Good day, ladies and gentlemen. Welcome to the TomTom Third Quarter 2015 Results Analyst 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 a conference coordinator will be happy to assist you. Please note that this conference is being recorded. I will now turn the call over to your hostess for today's conference, Bisera Grubacic, Head of Treasury and Investor Relations. You may begin.
Thank you, operator. Good afternoon and welcome to our conference call, during which we will discuss our operational highlights and financial results for the third quarter of 2015. With me today are Harold Goddijn, our CEO, and Taco Titulaer, our CFO. You can also listen to the call on our website, and a recording of the call will be available shortly afterwards. As usual, I would like to point out that safe harbor applies. We will start today's call with Harold, who will discuss the key operational developments, followed by a more detailed look at the quarterly financial results from Taco. We will then take your questions. With that, Harold, I would like to hand it over to you.
Thank you very much, Bisera. Welcome, ladies and gentlemen. Thank you for joining us on today's earnings call. We generated group revenue of EUR 254 million in the quarter, that is up 8% year-on-year. This is in line with our plan to deliver growth in the second half of 2015. Taco will provide further information on financials and the outlook later during his presentation. I will now discuss our key operational highlights per business unit. Our consumer activities held up well through a combination of a resilient growth of our PND and niche categories in the drive segment and growth in the sports products. In Q3, we saw a unit decline of 8% in the European PND market, whilst the North American markets declined by 20%. Our market share in Europe and North America improved year-on-year.
We continued to strengthen our ASP as our product mix in the quarter was skewed towards higher priced models. In the quarter, we made further inroads in diversifying our consumer business. We extended our sports product range with the launch of a new generation of sports and fitness watches with integrated music player and 24/7 activity tracking. We continue to broaden our offering in niche markets with the introduction of TRUCKER 5000, which is specifically designed for drivers of large vehicles. We also announced a number of new contracts with our TomTom BRIDGE business-to-business drive terminal, amongst others, with Daimler, regarding Fleetboard transport management services, with ASAP, which is a solution for field force automation in the utilities sector. There was a Scandinavian company called Frogne, who developed an advanced fiscal taxi meter, Tech Mahindra developed a business-to-business ADAS connected car solution.
Our automotive business developed as anticipated, owing to the phasing out of certain contracts. Our location technologies are gaining significant interest in the automotive industry, as reflected in the level of bookings we secured this year, which so far exceeds EUR 250 million. This level of order intake is substantially higher than in previous years, which is a good indication that our strategy in automotive is taking hold. Our business will continue to require high levels of investments, both OpEx and CapEx, in the near future. This is needed to support delivery of the new Business One and sustainable future growth of TomTom. In the quarter, we announced a number of new contract wins with Fiat, Alfa Romeo, and SsangYong Motors.
We also announced a partnership with Bosch to collaborate in the area of mapping technologies for highly automated driving, we extended our product portfolio with RoadDNA, which offers precise location technology for automated driving. We also launched an HAD map of Germany covering the complete Autobahn network. I will give you a quick update on where we are with our new mapping platform. With our new mapping platform, our map is updated continuously using transactions with automatic quality control. An update is available to customer applications as soon as a transaction is completed, and this helps us to dramatically reduce the time to change detection and publishing a new map, which you can also do incrementally now, to deliver real time maps. Some customer applications, in particular automated driving, place a high premium on being up to date with the latest real world changes.
For most countries, our maps are already being maintained on our new transactional map making system, we will be fully deployed towards the end of this year. Now telematics. By the end of the quarter, we reported 522,000 vehicles subscribed to our Webfleet platform, which is a 26% increase year-over-year. The integration of the two acquisitions we made last year, DAMS and Fleetlogic, are developing according to plan. We also announced a partnership with Pon, who is the Dutch importer for Audi, Volkswagen, and Porsche. Under this partnership, we are developing and implementing systems for the connected car. We are making information about the car, like engine status, maintenance information, fuel consumption, driver behavior, available to drivers who can share that information with others, including dealerships. This concludes my part of the presentation. I would now like to hand over to Taco.
