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

Story to tell. And we have our senior management here that will give you the different presentations. So let me talk you very shortly to our program. So if you can show me the slides, yes, obviously, we will start with our CEO, Harold to take you to our strategy update. We will introduce our new Map platform and then go of our business units, both automotive and our enterprise units. Then we do have a Q&A, so that will be both hosted online and in person here. I will give -- come back with some details then. But as we're doing it both online and in the room, we ask you to stand up and wait for the microphone before you ask your questions. We have done a short break go back to more in-depth on our technology, and we finish off with Taco before we do Q&A. And then Corinne Vigreux, one of our co-founders, obviously, will end the program with some closing remarks, and then we do have lunch and there is the opportunity to visit the various booths here in the venue. Okay. With that, we'll go to a short movie first. [presentation]

Welcome. Very excited to be here, and thank you for coming, both people who travel to Amsterdam and people who are obviously behind the screen somewhere in the world. We're here today in the A'DAM Tower overlooking at the city of Amsterdam. You will, by now, have seen our press on the availability of a new mapping platform, a new map, a record automotive order intake for 2022. And we also provided some midterm guidance for revenue growth and cash generation. The changes that we are announcing today in our tech and impact on our business, but also on the industry that we are operating in. The introduction movie gives you a bit of a flavor of what a completely rethought how to make maps and how to make them useful. And our improved products will make us more competitive in our existing market and new business, and will offer new possibilities to customers as well, give them a lot more freedom to innovate. We are aspiring to get back to growth. We outachieve and cash generation. Now the market for location technology is growing rapidly. It's a foundational technology to find things, but less visible and often running in the background, but equally important, maps are enabling people and things to move safely, easily and efficiently. Let me give you a simple example. Every time you order an Uber, hundreds of calculations, if not thousands, are made to work out which driver is -- what happens after you've left the taxi. And the accuracy of those calculations has a direct effect on customer satisfaction and operational excellence and eventually on your bottom -- carmaker and you want to get to a higher degree of automation and self-driving, you have a separate set of requirements. Developers of those postings red where the traffic lights, much more. And those requirements drive an insatiable demand for new things to map for improved fashions. And traditionally, it's been very hard to keep up with that ever-expanding list of requests. And there's no economic justification to map and maintain certain attributes. Now at the same time, map users are producing an ever-increasing amount of data and signals every time an Uber client about the world around us. And when an intelligent front-facing camera, passes by traffic sign, minutes later, we can see the traffic sign popping up and also the open source community has gone from strength to strength. The open street map communities producing and maintaining a visually extremely -- map platform, our new map platform is designed to bring all those sources together in a consistent way to power the most demanding applications. And that new maps platform is combining, of course, our own data, but we combine that with new, what we call super sources, not for the whole map across the whole world. And those new sources are sensor observation, open data. And that map platform is designed to support an ecosystem of up, improving the location technology we all use. In addition, and this is also new customers and partners and say a consistent base map, creating layers that cater to their specific needs. And that new maps platform is designed to -- applications can use that data as well. Now the technology will be a driving force for accelerated innovation. The new maps platform -- can come together to create the smartest map of the planet. The immediate effect is that our new maps are richer. They contain more data and are easier to maintain. And that takes us that makes us more competitive in our existing markets. But importantly, we'll also open markets and use cases where we currently are not present or not competitive. And let me pop up a number of maps. Here you see Amsterdam. Of course, it's our home city, high-quality map, well mapped. Navigation is very good. Traffic information is very good. But even here, if we combine that on our new map platform, you see a higher level of detail, especially in the non buildup areas, building footprints, parks, water features, tramlines, railways are all now part of our new mapping platform. This is another example of a completely different dimension. Kazakhstan. Now Kazakhstan is not one of our core markets, let's face it. But a lot of our customers have worldwide exposure, and they want us not only to do Western Europe and North America, but also Asia and other countries in Asia. And we don't have that map that's a distractor. And by not having Kazakhstan we can lose an important automotive deal. This is what the new technology does to our map in Kazakhstan. You see much higher detail, visually much more attractive, much more detail than we have ever had before, and we can do this at relatively low cost. Again, high-quality navigation map, Combine that with the new sources that we have, and they get much more detailed richness, visually more attractive map, and that's important for customers who want that visuality represented in their application. Another example, Southeast Asia, a very important big market. Indonesia is one of the -- is an important market, potentially important market. And again, there, you see a massive improvement in detail outside of the road network. The road network is relatively well covered. We improved there, but look at all the detail in the visual implementation and you get a feel for how you can start using these maps outside the automotive world. And it is a completely new level of improvement. This is Japan. In Japan, we don't have a map for historical reasons, competitive reasons, there