Good day, ladies and gentlemen. Welcome to the TomTom Third Quarter 2016 earnings conference call. At this time, all participants are in a listen-only mode. We will be facilitating a question and answer session towards the end of today's prepared remarks. At which time, if you would like to ask a question, you may do so by pressing star one on your telephone. If at any time during the call you require audio assistance, feel free to press star zero and the conference coordinator will be happy to assist you. Please note this conference is being recorded. I will now turn the call over to your hostess for today's conference, Bisera Grubesic, Head of Treasury and Investor Relations. You may begin, madam.
Thank you, operator. Good afternoon, ladies and gentlemen, welcome to our conference call, during which we will discuss our operational highlights and financial results for the Third Quarter 2016. With me today are Harold Goddijn, our CEO, and Taco Titulaer, our CFO. You can listen to the call on our website, and the recording of the call will be available shortly afterwards. As usual, I would like to point out that safe harbor applies to today's call. We will start today with Harold, who will discuss the key operational developments, followed by a more detailed look at the financial results and the financial outlook for 2016 from Taco, and after that, we will take your questions. With that, Harold, I would like to hand over to you.
Thank you, Bisera, and welcome, ladies and gentlemen. Thank you for joining us today. We reported revenue of EUR 239 million in the Third Quarter, which is 6% lower compared to last year. However, gross margin was strong with 60%, as we are reducing our dependency on hardware products and growing our high gross margin recurring data software and services business. Gross profit for the quarter was up 7%. Taco will provide further information on financial highlights and financial outlook for 2016 later during the presentation. I will discuss the key operational highlights for the quarter. Consumer PND markets have been weak over recent periods, which caused a decline in our consumer revenue. We saw our sports revenue more than double in year-over-year, but this could not offset PND decline we have seen this quarter.
In sports, we introduced a new range of sports watches, including a new GPS watch for outdoor activities with dedicated sports modes for hiking, trail running, skiing, and snowboarding. We also introduced a new TomTom Touch, our first fitness tracker that combines body composition analysis with steps, sleep, and all-day heart rate tracking. The automotive licensing and telematics businesses are developing in line with our expectations. In automotive, we continue to make good progress in delivering our connected navigation system components to existing and new customers. Peugeot i-Cockpit is enhanced with TomTom navigation, 3D maps, and traffic services, and the first car model to introduce the new i-Cockpit with our navigation components is the new Peugeot 3008. TomTom traffic services already available to sister companies Audi, Volkswagen, Porsche, and Bentley will be extended to all ŠKODA car models across Europe in the course of 2017.
We also announced that Subaru's next generation information platform will be equipped with our maps and navigation software. This product will be launched first in North America with the all new 2017 Subaru Impreza. Finally, Volvo Trucks selects us as the supplier of maps, traffic, and navigation software for their new infotainment system, launching first in Europe in 2017. Order intake for this year so far is above EUR 200 million, and that's in line with our expectations. We've won the largest deal available to the market this year, and together with orders secured earlier, this will support continued growth in our automotive business. This quarter, we announced a partnership with NVIDIA to create a cloud-to-car mapping system for high definition maps for self-driving cars. This collaboration is an important step for TomTom. In telematics, the installed base reached 671,000 subscribers or subscribed vehicles by the end of the quarter.
That represents a 29% growth compared with the same quarter last year. Telematics was recognized as Europe's leading and most innovative fleet management service provided by Berg Insight for the second year in a row. This concludes my part of the presentation. I'm handing over to Taco.
Thank you, Harold. I shall now begin a more detailed look at our financial results. As already mentioned by Harold, we've generated revenue of EUR 239 million in the quarter. This is a 6% decrease compared with the same quarter last year. The decline was mainly driven by lower consumer PND revenue, which was only partly offset by revenue growth in consumer sport, automotive, and telematics. Licensing showed relatively flat revenue compared to last year. Our revenue was impacted by the GBP depreciation versus the euro with EUR 4 million this quarter. Let me briefly discuss the business units one by one. In consumer, the PND business declined faster than we expected. In Europe, market was down with 21%, in North America the market was down with 23%. Our market share strengthens in both regions.
The sports category continues to grow with revenue doubling compared to last year in the quarter. However, it was not enough to offset the decline in PNDs. Automotive delivered a strong performance with revenue growth of 21% year-on-year to EUR 31 million. Licensing revenue was EUR 34 million in the third quarter , flattish compared with the same quarter last year. Telematics revenue was up by 15% year-on-year to EUR 37 million. Recurrent subscription revenue for the quarter increased by 17% year-on-year to EUR 29 million. Our monthly subscription, ARPU, decreased year-on-year owing to the impact of the acquisition in Poland. Gross margin was strong this quarter with 60% and we're reducing our dependency on hardware products by growing recurring data software and services business.
