Earnings Call: Q2 2017

Jul 19, 2017

Good day and welcome to the 2nd Quarter 2017 Results Conference Call. Today's conference is being recorded At this time, I would like to turn the conference over to Bythera. Please go ahead. Thank you, operator. Good afternoon and welcome to our conference call, during which we will discuss key highlights and financial results for the second quarter. With me today are Harold Hudain, our CEO and taqo Titulaar, our CFO. You can listen to the call on our web site and a recording of the call will be made available afterwards. And that usually, I would like to point out that Safe Harbor applied. We will start today with Harald. He will discuss key highlights of the quarter and that will be followed by more detailed look at the financial from Taco. And after that, we will take your questions. And with that, Harald, I would like to hand over to you. Thank you, Bijsira, and welcome. Our strategy is to build on our leading position in navigation technologies and to provide location, content, software and services to business customers. We are developing a growing, high margin and recurring revenue stream, combined Automotive Licensing and telematics revenue grew this quarter by 18% year on year, which was ahead of our expectation. We continue to strengthen our network of customers and partners to support our position in autonomous driving and smart mobility. We have seen lower than planned hardware revenue this quarter, and that is mostly because of a disappointing sports sales the wearables market has fallen short of expectations. And because of this and because we want to focus on our automotive licensing and telematics business we are reviewing strategic options for our sports business. This resulted in a noncash impairment charge of EUR 169,000,000 in this quarter. Today we announced that we aim to launch a share buyback program of up to 1,000,000 and that is equal to around 2.5% of the total issued share capital. This program reflects our confidence in our strategy and the future of TomTom. I'm very pleased to announce that, we will propose to appoint Verint Locard to our Supervisory Board. Verint is a member of the Executive Board of SAP, and also a member of the advisory board of the German Research Center for Artificial Intelligence. He has an impressive track record in software and product development and we're delighted that he is committing to our company. 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, starting with the impairment. The underperformance in sports resulted in a noncash impairment charge of EUR 169,000,000 in the quarter There is no goodwill related to consumer left. The remaining goodwill on our balance sheet is 225,000,000 of which $192,000,000 is related to automotive and licensing and $63,000,000 is related to telematics. Let me now discuss the business units and the rest of the P and L. The Q2 revenue was 253,000,000 that is 4% lower compared to last year. Automotive licensing and telematics combined grew by 18% year on year and that is ahead of our expectations. Automotive was up 39 percent to $48,000,000. The increase was driven by the ramp up of a new contract that went live last year, but it was also driven by the success of our customers in the, at the end market. Licensing revenue grew with 16% year on year to $39,000,000. The year on year increase included in catch up, that was recorded in the second quarter of this year. Telematics revenue was flat year over year 40,000,000 with current subscription revenues on an increase of 7% and then consumer saw a decrease of 20% year over year to reach 1,000,000 Consumer Products declined by 18% and Automotive Hardware revenue declined with 31%. If you look at the gross result, gross result increased by 11%. Gross margin was strong at 3% and increased by 8 percentage points year on year. For the second part of this year, we expect gross margin to remain at the same level as what we saw in the first half. Our revenue though will be lower, year over year So with the same gross margin, this will result in a lower gross result in our second half of the year. The operating expenses for the quarter were $151,000,000 that is $18,000,000 higher compared with a year ago last year, however, included a one off gain from a pending, custom case Excluding this 1 off gain, operating expense for the quarter increased by 8%, mainly driven by higher expenses on our long term employee incentive plan, and higher amortization expenses. For the second half of the year, we expect the OpEx to be lower than in H1 and also lower than H2 loss year. The biggest contributor to this decline is marketing. EBITDA grew by 4% year over year to 45,000,000 EBIT was $9,000,000, excluding the impairment charge versus $30,000,000 last year. The net result adjusted for acquisition related expenses impairments and gains on a post tax basis was $21,000,000, which translates to an adjusted earnings per share of on a fully diluted basis. And this compares with $23,000,000 and an adjusted earnings per share of $0.10 in Q2 last year. At the end of the quarter, we reported a net cash position of 1,000,000. We expect to generate cash in the second half of the year, and even assuming the 50,000,000 share