Thank you, Harold. I shall now review the financial results. We generated revenue of EUR 254 million in this quarter. That's 8% higher compared with the same quarter last year, and that compares with the 3% growth that we saw in the first half of the year. Consumer revenue was up 5% year-over-year in the quarter, compared with a decline of 2% that we saw in the first half of the year. The increase is the result of the resilient PND business and a growth in our sports activities. Automotive revenue was flat year-over-year in the quarter, compared with the 17% decline we saw in the first half of the year. As Harold already mentioned earlier, our order book for this year so far is above EUR 250 million, which together with earlier secured orders, will support growth in automotive from 2016 onwards.
Licensing did very well. It was up 32% year-over-year in the quarter, compared with 27% growth in the first half of the year. The year-on-year increase we have seen throughout the year is driven by both existing accounts as well by new accounts. Telematics revenue was up 12% year-over-year compared with the 30% increase we saw in the first half of the year. This was driven by relative weak sales during the summer months and a normalized performance at the end of the quarter. We expect the fourth quarter as a whole to show stronger growth than what we reported over the third quarter. Overall, we delivered a solid set of results for the quarter. However, the strong U.S. dollar continued to considerably impact our results like it did in the first half of the year.
Our gross margin was 53% in the quarter, which is four percentage points lower compared with the 57% we reported for Q3 2014. The gross margin for Q3 2015 at constant currencies was 58%, which was actually one percentage point higher than last year. Total OpEx for the quarter was EUR 130 million, which is EUR 5 million above the same quarter of last year, and that's driven by the growth of our workforce and higher marketing, which was partly offset by lower amortization of technology and databases as we had a one-off last year. We expect a quarterly run rate for OpEx in the fourth quarter overall to be mostly up to what we've seen in the third quarter. We delivered a net result of EUR 2 million, which translates in the adjusted earnings per share of EUR 0.05 on a fully diluted basis.
If you add the movements in our net deferred revenue and deferred cost of sales year-over-year of close to EUR 40 million, you take off 25% corporate income tax and divide it by the total number of shares, you could add EUR 0.13 to the adjusted earnings per share. We finished the quarter with a net cash position of EUR 94 million, compared with EUR 77 million last quarter and compared with EUR 104 million last year. We generated EUR 47 million from operating activities. Capital investments equaled EUR 31 million and largely related the investments in our new map production platform and the connected navigation system components for the automotive industry. Let's now move on to our outlook on slide seven. We are reiterating our guidance for the full year. We continue to expect revenue to grow this year to around EUR 1 billion.
We expect to see growth in three of our four business units, so not in automotive, where we expect a modest decline year-on-year ahead of growth in 2016. We expect the level of investments, both CapEx and OpEx, in our core technologies to be mostly higher than last year. We continue to expect adjusted earnings per share of around EUR 0.20. That concludes the formal part of the presentation. Operator, we would now like to start with the Q&A session.
Certainly. If you would like to ask a question, press star one now. We will now take our first question from Aleksander Peterc from Exane. Please go ahead. Your line is now open.
Yes. Good afternoon, and thanks for taking my question. I would just like you to clarify the EUR 0.13. Is that just the quarter or the nine months? Is that just pertaining to the deferred revenue situation? Just would like to understand that really well. The second question would be regarding your operating leverage in automotive and in licensing. If you could spell out to us a little bit how EBIT should evolve in those areas moving forward into next year. Will we see more operating leverage in licensing also, and why? Thank you.
The EUR 0.13 adjusted income share is on a full year basis, not specifically for Q3. The reason why we take the full year perspective is that there are some seasonal trends. We have some accounts that pay once a year for the coming 12 months. You see a fluctuation in the deferred revenue line, as we have seen if you go from Q2 to Q3. If you compare Q3 now with Q3 last year, then the net addition to our deferred revenue, and if you deduct the deferred cost of sales, is EUR 39.5 million. If you take out the corporate income tax of 25%, you arrive at EUR 29.6, and then you divide it by 236 or 237 million shares, and then you get to the EUR 0.13.
That is the EUR 0.13 that you could add to the overall adjusted earnings per share for the full year. Not specifically on Q3. The second question was operational leverage in automotive and licensing. It's a bit too early to give guidance for 2016 and 2017 and beyond, but what you need to realize is that the automotive bookings will have an effect on our OpEx levels. Some contracts will require upfront investments in our map content and technology. That's more the case with automotive than it is with licensing. We more and more view automotive and licensing as a group. We will see operational leverage, but some of that operational leverage will be invested in the short term to give an excellent product to our new customers in automotive.
Excellent. Thank you.
