TomTom N.V. (TOM2) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. As the chair of this general members' meeting and on behalf of the Supervisory Board and the Executive Board, I would like to welcome you to this virtual general meeting of shareholders of TomTom, which are hereby open. My name is Derk Haank, and I'm the Chair of the Supervisory Board of TomTom. Of course, these are special circumstances that we are in right now because of COVID-19. And in that regard, TomTom decided to make use of the temporary urgency law COVID-19, and therefore, to organize a full virtual shareholders' meeting to safeguard the health of our shareholders, employees and other stakeholders. Shareholders can attend the meeting from a distance, can participate and also cast their votes for the different decisions by electronic means. I would like to now introduce the ones present at this meeting. Firstly, the members of the Supervisory Board that attend through the virtual platform: Jacqueline Tammenoms Bakker; she's the Vice Chair and Chair of the Remuneration Committee; and Jack de Kreij, Chair of the Audit Committee. Also, I would like to welcome Mike Rhodin, who is attending the meeting through the webcast. Furthermore, I'd like to introduce to you also the members of the Executive Board that are here with me, Harold Goddijn, of course, CEO; and Taco Titulaer, CFO. Alain De Taeye is participating through the virtual platform. We also have here Mathilde Alberts, who I hereby appoint as the secretary of the meeting. She will be drafting the minutes of the meeting that will be available through the website of TomTom, as they always are. Through the virtual platform, we also have available, Patrick Gabriëls from -- apologies, the external auditor of EY for 2020. And Patrick Gabriëls, the external auditor of EY for 2019, unfortunately, because of personal circumstances, is unable to attend. We also have attending Reinier Kleipool, notary of De Brauw Blackstone Westbroek; and Irma Kroon of Meijer Notarissen with the voting instructions given by the shareholders. Now I would like to give you some information about the voting and -- during the meeting and about asking questions. Since this is a virtual meeting, shareholders can vote through the voting platform of Lumi that is available through your desktop or through your app. Shareholders who have logged in before the beginning of the share -- of the meeting, sorry, can cast their votes through the voting platform or through the app. And within a moment, I will open voting for all agenda items. And that means that you can vote for all voting -- sorry, all items during the entire meeting. So you can also change your choice until the voting ends. So you don't have to wait until the agenda item is addressed to cast your vote. So after the -- any other business item, we will show you the results of the voting, which will then, of course, be closed, and the results will then be shown on the basis of the online and written electronic proxies. Now something about the questions. Prior to the meeting, shareholders were able to ask questions in writing. We received 39 of those, and we will answer them per agenda item. And all these questions will also be fully integrated in the minutes. But because of the progress of the meeting, where possible, we have bundled the questions per topic and they will be answered at once. So -- and where possible, I will paraphrase the questions, and I will also mention the name of the shareholder who asked the question. So the shareholders who asked questions prior to the meeting can also ask additional questions through the chat function in the app or through the voting platform. Just to make things clear, these can only be follow-up questions to the questions that -- or the answers that we already gave to the questions that were asked in writing. So we will try to deal with these follow-up questions where possible with every relevant agenda item. Then during the any other business item, when voting has been closed, the shareholders that have access to the chat function can also ask questions through the chat about any topic of the meeting, and where possible, we will also answer all those questions. And we'd like to point out to you that there is a delay of about 30 seconds in the broadcasting of the webcast. So it's possible that questions that are asked through the chat function do not arrive with us timely to be able to address them in the relevant agenda item. Should that happen, we will then try to answer them during the any other business item. Then I have a few formal announcements to make. The call for this meeting was made public by the announcement on the TomTom website on the 4th of May of this year on the basis of this new COVID-19 law. And since that date, the agenda, the explanatory notes, the annual accounts, the annual report over 2019 and the triptych proposing the proposed -- sorry, explaining the proposed changes in the Articles of Association are available through the website of TomTom and also at our offices. We have not received any request from shareholders to add any items to the agenda. So all legal requirements have been met for the convocation of this meeting. So therefore, decisions can be taken and will have a valid -- will be valid. Now I can see that at the beginning of the meeting, we have registered 130,207,823 ordinary shares represented -- sorry, in total. And of those, at the meeting we have 87,756,961 shares represented. And that means that, that is 76.4% of the shares that have a voting right attached to them. Ms. Kroon of Meijer Notarissen, so our notaries -- I'm waiting for the slide to be presented to me. One moment, please. Okay. That will follow later, I hear. But given that, in any case, more than half of the shares are represented, we can take decisions with a regular majority. So now I will open the voting for all agenda items, meaning that up until the any other business item, you can cast your vote and also amend it if you wish to do so. Now let's start with agenda item #2, which is the report of the Executive Board over the financial year 2019. And for that, I will give the floor to Harold Goddijn, who will share with you the vision of the management related to the most important events of 2019 and also the most important developments in Q1 of 2020.

