Earnings Call: Q2 2015

Jul 21, 2015

Good day, ladies and gentlemen. Welcome to the TomTom Second Quarter 20 15 Earnings Conference Call. At this time session. Please note that this conference is being recorded. I will now turn the call over to your hostess for today's conference, Georgia Vlasou from the Investor Relations department. 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 second quarter of 2015. With me today are Hallo Houdain, our CEO and Marina Wyatt, our CFO. You can also listen to the call As usual, I would like to point out that the 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 for Marina. We will then take your questions. And with that, Harold, I would like to hand over to you. Yes, thank you, Georgia. Thank you very much. Ladies and gentlemen, welcome. Thank you for joining us quarter, which is 5% up year on year. Our gross margin was 51%, which is 5% below past year, as the section of the dollar adversely impacted our 2nd quarter results. Marina will provide further information on financials and the outlook for the full year 2015 later during this presentation. I will discuss the key operational highlights for business unit. Consumer Products revenue in Q2 was roughly flat year on year. This was driven by a low single digit decline of PND related COVID and services revenue, offset by a mid double digit increase of sports revenue. Automotive hardware revenue declined was due to the phasing out of our automotive hardware contracts. In Q2, we also saw a unit decline of 7% of the European P And D market, whilst the North American markets declined by 19%. Our market share in both areas was flat to modestly up We strengthened our ASP as our product mix in the quarter was skewed towards higher priced products. In the quarter, our sports business launched the TomTomanded Action Camera. It's the first Action Camera with the built in media server. Means that Swutridge can be edited on the camera, which makes it easier and faster to share video clips. The Bended camera introduction was well covered by the Cress and received a number of awards. The total Bended started to shift towards the end of the quarter, We continue to broaden our offering in the P and D category with the introduction of the new Go P and D devices with lifetime maps and lifetime speed cameras. We also launched Total My Drive, which is a portal and application designed to seamlessly connect user data the nation's favorites and roots across multiple devices. Our Automotive business contracted as anticipated and newly booked business continued at levels, which will support a growing from 2016 onwards. We will disclose the year to date booking number at the end of our Q3 results. We further extended our global partnership with FEOPS to deliver our MAPS, Live Services and Connected Navigation in the Uconnect infotainment systems in the new Fiat 500. We announced a partnership with Luxoft, to integrate NAFKit into their Automotive Infotainment solution. Also during this quarter, we announced a renewal and extension of our global agreement with Apple for Maps and related information. And to conclude, we acquired the map of Australia from our loan partner, Census, which is a former subsidiary of the incumbent telecoms operator Telstra. On this slide, about our map making platform, we give you a brief update on the progress we are making. Our new platform is it will be possible to continuously update the map using transactions with automatic quality checks. And updates of the map will be to will be available to customer applications as soon as those transactions have been completed This helps us to dramatically reduce the time between change detection and publishing a new map, which we can do also incrementally to deliver real time maps. Some customer applications such as automated driving, face a high premium on being up to date with the latest real world changes. We expect to have fully replaced our map make system with the transaction based platform before the end of this year. At now Telematics, by the end of the quarter, We had over 500,000 vehicles subscribed to our Repflute platform, which is a 28% increase year on year. In June, Telematics held its annual international developers conference for Web Fleet Comact, and IT Professionals And Software Developers joined forces to encourage innovation in connected applications and integrations built around our web click platform. To date, we have more than 600 third party solutions and applications connected to our web fleet platform. The integration of the 2 acquisitions we made last year are developing according to plan. Now this concludes my part of the presentation, and I'm now handing over Marina. Thank you, Harold. I shall now begin a more detailed look at our quarterly financial results. We generated revenue of 1,000,000 in the second quarter. Our telematics, licensing, and sports businesses grew well, and more than offset the reduction in PND and automotive revenue. At constant currency, revenue would have been 1,000,000, up from 1,000,000 last year. Consumer revenue overall for the quarter was 100 and 1,000,000, which