repurchase. Now let me go to Slide 4. As shown in the previous quarter, this slide showing operational revenue of Automotive. Operational revenue is a reported revenue plus the net change in the deferred revenue position. As we sell products to automotive that include multi year updates and or subscriptions, some of the revenue is deferred. Operational revenue in the quarter amounted to $60,000,000, an increase of 43% compared to last year. The total deferred revenue on our balance sheet is $220,000,000, and the main contributors are consumer which is slowing declining and is now at 1,000,000. And you have Automotive at EUR 86,000,000 and that position has doubled since last year. We expect Automotive to continue to grow strongly also in the second half of the year. Slide 5, the full year outlook. To conclude, I would like to give you an update on our outlook for 2017 and mentioned before, hardware revenues were lower than planned because of disappointing sports sales. As a result, we updated our revenue outlook. We now expect to deliver full year revenue around SEK 925,000,000 Adjusted earnings per share of around $0.25 remains unchanged. We expect the combined revenue of the Automotive Licensing And Telematics business to grow to around 15% year on year compared to 2000 in 2017. And then we expect a level of investments that is both CapEx and OpEx to show a modest increase compared with 2016 this excludes, acquisitions. Operator, we would now like to start with Q And A session. Thank you. We will now take our first question from Francois Bogus from UBS. Please go ahead. Your line is open. Hello. Thank you for taking my question. I have a couple if I may. The first one is on your OpEx trend given the trends on the sports revenue and you expect the OpEx declining year over year in H2. How should we think about beyond, I mean, 2017 is it, changing your plan of OpEx development, obviously, for the longer years? If I remember correctly, last quarter, you said that the OpEx will, I mean, will be growing in the next few years, but nowhere near this 15% CAGR the nonconsumer business. So I just wanted to have an update on this given what you said on the sports. The second one is on the automotive market. How should we think about the reference for growth for this year for the overall market? Again, in the next two quarters, last two quarters, Q4 and Q1, you said that the overall size of the market would be higher than 16, just to have an update on this Nothing related to your bookings as imagine you don't want to comment on that. And I have a last one, if I may, just after that. Yes. Do you want to ask that last question as well or? Yes, yes. I can. So the last one is on your HD map discussion as it's now in the market available. I just wanted to have a sense of when do you think you can stop having the manure in your bookings? So what anything about the pricing discussion with your customers? Any color on that would be very helpful. Okay. I suggest I take the first question and then leave the comments about the order intake and the HMMs to Harold. OpEx Indeed, OpEx was up with 11% in the first half. We expect OpEx to come down in the second half, to be modestly up for the full year. The main driver of the decline that we expect in H2 is marketing. We spent 80,000,000 of marketing in 2016, we think that that number is, is going to be around 60,000,000 in 2017. We need to look at strategic options as we set in our press release for what we want to do with the sports business. And with that, it is way too early to make any comment or give any color on the OpEx development beyond, this year. The order book, for automotive is, I, is we won't discuss the, the order book, as you rightly said, this call, but it's also true that the, that the available business in the year as a whole is bigger than it was in 2016. Now that doesn't say anything about our win rate or where we are, but there are more contracts to be won or was in 2017 than in 2016. If I look at HD Maps and the discussions there, Yes, it's still early days. I think notable developments are that, Baidu will use our mapmaking platform for the creation of HD Maps, that is important because that gives a unified map product to software developers that can be applied to for cars, both in the Western world and in China. And I think that is good news, for software developers that they have one standard, that they can work towards And we're also pleased that it is a good acknowledgement, by Baidu, about the the state of our platform and tools for HD driving, for self driving. Now Is the market developing RFQs are coming our way, for HD Maps not necessarily for level 5 self driving applications, but increasingly for level 2 and level 3 self driving yeah, cell driving autonomous driving, we're assisted driving application. So for, the applications that software developers and our customers are looking for are lane level guidance, but also more sophisticated adaptive cruise control and other safety features that are based on our AG map, including some applications for motor management, where fuel savings can be, achieved by having a better understanding of the road ahead and shifting the gearbox and the power of the engine in