are very few countries where we don't have a map. China, obviously, is an important market where we don't -- where we're not represented but also until now Japan was out of reach. It was simply too expensive, too difficult market to enter. But here, we are starting with a new map with a very impressive base map already that we -- from where we can improve using our other sources, trace data, sensor-derived observations and more. Finally, again, this is a well-developed market, Disneyland in Paris. Now with our current me, we get you perfectly okay to the entrance of Disney Park, Disneyland. But once you're inside of Disneyland, there's not a lot we can do for you. But that was until recently when you look at that new map, this is the power of the open street map community detailing, visualizing everything, combining that with the high-quality base map that we are producing also inside of Disneyland, we have something to tell you. You can see the railways there much more detail, the path, the attractions. You get the gist, I think. Now leveraging the opportunities of our new map offer also prompted us to overhaul our complete application landscape. And we have a set of brand new APIs and SDKs and that will make it much easier to consume all that goodness that we bring with our new maps and to power all those demanding industry strength applications. 2020 year for bookings in the automotive, by far, and we're spreading our previous record. The backlog has grown to EUR 2.4 billion, up from -- thanks to a record order intake. We aspire to further grow our market share in auto, our new maps gives us a good entrance there, but also in ADAS and automated driving will provide further opportunities for growth. Outside of auto, completely new markets will open to us, more countries, more use cases, and we aspire to double our on the back of that better product and better improved applications. Now in order to get where we are from leading tech companies to join us on our journey to build the best map of the planet. We're complementing that, of course, with very deep knowledge combining that new talent with the wealth of knowledge we have on mapmaking has enabled us to this product today. We're changing the way we're working. We are transforming into a leading tech -- mapmaker that caters to a wide range of products and solutions. We are lining up to provide that platform and the technology to bring. My colleagues will later on in this presentation, we'll take you through what that means and how would that give you a bit more detail. We also tell you what led the position, both in automotive and the enterprise market. Thank you very much so far. I'm handing over the microphone to Michael Harrell.

Thanks, Harold, and hello, everyone. Welcome. I'm Michael Harrell, VP of Engineering for TomTom's new maps platform. And I cannot tell you how excited I am to be here today to talk to you. Our new map platform is going to disrupt how mapmaking is done significantly. And I don't use that word lightly. I know we can always use. But I've been waiting a decade for this moment. And let me tell you first a little bit about my background and how I've gotten to this point. I'm at Amazon. Prior to that, I worked for Microsoft for seven years from 2007 to 2015 [Audio gap]. At the time or HERE maps now, but the map just wasn't good enough. Just like Google, we decided to make our own map [Audio gap] becoming fully mobile and new. Having an understanding of where the device was, was going to be critical to the success of their operating systems. Given the [Audio gap] better. We have all this great sensor data. We have the smartest engineers around in the world we knew we could build them. [Audio gap] And we did. We created algorithms and solutions that are just now being rediscovered 5, 10 years later. We are doing it efficiently and really well ours just for the United States. So fast forward a little bit. Satya become CEO. We've collected and completed the United States up [indiscernible] the price tag. He was like, [ how ]. His very next question, how much am I paying now? We gave him the answer six months later, we were sold to Uber. Why'd they do that? Why was that something that Satya sold? It's because hundreds of millions a [Audio gap] little better. It's not a clear differentiator for Microsoft. He could take that hundreds of millions of resources and apply it to core differentiation there. I left, I joined Amazon. But I've been watching the mapping industry for the past seven years, seeing if the eventuality of all these different companies trying to build their own map and then realizing even though we have all this extra data even the [Audio gap] more difficult, really very expensive. Many different companies have gone in and out of attempting to make a map, trying to build your own map has proven to be really difficult. And as companies started realizing that they can't build the map themselves. They started looking for alternatives in open mapping, as you can see here. especially with leading tech companies. OpenStreetMap or OSM, is a leading open mapping solution. OSM is a community of map builders, manually building and curating the map. It consists of volunteers, GIS students from around the world, mapping their country and local neighborhoods. It also includes paid editors from leading tech companies, like you see here. So I left Microsoft in 2015, and I'm watching the mapping industry to see how it responds to this challenge. And as we can see, many tech companies have been looking to open mapping as their solution. However, while we see significant growth, many of the Open Data, many of them that are using Open Data are only using it for their secondary and tertiary markets. Some are still just evaluating. Why is that? Well, OSM still has challenges yet to be overcome. What are the different options for the world in mapmaking? We basically have three options. I mentioned my background, building a map yourself, that's super expensive, as I mentioned. And most importantly, it's not a clear differentiation for many companies. You can go with a proprietary map. This is the most common option that's been used today, TomTom, HERE, Google, great examples. But these solutions continue to have challenges for companies to use. They don't get to control the prioritization of features and fixes made to the map, TomTom, HERE, Google, they've opened up their map, allowing companies to fix issues, but it's still against the proprietary map, and it's still controlled in a way that adds constraints