We'll now take our next question. This comes from Marc Hesselink from ABN AMRO. Please go ahead, your line is now open.
Yeah, thank you. I would like to know your view on what happened in the competitive landscape. Obviously HERE being sold to the consortium of the car makers, but also in the market stories about Apple or Tesla, Uber, making some kind of proprietary map for themselves. How do you see that going forward, and what will be your position in there, and how can you compete with these players, or will they be a competitor for some of them? Secondly, related to that, your views on market shares. I think you're winning market share at the moment with the current trends, but what are your trends and what are your discussions that you're currently having with the automotive clients? A final question is also a bit related to the cost.
When you have the migration done on the year-end, the investments that you spare on your old platform, will you completely reinvest that into the new platform? Those were three questions.
Okay. Thanks, Marc. Okay. Yeah, competitive landscape. Obviously things are changing with the planned acquisition of Nokia HERE by the German car makers. It is, for me, too early to give you an indication what the net result of that is going to be. I prefer to wait until we have more clarity what is going to happen and how the German car makers are going to play it. Currently, the transaction is not yet consumed. The regulatory approval is needed. After that, it will take some time before the dust has settled and before we get better visibility on that. I'm not going to comment now what I think the net effect of that is going to be. Competitive landscape beyond Nokia HERE. I think in the field of highly automated driving, there's a lot of experimentation going on.
We know of car makers that have done proprietary stuff for test tracks in terms of mapping. We're talking to those guys, we are comparing notes. I think there is a sense that this needs to be done professionally on a large scale. I think we are well-positioned, given where we are already with our HAD investment technologies and standardization, that we have a role to play in that space. Again, also in the area of highly automated driving, it will take at least, I would say, 18 months, 24 months before we have more clarity on what it is exactly the industry will need from us and how those business models around highly automated driving are going to develop. I can tell you there is a lot of activity going on, both in Europe, North America, and in Asia around the topic.
As you can imagine, we are party to quite a few of those discussions going on. Your last question, if I understand it correctly, is
Are OpEx related to the creation of a new mapmaking platform?
Maybe I can take that one.
Yeah.
We're well advanced in migrating all our countries to our new platform. That's a transaction-based platform. We aim to have concluded that transaction by the end of the year. A lot of the countries are already edited on the new platform, like the U.S., to just name one. It does not mean that investment will stop on the 1st of January. It will take time to further improve the platform, and add features and quality rules and what have you. I think that the investments will continue in 2016, but indeed will start to decline in the second half of 2016. That said, the enormous success that we have shown in the order book in automotive will lead to additional investments both in CapEx and OpEx.
Some of the reduction in specific investments that we will see from investment in our technology will shift to investments that we need to make in the delivery of the new products to our new automotive clients.
That's clear. Maybe just one follow-up on the automotive order intake. You're winning market share, but also the pie is getting bigger quite quickly. Can you give a bit of a split? What is the most important driver of your order intake that's more than three times as big as your sales at the moment?
You mean if it is the pie or it is the market share?
Yeah. What's the main driver at the moment for the strong order intake?
The main driver for the order intake is market share. We're winning more deals.
On the pie question, the traditional use case for maps is entertainment, and the take rate is 25%, 30%. That is not fundamentally changing in the coming years, not this decade. Next decade, you can talk about different use cases for the map, for highly automated driving and self-driving cars and what have you. The take rates go from 25% in theory, to 100%, and that will indeed quadruple the pie. The order intake that we're seeing today is not related to that. That is the more traditional use case, as we call entertainment maps for navigation.
Okay, very clear. Thanks.
The next question comes from Hans Slob from Rabobank. Please go ahead. Your line is now open.
Yes, thanks for taking my questions. First question is, what % of your automotive bookings are with Volkswagen? Second question is, could you give an update on the insurance telematics initiatives? Third is, will the strong automotive bookings also likely drive further sales growth for TomTom Automotive in 2017?
Yeah. Currently supplying Volkswagen in North America, compared to our total revenue, that's a relatively small number. I can't disclose the exact number. I think that answers your question. There's not a lot else that we have in our forecast or in our plans with Volkswagen for the moment. The second question, what's going on in telematics on the insurance side? Well, it's quite interesting. That's been long in the making. We've done a lot of trials and a lot of smaller deals. We start to see some traction in the insurance market, the usage-based insurance. I wouldn't say it's mass. I wouldn't say it's going to overtake the market by storm. We see higher levels of activity. We see some traction taking place in that space. In our telematics revenue, it is still a modest amount of revenue that is generated through insurance telematics.