anticipation of what's going to happen there is an expectation that, that can reduce fuel consumption. So there is a quite a range of applications developing ahead of level 5 self driving, which is good. We are quoting and for those businesses and trying to win those businesses. So we start to see the emergence of market for, highly detailed, maps. I don't say anything about pricing. I think that's too early But we do see some applications being developed for these type of products. When you say it's too early, does it mean that maybe you won't you don't expect to sign any contract with HD Maps in 17 or just trying to understand what you mean by that? Well, so if you say, So we the full specification of AG Maps is designed to make self driving level 5 a technical possibility. That we don't see happening before 2020, 2021. But we do see a market for these type of products and derived products emerging, for applications that are, that are going to happen earlier. And for those businesses, we are quoting and we hope to win some business as well. And that will help to establish that product category. And we can develop this and we can develop this from there. Great. Thank you. We will now take our next question from Mark Hasselink from ABN AMRO. Please go ahead. Yes. Thank you. My first one is also a follow-up on that, the available business in automotive So far, I understand you cannot give like exact success rate with what do you think you're taking your share fair of the market? Are you winning share or is it too early to tell on that one? No, I think it's too early to tell, but what I can tell you is that we feel good about our portfolio and the state of our technology. And we can see that we are, we're motoring in that space. And on the application side, definitely lead areas a bit of a, I think I think we look strong there, giving recent announcements of product and what have you. I think on the, especially on the application side, we're looking strong. So we have confidence that we will further progress our standing in the automotive world and continue to grow that business. I can't say much more at this stage, but other than that we feel good about where we are with our portfolio. That is clear. And the second question is more on general on the space like the ecosystem on autonomous driving. Obviously, you're announcing quite some partnerships your competitor here has been announcing a lot of partnerships. How do you see this market evolving now? Is it going to be like a 2 player kind of market? I also heard sometimes all kind of markets. What is your view on that one? And what will be the driver of these ecosystems? It will be the the software players or the car companies, what is your updated fuel on that one? Well, I think the the currency is still coming to terms with the challenges ahead of them. We see all sorts of developments, partnerships happening. We see a great level of excitement. It's a hot space now or the car tech space in general, but, as usual, it's far too early to declare if he's going to win what the structure of his industry is going to be. Is it I don't think it will be a one the winner takes all market. There are still different opinions about the technologies didn't to be applied, from the mental architecture of the software and how that all is going to work. So there's still a lot of 54 and a little to be explored and decided. So it's too early. It's too early. What we see is a couple of general trends. So software developers believe that maps will be inevitable. You need 1. Otherwise, it's getting too complex to keep those cars safe. I think that's a big lesson that we've learned in the last 2 years. There is progress about what what a self driving car can do, but it's also true that we haven't cracked the problem completely. So there's still a lot to be invested and to go for in this space. And that's true for everybody who is exposed to this, to this market. Okay, clear. And then the final question is on the on Baidu. You mentioned, I think, in the press release, when you announced the Baidu's contract, will not be extra costs related to it. Baidu is going to use your platform, and I think you're going to use their and knowledge on artificial intelligence. How does it work? Is this purely in R And D, working together that you both take your part of the share of the cost? Or is there also revenues in there because they're using your platform? No, it is a, so we are providing enabling technology to create AG Maps. So databases and database structures and technologies and tools. Baidu will populate the databases through camera out bringing camera observations in and doing, editing on the database, and and we can generate the license fee, when AG Maps are sold in China to certain customers. So it's a fairly well defined partnership. It's not going to generate massive amount of money in the short term. But I think the important message we're giving here is that there is a product that you can use both in Europe and in North America and in China. And Tom Thomas setting the specification standard for the product. And I think that's the core message that we want to get across to our partner in the current street. Okay. Thank you. We will now take