Total operating expenses for the quarter was EUR 144 million compared with EUR 130 million in the same quarter last year. The year-over-year increase was driven by an increase in personal expenses, partly offset by lower marketing expenses. We delivered an adjusted net result of EUR 12 million this quarter, which translates in an adjusted earnings per share of EUR 0.05 on a fully diluted basis. At the end of the quarter, we reported a net cash position of EUR 81 million. Our cash flow from operating activities for the quarter was EUR 54 million, EUR 7 million higher compared with last year. This was mainly due to lower working capital utilization, partly offset by higher tax payment. The cash flow used in investing activities excluding the effects of acquisitions increased to EUR 32 million in the quarter, similar to last year. Let's look at the outlook on slide four.
As previously announced on the 13th October 2016, we are updating our guidance. We now expect full year group revenue of around EUR 980 million, and the outlook for adjusted earnings per share remains at EUR 0.23. We expect the level of investments in both OpEx and CapEx in our core technologies to be higher than last year. That concludes the formal part of the presentation. Operator, we would now like to start with the Q&A session.
Thank you, sir. Ladies and gentlemen, to ask a question, please press star one on your telephone keypad. Please do ensure the mute function on your telephone is switched off to allow your signal to reach our equipment. We will pause for a moment to allow everyone an opportunity to think. Our first question is from Marc Hesselink from ABN AMRO. Please go ahead.
Thank you. My first question is on the auto order intake. Do you have a feel on if your market share there is similar towards last year? Of all the orders that were out there, did you get a similar or are you winning some market share? Also on the request for proposals that are out in the market, is the visibility going into 2017? Will 2017, will there be growth versus this year or will it also be a bit more subdued like this year is versus last year? My second question is on your partnership with NVIDIA. What does it exactly mean? Does it mean that NVIDIA, if they use their computing power, that they will use your mapping technology and your localization technology? What does it mean for the future for autonomous driving?
Will it help you to be available to the market or will it speed up the process?
Okay. That's it? Yep.
Yeah. Those were the questions. Yeah.
Yeah. Okay. Thank you, Marc. This is Harold. Thank you very much. Market share, it's difficult to say. I don't want to give you a number on market share win because we don't have reliable data, and there's no third parties either who collecting reliable data on total availability of deals. We think we're doing okay and certainly no worse than last year. I think it's also true that the total available deals for 2016 was lower than it was in 2015. I think on the whole, we are happy with the results. It's developed in line with our expectations. It's going according to plan. I don't want to give you indication for 2017 at this moment, partly because we don't have that visibility completely, and second, because I want to give guidance when we do the Q4 numbers and not now for 2017.
Yeah, the NVIDIA partnership, that's really interesting for us. It's a partnership that obviously needs to develop, but the idea is that we do map compilation super real time in the car based on-
The processing power that the NVIDIA platform produces. At the moment, we do a lot, of course, in the cloud. Given the enormous amount of data that sensors are collecting, it will be much more efficient to process that data in the car and only move the digitized data from the sensors into the cloud. That is what the NVIDIA partnership is about. That is what we're building. That should also result in a highly accurate positioning product. In other words, if you use the NVIDIA platform and our maps and our RoadDNA, the software developer for automated driving has a very good understanding of where exactly the car is. That is critical to get the whole system to work. An exciting partnership for us that we are developing now. It will involve exchange of technical information, development.
We are excited about that. Also what the technology can offer in terms of map making. It will greatly improve the efficiency of our map making process, if we get the technology under control.
Okay, maybe as a follow. Is that deal of the partnership with NVIDIA, is that exclusive? Would it imply that if NVIDIA wins an order for autonomous driving or any development on that, does it mean that you're indirectly connected to that as well?
No, I don't think it will go that far. At the end of the day, the car maker decides which technology he will use. The partnership with NVIDIA is also not exclusive. That will be atypical for the industry. The fact that we're working together will help us in our commercial efforts, but also is helping us, and we see that already, in getting a more granular and deeper understanding of what's going on in the market for autonomous driving, where the issues are, and where we can play a role.
Okay, thank you.
We will take our next question from Maarten den Breejen from NIBC Markets. Please go ahead.