was 2% down compared to the same quarter last year. P and D revenue was down 3% and that compares with a blended volume market decline of 11%. Automotive hardware was down by 12% and sports revenue increased by a mid double digits percentage. Our automotive business generated revenue of 1,000,000 in the quarter compared to 1,000,000 in the same quarter last year. This decline was expected, and as Howard mentioned, was due to the phase out certain contracts. Licensing revenue was, up 42% compared to the same quarter last year and the increase included telematics revenue in the quarter was 1,000,000, which was a 37% increase, compared to q2 2014. The recurring subscription revenue for the quarter increased by 34% year on year, and our monthly ARPU for subscriptions was flat year on year. The strengthening of the dollar adversely impacted our 2nd quarter results, like it did in the first quarter. Compared with the 56% we reported for Q2 2014. The gross margin for Q2 2015 at constant currency was 57 percent, which was actually 1 percentage point higher than last year. Total operating expenses for the quarter were million, which is 1,000,000 above the same quarter of last year. And that was mainly because of higher R and D and marketing expenses, which were partially offset by lower amortization of technology and databases. Total operating expenses included a positive one off as a result of a litigation settlement, which was partially offset by additional ForEx charges and higher costs related to the share based employee incentive schemes as a result of the appreciation of the share price. Overall, for the full year, these trends are expected to result in modestly higher R and D expenses both in OpEx and CapEx. We expect the quarterly run rate for OpEx overall remain at similar levels to what we have seen in the second quarter for the 2 quarters, for the remainder of the year. The net result tax basis was 1,000,000, and this translated into adjusted earnings per share of for the 2nd quarter. The end of the quarter, we reported a net cash position of 1,000,000. The cash flow used in investing activities during the quarter was 40 1,000,000, and this included our recent acquisition of the mapping company in Australia. During the quarter, three million stock options related to our long term employee incentive programs were exercised which resulted in a million cash inflow. And finally, let's turn to the outlook for 2015. Today, we are reiterating our guidance for the full year. We continue to expect revenue to grow this year to around 1,000,000,000, We expect to see growth in 3 of our 4 business units, but not in automotive, where we expect a modest decline ahead of growth next year. We're now expecting the level of investment, both in CapEx and OpEx in our core technologies to be modestly higher than last year, mainly explained by FX and the the presentation. Operator, could we now hand over for questions? Please. We will now take the first question from Garrett Jenkins from UBS. Please go ahead. Yes, a couple if I could or a few if I could. Firstly, on sports revenues, I guess, versus your original expectations of doubling this year, Can you talk about how you expect the rest of the year to play out? Do you see an acceleration there driven by the products and the investment you've made in SG And A? And then just secondly, on auto backlog, I think you'll typically give this maybe once a year, but could you just give us some sense of of how that's been progressing as well and whether you still feel confident in the kind of 2016, 2017 time horizon given that backlog? Thank you. Yeah. Let me handle the first question and then, Harold will talk about Automotive and the backlog there. On the Sports revenue side. So what we've said is we have grown in the 2nd quarter by, a mid double digit percentage, which after various conversations. I think everybody understands what that means. What we see in the second half is that we will have a greater contribution from, new products. So for example, at the moment, you know, the action cam has only just started shipping. And, you know, Tom, Tom, although we, you know, we don't pre announce new products, but we we have a track record of bringing new products into the market. I think that, together with continuing to expand our presence in sport, we have invested, in the first half in, media campaigns as well. And, you know, seasonality will naturally draw us to having a stronger second half on sport So we expect the growth side with how we're going. It's particularly going well in Europe, I would say, but more to come in the second half. Okay, thank you. And on the, auto order intake is developing a code plan, We expect a significant order intake this year same levels or higher than we had last year, and we plan to give you an update at Q3 numbers later this year? Yeah. So we we will quantify, the order book then at Q3. Just to give an idea as we go into into the end of the year. But we don't want to give this number out every quarter because of the lumpy of the automotive order book. And so I think, you know, but we will