our next question from Andrew Humphries from Morgan Stanley. Please go ahead. Few, if I may. The first is on the Consumer business. You, clearly it's too early to kind of talk in detail about what your strategic options might be. But I think in the past, you've indicated that part of the reason for keeping a U S PND business alive was to provide some shared overhead for what you viewed as an opportunity on the consumer side. Does that change in the light of for today's announcement. My second question is on telematics. I think last November, you talked about opportunities in the leasing space with replacement vehicles or insurance fleets any more color on that would be great. A third question is around the Bosch agreements I'd like to ask how, the localization technology you're looking to develop with Bosch compares to your own technology and that parking on what you previewed last November. And then finally on the buyback, clearly, we are certainly in the early innings of an arms race in terms of developing technology around autonomous driving and mapping, which has the possibility of requiring, multiple years of spending Any color on, how that plays into your thinking with regards to the buyback would be great. Thank you. Yes. So, on the sports side that we are evaluating strategic options. We're not doing that on the P and D side. B and D side is different. It's very much aligned with our technologies. It's cash generative. We have a strong position there. We generating cash, from that product category. And I think that TomTom is the best by far the best owner of that asset going forward. So nothing is changing there. But we have to face the reality that BND remains declining product category, and that's fine. We can live with that. Telemedic Leasing a connected car. So you can, broadly speaking, separate telematics product portfolio in 2 different product categories, one category for fleet management, where you sell your product to a business that's operating a fleet. And the other category is connected car services, where you, sell your products and services to OEMs, dealers, leasing companies. That lost categories new, we see good potential there. We have signed a couple of deals there that, that have great potential. Volumes are high, but ASPs or ARPUs are much more competitive. So it's high volume low price. We started to ship in that category, and that needs to ramp up. It needs to take some time to embed it and get your operations right and we'll have you. But the first results are there and the first contributions to the top line from that Connected Car business are starting to come through Lastly, the Posh agreement is about sorry, there's more 2 more questions. 1 is about a BOS agreement, and BOSH have developed a radar technology that is quite, there's an advancement in normative rate of technology for self driving what we are doing together with Bosch is creating a, let's say, a fingerprint of the road of that radar image that we align with our HD Map or the HD Map is the ground proof And by having that radar overlay OB HD map, the radar in the car can accurately help the positioning of the car where it is in the directions travel and so on and so forth. So we are helping Bosch to get the product aligned and created, and that will help the availability of the product will help force also to sell it in the automotive industry, both as a sensor and a methodology for positioning. Lastly, autonomous driving the AG map itself, how is it going? And how much money do you think you need for that, if I understand your question correctly? We've always said that it's difficult to create an AG map, but it's different than a standard map. Most of it we are working hard to develop the technologies that can help us to create that map to a large degree of automation. And that's where, R and D and research is coming in through a combination of computer vision and intelligence, we think we can achieve very high degree of automation for the creation of that HD map. So it's really a technology innovation game rather than a brute force game. Okay. And we feel good about the progress we're making there. Okay. Maybe just to follow-up on that then, and I think that's something you've touched on in the past in mapping. I I guess, kind of when you're signing agreements today, particularly on the automotive side, are you able to, incorporate elements of those agreements that allow you to start harvesting that data around the HD map more efficiently? Or are you waiting on cheaper lidar newer technologies to become available before you can start doing that in earnest? No, there's a lot of, there is kind of a marketplace starting to emerge, driven by the desire of carmakers to license the data, do something meaningful with the data they collect from vehicles. So there's one development. But there are also active negotiations going on of building a closed loop technology that will find its way into production vehicles. A bit early to comment on that, but we see that as an essential part of the equation, where you have a large fleet of relatively cheap census collecting processing data and validating databases that have already been published and constructed. And we see that as an