Yes, good afternoon, gentlemen. Yesterday there was an exciting announcement as well from Tesla, stating that its cars will be capable of Level 5 autonomy with the updated hardware suite. I have just two technical questions, if I may. Do you think an HD map can be uploaded to such a vehicle over the air via Wi-Fi? That's question number 1. The second one is, do you believe it's technologically possible to achieve Level 5 autonomous driving with sensors, cameras, and a current automotive grade map? Not an HD map, but a current automotive grade map. Thank you.
First, can we load a full HD map on a system? Yes, you can. There are limitations on the degree of geographical size, of course. You can't load, probably, the whole of the U.S. Certainly, a very significant part of the U.S. is possible to load that and also to maintain that. It needs to be done in a clever way, but technically, that is possible. That's certainly not an impossibility. Second question is, what is the exactly the second question? Can you achieve Level 5 on a standard definition map?
Can you achieve Level 5? Can you achieve Level 5 autonomous driving, given that there are so many advances in sensor capabilities, camera capabilities, and lidar becoming cheaper, and a current automotive-grade map? Because the industry seems to assume that you need an HD map. I'm a little bit torn between the Mobileye view and the, let's say, the opposite view.
I think everybody's coming around that you do need that high-definition map. For the simple reason that the range of the sensors is just limited in distance. You need two things. You need to know where all other objects are relative to the map, also further away, and you need to be able to plan your route further out. For that, you need those high-definition maps. I don't think currently there are many people who don't think you need a digital map for that.
Just wanted to be absolutely sure. Thank you.
Our next question is from François Bouvignies from UBS. Please go ahead.
Hello. Thank you for taking my questions. I have a couple, if I may. The first one is on the order intake. Can you update us on the situation on the ICE and also the penetration of in-dash? Do you see still increasing the penetration? Also, on the HD Map, what is the timeline? When do you think you will have contract with HD Maps? How should we think about the pricing? The last one is on your investments. In OpEx and CapEx, can you give us a bit of color if you need to invest more? How do you think about the industry and to next year? If you can give some color, would be great. Thank you.
Okay, François, thank you for the question. ASPs in automotive are relatively stable. I think that was your first question. They're actually going up a little bit for us, but we need to do more. We need to provide map updates often, software technologies, compilation services. On the whole, the price per car sold is stable and firming up a little bit. Penetration, I think for the moment what we see is higher levels of penetration than before. I think even mid-range, the attachment rates are going up. We don't see that reversing for the moment. That's also positive. By the way, the fact that we offer services with our map sales also means that we need to defer a proportion of our income under IFRS rules. You need to take it in account when you look at the revenue numbers as well.
HD Map. There is demand for the HD Map, not yet for autonomous driving. There is demand for the HD Map for better visualization for standard navigation functions, which is quite exciting for us because it gives us a way also to generate revenue from those early investments. What you can do with an HD Map is give a much more accurate visual representation of what's going on around a vehicle, and that helps with building a clearer user interface that's easier to understand and gives the driver more spatial awareness. For those type of applications, we see some demand developing already. Then I hand over to Taco for the last question with respect to.
It's a comment on OpEx and CapEx. Just to add to Harold's comment on deferral, as we have guided for automotive to grow with roughly 20% this year, you end up at a bit north of EUR 125. I expect the amount of deferral to be north of EUR 30 million only this year. If you look at operational revenue for automotive, you could add those two together. For CapEx, we've guided that it will go up this year. If you exclude the acquisition CapEx we saw last year, we had EUR 108 million of CapEx last year, and the guidance is that it will go up with roughly 15% to a level EUR 125. For OpEx, we set single-digit increase. I think it's still single-digit, but it is probably more in the 6%-7% range for the full year.
Any indication for next year, I would like to answer in a couple of months from now when we have seen the full results of 2016 and we have a better view of how 2017 will look like.
Okay. Thank you. Just on the HD maps, the timeline. Do you think from next year or in two years, the momentum, the development will translate into bookings? Or how should we think about the timing, just to have an idea?
Well, for self-driving, you're looking into not anytime before 2020, I don't think. That's in line with what you read from the car makers when they want to introduce their self-driving technologies.
Okay. Thank you very much.
I think we also need to point out that in the Tesla case, what has been announced is to equip the car with the hardware, not necessarily with all the software that's needed for Level 5 self-driving levels. I think that will take some more time.
Okay. Thank you.
We will now take a question from Andrew Humphrey from Morgan Stanley. Please go ahead.
