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Automotive & Licensing business & financial review


3.2.1

strategic priorities


• Grow through technology leadership in maps, traffic and navigation

• Invest in automation, modularity and industry standard interfaces
• Target new growth opportunities in ADAS and Autonomous Driving

3.2.2 Automotive business review

Our Automotive business delivers leading maps, navigation software components and connected services to OEMs and Tier1 head unit vendors.

Car makers increasingly demand future-proof solutions that are open, modular and upgradeable. Given the complexity of building state-of-the-art infotainment systems, they are looking for suppliers who can help create competitive, low-risk products that have a fast time-to-market. TomTom's Automotive connected navigation components can be easily integrated to meet these demands to create location and navigation functions for connected cars.

With regards to components for Autonomous Driving, TomTom has continued to extend its HD map coverage, which now covers over 200,000 kilometres of roads across Europe and North America. TomTom's HD map has also won the prestigious CLEPA Innovation Award for Connectivity, an award that recognises the most innovative products and services launched in the European automotive industry. 

Our Automotive strategy and products continue to be well received by automotive OEMs and Tier1 suppliers, resulting in order intake for 2016 of over €300 million. This will continue to support our top-line growth in Automotive business going forward.

We made good progress in delivering a complete set of connected navigation components to our existing customers as well as securing new deals and partnerships. In 2016, TomTom announced the launch of the connected navigation system in FCA's new Uconnect 7-inch HD Nav and Uconnect 7-inch HD Nav LIVE systems available on the all-new Fiat Tipo and Fiat 500S.

TomTom also announced the launch of PSA Groupe's global infotainment platform, built on the full suite of TomTom products, including maps, navigation software and connected services. The flexibility and modularity of these components is highlighted in the new Peugeot i-Cockpit – which was launched at the Paris Motor Show - where TomTom components work smoothly and seamlessly across an 8-inch touchscreen and a 12-inch cockpit display screen.

Our full suite of products has also been selected by Volvo Cars for their 2019 global platform, representing a first time collaboration between TomTom and Volvo Cars. Among the key features and services are automotive-grade digital NDS maps, incremental near real-time map updates, world-class navigation software NavKit, TomTom Traffic and travel-related services.

TomTom technology was also selected by Subaru for their next generation global infotainment platform, which will launch first in North America with the all-new 2017 Subaru Impreza featuring TomTom Maps and navigation software. TomTom also won a deal with Volvo Trucks to provide a customised version of the navigation software particularly aimed at the trucks segment, as well as maps and connected services, marking the first collaboration between TomTom and Volvo Trucks.

In addition, ŠKODA has chosen TomTom as traffic service provider for Europe. Within the Volkswagen Group, TomTom Traffic is already available to Audi, Volkswagen, Porsche and Bentley, and it will be rolled out to all ŠKODA car models across Europe in the course of 2017. We also entered a number of new contracts with Tier1 and Tier2 suppliers, including Digen, through which TomTom components appeared in models from Mitsubishi.

 

In 2016, we partnered with NVIDIA to develop artificial intelligence to create a cloud-to-car mapping system for self-driving cars. The partnership will leverage TomTom's extensive HD map coverage with the NVIDIA DRIVE PX2 computing platform to accelerate support for real-time in-vehicle localisation and mapping for Autonomous Driving.

3.2.3 Licensing business review

Our Licensing business sells maps, traffic and navigation software products on a global scale to businesses across a multitude of industries. It also offers intelligent location-based services for developers to easily integrate our location content in their location aware applications.

With rapid advancements across the Internet of  Things, connected devices, mobility, and smart cities, location intelligence has quickly become an essential component across a broad range of revolutionary products and services. In 2016, we focused on three key objectives: forming strategic partnerships that would allow us to reach a much broader developer community, expanding our existing customer relationship and partnerships to further enhance the location capabilities within their applications and collaborating with cities to develop innovative traffic solutions.