integral part of the challenge. That's very helpful. Thank you. We will now take our next question from Ike Slottbaum from the idea. Please go ahead. Good afternoon. Thanks for taking my question. I'm not the expert on TomTom, he's walking the field access with his TomTom. But the question I had relates to the impairments, could you shed some background information on the timing of an impairment And normally, we tend to see these kinds of impairments at the end of the fiscal year, and this comes somewhere during the half year. Could you please tell me, yeah, provide some color on that. Yes, sure. Indeed, the, you do that annually, but you do it also if there's a trickering event. And we started with our sports business in 2011. And since then, we have seen growth year over year to reach over 100,000,000 at the end of 2016, with a growth level of more than 50%. That said, the we were not able to make profit at those levels and we knew that we had to grow our business further, to at least 200,000,000 to start to be breakeven or to start to make profits. We, in our expectations for 20 we didn't think we would reach that level already in 2017, but we would get there somewhere in 2018. But when we saw the first quarter results, coming in, they were they were not great, but we we thought that that would be more a temporary event, but then after a marketing campaign in Q2 and still no growth year over year, we decided early July that we couldn't go on, this way. And that in itself was the so called triggering event that led to the review of the impairment mobile and led to the full impairment of the goodwill at the end of Q2. We will now take our next question from shyam Kumar from Kubera Partners. Please go ahead. Hi, Al. Thank you very much. Just a couple of questions. In terms of the auto revenue growth of 39 percent, which is very good, can you beyond your end customers volumes, which I know commented was strong. Can you kind of break out what's driving this high level of growth in terms of take up rates the extent to which take up rates themselves are increasing. What is driving that increase in take up rates, please? Whether it's car companies offering navigation and traffic as standard or the extent to which it is customers, end customers choosing to take on products such as lane departure warnings that require the map and traffic, please? Yes. So the growth is obviously a function of contract wins, generally speaking, in the past. We've given you those numbers of order intake in, over the last 3 years, if I'm correct, that is what's driving it. So it's a market share. 1st, the biggest driver of the month share. Now we do a bit better than we anticipated, and that is mostly because that is mostly because car sales are small. With a combination of higher take rates. And we had some, some very favorable news from Peugeot at the car of the year. Those things have helped to sell more and it makes everything a little bit easier. So those are the 2 big drivers where take up rates are exactly in our customer base at the moment We don't have a reliable number for that, but we will we think it's growing to about 30% across the range of all cars, but that's a very rough number and it's not been verified. And Ken will be independently verified either. But I'll make a point to, to have a look what the, what take rates are according to, entries analysts and where they expect them to go. And what's driving the increase in take up rates? Is it some of these new applications we talked about? The level 2 type stuff or is it just, what is driving it, please? What it is driving is a higher take rate customers are asking for it, the availability and the equipment levels are being pushed down to the mid range. The technology is getting better. Traffic and dynamic routing are increasingly seen as essential tools in the card because it's getting better. It does help save time. People start to expect good quality routing and traffic information in the car, and rely on it more, think those are the key drivers. And connectivity is becoming standard as well. That's not just driven by navigation, although we have a big part in that because of traffic information, but there is a general trend to risk connected car for multiple purpose And we're benefiting from that because the additional costs to bring the navigation services into the vehicle are going down as a result of that. Is getting easier, technology is better, easier to integrate, maturing rapidly, demand is there, and especially dynamic routing is increasingly seen as a must have. Just in terms of HD Maps, you mentioned that there were potential RSQs. Now in terms of the amount of actual roadways, you have mapped with an HD map, it's, I guess, relatively low. So I guess what I'm trying to understand is, I understood your point on the technology But as RFUs come through and you have to deliver the HD MAC, how populated does the HD MAC have to be in terms of coverage to start winning to deliver on potential RFQs? And how are you going to get there, please? Well, we do have extensive coverage of, over HD Map. We have the major roads. So the closed entry roads, so highways motorways, where the technology will be deployed first, we've covered