Thank you very much, Derk. Yes, ladies and gentlemen, and welcome to all of you. This is a very strange shareholders' meeting. And -- but first, I will address the events of 2019, and then I will share with you some information about the first 6 months of 2020 and also the implications of 20 -- of COVID in this year on our company. In 2019, with the Telematics company sale, we made very, very important step to simplify TomTom and to focus on the location technology market. So basically, we are doing 3 things. We are building and maintaining a geographic database. We are building and making software to disclose all that information so that it's easier for -- to make applications. And we also service the automotive market, which is a specific market for our location technology. The markets that we service are very much changing all the time, right? Basically, the location element need is an important part of all applications. And also in the automotive industry, the user experience has to be lifted and backlogs have to be removed. And also in 2019, we have managed to increase -- or to further increase the efficiency of our map platform, which is also necessary because the requirements of our database are increasingly high. And we see in the future important opportunities for even further improvements in our efficiency. So we see it as a strategic priority to obtain good results. On the basis of our maps and other services, we build software modules, right, that disclose important information. And over the years, we have built up an important position, and our technologies are used by many leading companies. Finally, we have also made good progress in the automotive industry. Our order book in 2019 grew significantly and reached a total value of EUR 1.8 billion, which is a record. And together with FCA, we were able to obtain a very strong and big client in the U.S., increasing our position there. And our P&D turnover was relatively strong, and the cash flow was good, and there was a turnover decrease of 30%. And this, of course, does not mean that we know that the consumer business, especially now because of COVID, will be further affected. When it became clear that the coronavirus would also affect Europe, we immediately started to prepare TomTom for working from home. We already had all the technology to enable this, and we also had a lot of experience with people working from home and the teams working together from different locations. And that is why the transition to working from home went very well. We think that there was hardly any productivity loss. Furthermore, we took a lot of measures to basically try to compensate for the lack of personal contact, and our employees value that a great deal. Unfortunately, 2020 from a financial perspective is a lost year. The sudden turnover loss or decrease in both markets, consumer and automotive, cannot be compensated for. But strategically, we can do many things. The order intake, especially in the Automotive segment, changed a lot in the first half of this year, and we're really working very hard to further increase the productivity of our satnav products. And our software products are increasingly competitive, meaning that thereby, we can further increase our market share. And so financially speaking, we can get through this crisis. We took a good look at where we can reduce costs without disturbing our development plans. And of course, we have a very strong balance sheet, which, in this unexpected crisis situation, is very useful. So we think that we will come stronger out of the crisis than we went into it. Of course, I do have to say that it's not clear yet how the economy will evolve over the rest of 2020 and 2021. So as a precaution, we have suspended our share buyback program. And I'm very, very grateful to our employees that we were able to adapt to the new situation very quickly, so employees working from home, because that's not a given, of course. And for many, especially young people and people with vulnerable family members or friends, it is not an easy time to get through. We do see now that the situation is improving every day. And we learned a lot during this crisis, and some of these lessons will lead to permanent changes in how we manage our company. Finally, I would like to thank all of you, our shareholders, for your support and your trust in this insecure period, in these insecure times. Thank you. I will now give the floor back to the Chairman.

Thank you very much, Harold. So before we will now deal with questions about this agenda item, I can say that Ms. Kroon of Meijer Notarissen has 87,541,947 voting instructions on behalf of shareholders. So now we will deal with questions about this agenda item.

Prior to this meeting, there were several questions that came in related to the consequences of COVID-19 for the strategic and operational activities of TomTom. These questions were asked by the VEB, by [ Mr. von Droonen ] and by [ Mr. von Orsoltz ]. Harold, can you give a quick reaction to these questions, please?

Yes. And I already addressed this a little bit in my introduction. All our employees in one way or the other have been affected by COVID. So from one day to the next, everyone was asked to work from home. So because of the nature of the activities, almost our employees are able to work from home easily. And in some countries, like in India, for example, where, of course, circumstances are different than in our case, we gave laptops to them because normally, they work at the office with desktop computers. And we also provided dongles to make sure that everyone had a good Internet connection from their homes. And we also paid a lot of attention to the well-being of our employees. And we have already carried out 2 employee satisfaction surveys specifically focused on COVID-19 that have enabled us to take adequate measures and, of course, also to change things where necessary. Think, for example, of specific communication trainings that we made available, also sessions whereby our staff were able to talk with senior management, we call them "ask me anything" sessions, and we also set up a buddy program with which employees were basically connected to others to talk about their experiences and to share their experiences to be able to get through these crisis, right? So in this way, we were able to quickly adapt, and we were able to monitor our engineering and service levels. And therefore, we have hardly suffered any negative consequences on the ongoing projects. So the COVID-19 pandemic hardly affected our Enterprise business. But it did, of course, affect the turnover of automotive and consumer activity. So the deal activity in the Automotive and Enterprise segment seems to hardly be influenced by corona. And the order intake until now, in combination with our strong cash position, results in us being able to continue our strategy and product road map without any problems. Back to you, Derk.

Thank you, Harold. Next to the strategic and operational consequences of COVID-19, I would also like to hear your reaction on the financial implications. And this is because the VEB asked some questions about this. Can I give the floor to you, Taco?

Sure, Derk. At the end of March, we withdrew our guidance for cash flow and our turnover, as a consequence of the insecurities around the impact of the pandemic. And so currently, we cannot give any guidance with regards to the free cash flow, although we do expect that it will be negative in 2020. As soon as we have a better view on the recovery of especially car sales, we will issue a new guidance, but it will not be before the 15th of July when we will publish our figures over the first 6 months of this year. But realistically speaking, I don't think it will be before mid-October when we will publish the figures of Q3.

Okay. Thank you, Taco. Now we will deal with a number of questions that were asked by the VEB. A number of years ago, TomTom was optimistic that it would want to put into play a very important role in the development of the self-driving cars, and we received 3 questions. One, what's TomTom's idea about the progress in the development of the self-driving cars generally and also the specific role of TomTom in it? Two, to what extent will the difficulties that the car industry has had to go through as a consequence of the corona pandemic delay the development of the self-driving cars? And three, to what extent does TomTom think that the self-driving car market will be a winner-takes-all industry? And in that scenario, what would be the implications for TomTom? Harold, can you answer?

Sure. Yes. I think that the question is not so much whether or -- but when cars with very advanced cruise control facilities and also finally also self-driving cars will enter the market. The expectation that fully 100% self-driving cars will be on the market will take a bit more time and probably also a few years later, not only because of COVID but also because of technological complexities. The car industry has always had a strong preference for dual sourcing. So we don't think that it will be expected to be a winner-takes-all market. But it is important that we are in the race from an early moment on and that we develop these products for self-driving cars together with our clients.