Hi. Thanks for taking my question. Maybe a couple on PNDs if I may, then one on mapping. On PNDs, obviously you've seen this quarter. I wonder if you could give us an idea of how you view shorter term market prospects, by which I mean over the next 2-3 quarters there. Are we looking at an issue with product cycle or is it broader based market demand? What should we expect to see, do you think, over the coming quarters? Secondly, whether you can quantify the impact that FX has had on ASPs versus a year ago. Finally on mapping and automotive, and the deferred revenue that you're highlighting, it would be useful to kind of get a view of how you see that developing over the next year or two. Clearly, there's a long lead time on these deals.
The deals that are being signed today, you might not start shipping units until 2018, 2019. Clearly, we may see a couple of years with deferred revenue going up. If you could give us more detail on the dynamics around that would be great.
Yeah. Thank you for this question. PNDs were weak, especially in the last quarter with quite a steeper decline than we had anticipated. The market decline in 2015 was actually quite benign, with single-digit numbers, and that has accelerated a decline in 2016. We expect, for the lack of further insight, that decline to continue at 20% for the fourth quarter of this year, and probably also into the first quarter of next year. The FX question I defer for Taco, but we've been hit by the pound. Obviously, that has had some effect. Automotive revenue. What you will see over the coming years is that automotive revenue based on IFRS will increase, and that trend will continue.
That's based on the order intake of past years, and delivery schedules that we're working towards, that we're confident that that will lead to growth in the automotive revenue in years to come. The deferral of income has nothing to do with the introduction date, but that is when a car leaves the factory with our products, we charge a certain amount of money for maps and services and traffic, but only a proportion of that revenue can be recognized in the P&L. A very significant proportion, I think it's nearly 25% of that income, needs to be deferred, in line with IFRS rules, and will then come through the P&L typically in a period of 3-5 years. Yeah. If you look at FX, it's mainly the sterling that had an effect.
In Consumer alone, the effect is roughly a bit north of EUR 3 million this quarter, and the remainder is in Telematics, south of EUR 1 million. Automotive and Licensing are not really impacted by GBP. ASPs in the PND category year-over-year were flat or even a bit up. The volume was the main driver or the only driver, actually, of the revenue decline.
Thanks very much.
Okay.
We take our next question from Marc Zwartsenburg from ING. Please go ahead.
Thanks for taking my call. A few questions left. I want to first go back to the order intake. We've seen a number of 220 for 2014, a number of at least 300 for last year, and now we're above 200. What I'm trying to understand a bit is, of course, I understand that if there's less RFQs in the market, that you can have a lower order intake. I want to get a bit of a feeling, what is a normal year on average, say, over an automotive cycle, in terms of number of RFQs? And if you would say we have a stable market share in the RFQs, should at an average, say, the last three years, or is it a totally nonsense way of looking at order intake? Can you give a bit of feel?
I understand you're not willing to share the pipeline or the expectations in terms of RFQs for next year and wait for the full year results. To get a little bit of a sense for how we should look to that towards the future, that would be very helpful. If you could help there.
Marc. By the way, the 200 that we published now is for the first three quarters, and the 300 you related to was for the year as a whole last year.
Yeah.
There's still quarter to go. Just to be clear there.
True.
It's always easy to give you a prediction of the size of the available market. Really, we've seen steady increase over the last couple of years in our total bookings. This is in terms of the total demand for our services or the addressable market, was not a great year in the sense that there was a lot on offer. I think we are doing okay in line with our expectations in terms of what we can win and what we have won so far. I think that's the only thing I can say at this stage.
I understand that indeed it looks from a number of RFQs in the market that indeed your market share is probably even rising. I want to get a bit of a feel for what if it remains at this level, what is sort of a market in general over a longer period? If you get your fair share, is it then sustainable to have at least EUR 200 million of order intake in a certain year? Because your order intake has been rising over the years, but maybe the underlying market was at that stage stable, that you've now been gaining market share.
I just want to get a feel, because we don't have the order books and the RFQs and addressable markets for the past four years, but I want to get a feel for that, whether the market as a whole has remained rather stable and that it's also a good proxy then perhaps for the next four years to come.
Well, it's definitely true that we have been winning market share in the last three, four years. Our order intake total has nearly tripled in the last three or four years, I think. We are getting better. We are winning market share. What we have seen, of course, is HERE being now owned by the German car makers that will make it more difficult to win business from German car makers, although not impossible, but we expect that the bulk of their orders will not be available to us. That also means that there are better opportunities for us to grow outside of that market, and we are seeing that at the moment. There was a clear market win with Volvo, for instance, which we have not been serving in the past.