quantify it, but it's going fine. It's on track. That's great. Thank you. Thank you. We will now take the next question from Youssef F. H. From Barclays. Please go ahead. Thank you. Actually my question was just asked by, Garrett, although I can add a few follow ups. You've mentioned before that the ASP of the sport wishes was basically more or less a 100 euro based on the volume shipments and the revenue that we reported. Have you seen any pressure on this number and what about the gross margin? Thank you. I think that there is a sort of cycle with with sports, with sports watch products as with other, consumer products. So over time and in preparation of new products coming to market, we will bring prices down, but I think that's the main trend that we see. Nothing more than that. What was your other question? Sorry. I was asking you about the gross margin, but it seems to be going in line with what you said on the ASP. Yes, exactly. I think the gross margin in sports products is stronger, and the watches is stronger than in and for for PMD. So over the, average gross margin for con for consumer, and, we continue to see that. Thank you. Can I ask you a quick one on telematics? You said previously that you would be doing less acquisitions in 2015 than you did in 20 4 Is it looking to make acquisitions this year? And we have a team that is dedicated in the telematics organization to looking, searching out for acquisitions for us. And they're continuing to do that. I mean, the comment that I made or we made was with more to say that We've made 3 acquisitions. We do see more consolidation going on in this market. We have a disciplined approach to, making such acquisitions. There continue to be targets out there, but it gets harder. So there may be acquisitions that may not be acquisitions. We couldn't commit, but the strategy is unchanged. Thank you. So if I may, one very final one on telematics, the growth of, with fleet subscribers is, on one side, you subscribers, but it's also people that come from the acquisitions that you have migrated to the web fleet platform. Can you tell us what's the mix or how much do you still have to go with the acquisitions you did last year on that? So overall, the subscriber base is up 34 cent. And that, and the majority of that is organic. But, you know, there is some contribution from the acquisition. So think the acquisitions would be in the mid-twenty. So the organic growth of the, installed base is in the mid-twenty percent. And the rest comes from acquisitions. Thank you. The next question is from Mark Hasselink from ABN AMRO. Please go ahead. Hi. My first question is, the Nokia here selling process, do you see an impact in your automotive business at the moment? Are people delaying decisions there or anything around that? And secondly, it's a bit speculative, but if indeed what's not the region speculation that the German car makers would acquire Nokia here. Do you want to speculate on what that would be for your business? What kind of impact it would have? And the second question is on the market share of new contracts in automotive. Do you still have the feeling that you're winning market share, as you said, in the first quarter? And then finally, on pricing in automotive, you're clearly stating that the value of your is increasing. It's a little bit of a long term story, but you believe that over time, you would be able to raise prices, in the automotive side, given that you're providing much more value to a connected car and highly automated driving? Yeah. So, I think the, So I think it's more or less busy as usual, the automotive sector for the moment, but what I think what did help us process that here is involved is, is that we got a lot of attention and a lot of interest in our underlying platform and our capabilities. If we go through message transition, we've been able to position that more clearly now and have been able to go through a number of in-depth presentations about our technologies, and we got very good response for that. So I think it has helped us to establish ourselves as a, as a good vendor and a good alternative in the automotive industry. An incredible player, and that puts us as a, you know, a credible alternative, both to carmakers, but also to, to the technology companies. And I think that's a positive. What will happen to here is, is unclear. I don't speculate. It's no point doing that. So I'll leave that, you know, for later when we have more and what's going to happen, who the new owners of here are going to be and importantly, how they're going to play it. The, if I look to your 3rd question, so highly automated driving, yes, there's a lot of interest there. We've done a number of, test coverage areas with Hialeah, with our high definition maps that we're sharing with, with a lot of car makers for evaluation for testing, a lot of postage feedback coming from there. We are motoring ahead covering the highest road classes in North America and Europe. We plan to have that available as a commercial product by the end of 2016. We see intermediate applications between highly automated