Thank you, Harold. Next question was also by the VEB. TomTom focuses on satnav maps, and is, therefore, very strongly dependent on car traffic and also future car traffic. So to what extent is TomTom dependent or independent from the growth in car traffic? Harold?

Look, our turnover in the automotive industry is determined by 2 factors. Firstly, the production of new cars, manufacturing of new cars, and on the other hand, the percentage of cars with built-in satnav systems. Our expectation is, of course, unclear now as to how will the demand for new cars develop because in China, the demand for new cars went back to the old level very quickly. And we think that it will take a little longer in Europe and in Northern America, but we do think that the productivity and the manufacturing will be back at the previous level within a certain time frame. Second factor that is also very relevant for us is the number of attachments, as we call it. So the number of cars supplied with a navigation system. And we see a positive trend there. There are an increasing number -- there's an increasing number of cars that are made with navigation. So we think that the movement to electrification, whereby a good infrastructure and the right user interface are, of course, even more important, will be strengthened even further. So we think that in 100% of all cases, the electrical cars will have a satnav system. Then back to you.

So the next question is also from the VEB. Because maps are now and almost -- have become an almost free commodity for many consumers, so why would this same thing not happen for the more complex maps that TomTom invests in? Can you answer?

Yes. Sure. Look, maps in the view of consumers are always free, right, because basically, they're paid for by the consumer by providing his or her information, right, because that information is marketed and used in other business models. But for professional users, those maps are not free at all. In the B2B industry, other factors are much more important also when determining the value of the map, and also the type of users of the free maps is limited. Professional users have -- need much more freedom to be able to use the maps in a way that fits their own technology and business model. Back to you, Derk.

According to the VEB, TomTom has always alleged that its independency should lead to a benefit, right? So many companies, for example, from competition motives are hesitant to do business with Alphabet. But after Volvo, Nissan, Mitsubishi, Renault, the American GM is now also going to buy services from Android Automotive. So the VEB wants to know whether TomTom is still of the opinion that independency indeed leads to competition advantage, right? And if that's the case, when will then -- when will this translate then in a substantial improvement of the yield on invested capital -- return on invested capital?

Look, we are, indeed, of the opinion that independency has a positive contribution to our competitive position, especially if we compare it with the past.

The next question was asked by Mr. [ von Droonen ]. In 2017, it was announced that TomTom created an HD map, an additional localization layer in the shape of radar road signature together with Bosch. Are TomTom and Bosch still working on this together? And if so, has this already been implemented commercially?

Look, currently, we are not working on this anymore, not in the road -- radar road signature, and Bosch also has not launched this in the market. And the reason is that the camera technology has become cheaper and less complex. And camera-based technology is, therefore, now the most important technology factor for automated driving. The technology for radars, of course, continue to develop, and possibly radar and lidar can play a bigger role in the mid to long term in automated driving.

Okay. We've also received a number of questions of the VEB and Mr. [ Droonen ] that relate to the automotive backlog. Taco, could you address this?

Yes. We have introduced the automotive backlog to have a better idea of the future turnover. The automotive backlog contains the cumulative expected IFRS turnover, and it is influenced by the reported turnover in the relevant period, the estimates of the cumulative turnover of new deals, so the old order intake and any amendments of the cumulative turnover of deals in the past. Given that the order intake has a binary character and is only one of the ingredients for our future turnover in automotive, we stopped reporting the backlog -- on the backlog, and we will, in the future, only give an annual update, so once a year, of the automotive backlog when we present our full year figures. As indicated during the publication of the Q1 figures of this year, we're very satisfied about the deal activities until now in 2020. For now, no contracts have been put on hold or have been dissolved. Back to you, Derk.

Thank you, Taco. Okay. I have established that there are no further questions with regards to these agenda items. Given that this is no agenda item to vote on, we will now continue with the dividend policy.

The Executive Board is not planning to pay out dividends, and the dividend policy will remain unchanged. The company gives priority to the expansion of investments in technology to be able to strengthen its capacities and its position in the market. TomTom is also of the opinion that the objectives of the company's right to create value in the long term is best realized, and the interests of the shareholder in the long term are also best guaranteed. Let's now take a look at the questions that were asked about this agenda item.

Prior to the meeting, several questions were received related to the expected cash flow and also the dividend policy of TomTom. These questions were asked by VEB, Mr. [ von Droonen ] and Mr. [ von Orsoltz ]. Taco, could you give a first reaction to these questions?

Yes. In 2019, we have paid back the largest part of the proceeds of the sale of Telematics, namely EUR 750 million of the EUR 910 million. And Telematics, of course, gave us a very guaranteed cash flow, given the fact that the turnover was largely generated by subscriptions. Furthermore, Telematics was profitable. So the sale of this part of our business changes our income flow and also profitability. That's why we've chosen to not pay out the full proceeds and to keep a larger cash buffer. In March 2020, we started with our shares -- a purchase program of EUR 50 million to cover our long-term remuneration program and bonus program for employees. And therefore, the volume is limited by the expected number of outstanding instruments. And this program -- the share buyback program has been now temporarily suspended, and we expect that when we present our figures over the first 6 years or when we present Q3, we will be able to say more about this. During the Capital Markets Day in September 2020, we have explained our financial framework, and we also expressed our ambition to keep generating cash and in the mid to long term have an FCF as double-digit percentage of the turnover of the group. So the scope of investments in R&D is also matched with this. The midterm free cash flow guidance is mostly based on the free cash flow of Location Technology. The remaining cash position is maintained, especially for these difficult times, right? Like now with the COVID-19 pandemics, because we have to be able to execute our strategy and road map. Furthermore, this cash position also gives us the opportunity to be able to acquire companies if possibility should present themselves. So our dividend policy is unchanged, and we do not expect in the short term to pay out dividends. But of course, we will assess this every year.

