expenses as a percentage of revenue for the quarter decreased to 33% (Q2 2009: 35%, Q3 2008: 34%).

Research and development (R&D) expenses for the quarter were €31 million, an 8.1% decrease compared to the previous quarter (Q2 2009: €34 million) and a decrease of 18% compared to the R&D expenses for the previous year (Q3 2008: €38 million). The decrease is the result of improving efficiency in our map production activities.

Amortisation of technology and databases for the quarter was €19 million (Q2 2009: €21 million, Q3 2008: €17 million).

Marketing expenses showed a slight decline for the quarter at €21 million (Q2 2009: €22 million). The year on year comparison shows a decrease in marketing expenses of 31% (Q3 2008: €31 million). Total marketing expenses represented 5.8% of group revenue, a slight decrease compared to the previous quarter (Q2 2009: 6.0%), and a decrease of 1.4 percentage points compared to the same quarter last year (Q3 2008: 7.2%).

Selling, general and administrative (SG&A) expenses for the quarter amounted to €46 million, down slightly compared to the previous quarter (Q2 2009: €47 million) and by 18% compared to the same quarter last year (Q3 2008: €56 million). SG&A expenses for the group represented 13% of revenue, the same as in the previous quarter.

Stock compensation expenses for the quarter were €3.6 million, down from €5.1 million in the previous quarter. The costs in the previous quarter were higher because of share options which have since vested which resulted in lower ongoing costs.

The operating result for the quarter increased by €11 million quarter on quarter to €70 million (Q2 2009: €59 million). As a percentage of revenue, the operating profit increased by three percentage points to 19% (Q2 2009: 16%). Year on year the operating profit decreased by €23 million (Q3 2008: €93 million).

Financial results

The interest expense for the third quarter amounted to €27 million (Q2 2009: €15 million). The increased interest expense is explained by the one-off accelerated amortisation of the capitalised transaction costs on the borrowings (€13 million) which resulted from the debt repayment of €409 million. The interest expense was partly offset by a €3.0 million gain resulting from buying back part of the outstanding debt at a discount.

The other finance result shows a loss of €2.5 million, which arose mainly from foreign exchange contracts which were put in place to cover our committed and anticipated exposure in non-functional currencies. The loss on our foreign exchange hedge instruments was mainly driven by a weaker US dollar against the euro during the quarter which was partly offset by the weakening of the GB pound as we hedge both our GB pound sales and our net exposure related to our US dollar sales and purchases.

Tax

The net income tax charge in all the jurisdictions in which we operate was €9.8 million in the third quarter (Q2 2009: €6.8 million). The effective tax rate in the third quarter was 24.0% (Q2 2009: 24.1%).

Cash flow

In the third quarter, we had strong cash flows from operations of €114 million, an increase of €8.6 million versus the same period last year (Q3 2008: €105 million) and an increase of €16 million versus the previous quarter. The cash generated from operations was mainly driven by our operating profit of €70 million and by a further reduction of working capital which resulted in a cash inflow of €8.2 million. Net cash flow from operating activities was €79 million compared to €37 million in the same period last year and €96 million in the previous quarter.

The net proceeds of the equity issue were used to repay the loan and resulted in a cash outflow from financing activities of €64 million as the cash inflow from the private placement was booked in the previous quarter.

Debt financing

On 30 September 2009 the book value of our borrowings amounted to €996 million, a decrease of €398 million compared to the previous quarter (Q2 2009: €1,394 million). Excluding transaction costs, which are netted against the borrowings, our borrowings amounted to €1,018 million, down from €1,427 million in the previous quarter. The decrease results from a repayment of €409 million which includes a €3.0 million gain resulting from buying back part of the outstanding debt at a discount.

On 30 September 2009 our net debt had decreased to €599 million, down from €1,006 million at the start of the quarter. The decrease results from the cash inflow received from the rights issue in combination with a strong operating cash flow for the quarter. The net debt is the sum of the borrowings (€1,018 million), minus the cash and cash equivalents at the end of the period (€423 million) plus our financial lease commitments (€3.6 million).

The floating interest coupon of the loan is based on Euribor plus a margin. The Euribor element of the interest coupon is fixed with interest rate swaps.

Balance sheet

Current assets slightly decreased in the quarter, mainly driven by a decrease of €25 million in trade receivables to an amount of €212 million (Q2 2009: €237 million). Our inventories increased during the quarter by €13 million to €78 million (Q2 2009: €64 million). The cash position remained stable during the quarter at €423 million (Q2 2009: €423 million).

At the end of the third quarter, we had shareholder’s equity of €943 million, up from €502 million at the beginning of the quarter, mainly resulting from the gross proceeds of the private placement and the rights issue.