that for North America and Western Europe. So you can do meaningful applications today with AG Maps that are available in those key markets. Where we cover 100% of the highest road classes. So there is, there's really something that we have an offer in and that carmakers can buy. And we see, we see our fuse coming through where there are requirements for HD Map as I said in my earlier remarks. So the product is there. It's working. It's good. And it will increasingly be deployed in, in kind of applications that will come in before full self driving will be a reality. It was a strong number plus 16%. I understand there was some catch up payments, but are there any interesting underlying dynamics driving that growth, new verticals, new need for mapping, internet of things or is it just phasing of revenues from your current customer base? No, I see it's the what you see is real. There's bigger application, from our key customers via disclosures list. I think the next growth needs to come from the online services that we are developing now with Microsoft for the Azure platform, all that is on schedule, and we expect to launch that after the summer. So, don't expect anything big in the second half year in terms of revenues, but relaying the foundation for a additional revenues to your location based services that was not available to us before that Microsoft deal. So we are excited about that and the technologies we are deploying there are maturing rapidly. So all that is really exciting, not just for, for us counting the money, but also for the engineers, a lot of new opportunities a lot of innovation happening there that keeps everybody excited and and innovating. So, yeah, I like what we're doing in that space. And I think when we give our guidance for 2018, we will start to be able to give a little bit of color on the on the opportunity from those debt type of services. Okay. All right. Thanks, Harold. We will now take our next question from Sander Van Urthe from Kempen. Please go ahead. Yes, thanks for taking my questions. 2, if I may. First of all, on the partnerships, you signed more recently to what extent are these unique partnerships or is it have both parties also the opportunity to maybe team up with other industry players at a later stage? And the second question also related to a former question, which you commented that not all nuts have been cracked autonomous driving today. So I was wondering, is it TomTom that needs to solve these challenges internally or is it just a matter of finding the right partner to have to find the right solution and get to the next stage? Thank you. Yes. So, those, most of those, partnerships are more exclusive, and that wouldn't make sense either I think there's very few people in the position now to place bets. That's not how it works. People want to work together, but also keep their options open. I think that's healthy and and good. And that is kind of a pattern we see in this industry for a long time. Self drives no reality yet, and there's still a lot of things happen. Things need to happen on our side. Things need to happen on the OE side, things need to happen on the tier 1 side. Thinking to happen on the regulatory side, still a complex puzzle we're putting together here. But there's a significant amount of resources committed now to making this technology in Riyadh. We will now take our next question from Mark Swatzenberg from ING. Please go ahead. Yes, thank you for taking my questions. Some phone issues, maybe some questions asked, but I'll ask them anyway. To start with telematics, Can you give us your view on what the growth prospects are for this business inside the medium to longer term? But also when can we expect, say, that we see a higher growth path again, coming back into your business? So then on the growth side, and then also, how do you see this business developing in terms of investments that are needed to keep the product up to standard and to cope with competition, etcetera? So that's my first Yes, seeing the underlying industry dynamics and characteristics are still very favorable, for, for telematics service. Our customers are making money, short return investment. We are by far the leader now in Europe. We are operating across all European countries in all languages. I think we have a good opportunity to connect car services, what I explained earlier. So we need to figure out how we can back to grow. So I think it's possible, to faster growth. We're still growing, of course, but we don't grow with 3% brand and that's not good. I think the market can grow faster than what we currently the rate that we are currently crawling at. There's a couple of things, things that are specific. So we made big investments in the platform, And if you go through a that's mostly a transition from Flash Technology to more modern HTML technology that gives us all sorts of, advantages But it's also true that in the time when you're working hard on those transitions, that innovation tends to slow down. Before you go faster again. So we're sitting towards the end of that period. We have launched now a version of the new platform that's been well received. And I think by the end of this year, that transition will be completed