Your third question was, do you see further growth beyond 2017?
16.
2016. The answer is yes. If you look at, for instance, our order intake for 2015 this year, which is currently, or was at the end of the quarter, EUR 250 million, that will only start to be visible in the top line, on average two years after the moment the deal is done. You won't see any positive contribution of those orders in 2016. That will only start in 2017. Yes, we anticipate continued strong growth, top-line growth in the automotive segment beyond 2016.
Thanks. Many thanks.
Next question comes from Marc Zwartsenburg from ING. Please go ahead. Your line is now open.
Yeah. Thank you for taking my questions. First, starting with the Q4 and your outlook. I'm seeing a working capital increase. Should we see, based on, say, the inventory buildup, your working capital needs a stronger consumer segment in Q4 than is normally seasonally the development from Q3 into Q4? That's my first question. Perhaps also on Q4, I'm looking at exchange rate impact, so below the EBIT line. An exchange rate result is still quite negative. Should we expect, say, more zero result there because the ForEx comps are getting more normal year-over-year? Should we expect a plus? Can you give us a bit more guidance on that line? On OpEx, and that's for Q4 and beyond. I think, Taco, you mentioned that OpEx should be modestly up in Q4.
Is modestly up, say, sort of similar seasonality we saw last year, say, EUR 5 million-EUR 6 million increase? Beyond that, you're saying, okay, we're going to see some more OpEx investment because of the development of the order book in automotive. Are we talking more about, say, a EUR 10 million or EUR 20 million uptick in SG&A? Could you give us a bit more feel for what we should expect there? On automotive, if I may continue. What market share, because it's been asked by Marc, I believe. What market share do you think you currently have based on your order book? Because we know that your market share is, say, 25%-30% just on actual revenues. Where are we in terms of order book, if you take that into account?
Perhaps also following up on the diesel impact on the German car makers and perhaps the consortium. Do you see any developments in terms of how the other OEMs react to that? Because you talk to, I presume, all OEMs that are in the market. Do you see any different sort of stance towards TomTom now that HERE is bought by the consortium and on the back of that, also involved in a diesel scandal? Could you perhaps share a bit what behind the scenes you feel is going on? That's it for now.
I started to write down your questions when you talked about Q4.
Yeah.
What was the first question?
Yeah, the first question was about the consumer segment. We know that Q4 is always a stronger seasonal quarter, but should we now see a stronger seasonal impact because of the new product launches and the fact that your working capital is up, which I assume has to do with the inventory buildup. Should we expect a stronger seasonal uptick in Q4 than normally in the consumer segment? That was the first one.
Indeed. The seasonality in PND has shifted, right? Years ago, seasonality was that Q4 was very strong, and now it's shifting more to Q2. It's more towards the holiday season. With new products like sports watches and action cameras, et cetera, you go towards the Q4 as a stronger quarter. Indeed, I think in absolute terms, the pickup this year what we expect in consumer will be a bit higher than what we saw last year.
Okay, clear.
Exchange rate, Q4.
Yeah.
The next question is exchange rate.
Yeah.
The average Euro-dollar exchange rate last year was 1.25. It's still a bit higher or a softer dollar than what we are currently trading at. The dollar rate is now 1.13. We're doing our best to deal with the new reality, but it will still have an effect. The strengthening of the dollar was so big that it will take more than a year to completely recover from that. You could question if you can completely recover from that.
Yeah. Now you're talking probably about the gross margin, that you can perhaps improve it within the channel. I was referring to the exchange rate results below the EBIT in relation to your EPS guidance, that if you get another hit, say, of EUR 3 million on your exchange rate.
Oh, no. That is not necessarily related to the U.S. dollar. It can also related to the other currencies.
What do we expect there?
We hedge the U.S. dollar and the pound. Other currencies like the South Africa rand devaluated a lot in Q3, and that had an effect on our financial income expense. Those are more incidental items that I don't expect to reoccur. OpEx will go up with the same as we saw last year. In absolute terms, a little bit less probably, but we'll see similar trends.
Okay.
Your question was about automotive investments for next year?