- END-

Consolidated income statements

(in € thousands)	Q3’09	Q3’08	YTD'09	YTD'08

Revenue	365,151	428,712	946,348	1,145,965
Cost of sales	173,857	188,530	460,056	603,169
Gross result	191,294	240,182	486,292	542,796

Research and development expenses	31,385	38,428	102,910	84,723
Amortisation of technology & databases	19,355	17,300	57,080	29,889
Marketing expenses	21,302	31,012	60,445	90,952
Selling, general and administrative expenses	46,132	56,685	146,870	141,326
Stock compensation expense	3,552	4,630	8,829	2,933
Total operating expenses	121,726	148,055	376,134	349,823

Operating result	69,568	92,127	110,158	192,973

Interest result	-26,945	-26,460	-59,592	-24,496
Other finance result	-2,542	11,424	-35,480	19,506
Result associates	672	0	1,870	-13,456
Result before tax	40,753	77,091	16,956	174,527

Income tax	-9,780	-19,422	-3,205	-57,757
Net result	30,973	57,669	13,751	116,770
Minority interests	431	-36	0	162
Net result attributed to the group	30,542	57,705	13,751	116,608

EPS, € basic	0.14	0.39	0.08	0.79
EPS, € diluted	0.14	0.38	0.08	0.78

Basic number of shares (in millions)	213.4	148.7	171.3	147.8
Diluted number of shares (in millions)	215.9	150.8	172.0	150.1

Consolidated pro-forma income statements (excluding restructuring charges)*

(in € thousands)	Q3’09	Q3’08	YTD'09	YTD'08

Revenue	365,151	428,712	946,348	1,220,111
Cost of sales	173,857	188,530	460,056	587,232
Gross result	191,294	240,182	486,292	632,879

Research and development expenses	31,385	38,428	102,910	127,440
Amortisation of technology & databases	19,355	17,300	57,080	50,255
Marketing expenses	21,302	31,012	60,445	102,903
Selling, general and administrative expenses	46,132	56,052	139,366	167,678
Stock compensation expense	3,552	4,630	8,829	10,478
Total operating expenses	121,726	147,422	368,630	458,754

Operating result	69,568	92,760	117,662	174,125

Interest result	-26,945	-26,461	-59,592	-75,154
Other finance result	-2,542	11,424	-35,480	20,060
Result associates	672	0	1,870	-1,211
Result before tax	40,753	77,723	24,460	117,820

Income tax	-9,780	-19,583	-5,118	-45,448
Net result	30,973	58,140	19,342	72,372
Minority interests	431	-36	0	-137
Net result attributed to the group	30,542	58,176	19,342	72,509

EPS, € basic	0.14	0.39	0.11	0.49
EPS, € diluted	0.14	0.39	0.11	0.48

Basic number of shares (in millions)	213.4	148.7	171.3	147.8
Diluted number of shares (in millions)	215.9	150.8	172.0	150.1

* The figures assume consolidation of Tele Atlas throughout 2008 and exclude the restructuring charges of €0.7 million in Q3 2008, €5.4 million in Q1 2009 and €2.1 million in Q2 2009.

Consolidated balance sheet

(in € thousands)	30 Sept 2009	31 Dec 2008

Goodwill	854,717	854,713
Other intangible assets	977,637	1,011,194
Property, plant and equipment	45,204	53,155
Deferred tax assets	37,156	32,977
Investments	7,494	5,663
Total non-current assets	1,922,208	1,957,702

Inventories	77,509	145,398
Trade receivables	212,093	289,981
Other receivables and prepayments	36,501	15,987
Other financial assets	19,077	36,583
Cash and cash equivalents	422,932	321,039
Total current assets	768,112	808,988

Total assets	2,690,320	2,766,690

Share capital	44,337	24,663
Share Premium	973,691	575,918
Other reserves	42,218	32,746
Stock compensation reserve	74,932	69,469
Retained earnings/ (deficit)	-196,602	-194,387
Minority interests	4,191	4,964
Total equity	942,767	513,373

Borrowings	795,233	1,241,900
Provisions	54,049	55,702
Long-term liability	3,640	4,749
Deferred tax liability	227,560	229,075
Total non-current liabilities	1,080,482	1,531,426

Trade payables	137,932	152,119
Borrowings	200,841	146,588
Tax and social security	42,584	29,044
Provisions	47,407	57,231
Other liabilities and accruals	238,307	336,909
Total current liabilities	667,071	721,891

Total equity and liabilities	2,690,320	2,766,690

Consolidated statements of cash flows

(in € thousands)	Q3'09	Q3'08	YTD'09	YTD'08

Operating result	69,568	92,127	110,158	192,973
Financial gains / (losses)	8,766	25,569	-15,851	13,609
Depreciation of PPE	2,418	5,831	14,465	10,689
Amortisation of intangible assets	23,555	18,415	66,115	33,933
Change to provisions	-2,529	1,331	-12,074	11,866
Change to stock compensation reserve	3,632	2,288	7,043	1,247
Changes in working capital:
Change in inventories	-12,464	-55,503	68,487	-68,103
Change in receivables and prepayments	7,073	80,753	57,379	194,187
Change in current liabilities	13,558	-65,826	-70,678	-178,166
Cash generated from operations	113,577	104,985	225,044	212,235
Interest received	289	565	1,877	11,566
Interest paid	-23,155	-24,190	-57,745	-32,680
Corporate income taxes paid	-12,184	-44,459	-14,985	-86,275
Net cash flow from operating activities	78,527	36,901	154,191	104,846