It was a very significant win, both financially but also strategically, an important step for us to be able to get into that account. I think we will see more of that. We've seen last year Nissan coming our way, which was a new one. I think that trend will continue in 2017 and beyond.
Is there any indication from larger OEMs which are either client or not yet a client that are scheduling big model overhauls for next year? That's the natural moment that you would also opt for a total overhaul of your mapping and infotainment systems. Is there anything out there that we can already see, and that would bring an indication for next year's RFQ so that the year looks promising?
Well, we have those predictions internally, they're quite wobbly and lumpy, they're indications, estimates from our side. We often see that things are not developing exactly in line with our expectations. I don't think it would be good for us to give you guidance on those internal judgments. I think that wouldn't be good. I think generally speaking, what we're seeing is market share wins in the last couple of years. We've repeated that this year with specific accounts. We're on the right track to continue to grow.
Okay, in terms of your cooperation with NVIDIA, you're also in the Tesla, would that strengthen your relationship there? Would it make an inroad with Tesla? Can you give us any feel what the trend and the developments are with Tesla?
No, I can't give you specifics on Tesla, unfortunately. I think the fact that we are getting better involved in the North American market is a bonus for us, with significant wins, not only with car makers, but also with the tech firms, what we showed you last year.
You do already provide some service to Tesla. Is that correct or not?
I cannot comment on that.
Okay. Final one, SG&A, looking to your consumer segment and the shrinkage there in PNDs. I assume that you will take quite some measures there to take out cost for next year. Would that imply that for next year, we now might end up in a high single-digit OpEx increase, given the current pipeline in automotive and the work you budgeted there? Would it imply that it will, for next year at least, look a little bit better on the OpEx line because you can squeeze out some cost from the consumer segment?
We are not going to comment on that. We want to wait for the end-year results and to have internal planning finalized, and we will give more guidance during our February results.
Okay, we shouldn't extrapolate the Q4 guidance to next year?
I can't give any guidance on it.
Okay. Fair enough. Thank you very much.
Okay. Welcome. Thank you.
Our next question is from Andrew Hayman from Independent Minds. Please go ahead.
Thank you. In terms of the HD maps, you have 200,000 kilometers mapped now, and presumably you've done that to show your automotive clients what you're capable of. For the next step, you've got obviously a lot of mapping that still needs to be done. Are you planning to do that by yourself, and is that feasible, or are you very much looking for partnerships there? Then, a two question maybe on the sport segment. I was wondering how you build or differentiate your products there. In terms of the sport watch, initially you partnered with Nike, and then you went your own route. If we look at the outdoor watch now, the fitness tracker, and the action camera. In all three of those markets, there's very much an established player there. How are you building your position in those newer areas for you?
First, on the mapping side, we have done good coverage for customers to show not only our capabilities, but also for our customers to test and give us feedback on that product, so we can work on detailed specifications. At the same time, there's work going on to achieve high levels of automation. Partly the partnership with NVIDIA is to achieve those higher levels of automation. We are hopeful that mapmaking process for HD maps can be automated fully, or at least to a very large extent. With the new technologies, including the type of computers that NVIDIA is building, computer vision, artificial intelligence, deep learning, we believe it is possible to achieve much higher levels of automation, enhance efficiency, than what we currently can achieve.
That's ongoing work, and we need to do that, of course, because maps are never good enough, and productivity is a key metric in the mapmaking business, and we're working hard on that. Does that answer your question, Andrew, on the mapping side?
Just maybe one clarification. With the NVIDIA partnership, at the moment, it's the NVIDIA solution that's going into your own mapping vehicles. Am I correct with that? Obviously, there's a much more potential if the NVIDIA solution starts going into cars with some sort of assisted driving. Is that the way to think about it?
Yeah, that's the way to think about it, yeah.
Okay.
What we offer the car maker, of course, on our platform is digital maps, high definition maps, but also accurate positioning, which is technically a problem for the market that needs to be solved.
Okay, great. Thank you.
Okay. On sports business. You're right, there is competition, and we're not the first in the market, but we are quite happy with the progress we're making. I think we're building a nice ecosystem of applications, websites, and devices, that has great potential, not only for today's type of applications, but also there's more to do in that space. The link from sports to wellbeing, potentially health, can be further developed. We're happy with the progress. We're happy with the stickiness. We see that customers are actually using our products for prolonged period of time, interacting frequently. We're building up a lot of knowledge and statistics, and data that we think will help us to design the next generation of products and services around sports, health, and wellbeing.