A bit also on OpEx. For next year, you say maybe you get some extra cost for the order book build-up in automotive, all that. What kind of impact should we see on the OpEx line? Should we see, say, versus last year, you probably were now looking at just north of EUR 10 million of an increase year-over-year on a full year basis. Should we expect, say, EUR 20 million in for next year to take into account that you have more costs related to the order book?
I would really like to defer that question to February. It's too early to comment on that.
Okay.
We first need to see where 2015 will end, then we can make a proper analysis on what kind of a year-over-year increase we can expect.
Okay. Yep.
Market share automotive.
Yeah, that's a tough one to say what our future market share is going to be. I think that's where the question boils down to. That would require a certain insight also in the order book of our main competitors, which we don't have. I think the trend is definitely positive. Two years ago, our intake was, I think, EUR 130 million. Last year, it was EUR 220 million or EUR 170 million around the same time. Now that's gone up to EUR 250 million. We are on a positive trend. I think there is more to come. I think what we're doing is seen as relevant, innovative, and strategically correct. We've seen that translated in orders already. I think, we're in a good position to continue that trend.
Okay. Harold, you mentioned that you were at EUR 170 million same time last year, you ended at EUR 220 million. Is that the normal seasonality through a year, or is there nothing you can say about seasonality? When do these deals really come in? Are there set dates for it?
That is the difficulty with automotive. It is rather binary. It's not a linear process. That's also why I'm very reluctant to give you any indication for Q4 the order intake, because it can be quite lumpy.
Can you share perhaps whether the pipeline in tendering is very busy.
Well, yeah, the levels of activity are good. There's no doubt about that. We have the interest, we have the ear. As I said, we're doing innovative things. We're leading in traffic, which is increasingly important and embedded in more cars now than ever before. Certainly in Europe, we have 80% market share, which is very good. Things are happening, and that gives us confidence that we will be able to continue the trend.
Okay, clear. Thank you. The final one on the diesel impact.
The diesel impact, the Dieselgate is, I think more in general terms, I think the industry is worried and concerned about, not in relation to maps, but more in general, what Dieselgate will eventually bring to the industry. I think everybody is watching that very closely and also nervously. I don't see a direct link between Dieselgate and our position in the mapping market.
You don't think there's an effect that because Dieselgate and the consortium being involved, that others want to keep away from that?
I don't see that.
Okay.
Next question comes from Martijn den Drijver from SNS Securities. Please go ahead. Your line is now open.
Yes, thank you for taking my question. Well, after the long list of Marc, I only have one question left. When we talk about the investments in the map for automotive clients, what you just mentioned is one of the reasons for the higher OpEx and CapEx. Can you elaborate a little bit on what types of investments you actually need to make? Because we've always been, or I've been assuming that you weren't much behind or maybe not even at all behind Nokia HERE in terms of the quality of your maps for the automotive market. Maybe you can shed some light on where that delta is coming from and how you can actually catch up, and whether it can be done in one year, or should we think about a multi-year process?
Yeah, Martijn, I think the focus is we do two things. We design and develop systems to create maps. Let's say we're building the infrastructure, the factory, and then we operate that factory in creating content. What we see and what we expect is that the demand for accuracy and freshness will go up in the coming years, and that that factory needs to be able to handle that. We can't just build new factories and add a lot of operators. That would not be the right strategy. The right strategy is to rely more than in the past on machine learning, on processing sensor-derived observations, and other ways of automated mapmaking. If we look at our mapping platform, this year, we're finalizing a big milestone, and that is moving over from old to new. You will see, and we will see ongoing investment in further automation.
We are working actively, for instance, with tier ones and also with OEs to extract live information or information from the vehicle live and ingest that in the map process automatically and then give that back. That's the type of investment that will continue to happen. Relatively speaking, we continue to invest at relatively high levels in the tools, in automation, and in machine learning. The quality and the accuracy of the map will benefit from that, and without having too high operational expense, because that is not what the market can or want to afford.
Effectively, you're saying that the whole mapmaking process, as you have it today, will ensure that the additional investment that you need in 2016 are some sort of a one-off. After that, you can have maps that are equal to Nokia, you don't have this catch-up investment.
Well, it's an ongoing game. As I said, the requirement and the amount of maps will go up. We strongly believe that the one who can make those maps faster and at lower cost is the business that's going to win.