based on the direction of the proprietary map is going, limiting collaboration and integration. But even more importantly, the speed at which innovation can occur is limited by the speed of that company. And the resources that company is able and willing to spend in moving that product forward interest in Open Data. It's been around for a while and continues -- and we continue to see companies playing with it. There is a lot of interest, but it's still challenging for many companies, such as slow quality checks. Well, community activity identifies and fixes issues, these issues still cannot -- can still be exposed to customers before being fixed. Vandalism is a particular concern as it's an attack vector that didn't exist with proprietary maps. And it's really problematic when it gets exposed. When you compare TomTom's map to OSM, it's clear, OSM is built by a community of editors with their own priorities. Not by a company who specialized [indiscernible], it has -- it's missing significant road coverage. Routing capabilities are nowhere close to the proprietary solutions is missing [Audio gap] viable products for commercial use. And it also lacks standardization, which is challenging. Each country runs its own community. They are different -- there's a bunch of differences, even for simple things like month, day. It could be [Audio gap] makes it really difficult to work with on a global amount. And of course, big companies trying to do a lot of work, can't do automation problematic thing and the automation and machine learning capabilities you've built. So that's TomTom [Audio gap] as I mentioned today. We see these leading tech companies working with OSM but not fully due to the challenges I've mentioned. Automotive has been evaluating OSM, but they haven't been able to really leverage it, again, due to the challenges, but also because they're more cautious with the quality, particularly in coverage and routing. Some have looked at it, but they haven't gone very far with it. This is where TomTom's map platform comes in, and this is where the disruption is happening. This is big. Now those using OpenStreetMap can get the full coverage of TomTom's Road network, and that provides a significant opportunity for everyone to co-collaborate. It's everything great about TomTom with the added richness of OSM. The TomTom maps platform makes OpenStreetMap enterprise-ready commercial grade. What I mean by this is, we're going to add in all the extra features and capabilities that have blocked people from using OSM like standardization with the content. TomTom's map platform will read in OSM data and normalize a few of the top tech companies in the world on this standardization. We've had meetings weekly with them, including several face-to-face sessions. This excitement has gotten amazing. In the working sessions, it's been awesome. I can't tell you how engaged everybody has been. It is challenging, how everyone is thinking and strategizing about map making at the top companies in the world that we're working with already. We're also going to protect from vandalism and bad edits by adding quarantining, keeping those things from making it out into the customers' hands. Then we're going to add all of our additional content that have made TomTom's map so great, all the content algorithms, our POIs and addresses that we spent significant time sourcing all over the world. All these capabilities within a single ecosystem will bring the resources of the world together to share and work on a better map. This is a single company and how fast that single company can go. We're talking about bringing the resources of all the different companies that want to play in the same ecosystem together. And the resources of all of that significantly. The best analogy I tell people, we keep saying self-driving cars. They're going to be right around the corner. It's going to be a few years out, and then a few years comes, it will be 10 years out. We keep predicting it, but it never gets here. The reason for this is because of the options I mentioned previously, you have to build the end-to-end system yourself. You have to spend significant dollars and just redoing what's already been done. Just to add a little extra piece of the secret sauce, gain the capabilities from the base, license the content and capabilities you need, then focus your resources solely on the next innovation that you want and are trying to achieve. It's great for TomTom because we can pull sensor data and our capabilities. But it also provides a huge opportunity for everyone in the industry to do the same for their area of expertise. TomTom [Audio gap] to embrace open mapping, bringing the best of all these worlds together. This is how TomTom beats Google, unique algorithms for specialized use cases, mapping can no longer be done alone. TomTom's map platform is providing the answer, bringing collective resources of the world together on a nondifferentiating base map and allowing everybody to focus their efforts where it matters. I know, I know everybody's probably thinking after I said, how can anyone beat Google? They have what seems to be a bottomless pit of money to spend due to a very successful advertising business. But even Google can't go against the collective resources of the world. And the partners we've talked with thus far are really excited about the platform. It has finally given them the answer they've been looking for, excited. And I'm not the only one. TomTom has got a ton of excitement happening particularly for those we have over half a dozen directors and VPs that have come from there Amazon, over half a dozen directors and VPs that have come from Google. A few of them from -- all in the last two years. Combine this with our TomTom veterans, that has been making maps for decades. It's a really unique time here because it is so exciting. This new platform and ecosystem, we've seen a big influx from all over the tech community, which has shifted. We are now moving in to truly being a leading tech company, which is really exciting here at TomTom. Someone asked me, why did I join TomTom? For me, personally, I joined this happen from the sidelines. I'm so happy and feel very lucky that I've been able to be here to tell you about such a big ground baking thing that's happening in the mapping industry and to be a part of that announcement. And with that, I'm going to hand it off to [Audio gap] tell you a bit more about how our map is getting better and the great ways we're using and leveraging our sensor data.