Thank you, Taco. We also received a number of questions of the VEB related to the consumer industry. Harold, could you quickly give an explanation?

Yes, of course. 2019 for our consumer activities was a very good year and with, of course, a limited decrease of the turnover. But this year, consumer -- the consumer industry is, of course, hardly (sic) [ hard ] hit by the COVID crisis. We assess activities of consumers every year to assess the potential to generate cash. And we think that we are the best owner of the consumer asset because our assets are very strongly integrated in the rest of the company. So the cost to basically divest consumers will not outweigh the proceeds that we can generate ourselves. So back to you, Derk.

I establish that there are no further questions -- or I observed that there are no further questions. And given that this is nothing to vote on, we will now continue with agenda item #4, which is the first point that you can vote on.

Agenda item 4 is remuneration in the financial year 2019. You were all able to see the remuneration policy for the Supervisory Board and the Management Board. It was described in the remuneration report, and I refer you to Pages 51 through 58 of the annual report 2019. The remuneration report was also published on the TomTom website. And this year again, the Supervisory Board has tried to improve transparency with regards to the remuneration policy, and they were helped by the implementation of the reviewed EU shareholders directive in Article 135b Paragraph 2 of Part 2 of the Dutch Civil Code. The report described, amongst others, which initiatives the Board has taken in all our stakeholders and how they used feedback. Also tables were added that used to be part of the explanation of the financial statements. And now we have a fully integrated report. As of now, the general meeting every year will get an advisory vote on the remuneration report with regards to implementation of the remuneration policy in the relevant year. And the proposal is to give a positive advisory vote. I find that there are no questions that were sent in by shareholders prior to this meeting. I'd like to remind you that you can still vote for all agenda items. And I will now continue with agenda item 5, which is adoption of the financial statements 2019. The general meeting is asked to adopt the financial statements for 2019. The financial statements were audited by EY, and the unqualified report has been included on Pages 104 through 109 of the annual report. I'm happy to give the floor to the Chair of the Audit Committee, Jack de Kreij, who will further explain this subject.

Yes. Thank you, Derk. You were all able to see the financial statements. It was included in the annual report on Pages 63 through 101, and these pages involved the profit and loss accounts, the balance and the cash flow development as well as the explanation of these subjects, important subjects that arose in 2019 as well as their inclusion in the annual accounts: amongst others, the sale of Telematics, the connected repayment of capital to shareholders for a total amount of EUR 750 million, reducing the remaining lifespan of the map content and mapmaking platform, the higher amortization connected to that as well as the consequences of IFRS 16 with regards to lease accounting and IFRS 15 with regards to revenue recognition. IFRS 15, amongst other things, led to an increase in deferred revenue. So for a clear overview of these complex subjects, the company is not just reporting the sales development but also operational development -- operational sales, sorry, and free cash flows. And EY, the accountant, has paid extensive attention to this. I think it would be good for the meeting if Mr. [ Tom deKauper ], the responsible accountant at EY, briefly explains the number of important items from the audit and the unqualified report.

Yes. Thank you, Jack. And my apologies also on behalf of EY that I'm here instead of Patrick Gabriëls, who at the last minute, for personal reasons, could not be here. So thank you very much for this opportunity to present our involvement as external accountants. So meeting, ladies and gentlemen, I'm an accountant at EY. I'm substituting for Patrick Gabriëls today. Since 2015, Patrick has been involved as external accountant at TomTom. And in this presentation, we'll go into the following subjects of the audit. So that's the scope, the execution, the conclusion, communication we have with the Management Board and the Supervisory Board. First, the scope. We audited the consolidated financial statements for TomTom. We checked whether the financial report meets legal requirements and whether the contents match the knowledge we have of the company. So our approach, including materiality and risk assessment, is similar as in last year's with our work on balance. We do 99% of total assets and 100% of sales. So it's a relatively high percentage, and that's mostly because of the way in which TomTom has been organized. It's a very central organization, meaning we can do our work in a very centralized way as well. So like last year, we identified a number of key audit matters. And specifically, I'd like to focus here on revenue recognition, and in connection with that, the deferred revenues at Location Technologies. Contracts in the automotive industry are pretty diverse, and in general, contain many different components. So it means that we pay more attention to this, more than we would do on average. And we've also looked specifically at the IFRS treatment of the various components as well as the assessments made by management. And our conclusion with both the single and audited financial statements is an unqualified report, which has been included in the financial report -- the annual report. Then about communication. Throughout the year, we've had a lot of contact with management, Supervisory Board and the Audit Committee. Important reports that have been discussed have been the audit plan, the management letter, including recommendations and the accountant's report. And during these sessions, people are very engaged, very involved, and our findings are taken seriously and discussed in [ depth ]. And I can also tell you that at the last meeting that I was present for, this was also the case. And then some attention for the following, like I said, Patrick has been involved in TomTom for the past 5 years as external accountant. So in line with the rules, Patrick will now have to be replaced. We'll have to vote it. So we found a successor for Patrick. From 2020, I will take Patrick's role. In 2019, I shadowed Patrick in order to safeguard a lot of the knowledge that we've acquired over the past 5 years. And then finally, I would like to say that we work together, very well together. And in conversations with management, the Audit Committee and the control team, I saw as much. And I'm happy to get the floor back to the Chair.

Yes. Thank you, Jack, and thank you, Tom. And now we'll look at questions to do with this agenda item.

So prior to the meeting, the VEB posed a number of questions, and they introduced these questions with the following statements. So they said TomTom at the annual -- semiannual figures for 2019, to summarize that, that they were going to capitalize fewer investments in innovations, and they wanted to do an accelerated write-down when it came to intangible assets. So in 2019, that meant that the amortization of the so-called technology and databases increased by EUR 153 million, as you can see on Page 27 of the annual accounts. Write-down is not a new phenomenon at TomTom, also include the [ series ] impairments in Consumer segment and the Google and Tele Atlas in the past. And at earlier meetings, VEB already raised questions about the valuations and impairment process at TomTom. So now we get to the questions of the VEBs, what did TomTom learn from assumptions at valuation that in hindsight were much too optimistic? And weren't there sufficient signs 1 or 2 years earlier that we need an accelerated write-down? Taco?