And then we have every all deduction in a row again and innovation will go faster as a result of that. So that's one thing. The other thing is that we've made considerable commitments in the Connected Car platform, technology over the last 2 years. We start to sign up customers at the end of 2016. And we now see a period where we start to roll out those technologies customers and I expect that that will accelerate in the coming, period. So I think that will have positive influence on gross numbers again, but I also feel that we need to do more. What it is exactly is, I don't want to elaborate on that, but I think there is a bigger opportunity than what we can show Day in our gross numbers. Would that require significant investments to deliver that No. I think the big investment relative to the size of Telematics has been made in the transition transitioning the applications from HTML from Flash to HTML. Most of the technologies from the platforms of from the acquisitions we've done in the last couple of years have been absorbed. It's not 100% done, but the bulk of the work, to bring everything in line on one platform is behind us. With the exception of Feiner, but also there, Feiner is a Polish acquisition we did, last year or 2 years ago. December 2015. December 2015 to be exact. And, but also finder started to stop selling the Lexi platform and start selling now the new platform that's based on HTML5. So there's been a transition a bit of cleaning at a kitchen, playings is completely another, not 100% sure, but I think we can, we need to get those gross numbers up in the second half and also in 2018. And in terms of acquisitions, now that you do this share buyback, Do we should we also read that as no acquisitions in telematics or are they so small that it could still fit in the current strategy there? Or are the targets just too expensive that you've given up on that? Well, we don't we don't pay a silly money and evaluations are high, but there's still consolidation taking place. And there are opportunities to buy that kind of smallish medium sized companies with reasonable prices. And if those opportunities happen, we will we quite happily do that and, but we there's enough financial room to do that. And so the smaller strength, a change in strategy, but it's getting harder to find our targets, to be to be totally clear, there are still they're all to us every now and then, but it is, it's not getting clear. Then on the P and D side, Well, how do you look to the to the PNDs in the sense that how long can you give in current declines? Still remain cash positive in this business? Well, quite some time. So, there's a couple of things happening. The PD market as a whole is declining, but so that's clearly a negative. But within the category, we see some niche products that are growing for motorcycles and trucks and that kind of stuff and that's quite possible. We see that ASPs are going up and we also see that our market share is going up. And we do that with relatively little investment And that we can do that because we are benefiting from all the other developments we're doing for location based services for Car Industry, and I'd like to see this as just another vertical in our product portfolio. But that's fairly well aligned. And it brings to something other that is quite valuable, which is a softer benefit and that is direct contact with an end user, who tells us what works, what doesn't work, what they like, what they don't like I think that's valuable for us as a company to have that. So we don't have to rely on our automotive customers who have their own interpretation of what customers want. I think it's good to have that direct link for better understanding how the model works of people are expecting. Yes. But most importantly, it's cash. Yeah, we're generating cash there. Let's let's say, so it's still finance as part of your mapping R and D, so to speak. But at some stage, you will hit, say, a sort of threshold that you get to sort of tipping point that, yes, given the declines that is difficult to remain cash positive on that front or still allocate costs to, enough costs to P and E's. Is at point, say, 1 year or 2 years or 3 years from now? Or can you give us sort of an indication when you might hit that and because I can imagine that there is cash negative that you have to take also a decision perhaps on P and E. No, I don't want speculating there. I don't think that's very helpful, but it says to you. And of course, if you look at your clients, just model Yes, I think you climb, but it's going slower than the it has been, there may be some pleasant surprises there. I don't know. We'll see we keep a a close eye on the profitability. It should not distract us. It should run its own course. But for the moment, I think it's a we're the right owner and there is considerable benefit of playing in that space for us, although it is less strategic, of course, than it used to be in the hey days of personal navigation. Yeah, sure, sure. But maybe on the back of saying, we are the best owner, but you're now looking for perhaps an exit for sports agree in one way or the other. What if a potential buyer comes along and says, okay, the sports category, but also