Okay, great. Thank you very much.
Our next question comes from Shyam Kumar from TT International. Please go ahead.
Hi, Harold. Can you talk a bit about, I guess, ADAS, the middle road between map to navigation, self-driving cars, which you said is a 2020 type phenomenon. When will ADAS start to impact the business in terms of the size of orders coming through and in terms of revenues? Secondly, does the HD map help facilitate more advanced ADAS capabilities as well? Thirdly, how much more do you make when a car is sold with ADAS component, please?
Yeah. ADAS is there. ADAS is real. It exists, and we're selling it. ADAS is used in various applications, including motor management, braking, and there's a whole range of applications, Electronic Horizon, where ADAS data are used for. We're selling that already. Typically, that commands a premium over a non-ADAS enabled map. A premium, you need to think about 15%-20%.
Okay.
The way to collect ADAS features is very much in the same way as we get the HD map. Wherever we have HD coverage, the ADAS attributes that we have are not a free byproduct, but a very cheap byproduct of our HD mapping efforts, which we have been able to automate to a very high degree at this stage.
Okay.
It's not free, ADAS and HD are very closely linked. Where you have HD, you also have ADAS attributes.
Okay. In terms, your current standard map, it's sufficient to obviously deliver ADAS as the technology is at this current level?
Yes, it is.
Okay. What's the kind of penetration rate of ADAS sales and how fast is it growing? Because I imagine it's quite a low penetration technology at the moment.
That's right. It is early days, but it is becoming mainstream, and we can see that from the RFQs and the RFIs that we're receiving. You will see a fast uptake of ADAS features in the higher segment, in the mid-range segment in the coming years. That's going to be mainstream in volume in 2017, maybe 2018, 2019.
In terms of when will the benefit of that, I guess it will first feed through into your order book before it feeds through into your revenue base, right? When would that start benefiting the order book, please?
You can see it already in the [2000] and this year, not all of those contracts we've done are including ADAS features, but there is some contribution from ADAS features in the order book for this year. Last year, the same thing. Don't off the top of my mind which percentage, but I do know that we did sell or took orders for ADAS features in 2015, and now again in 2016. I think the penetration for ADAS will go up, in Q4 and in the years to come.
Okay, perfect. When you said the penetration of ADAS goes up, you mean in terms of that coming through the orders or in terms of the revenues?
Both.
Okay, fine. Okay, perfect.
Yeah, both.
In terms of licensing and telematics, the licensing's obviously gone flat this year. Any kind of interesting growth drivers on the horizon there? Also on telematics, if you can just kind of give us some comfort as to why a kind of double-digit growth rate is sustainable going forward, and what are going to be some of the key drivers there, please?
I think for licensing, we work on some interesting things, but I think it's too early to give you more indication of what that will mean for the P&L. There are new opportunities opening up, and that's also driven by the fact that a lot of companies who use location-based services don't feel comfortable with the current vendors. I think there are opportunities there. It's a bit early to talk about it in more detail than what I can do now.
Yeah.
Telematics, I think there is some exciting stuff going on in telematics. We're working in the last years to kind of explore the world of both UBI, so user-based insurance, but also connected car services for other than fleet management. I think both those opportunities will start to materialize in 2017 and will start to contribute to growth in a segment that we didn't offer before.
Okay.
When I say connected car services, you need to think about leasing companies, dealer organizations, and insurance companies, who want one way or another, want to get data out of this vehicle to use it for a variety of purposes.
Okay.
We see that as a trend. Those are typically deals where ASPs are lower than for WEBFLEET, where the value add is higher, but there's also significant volume involved.
Okay.
We've learned a lot about that segment. I think 2017 will give first indications, tangible proof, that we are penetrating that market with our product portfolio.
Perfect. Just last one. In terms of, I guess, the consumer and the hardware business, given the growth in the software and services business, is there any logic to separating out that business and maybe disposing it or doing a management buyout with the divisional management of that business?
I can't speculate on that, Shyam.
Okay, fine. Okay, that's great. Thanks, Harold.
Yeah, thank you.
Thanks, Shyam. I would like to thank you all for joining us this afternoon. We are closing the call. If you have any questions, please do not hesitate to contact the IR department. Operator, you can close the call now.
Thank you. Ladies and gentlemen, just to confirm, this now concludes today's conference call. Thank you for your participation. You may now disconnect.