TomTom is of the opinion that we have solid valuations of all of our intangible assets where our assumptions are assessed based on the best estimates and insights that apply at the moment of valuation. Case of new technological or market developments, we include them in the valuation of our intangible assets. With regards to the write-down, TomTom looks at the lifespan of its assets every year. And based on technological developments in 2017, there were some adjustments made on the write-down period for some assets. As you can see on Page 79 of the annual report for 2017 and based on further innovations over the past periods as well as recent developments in the industry in 2019, we've reduced the write-down period for the map database to 2 remaining years.

All right. Then the next question, are there reasons to now assume that assumptions at Location Technology, that's Page 81 of the annual report, are realistic? And did the accountant play a part in management's decision to accelerate the write-downs? Taco?

[ As ] the assumptions as described in the annual report were realistic assumptions when the annual account was drawn up. So the decision for accelerated write-downs was the decision of management, the accountant simply checked our position. And then the last question from the VEB is the following. The annual report on Page 69 indicated that the total of realized EBITDA of the segment's Location Technology and Consumer in 2019 were minus EUR 68.7 million. Shouldn't that be plus EUR 68.7 million? Yes, that is correct. That should be EUR 68.7 million. Back to you, Derk.

Right. Thank you, Taco. The next 2 questions were addressed to EY by VEB. These questions will be answered by Tom of EY. The first question is, what conclusions does EY draw as an auditing accountant from the much too rosy assumptions in the past when it comes to intangible assets, much too rosy according to the VEB.

The intangible assets item consists of several elements like the activated development costs and customer lists. In accordance with IFRS, TomTom periodically needs to reconsider the expected economic lifespan. TomTom does so. And if there's a reason to do so, the economic life span is adjusted as well as the remaining write-off period. And as accountant, every year, we check that this assessment has taken place and that it was reasonable and substantiated. In the past year, TomTom did an extensive analysis. And as TomTom has indicated previously, in 2019, there were some important developments in technology in the market. And we discussed these developments with management. We also validated them ourselves based on information we get from the market and information we got from TomTom. And based on this work, we arrived at the conclusion that TomTom's assessment is substantiated and is in line with IFRS. Back to you, Chair.

Thank you. Then I'm going to read out another introduction from the VEB for the next question. One of the key audit matters consists of recognizing the sales, or giving account of sales of the segment, Location Technology. With revenue recognition, the accountant, to summarize, uses the assessment of the management about, for example, claims on the performance goals laid down in contracts. So how does EY check the assessments of management? And should shareholders be worried that the sales are assessed in too rosy a manner? Can the accountant indicate how they used a review of NV COS 540, which is to do with assessments made by management? And what changes can we see in the auditing approach compared to last year? Patrick -- Tom, sorry, can you answer these questions?

Yes, I can. The contracts at Location Technology, as I've said before, are complex and diverse. And the first step in revenue recognition is a technical assessment of the contracts. So we make an analysis of the various elements, and then we assess how these elements should be recognized in line with IFRS 15, which is the standard for revenue recognition. TomTom has a specialized team making this analysis, and for bigger and more complex contracts, a separate memo is drawn up. And as part of our audit, we assess specific contracts in detail. So we do a detailed analysis of the contracts and of the other communications with the clan. We talk to -- sorry, with the client. We talk to the central finance department, sales department and management. The second step has to do with the actual recognition of the actual revenue for these identified elements. For most of the contracts, they're not that complex. So there's not so much of an estimate involved. For some contracts, however, an estimate of the total contract value does need to be made, and TomTom's account managers make assessments of the total contract value based on their own insight, information from clients and historic data. The central finance department of TomTom then assesses these assumptions, so that there's a clear internal division there. So we assess these assessments, and we look at the internal and external information. We also do back testing where we compare actual revenue to the assessments of management. And also, I'd like to say that the review of NV COS 540 applies for financial years from 2020 onwards. So it wasn't part of the audit for 2019. I'm happy to give the floor back to the Chair.

Yes. Thank you for this extensive explanation, Tom. And because of a response to one of the general items of attention in crisis periods that the VEB has indicated, I would now like to give the floor to Taco.

Yes. Thank you, Derk. I would like to use this opportunity to respond to item of attention 2, and that was the additional review accounting at the publication of the 6 months figures. So the subjects contributed by the VEB, like liquidity, prognoses, adjustments to financing and prognosis, the lifespan of goodwill and provisions are important subjects that we pay a lot of attention to, and TomTom is continuously analyzing things, and every month has a discussion with the Supervisory Board. So by analyzing the various scenarios and the liquidity prognosis that they have led to, show that there is no -- that there are no continuity issues. Also TomTom is debt-free, and there are no complex refinancing issues. Because of the current situation and the intensive attention already paid to these subject, we've concluded after discussing it with the Audit Committee that additional work by the external accountant in this context offer no added value. We think it's wiser, also in the interest of shareholders and other stakeholders, that these extra costs can be used for other important subjects. Should circumstances change, then, of course, we will reconsider. Back to you, Derk.

Thank you, Taco. In the chat box, I see that the VEB is pointing out that one of their questions has not been answered. And what that question comes down to is, what time horizon should investors use before they can hold the Board to account for the returns produced? And I think you said something about that during the Capital Markets Day, Taco.

