TomTom N.V.

Bruno Priuli - IR Harold Goddijn - CEO Taco Titulaer - CFO

Francois Bouvignies - UBS Andrew Gardiner - Barclays Capital Martijn den Drijver - NIBC Markets Marc Hesselink - ABN AMRO Marc Zwartsenburg - ING Francois Meunier - Morgan Stanley Shyam Kumar - Kuvari Partners

Thank you, Operator. Good afternoon, and welcome to our conference call during which we will discuss our operational highlights and financial results for the third quarter 2017.

With me today are Harold Goddijn, our CEO; and Taco Titulaer, TomTom's CFO. You can also listen to the call on our Web site, and a recording of the call will be available shortly afterwards.

As usual, I would like to point out that Safe Harbor applies. We will start today's call with Harold, who will discuss the key operational developments, followed by more detailed look at the financial results from Taco.

We will then take your questions. And with that, Harold, I would like to hand over to you.

That's great. Thank you, Bruno.

Welcome ladies and gentlemen, and thank you for joining us today. I want to start with an update on our Consumer Sports business.

We communicated earlier that we would initiate a strategic review for our sports business. That review is ongoing, but in the meantime we have reduced our cost, and are now in maintenance mode.

Our customers, both existing and new ones will continue to be served. We've just launched major updates to our mobile app and Web site that have been very well received.

But our costs are now aligned, and given a short period of adjustment we will return to black numbers by the end of Q4. The review for assessing our longer term options is in full swing.

And we expect to give an update at our full-year results earlier if possible. The PND business is cash generative, and we will continue to provide a valuable platform for consumer insight and location data.

By the end of this year our Consumer business will represent less than half of total revenue, and less than 30% of our gross profit. Our strategy is to build on our leading position in maps, applications, and services where location is important.

Year-to-date, combined revenue of Automotive, Licensing and Telematics grew by 17% year-on-year. As you can see, our business is shifting towards higher gross margins, better predictability, and more upfront cash.

I'll start with a more detailed view on Telematics. So the Telematics business reached 785,000 subscribers by the end of the quarter, and that is a 17% increase year-on-year.

In the quarter, Telematics was recognized as Europe's largest provider of fleet management solutions by research firm Burke Insight. This is the third year running that we have led the European market.

Telematics launched an open beta version of the new WEBFLEET 2018 application suite, and that offers a fresh modern user interface in our main fleet management solution. In the Connected Car Services segment we announced a contract with LeasePlan.

This is an important partnership. We can bring value to large corporate fleet owners with what we think are short times for return on investment.

I will now move on to Automotive. Automotive had a very strong Q3.

Revenue growth was over 50% year-on-year. And year-to-date we deferred a net amount of €36 million of automotive revenue.

For the whole year, we are expecting a 40% revenue growth year-on-year. 2017 is an important year for Automotive, and it will continue in 2018.

We are seeing low RFQs coming in. And in most RFQs we are asked for a global brand and car model agnostic offering.

This means that we're seeing more requests for system sales where we can provide a best-in-class product and services offering where we integrate traffic, online map update services and more. We'll give an update on our order intake for 2017 early February, when we publish our full-year results.

This concludes my part of the presentation. I'm now handing over to Taco.

Thank you, Harold. Let me make a couple of brief comments on the financials.

In Q3, revenue totaled €218 million, and our Automotive, Licensing, Telematics combined grew by 18% year-on-year. Automotive revenue was up by 51% to €47 million, this increase was driven by a combination of higher take rates and more customers versus last year.

Our expectation for full-year have gone up to 40% growth year-over-year for this business unit. Licensing revenue was flat year-on-year, with €34 million, and Telematics revenue was up with 8% year-on-year, with €39 million.

The recurring subscription revenue for the year increased 7% to €32 million. Consumer revenue decreased 29% year-on-year to just south of €100 million.

The majority of revenue, roughly 80%, is PND related, Sports represent approximately 10%, and so does Automotive Hardware also 10% of Consumer revenue. Gross margin was fairly strong in the quarter with 65%; this was an increase of five percent points year-on-year as we see the continued growth of recurring data software and service businesses, and a decrease of dependency on hardware products.

We expect gross margin to be north of 62% for the year as a whole. Total operating expenses for the quarter was €147 million, that's €3 million higher compared with a year ago.

But if we exclude the one-off restructuring charge of €12 million, the OpEx declined with €9 million year-over-year. We expect this trend of lower marketing expenses to continue during the last quarter of the year.

Our OpEx in the fourth quarter is expected to be down, with roughly 10% year-over-year. EBITDA decreased by 6% year-on-year to €31 million, and EBIT was a loss of €6 million in the quarter.

The net results adjusted for acquisition-related expenses and restructuring charges and gains on a post-tax basis was €19 million, which translated in an adjusted earnings per share of €0.08 on a fully diluted basis. This compares to €12 million and an adjusted earnings per share of €0.05 in Q3 last year.

At the end of the quarter, we reported the net cash position of €102 million. Then I continue, on slide four, to have a look on the Automotive numbers.

As shown in the last couple of quarters, this slide highlights the operational revenue of Automotive. Operational revenue is the reported revenue plus the net change in the deferred revenue position.

As well as we sell products to Automotive that include multi-year updates and our subscriptions, some of the revenue is deferred. Automotive operational revenue in the quarter amounted to €55 million, an increase of 54% compared to last year.

The total deferred revenue on our balance sheet is €240 million; the main contributors are Consumer and Automotive. Consumer represents half of it, €120 million, but is declining, and Automotive represents €94 million.

And that represents a doubling since last year. In the year, so year-to-date, Consumer released its deferred position with €13 million, but on the other hand Automotive increased the deferred position year-to-date with over €35 million.

Consumer deferred revenue will continue to decrease, while Automotive will continue to grow. And that growth will -- is even expected to be stronger in the quarters to come.

The effect will not be visible in the short-term in the P&L, they'll best reflected in the balance sheet and the cash flow statements. The consequence of this change in nature of our business is that we're becoming more and more a software business.

In Q3 2017, almost 65% of our revenue was derived from data, software, and services, which results in a more predictable income stream and provide higher growth margins. Let me conclude my comments on slide five.

We're updating the guidance for the full year. So due to the continued headwinds in Consumer Sports, we now expect to deliver full-year revenue of around €900 million, the adjusted earnings per share of around €0.25 remains unchanged.

We now expect the levels of investment, CapEx and OpEx combined to show only a marginal increase compared with 2016, and that is excluding acquisitions and restructuring charges. Operator, we would now like to start with Q&A session.

As we have no further questions, I would like to…