Investments in intangible assets	-7,624	-12,401	-42,429	-20,931
Investments in property, plant and equipment	-3,340	-4,374	-12,185	-25,159
Acquisition of subsidiary	-2,604	-59,558	-2,604	-1,829,495
Total cash flow used in investing activities	-13,568	-76,333	-57,218	-1,875,585

Repayment/proceeds from borrowings	-412,048	-3,648	-412,048	1,550,789
Proceeds on issue of ordinary shares	348,189	7,686	415,867	20,376
Total cash flow from financing activities	-63,859	4,038	3,819	1,571,165

Net increase in cash and cash equivalents	1,100	-35,394	100,792	-199,574
Cash and Cash equivalents at beginning of period	422,530	296,277	321,039	463,339
Exchange rate effect on cash balances held in foreign currencies	-698	1,631	1,101	-1,251
Cash and Cash equivalents at end of period	422,932	262,514	422,932	262,514

Consolidated statement of changes in stockholders’ equity

(in € thousands)

share capital

share premium

other reserves

stock compens. reserve

retained earnings

shareholders equity

minority interests

total

01 January 2009

24,663

575,918

32,746

69,469

-194,387

508,409

4,964

513,373

Translation differences

-1,012

-773

-1,785

Transfer to legal reserves

10,484

-15,966

-5,482

-5,482

Net income (expense) recognised directly in equity

0

9,472

0

-15,966

-6,494

-773

-7,267

Result for the year

13,751

0

13,751

Total recognised income and expense

0

9,472

0

-2,215

7,257

-773

6,484

Stock compensation reserve

5,463

5,463

Issue of Share Capital

19,674

397,773

417,447

417,447

31 September 2009

44,337

973,691

42,218

74,932

-196,602

938,576

4,191

942,767

Accounting policies

Basis of accounting

The condensed consolidated financial statements for the three-month period ended 30 September 2009 with related comparative information have been prepared using International Financial Reporting Standards (IFRS). Accounting policies and methods of computation followed in the interim financial statements, for the period ended 30 September 2009, are the same as those followed in the Financial Statements for the year ended 31 December 2008. Further disclosures as required under IFRS for a complete set of consolidated financial statements are not included in the condensed consolidated financial statements.

Audio web cast third quarter 2009 results

The information for our third quarter results audio web cast is as follows:

Date and time: 28 October 2009 at 14:00 CET

Place: http://investors.tomtom.com/tomtom/presentations/

TomTom is listed at Euronext Amsterdam in the Netherlands

ISIN: NL0000387058 / Symbol: TOM2

About TomTom N.V.

TomTom N.V. is the world’s leading provider of navigation solutions and digital maps. TomTom N.V. has over 3300 employees working in four business units – TomTom, Tele Atlas, AUTO and WORK.

TomTom's products are developed with an emphasis on innovation, quality, ease of use, safety and value. TomTom's products include all-in-one navigation devices which enable customers to navigate right out of the box; these are the award-winning TomTom GO family, the TomTom XL and TomTom ONE ranges and the TomTom RIDER. Additionally, independent research proves that TomTom products have a significant positive effect on driving and road safety.

Tele Atlas delivers the digital maps and dynamic content that power some of the world’s most essential navigation and location-based services (LBS). Through a combination of its own products and partnerships, Tele Atlas offers digital map coverage of more than 200 countries and territories worldwide. The business unit AUTO develops and sells navigation systems and services to car manufacturers and OEMs. WORK combines industry leading communication and smart navigation technology with leading edge tracking and tracing expertise.

TomTom N.V. was founded in 1991 in Amsterdam and has offices in Europe, North America, Middle East, Africa and Asia Pacific. TomTom is listed at Euronext Amsterdam in The Netherlands. For more information, go to www.tomtom.com.

This document contains certain forward-looking statements relating to the business, financial performance and results of the Company and the industry in which it operates. These statements are based on the Company’s current plans, estimates and projections, as well as its expectations of external conditions and events. In particular the words “expect”, “anticipate”, “estimate”, “may”, “should”, “believe” and similar expressions are intended to identify forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. These include, but are not limited to: the level of consumer acceptance of existing and new and upgraded products and services; the growth of overall market demand for the Company’s products or for personal navigation products generally; the Company’s ability to sustain and effectively manage its recent rapid growth; and the Company’s relationship with third party suppliers, and its ability to accurately forecast the volume and timing of sales. Additional factors could cause future results to differ materially from those in the forward-looking.