Yes. Well, we said 2 things during the Capital Markets Day about revenue and free cash flow, about -- for revenue, we gave a short-term projection that we expect that in the Location Technology segment, our revenue will show an average growth of 10%. And that continues until 2021, so until next year. And we're not revoking this guidance. But of course, we have to look at how COVID-19 will affect our revenue in 2020 as well. For the longer-term goals there, I have more faith because we think that over a longer period that we will be able to grow revenue by 15%, and that is until 2030. For our cash generation, our goal is about a 10% yield. So 10% of our sales remains -- or revenue remains in cash, is that goal.

Right. Thank you. That takes us to agenda item 6, which is release from liability of the members of the Management Board. It is proposed to the general meeting to release the members of the Management Board in office during the financial year 2019 from liabilities towards the company for their management insofar as such management is apparent from the financial statements and annual report for financial year 2019 or other public disclosures prior to the adoption of the financial statements and annual report for financial year 2019. We received no questions about this agenda item prior to the meeting. That brings us to item 7 of the agenda, release from liability of the members of the Supervisory Board. This is a similar item to the previous one, to item 6, but now it's proposed to the general meeting to release the members of the Supervisory Board in office during the financial year 2019 from liability towards the company for the supervision -- insofar as such supervision is apparent from the financial statements and annual report or other public disclosures prior to the adoption of the financial statements and annual report for financial year 2019. Prior to the meeting, we received no questions on this item. So that brings us to agenda item 8, which is adjustment of the remuneration policy for the Management Board. Supervisory Board proposes to adjust the remuneration policy to align it with new legislation to implement the reviewed EU directive. I'm happy to give the floor to Jacqueline Tammenoms Bakker, who will give a further explanation.

Yes. Thank you, Derk. As has been said before, in the context of the 2019 remuneration report, the Supervisory Board has tried to improve transparency with regards to the remuneration policy. And they were helped in doing so by implementation of the reviewed EU shareholders' directive in the Dutch Civil Code. Specifically, that is Article 135a Paragraph 2 [ part 2 ] of the Dutch Civil Code. Remuneration policy has been amended to comply with this new article of law. The proposed changes are intended to offer more transparency with regards to the goals of the policy, how it fits in with the long-term strategy, the desired culture, the interest of various stakeholders and the remuneration policy within TomTom. The considerations that were considered when the remuneration policy was arrived at, the decision-making process and considerations of the Remuneration Committee and the situations in which the Supervisory Board can deviate from the policy. In formulating the adjustments, we've considered the recommendations of various parties like Eumedion, VEB and ISS, and we implemented them where possible. We very much appreciate interaction with these parties, and we intend to continue this interaction. And just to be clear, the remuneration structure for the supervisor -- for the Management Board, as approved by the general meeting last year in 2019, remains unchanged. The goal is a total remuneration that fits in with the third quarter of the benchmark group, as long as the operational results of the company are in line with the goals set, or exceed them. And the companies in the benchmark have been listed in our annual report a total remuneration for Mr. Alain De Taeye meet this criterion. As we've said before, total remuneration for Mr. Goddijn is below the median. So this year, we will execute the benchmark in order to compare the total remuneration to the current relevant companies. This could lead to a change of the companies included in the benchmark group. The main remuneration components are a base salary, a cash-based short-term remuneration arrangement. So right now, there's an on-target level of 80% of the base salary for the CEO, and 64% for other members of the Management Board. And finally, a share-based long-term remuneration scheme with currently an on-target and also maximum level of 140% of base salary for the CEO and 100% for other members of the Management Board. The allocated shares vest after 3 years under the condition of continuous employment and will have to be kept for an additional period of at least 2 years. Share ownership is encouraged by the requirement for the Management Board to hold shares in TomTom or to build share ownership in TomTom equal to 3x the base salary for the CEO and twice the base salary for other members of the Management Board. There's also the possibility for the Supervisory Board to not allocate shares in case of exceptional market and/or company circumstances. So that's the so-called performance underpin. Supervisory Board feels that with this remuneration policy, the long-term value creation focus of the members of the Management Board is in line with the interest of the shareholders and it also safeguards internal consistency with the long-term remuneration policy for the senior management of TomTom. Back to you, Derk.

Thank you, Jacqueline. Prior to the meeting, VEB sent in questions about this agenda item. I'm happy to give the floor back to Jacqueline.