And thanks, Mike. So let me tell you a bit more concretely what exactly this new map is and how it better solves the core challenges that our customers are having. I'm Lawrence. I joined TomTom with Mike about a year ago. And -- autonomous mapmaking. Now as a product manager, one of my big jobs is to understand, hey, what are those challenges? Four major ways that the expectations on maps have been rising in the last couple of years. One is we need richer map features. Gone are the days where a road network and points of interest are sufficient. Now we need 3D buildings with clear entrances and pedestrian paths and routing towards those buildings. It's not just sufficient to understand, hey, what are the turn restrictions for vehicles, but you need lane-specific restrictions by vehicle type, right? Richer map features is one. Two, global coverage, as Harold mentioned, our customers are increasingly global. Their revenue is increasingly global. So the map that we provide needs to be of the same quality globally. Three, higher accuracy and autonomous driving. I was at Google Waymo for a few years, leading amongst other things, the mapping platform. And when you think about autonomous robots, right? Double lane geometry to understand how do I safely navigate those roads. When we talk to some partners that are thinking about the metaverse, you need to project the metaverse onto 3-dimensional buildings you need to know exactly where those buildings are. So higher accuracy and quality levels than provided in minutely updates. Now that's not true for all features. It tends to be that buildings don't move around on a day-to-day basis. However, there's other features like hazardous. They change. We need to be able to update them on a minutely basis, right? As well as if a customer tells us about an error in the map, we should be able to propagate that error to their production map within minutes. Now let's [indiscernible] sources are. Now we've talked about OpenStreetMap as a very important source. This is a human curated source that is good at certain types of features. For instance, visual features, their road map. And the community is worldwide, meaning that this quality they're able to provide on a worldwide basis. Now we, as TomTom, intend to be a very good corporate member of this community also giving back. But it's just one of many sources that we use. For instance, we have prop data, there are 600 million devices, vehicles, phones that give us GPS traces and help us understand, hey, where are new roads opening up, but directions are they going, what speed are they going? More recently, with more and more cars coming online and having access to cameras, we get information from their observations of where the speed signs are, where the lanes are. Then we combine that with our sensor ground truth lies in an aerial imagery to provide the ground truth to understand from multiple sites, hey, what is actually there in the world. Then data acquisition, we've been around for 30 years. In those 30 years, we have acquired many local sources from local governments, understanding where are the administrative foundries, where are the postal codes. That takes a lot of time to establish those relationships and understand where those sources are. So there is a great advantage of being a mapping company that has been around. Then finally, automated feedback loops, customer data contributions are [Audio gap]. Now let's dive a little bit deeper into some of these sources. Our new map data improvements on visualization. As Harold mentioned, here on top, we see Monza, Italy near Milan, in our current map. And below, you see the new map with much more detail in greenery, parks, more detail in the building footprint. It's a much more pleasant map to look at, but it's also more functional. Then when you have a better roads graph, when you have better road data across the world, it doesn't just help the visual appearance. Here, you see the difference with more roads and more accurate roads, how it helps Teresina, which is a mid- to large city in Brazil, how it helps our current product, like traffic. With more accurate roads, we're able to better map match our traffic product to those roads, making our existing products, we're already world-leading, much better globally. Then the automated observations, right? As I mentioned, we are getting these observations of daily 650 million signs, 70 millions of kilometers of road in 60 countries. Now these observations contain, what the vehicle thinks, where the lanes at? Where are the signs? What are the signs that I'm seeing. Now these observations can be noisy. So a single observation tells you something, but you can't trust it yet, which is why these vehicles need a map. But if you aggregate the observations together, you get a much better picture of, hey, where the lane boundaries? Is this a -- what is a lane divider type? Where exactly are the signs and what are the signs saying? So this is an incredibly important source for us to update our maps. And we are getting these in partnerships with OEMs. [Audio gap]