the PNDs, we're interested in the pack deal, which would be open to such a scenario? We will every proposal, we that the market's maintenance, we were listed to evaluate it. I don't see that happening. I see the likelihood of that scenario nor is highly realistic. But if someone has a plan, we will listen, but I don't expect that to happen in all fairness. Okay. Okay. And then on the sports category, you say we're in a current strategic process. Does it is there also an option possible in searches and to just close it because you seem quite confident to close it somewhere this year, because we would provide you provide us with an update on the Q3. I think also your outlook has part of it on the OpEx guidance, some indication that you might not invest more into marketing, for instance. But the fact that you're quite confident in closing it, does it also mean that if you don't find a buyer or whatever carve out a new owner will be interested that if that doesn't in the end go through, that you might also consider just closing the business for and taking a charge against, perhaps a cash inflow from working capital that you say, okay, we can close it at the minimum amount and we stop with the business? Is that also a possible scenario? Well, what we said is the business is not developing a core plan and we don't see a reasonable path to profitability. And the conclusion is that we needed our options now. But we will need this quarter to figure out what that what it is. And I think I'm quite confident that by Q3 we will have a much better picture, what that evaluation has yielded I don't want you and I don't want you to go much further than that. I don't think that will be helpful. Okay. But what we're signaling today is that the market is disappointing. We need to look at it. We can't carry on as we are as we are going at the moment. Sure. Okay. Can I ask how many people work? For instance, for the sports category in terms of wearables? No. I don't, we haven't disclosed that number and I would make it up as we go. I don't think that is, that will be right. No, that's not useful. And then, one on the order book, can you give us an update on your success in because you may that there are more ARQs this year in the market. Can you give us perhaps a bit of an update how successful you are in that front and whether the RFQs are still there, and whether you're perhaps on track to meet last year's order book of anything, any color you can give there? No, I can't give you any color. The, the general picture is that the total number of orders available is bigger than it was last year. I beg your pardon? And that is still the case currently? Yes, that is still the case. So there's more to win or to lose in this year than last year. We are obviously involved in those RFQs. We think they will be decided this year, but that we come with an update, looking at tackle normally we do it, I think, at Q3. No. What we said at the start of the year is that we would go to annual updates. Annual updates. You said we're going to go to annual updates. I think that's better as well because those deals are quite lumpy and they happen or they don't happen often they're postponed or don't fall exactly in the period that you thought they would fall. So at the end of the year, we give you enough debt what the order book is. Okay. Now that's why I'm asking because then change and it might disappear from the RFQs. But that's still unchanged and we get an update at the end of the year. That's how I should read the answer, okay. Then the final question, on the share buyback, can you perhaps share me with me the rationale to announce it at the H1 figures? Well, there are three reasons. Number 1 is that with this, we won't as a company, as a management team, give a signal to the market that we, that we, for everyone's belief in our strategy and our future. The second is that when we look at our cash generation in the coming short term period, that even with, when we consider the buyback of 1,000,000 worth of shares, we still think we generate cash in the second half of this year. And the third reason is that there is this availability as we have, we have this ESOP plan, the equity share option plan, And we have ongoing commitments to future transactions. And we can build a pool of shares that can create a hedge for future execution of those options. And that will be done in a tax efficient way. How many dilution, what kind of dilution is currently on the current share price in on the balance well, if you would, if you would divide the $50,000,000 by, the share price of the share price of yesterday's was 2.4 percent dilution. So it's exactly the amount of the share buyback. So it's it's matched? No, or you mean the number of auctions that are outstanding? That is a bit higher. That's higher. So there are, there are 6,300,000 options outstanding at this point. So that is roughly 2.7%. Okay, very good. Thank you very much. Those were my questions. Yes, you're welcome. Thank you, Mark. I would like to thank everybody for joining us in this afternoon. This is we will end the call and I would like to ask the operator to The growth call. Thank you. That will conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.