Thank you, Derk. The VEB has asked me to read out a voting statement, and I'll start by doing that. The VEB attaches a lot of value to remuneration policy where there's a parallel interest created between shareholders and the Board, a crucial part of an adequate remuneration policy, and this has been laid down, and the code for proper governance is that there can only be variable remuneration when -- if challenging performance goals have been met. VEB regrets that TomTom will continue the current policy where under the long-term incentive, LTI, shares are still granted to directors annually without them having to meet performance criteria set in advance. So the VEB, therefore, votes against agenda item 8. That's the end of the statement. And I will now respond to the questions asked by the VEB. First of all, the question was asked why TomTom didn't use this opportunity to have the stock units as a long-term variable payment depend on performance criteria. With regards to the long-term incentive, it has become clear that it's extremely difficult to set useful long-term targets in such a fast-changing market. So last year, this meant that we paid out restricted stock units without performance criteria, but with a significantly tougher requirement with regards to share ownership, as I've said before. It's also important to keep in mind that the result of this long-term incentive in no way leads to excessive remuneration. In fact, it is modest compared to other tech companies. So considering all interests means that the Supervisory Board is of the opinion that the current total remuneration policy serves the interest of the company and is also in line with the shareholders' interests. And then there was a question about our short-term incentive. And then especially the KPIs, and I'd like to say the following on that subject. According to our remuneration policy, every year financial KPIs are set. And those are the KPIs that we deem most appropriate to assess the performance of TomTom and to encourage economic value creation for 2020. 2 KPIs were chosen, Location Technology revenue and free cash flows for the entire company. So we give guidance on these 2 KPIS, and we feel that these 2 KPIs at this moment are the most important criteriums to assess TomTom. So we won't change the target set at the start of the year during the year. So we won't do that this year either. With regards to questions of what the shareholders can hold the Board accountable for and how the remuneration policy leads to the correct focus on economic value creation. Well, Taco already said something about the targets, but I will repeat that here. During the Capital Markets Day in September 2019, we stated the following long-term ambition with regards to 2 financial KPIs: a 10% CAGR for the period 2018-2021, and 15% for the period 2021-2030. And for the mid to long term, a free cash flow double digit as a percentage of revenue of the group. Assessment will take place over a number of years to see whether our results are in line with this ambition. The question was asked whether remuneration of directors will be reduced temporarily because of COVID-19. Well, the remuneration of the Board in light of COVID-19 has been the subject of talks within the Remuneration Committee and the entire Supervisory Board. We see COVID-19 as an exceptional situation. But as we've said before, the targets for variable remuneration will not be adjusted with all that entails. And right now, we see no reason to temporarily reduce remuneration. TomTom is debt-free, has a very strong balance sheet, and as you've heard previously, has the resilience in spite of the current circumstances to stay the course and to make the necessary R&D investments. So I think that's also an answer to attention item #1, which is about not granting variable remuneration. It was a point raised by the VEB as well. With regards to the important question of how we took into account the contrary vote of 18% of the share capital with regards to remuneration policy, and especially with regards to the long-term incentive plan, I'll answer that now. I'd like to emphasize that we took that vote against of a large group of shareholders in 2019 very seriously. We had an open dialogue with important stakeholders like VEB and Eumedion, and we used that feedback in defining our policy, which is up for a vote today, and we very much appreciate this collaboration. And we hope we'll be able to continue to gain new insights in this way to consider your interests and to remove any concerns you might have. We've not changed our policy with regards to the long-term incentive because we are of the opinion that this instrument keeps the interests of the Board and those of the shareholder in line and leads to very reasonable results as well. Obviously, we don't want to get ahead of ourselves. And we hope that this year, even more shareholders will be supporting our remuneration policy. I'm happy to give the floor back to you, Derk.

Thank you very much, Jacqueline. So during the meeting, we have not received any follow-up questions, meaning that I can now continue with the next item on the agenda, #9, which is the adjustment of the remuneration policy for the Supervisory Board members. This is also an agenda item that Jacqueline will further elaborate on.

Yes. Thank you, Derk. So in the context of the same new law to implement the reviewed EU shareholders directive, the Supervisory Board proposes to amend the remuneration policy. By having a written policy document, which includes all the remuneration elements that are relevant for the Supervisory Board, we will be able to offer more transparency. The structure of the remuneration of the Supervisory Board members has been lastly amended in 2019 with the additional -- with the addition of an international travel expense allowance. This will remain unchanged, and the -- it will consist of the following components. There will be a fixed remuneration per seat in the Supervisory Board and Committee, depending, of course, on the position, and an intercontinental travel allowance of EUR 3,000 per regular physical meeting in the Netherlands.

Okay. Thank you, Jacqueline. Prior to the meeting, we have not received any questions about this agenda item. So therefore, we can now continue with agenda item #10, which is the reappointment of Mr. De Taeye as a member of the Executive Board. This appointment is happening because of the fact that the 4-year period for which he was appointed as an Executive Board member in 2016 has ended. Because of his extensive knowledge of the TomTom business, his year-long experience and the way in which he has basically given shape to his role as a member of the Executive Board, the Supervisory Board has proposed unanimously to reappoint Mr. Alain De Taeye for a new period of 4 years. And that period will therefore end after the Shareholders' Meeting of 2024. Prior to this meeting, we've not received any questions about this agenda item. And I would like to remind you, by the way, that you can still cast your votes on all agenda items. And you can also change your vote right until the moment that I have closed the voting procedures. So I do that before I will start with the last item on the agenda, which is any other business. So now we will continue with agenda item 11, which is the proposal to amend the Articles of Association of the Company. You have all been able to take note of the proposed amendments with the explanations as described in the triptych that was annexed to the meetings -- meeting documents. The most important changes are the following: firstly, the possibility to also, in the future, organize electronic shareholders' meetings, general shareholders' meetings that will allow shareholders to attend virtually and also to cast their votes electronically; and second, to bring it in line with the current rules and regulations. So the proposal to amend these Articles of Associations also will entail granting a power of attorney to employees of De Brauw Blackstone Westbroek to have such a deed of amendment of the Articles of Association executed and to do anything else relevant or necessary for this. And we have not received any questions about this, meaning that we can also continue with item 12, which is the authorization of the management board to have the company acquire its own shares. So the general meeting of shareholders is proposed to give the Executive Board the power of attorney to purchase its own shares in the capital of the company under the following conditions: One, to a maximum of 10% of the issued share capital per the 15th of June 2020; and two, at a minimum price of the nominal value of a TomTom share and a maximum price of 110% of the average of the last share prices of the TomTom share at Euronext Amsterdam of the last 5 trade days prior to the day of purchase. And this power of attorney to the Executive Board to acquire shares in the owned company is requested for a period of 18 months and will therefore extend until the 15th of December 2021. Now we have not received any questions about this agenda item, so meaning we can continue with item 13. And so here it is again, the proposal to authorize the Management Board for a period of 18 months from the date of the general meeting to issue ordinary shares or to grant rights to subscribe ordinary shares up to 10% of the ordinary shares outstanding on the 15th of June, right? And this 10% can then be used for general purposes, including, but not limited to, the execution of TomTom's long-term remuneration or bonus scheme. The authorization would extend until the 15th of December 2021. Also here, we have not received any questions, so we can continue with agenda item 14, which relate to the authorization of the Management Board to -- with, of course, the approval -- prior approval of the Supervisory Board to restrict or exclude preemptive rights for ordinary shares, which can be excluded or restricted as referred to -- under the conditions as referred to under agenda item 13, right? So -- and this again will extend until the 15th of December 2021. And also prior to the meeting, we've not received any questions about this item. This brings me to agenda item 15. In addition to the previous agenda item, the general meeting is proposed to decide to issue ordinary shares or to grant rights to subscribe ordinary shares up to 10% of the total number of shares outstanding on the 15th of June, which 10% can only be used in connection with or for the purpose of mergers, acquisitions and/or strategic alliances. And this would also extend until the 15th of December 2021. So prior to this meeting also about this question, we have not -- sorry, about this item, we have not received any questions. Then agenda item 16, the authorization of the Management Board to restrict or exclude preemptive rights in connection with agenda item 15. And this is to authorize the Management Board with the approval -- prior approval of the Supervisory Board to resolve, or to exclude or restrict preemptive rights of shareholders in relation to ordinary shares, which can be issued or which rights can be granted pursuant to the authority, as mentioned, under agenda item 15. And so this authority will also extend until the 15th of December 2021. And we've not received any questions about this before this meeting. As I indicated before, the voting for all items will be closed before the any other business item, which is now. So I would like to kindly request you to finalize your votes. You will have a few more seconds to cast your votes. And given the delay in the webcast, I will wait another half a minute. [Voting]