As map usage continues to evolve, we have continued to innovate and advance our location technologies and capabilities. This has provided us with the opportunity to supply location services and data to many globally recognised technology companies. This includes Microsoft, who we have partnered with to integrate location-based services into Microsoft Azure to make it easier and more flexible for developers to build and manage enterprise, mobile, web and Internet of Things applications that are location-aware.
 
TomTom's strong mapping background has lead companies such as MapQuest, SAP, and Pitney Bowes to choose TomTom as their location partner. In 2016, these three companies have not only extended their partnerships with us, but also expanded them.

The deal with MapQuest, a subsidiary of AOL, Inc., now includes TomTom's traffic solutions in addition to our mapping services. This will provide a better user experience to millions of MapQuest customers who are seeking location information. With Pitney Bowes, we have increased their access to our localisation data. We believe this closer collaboration will redefine GIS products and intelligence services worldwide. Lastly, we are providing geocoding and address validation capabilities across SAP's product portfolio on a global level. This enriched geocoding and address validation with in the cloud and on premise will power SAP HANA's localisation information.

To address the opportunities in smart cities and live up to our commitment to fight against traffic congestion, we launched the TomTom City portal. The portal is a free to access web portal that uses our extensive range of traffic information to connect road users, connected vehicles and traffic authorities. This makes it easier than ever for traffic management experts to get access to our rich data to monitor, identify, analyse and influence traffic. The TomTom City portal currently contains live and historical traffic information for over 100 cities. Many cities, including Amsterdam and Moscow, have already selected TomTom to collaborate on developing traffic solutions to improve traffic flow, air quality, and overall mobility.

3.2.4 Financial review

3.2.5

The Automotive & Licensing financial review is combined as both segments make use of the same shared technology assets. EBIT and EBITDA for both the Automotive and Licensing segment is given in note 4 to the consolidated financial statements

Automotive & Licensing generated a combined revenue of €269 million this year, which represents an 8% increase year on year.

Automotive revenue increased by 25% from €106 million in 2015 to €133 million this year. This growth reflects increasing revenue from new contracts that started to kick in during 2016 as well as higher revenue on existing contracts. The deferred revenue position of Automotive increased to €59 million at the end of 2016 from €23 million at the end of 2015.

Licensing revenue for the year was €136 million, compared with €142 million in 2015. The year on year decrease mainly reflects the impact of discontinuation of a business relationship with a customer, which was partially offset by revenue growth from other customers.

 

The EBITDA of Automotive & Licensing was €82 million compared with €68 million in 2015 while the EBIT improved from -€34 million in 2015 to -€25 million this year. The year on year improved profitability is the result of the revenue growth in Automotive at a stronger gross margin, partially offset by the increase in amortisation expenses of several technology platforms.

Table_3 Key Figures Automotive and Licensing

(€ in millions, unless stated otherwise) 2016 2015 y.o.y. change1
Automotive 132.6 105.9 25%
Licensing 136.3 142.1 -4%
Total Revenue 269.0 248.0 8%
EBITDA2, 3 82.1 68.4 20%
EBITDA margin (%) 31% 28%  
Operating result (EBIT)3 -25.5 -33.9  
EBIT margin (%) -9% -14%  
 
1. Change percentages and totals calculated before rounding.
2. D&A costs mainly relate to our map asset (including acquisition-related amortisation).
3. The EBIT and EBITDA measure and the reconciliation to our income statement is further explained in note 4 of the consolidated financial statements. This note also provides a split between Automotive and Licensing.

Business outlook

In 2017, we want to extend our Automotive market share. Building on our strategic partnerships with NVIDIA, Bosch SoftTec and other automotive suppliers, we aim to strengthen our position in the automotive industry with the mapping, software and services expertise that enables TomTom to seize ADAS and Autonomous Driving opportunities.

The explosion of connected devices coupled with advances in location awareness will continue to pave the way for growing number of new opportunities in Licensing. As an independent location content and service provider, TomTom is in a unique position to innovate and capitalise on this market. Our transactional mapmaking platform enables us to create fresh and more detailed maps with high quality that takes full advantage of the growing sensor data offered through the connected devices. These maps, combined with our leading traffic products and online services, give us a very competitive and complete product portfolio.

3.2.5.1