driving and steps in between where those new maps are going to be deployed, which is good for us. Gives us a way to grow into that business and, and evolve our product roadmap. So there's a lot of activity, development going on and lot of interaction with the car industry to see, how we need to progress our product roadmap. Okay. And the second question on market share in automotive on current contracts? Yes. So we saw a good uptake in 2014. I think that trend is continuing. I see healthy order intake levels in the first half of this year. And I have and I'm confident that in the second half of this year, we'll continue on the path, and that we'll have another good year of order intake And as Marina said earlier, we will quantify that in with when we give our Q3 results. Okay. Thank you. We will now take the next question from Ann Humphrey from Morgan Stanley. Please go ahead. Hi, just a couple from me, if I may. Firstly, I wanted to ask a bit more about Autos orders. I mean, you've given data points there previously and will do again. I just wanted to ask about your order booking policy. I mean, are you typically booking the entirety of an estimated size of order for a multiyear contract based on rates uptake with with particular customers or, basically, what's what's your booking policy on on the auto side? And my second question is just, on OpEx, actually, if you could just run through the points you have on OpEx trajectory of the remainder of this year and maybe talk about which of the areas really you're targeting in terms of additional investment and how the trajectory looks there based on your sort of preliminary views on how 2016 might develop? Yeah. So typically, so first on the booking policy, so typically in the automotive industry, we respond to RFQs. And RFQs are quite detailed in, the vehicle line that needs to be covered. The expected volumes, introduction date and date such a contract and that gives us a, quite accurate view on the total value of a contract over time. Typically, when we win an order, you can start shipping between 12 24 months from taking the order and the average run time of the contract is 3 to 4 years. So we do a order intake. We'll be published at a number the typical run time of such an order is for 3 to 4 years. And it starts being visible in the top line between 12 24 months after we have concluded that, that agreement and won that deal. Does that answer your question? Yes, that's great. Thank you. Yes. Okay. And just the trajectory on OpEx. So we've we've reported a 134,000,000 of OpEx in the 2nd quarter, And looking at what we're expecting for the other 2 quarters of this year, we expect, OpEx to be at relatively similar levels. There'll be a bit of a change in the mix. R and D was particularly high this quarter for reasons I've mentioned, and I expect that to come down. Above it'll still be above the level we saw in Q1, but down from where it is in Q2. On the other hand, G and A costs will go up because they have been, flattered by the credit on the litigation side in Q2. But overall, we expect things to be roughly awash for the rest of the year. Our major areas that we have been investing in, this year have been in, on the R and D side have been very much on the new mapping platform, where we are going through the transition to the new platform as we speak, and that will continue throughout the rest of this year. And the other sort of major area investment is in the, the, components that we are developing and upgrading for the connected car environment. So those are the major 2 that we have been investing in and are highly committed to getting those completed so that, you know, that will help us, as we go forward for next year. So, you know, those are the main things. That's great. If I can just kind of follow-up briefly on that on the R and D side in particular. I think you mentioned previously that While you've been rolling out the transactional mapping platform, you've, been bearing sort of double R and D costs in, in some areas supporting to platforms, should we basically think about you recycling any potential savings on that front you make into speeding up developments of HD maps and those sorts of things next year? Or how should we be thinking about the R and D trajectory? Well, the new mapping platform is designed to be faster and more and cost effective. And it's designed to apply a higher level of automation machine learning statistical analysis. It's what we're doing already with probe data. So we collect probe data in a large scale. Use it for mapmaking and we want to extend that to other information that we automatically collect from cars, sensors, but also from the community without any compromise on quality, obviously. That will help us to make better maps, make them faster and at lower cost. At the same time, the requirements for maps will go up. So more attributes, high level of accuracy, more information. So it's a balancing act between higher levels of automation and efficiency. And at the same time, meeting future requirements of, of our customers, both in the automotive 3 and from the tech