So I hereby close voting. Now let's take a few moments to take a look at the results and to combine them with the powers of attorney that have been issued prior to this meeting. It can take a few minutes for us to count the votes, but we will continue in the meantime with the any other business. And of course, you may ask any additional questions you should have.

A number of questions have already been received before. The -- TomTom has taken note of attention point #3 of the VEB, right, to bring down additional positions of Supervisory Management Board members. And given the very broadly formulated point 4, the obligations for the climate, I would like to give the floor to Harold.

Yes. Thank you. The VEB is asking to give more attention to this in our business model, right? So climate changes and the impact. So we already told you that we are a leading location technology specialist that shapes mobility by very, very detailed maps, navigation software, traffic information and services. And the increasing focus on climate improvement in society can also be seen at a large number of our clients. And of course, it is completely in line with our own mission. And we also see a strong movement at our clients, for example, towards electric driving, right, where routing and our technology play an important role. It's not only about how to get somewhere but also about, can you actually reach a certain place with the battery capacity available, right? And of course a very careful and accurate range calculation will contribute to this. And goal #11 of the UN Sustainable Development Goals has been identified by TomTom as being fully in line with our vision to create a safer world without emissions and without traffic jams.

Thank you, Harold. Given that we have not received any other questions, we hereby close the any other business. So I would like to propose to take a look at the voting results. We have received the results. So here, per item, you can see the results and the percentages. So on the slide, we will show them to you per group. Let's start with agenda item 4. So remuneration in the financial year 2019. So 87.12% has voted in favor. For agenda item 5, the adoption of the annual accounts of 2019, we can see that 100% and no less of all votes have been cast in favor. So everyone has adopted the annual accounts. Agenda item 6, the release from liability of the members of the Executive Board, also 100% of all votes have been cast in favor, and the same applies to agenda item 7, which is, of course, the discharge of the members of the Supervisory Board, again, 100% of all votes cast were in favor, meaning that this proposal has thereby also been adopted. Should we report also the number of people who abstained from voting? Can we go back to the -- yes, to this slide? So for agenda item 8 then, there were no abstentions. For agenda Item 9, there were 11,014 abstentions from a total of more than 87 million. And for agenda item 10, there were no abstentions. Wait. Apologies. I have to go back to the previous slide because we had not reached agenda item 8 yet. So first, let's take a look at agenda item 8. We can see that 80%, so 70,356,963 votes have been cast in favor, meaning 80.18%. This means that the remuneration policy has been adopted. And as said previously, we will take this result into account when we evaluate our remuneration policy. Then agenda item 19, this item has also been adopted with 99.94%. And as said, there were 0.6% -- 0.06% votes against, and 11,014 abstentions, meaning that this point has also been adopted. And then agenda item 10, the reappointment of Mr. De Taeye as a member of the Executive Board has been voted on in favor with 99.92%. Alain, congratulations. And the company, congratulations, of course. Then agenda item 11, which is the proposal to amend the Articles of Association of the company. I hereby observe that this has also been adopted with 99.94% of the votes. There were no abstentions. Then agenda item 12, the authorization of the Management Board to purchase its own shares, which -- of the company, of course, has also been voted on in favor with 99.97%, with 0.03 (sic) [ % ] votes against and 11,014 abstentions. Then agenda item 13, this relates to the authorization of the Management Board to issue ordinary shares or to grant rights to subscribe for ordinary shares up to 10% for general purposes. This has also been approved at 99.95%. There were no abstentions. Then agenda item 14 concerns the authorization of the Management Board to restrict or exclude preemptive rights in connection with agenda item 13. This is also an item that has been approved with 75.50 -- apologies, 96.08%, no abstentions. And then item 15, which is the authorization of the Management Board to issue ordinary shares or the current rights to subscribe to ordinary shares up to 10% in connection with or on the occasion of mergers, acquisitions and/or strategic alliances. And this item has also been voted for in favor by 79.19% of shareholders, and there were no abstentions. Then agenda item 16, the authorization of the MB to restrict or exclude preemptive rights in connection with agenda item 15. I can hereby observe that this item has also been adopted with 75.55% of the votes, and there were no abstentions. I can also report that, of course, a very detailed overview of all the results will be placed on our website after this meeting. Then that brings us to the last point of the agenda, which is the formal closure. Now that we have shared the results of the voting with you and that there are no further questions, apparently, I hereby close the Annual General Shareholders Meeting of TomTom N.V. Thank you very much all of you for your participation, your attendance and your participation. We hope to see you next year. [Statements in English on this transcript were spoken by an interpreter present on the live call.]