Okay. Thank you.
The efforts are designed around that strategy. Do more automated, do that at lower cost, do that faster, get high granularity and detail, but at constant cost, if you like.
Okay. Thank you.
The next question comes from Youssef Essaegh from Barclays. Please go ahead. Your line is now open.
Hello, thanks for letting me in. I have two questions. The first one is on the consumer business. Initially, the strategy was to make a broad portfolio of sat navs. That was very successful for years, but now it seems like your business is evolving more and more towards smaller and more niche products. I was thinking, do you expect to keep pushing in that direction or eventually to rationalize a little bit the various directions you've been exploring recently?
Yeah. It's a good question. We feel good about the progress we've made in sports in particular. That took a while, but we're growing now. We're gaining momentum. We're getting also, crucially, credibility in that space. We think we can turn it into a very significant revenue stream. We're good about that, and we will continue along that path. I think with the camera, it's a bit earlier. We've just launched that. Similarly, it will take some time before that sticks and before we can see significant revenue coming through. We're busy now in developing those product categories, and that has our full focus. We will see whether that needs changing in the future or not. For the moment, I think the traction we're having in sports products is okay, satisfactory.
We have a big opportunity with the camera ahead of us, and we will continue to work on that and develop that further.
Thank you. All right. Elsewhere in the business, I wanted to sense check your views on the automotive business. Sorry, another one on automotive, but I'm sure it's going to be different. If you look at HERE today, they have 80% share of what's out there, maybe gaining a bit of share. HERE being the leader, achieves more or less 10% underlying EBIT margin, and we're talking about eventually getting somewhere into the low to mid-teens as things like automated cars and more of these high-end services around the map starts to roll out. My question is, especially if you become aggressive on this market as well and try to gain share, where do you see the kind of margin that you can achieve knowing that HERE comes from 80% market share with 10% EBIT margin?
If now you too, even with the added sort of services, what sort of margin in the industry do you think we're going to see in the long term?
Well, as I said earlier in my previous comment, I think the one who's going to make the best maps at the lowest cost is going to win, and that is our strategy. If you look at cost effectiveness, I think we are a lot more cost-effective already than competition. We continue to add efficiency through automated mapmaking, and that is where I want to be. I don't want to compare our cost structure to cost structure of HERE at all.
Putting it slightly differently, if you achieve the same kind of market share that HERE have had historically, you see yourself basically with a much higher margin than the 10% they've been doing.
We are able to do it at much lower cost.
Okay. Thank you.
Next question comes from François Bouvignies. Please go ahead. Your line is now open.
Yeah, hello. Thank you for taking my question. I just have two questions. The first one is on sports revenues. Can you give us an update on your guidance because I think you mentioned you would double the revenues in 2015, how is it going and what is the growth this quarter for sports revenues? How should we think about next year? The second one is on telematics. Obviously, Q3 was a bit lower than expected, I wanted to have your thought on Q4 and how should we think about next year given the strong growth you had this year. Thank you very much.
Let me take the sports question. When we started the year, we had set ourselves an impressive target to double our revenue in sports. 10 months into the year, we're very positive and enthusiastic still, but also we suffered from some launch delays. The action cam was launched a couple of months later, and also with our sports watches, we launched them towards the end of Q3, where initially we hoped to launch them earlier in the third quarter. If you'll add that all up, I think doubling the revenue for the full year is a bit of a stretch. The revenue that we've seen in Q3 is good, but that did not involve the new products yet because they only started shipping for a couple of days at the end of the quarter. Q4 will be deciding. So far, so good.
Enough demand, we're working hard to meet all that demand. In the second half of Q4, we will really have more insight about the sell-through. So far, so good for sports.
Just to follow up on this. We saw, for example, Garmin, which is doing also sports revenue fitness, and they recently lowered their guidance from 25% to 15%, showing a tough environment in this area. Do you see anything of this kind as well?
I think we're in a different position because we are introducing new products and we are expanding our range. I'm not pointing at the market or competition, competitive pressure at this point. It's more the launch dates of our products have the biggest influence so far.
Okay, thanks. On telematics?
Telematics. I think telematics is good. The good news about Q3 was that September was good. The not so good news about Q3 is that July and August were not so good. The September performance gives us confidence that we have a more normalized quarter again in the fourth quarter, where we will see revenue at the levels that we've seen in the second quarter and not the levels that we saw in the third quarter. I don't think there's anything fundamental here. It's a bit the effect of the strong second quarter, where our distributor partners had a bit too much hardware at hand and we had to wait until that sold through. That happened at the end of the quarter.