companies, where that exactly the right balance is we'll find out but I don't expect overall despite higher efficiency levels in the map making process. That we will reduce our investment in platform development or operations for our map making process. Our aim is to win market share and to grow the top line and use the funds generated as effective and efficient as possible to make the best possible map at the lowest possible cost. Okay. That's helpful. Thank you. Thank you. And the next question is from shyam Kumar from TT International. Please go ahead. Hi there. I just kind of want to ask a few kind of strategic top down views on I guess, the mapping industry, just with this real time map making platform, I'm trying to understand the kind of new addressable markets it's unlocking So for example, obviously with Automotive, I guess my first question would be 3 to 5 years from now, how big could the addressable market be in terms of and mapping software going into the automotive industry. Right now, I'm guessing it's about a 600,000,000 tangible addressable market. What could that be 3 to 5 years hence? Second question, and I guess that also ties into the up to strong uplift you're seeing year on year, half on half in licensing, what are the kind of new areas real time map making is going to kind of unlock from, is it e commerce, is it search, just more of that kind of strategic thinking on the 3 to 5 year view? Because I guess they're kind of tied into that is just a view on, obviously, we're not going to hear going on. You're seeing potentially room at very high values of map assets much higher than your entire market cap. The question is, it would be easy or potentially very lucrative create shareholder value by going down that path depending on what happens. At the same time, if there is a vision that there's significantly more value to be driven from owning this asset over this tech cycles through to 5 years, it's good to kind of keep hold of the assets. So just anything that you can address around those three points would be very interesting, please. Yes, it's a broad topic and a broad set of questions, hopefully, as you're raising there. Think the total addressable market is higher than what you, today is already higher than the number you mentioned. And we expect that addressable market to go up in value go forward. And that's both driven by tech firms, who want independence from other mapmakers or other vendors want to protect their user data and have an independent product offering from, from Google in particular We see renewed interest from those companies to and our willingness to invest in, in a location based search platforms and offerings. So we expect growth coming from that space. There is growth coming from the GIS type of applications, intelligent cities, more awareness for, for traffic and transport and what have you, we see good growth opportunities there. And then finally, we see good growth opportunities in the automotive space. And that is really coming from two directions. And in Tom's case from 3 directions. So first of all, we see that, despite the introduction of broadband navigation, like you get on smartphones, we see that the attachment rates for built in navigation are going up. We see new use cases emerging where maps are part of the overall infrastructure of the car, the electronics infrastructure. So for adaptive cruise control for lane level guidance, for helping to switch the, the gearbox in an efficient fuel efficient way. Ultimately leading to more advanced forms of automated driving. And then the last element where we think we can grow, and again, especially in your automotive space is where that we win market share from our biggest competitors there. So there is a broad area for us to play, with an overall good outlook and we feel good that we have transitioned to our new technology platform. So we can capture a larger part of the year of the upcoming opportunities as well. Okay. And just just in terms of telematics, I know you mentioned this Tom Tom Kirk, Tom Tom Link 100. Stacy more geared towards fleets towards fleets? What's the timeline on these kind of products being rolled out to passenger vehicles for insurance purposes or just help people come better drivers or whatever? Yes. So yeah, that's a good point. So we so the core of telematics business of course is business to business. And that is really to optimize and the use of mobile assets and to improved customer service and the overall, overall integrity of the business. So that's an important application. But next to that, there is have we covered it under business development. There are 2 big areas of interest. 