Any color on next year? Given the strong growth that you have with acquisitions. I was wondering what type of course we should look at.
It's a bit too early. I would rather wait with answering that question, that I have the full results, and then I can have a better estimate. Otherwise, I have two variables, right? I don't know exactly what 2015 is, and I don't know what 2016 is. That makes it a bit hard. I see growth, I can say that for 2016, but how big the growth will be, that answer has to wait until February.
Great. Thank you very much.
As a reminder, to ask a question, press star one now. The next question comes from Shyam Kumar from TT International. Please go ahead, your line is now open.
Hi there. Thank you very much. I'd like to ask a strategic question regarding the automotive and licensing business. I'm trying to get a sense of what the tangible addressable market you believe you could face in those businesses going out, say, three, four, five years, in that, obviously it's fine to be investing. I think there's a huge opportunity for you guys to go for. As you said, your order growth has already hit sort of EUR 250 million in autos, and that's market share driven before we get any inflection from the growth of semi-autonomous and autonomous vehicles. I'd just like your kind of internal projections or Not internal projections, sorry, I rephrase that. How you're thinking about it in terms of the market opportunity you're targeting on a three, four, five-year view.
The reason I'm thinking that is that part of it comes down to how one values your mapping assets with variations I've seen in from the analyst from EUR 400 million or EUR 500 million looking at today's revenue base to comparable to where the Nokia HERE valuation was. I think to square that circle, maybe understanding the longer term tangible addressable market and how you think that can really develop in automotive and licensing, through till the end of the decade, please.
Yeah. That's a tough one. We have reasonable visibility of what's happening to, let's say, the traditional map product, which is used for navigation, embedded in infotainment systems.
If you look at those, the market development also not just projected by ourselves, but also by others, that is likely to go up. Market penetration, despite some brought in products like Apple CarPlay and Google have a product as well. I think the industry is fully expecting that the penetration and attachment rate for embedded navigation will continue to go up. Already you see integration of maps with security and safety systems in the car, ADAS type of applications are gaining traction in the marketplace as well. Surprisingly, the attachment rate currently is relatively low. People think it's 100%, but in reality it is about 25%, 26% of cars that are now coming with the car navigation system built in. There's room for growth. If you look at the new types of mapping for highly automated driving, that is uncertain.
Uncertain is exactly the introduction dates, the growth, the acceptance by ordinary people of those new technologies, the cost at which they will come to the market initially. There's a lot to learn and a lot to explore in the coming years. I think it's fair to say that all mainstream established players are looking to have self-driving cars in the marketplace. They will start on the motorways, they will learn, and they will continue to refine those systems. Maps are needed for that. We are well positioned to play a role there. Quite frankly, I cannot give you an indication how that will financially pack out other than that there is a huge opportunity to have. How, when and how fast is much harder to predict.
Theoretically, in terms of the attachment rates, I know earlier on, Taco said, we haven't quite seen the pickup yet from these more autonomous or semi-autonomous features, but attachment rates theoretically could reach 100%, as and when more semi-autonomous features comes endemic in all cars. Any sense of the timeframe? Is that towards the end of the decade, maybe we start moving to that sort of level?
No, that is far too early. I think 2019, you will see the first cars come to market.
Okay.
That will be niche. The next question is, how quickly will that be accepted by users? How quickly prices for those systems will come down before they can become mainstream?
Okay, fine. Just in terms of your order growth this year, you're doing about sort of 50% order growth in your auto business this year. I know it's lumpy, but there's obviously structural trend growth there. Is it gonna remain in this kind of 20%, 30%, 40%, 50% growth level going out, do you think? Or is it too early to Do you not want to forecast that?
No, again, I don't want to forecast that at this moment.
Okay, fair enough.
There's change going on in the industry as well that we're all aware of. It will take some time for that news to settle and for everybody to come to grips with the new situation and then place his bets.
Okay.
There are no further questions in the queue.
Thank you, operator. I would like to thank you all for joining us this afternoon. If you have any follow-up questions at a later time, please don't hesitate to give me a call. Thank you all very much. Operator, you can close the call.
That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.