1 is, insurance. So, driver based, behavioral based insurance premiums and risk assessment. That's getting some traction, and we're making progress there. I wouldn't say we've cracked the code. But there's more and more evidence that this is, that this is technology is preparing itself for mainstream, prime time application. We have reasonable position in that space and we're expanding there. The second area is a really connected car in the consumer sense. We've got a couple of pilots running there. We're investing in some product development there. And I think that in 2016, we will see the 1st large scale applications coming to the market for connected car applications. There's a lot going on there. It's a bit early to say how big your Q and G is and how fast it can go, but there's definitely a lot of interest from the industry for these type of applications. Thank you. Thank you. And the next question is from Peter Olofsen from Kepler Cheuvreux. Please go ahead. Good afternoon. I had a question on the, the gross margin erosion that you witnessed in the quarter. I guess it's mostly on the consumer side. Are you taking any initiatives in terms of pricing or billing material reduction that could already help you to recover some of the gross margin decline in the second half of the year? Yeah. Yes. I mean, absolutely. Of course, we are. It's a big impact on us. And the brunt of the impact is felt in our consumer business units, absolutely. But on the on the other hand, that you can't just it's difficult to just take products and put up prices overnight. So we need to take the opportunities and the opportunities that are presented, when as we bring new products to market and look at the price then and adjust accordingly in order to get the margins to where they need to be. So I think there are two fronts. There is the pricing of products and also the underlying bill of material costs for our products. And that's where we also look at our existing products as well. This is going to take some time to adjust to. But, you know, already you see as new products start to play more of a contribution in our results as we go through the year that that will start to have a positive impact. Okay. Thank you. Thank you. And the next question is from Mark Zwartenberg from ING. Please go ahead. Yes, good afternoon. A few questions left. First on the on the camera. I know it's very premature, but you just started shipping, but can you give us any color on expectations on what it can contribute, say, over the next 6 months? Because I think you mentioned we expect still the sports category to double in terms of revenues. Is that including then also contributions from the camera. And what are the expectations going forward? So in 2016, what kind of volumes should we expect? And can you also give us any guidance on the margins? Is it similar to the sports watch? It's also that the gross margin is better than on P And E as well. And then my second question you give us also the organic growth rate, X Forex and X PNDs? Is that a number you have at hand that you can give us? That's it. Okay. So, yeah, so first of all, in terms of looking at, sports products and I think the camera was your first, was your first question, So the camera in Q2 has basically, and it contributed only a tiny amount to Q2, not really on the radar because it's only started shipping. In May. And yes, clearly, as we go through the rest of the year, we are expecting it to make a bigger contribution the numbers, but, you know, it's a new category for us. So, we need to see how that develops, but we are, of course, expecting that to contribute towards the higher growth in the second half. We saw an action camera, but there are also a whole range of accessories that go with that. And so, you know, we we look at that for the family family as a whole in terms of, driving a margin for that category. It's relatively competitive. But overall when you put all of that pack together, that makes a decent margin for us. Would you say that the sport category, is that the 100,000,000, the doubling of say the sport watch contribution of 50 to 100, would you now include the camera in your guidance or should we see this separately? Yes, no, no, don't sit separately, included. In terms of size, because you I think you mentioned that you say, okay, we have a track record of coming to the market with a new product. But in terms of size of a market, camera versus the sports watch, what kind of number should we think about for, say, next year? Because we know that the sports watch took off really fast. I think we need to, yes, but when we introduced it, we were also, you know, giving the message. Let's see how it goes and see how it And I would say we need to adopt the same approach with the camera. So we can't give predictions for next year at this point. Okay. And your next question, can you just remind me, please? Yes, the organic growth, if you exclude say the 4x impact, but also if you exclude the P and D category that's still declining, could you give me the organic growth rate of all those excluding those elements? In consumer? No, the group. Or overall in the group. So we've said organically, we, as a company, so excluding on a constant currency basis, our revenue was up, year on year. By a small amount, I think, by a 1,000,000. Clearly within that, we had, PND declining overall by 3%. You know, so I would if we take out PND, clearly, the organic growth rate is is higher, But I, you know, I'm afraid I don't have the exact split of the ForEx impact by product category in front of me, but we can get it to you. But the P and D decline of 3 percentage points you mentioned, that's including ForEx up soon. Yes. Thank you. And the next question is from Alexandra Petrick from Exane BNP Paribas. Please go ahead. Yes, hi. Thanks for squeezing me in. I'm just wanted to ask you a little bit about margins in licensing and telematics. From what I see in H1, you had a slight decline from 32.5% to 27% EBIT margin. In telematics? Is there anything special going on there? Is it attributable basically to the horror that you sell within telematics as well? There's this pressure from FX. And that would then explain why EBITDA margins are actually quite flat a little bit down. And then secondly, on licensing, Here, I'd just like to understand because to me, it looks like the business should scale quite well as you as revenue growth returns to more normal levels. You now have 24%, 25% growth in H1. And I don't see any scale effect that benefit your EBIT that is negative at the same level. And the EBITDA margin as well is also down a little bit So if you could just clarify those points for me. Thank you so much. Yes. I think the impact that we see in telematics is very much caused by the acquisitions. So in the EBITDA, we're stripping out the amortization effect of from the acquisitions. That's most of the DAR that you see there. So I think when you strip those out, that charge has gone up because we've made more acquisitions when we're amortizing them. That's why it looks relatively flat. So that's kind of telling you that in underlying terms, the telematics EBIT margins are pretty much intact. What I would say is when we make acquisitions, we do end up with a slightly in effect, in efficient, operating cost structure that we have to work through and takes a bit of time to work through as we assimilate the acquisitions. So that is really explaining what is going on in telematics. In licensing, your point about, you know, revenue has increased significantly in licensing but we've not seen that translating through to the EBIT line is purely because as we've already said, we're investing at a higher level in our map. And when we do the segment, when we prepare segment notes, any unabsorbed costs of the map that are not absorbed within the consumer business or elsewhere end up being apportioned in the automatic automotive and licensing businesses. So all the costs of the map get apportioned out And we apportion them on a simple metric, which is, driven mainly by revenue. So the fact that licensing did better also meant that it or more of the mapping cost. So the way to read it is just, you know, automotive and licensing together are bearing the lion's share of the cost of the map. And we need to continue to increase revenue in those 2 business units in order to turn that bottom line profitable. Can I just ask you as a follow-up, is there a point in time where you think you will be able to stop growing the cost base in map making alongside the revenue base, I? E. Will we see scale effects at some point? Yeah, I mean, I think we're very focused on, you know, we need to make sure that we have the products we want at the quality level we want. We've been incredibly focused on delivering, and we continue to be on delivering the new mapping platform. But there's also a need to continue to upgrade the content. We see that it's important to continue to invest at high levels in our map. And we also see that revenues as we go forwards are increasing and will continue to increase as we win new business. So I think there's a bit of making sure we're as efficient as we can be in our costs, but maintaining the quality of the product, but really the real drivers to drive more revenue. Okay. We will now take the next question from Hans Klobbe from Rabobank. Please go ahead. Thanks for taking my question. My question is on the licensing business, even stripping out the 5,000,000 impact in Q2, the licensing sales were still pretty strong. Maybe playing in the line drivers for your licensing business? And should we also expect a higher win rate for your licensing business as you have extended and expanded your relationship with Apple. So maybe a little bit more color on that subject. Yes. So we've got 5,000,000 in Q2 that should be a portion to Q1 as look at your quarterly comps going forward. And then if you strip out that 5,000,000 from Q2, that should give you decent feel for the run rate going forward in the licensing business. And indeed, what you'll see is that's running quite a bit higher than it was last year. And without being specific about customers, that is due to new customer wins coming in. Including the Apple contract that we announced in May. All right. So let's say going forward, we should strip out the $5,000,000 and take that as a run rate for your next quarter. Thanks. There are no further questions in the queue at this time. Thank you, operator. I would like to thank you all for joining us this afternoon. Thank you all very much. Operator, you can close the call. Thank you. That will conclude today's conference call. You may now disconnect.