Good day, ladies and gentlemen. Welcome to the TomTom first quarter 2015 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 a conference coordinator will be happy to assist you. I will now turn the call over to your hostess for today's conference, Bisera Grubesic, investor relations officer. You may begin.
Thank you, operator. Good afternoon, welcome to our conference call, during which we will discuss our operational highlights and financial results for the first quarter of 2015. With me today are Harold Goddijn, our CEO, and Marina Wyatt, our CFO. You can also listen to the call on our website, a recording of the call will be available shortly afterwards. As usually, 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 Marina. We will then take your questions. With that, Harold, I would like to hand over to you.
Thank you, Bisera. Welcome, ladies and gentlemen. Thank you for joining us on today's earnings call. We have started the year in line with our expectations. We generated group revenue of EUR 205 million in the quarter, which is flat year-on-year. We reported a gross margin of 54%, which is three percentage points below last year. The weakening of the euro adversely impacted our first quarter results. At constant currency rates for the US dollar and the British pound, our gross margin and operating result were relatively flat year-on-year. Marina will provide further information on financial highlights and the financial outlook for 2015 later during this presentation. I would now like to discuss the key operational highlights per business unit. The consumer activities held up well in the first quarter through a combination of resilient PND market and strong growth in sports products.
We saw a unit decline of 8% in the European PND market, whilst the North American market declined by 17%. Market share in Europe remained broadly flat, whilst we continued to strengthen our ASP. We saw market share improvements at the end of the quarter in both regions. We continued to see strong growth in our sport business, and we doubled the number of outlets in Q1 globally. We also added Nike+ to the list of platforms available to the TomTom GPS sports watch, enabling our user to track their progress and share their information with the Nike+ community. Our fleet management business grew strongly in the first quarter. At the end of the quarter, Telematics reported an installed base of 482,000 active subscribers, which is a 39% increase year-on-year.
Our automotive business contracted as anticipated, and newly booked business continued at levels which will support a growing business. In the quarter, we announced an agreement to deliver maps to Volkswagen in North America. We also continue to expand our position as a premium traffic service provider in the automotive market. We announced that we will deliver our real-time traffic services to Volkswagen, Hyundai, and Kia in Europe. We extended our global partnership with Fiat to deliver maps and navigation in Latin America, and we also announced a new deal with South Korea's SsangYong Motor Company. Our maps and navigation software will be included in the all-new Tivoli model throughout Europe in the beginning of May 2015. Good progress has been made with migrating our country databases to our new mapmaking platform.
This new platform technology is fundamental to our future and will transform our digital map process from a quarterly batch process to one in which our map is continuously releasable and that can swiftly and automatically process sensor and crowdsourced data. The new platform allows us to process a variety of external sources, proprietary and from our strategic partners at low cost in near real time. We are well on track to have fully replaced our mapmaking platform in the second half of this year. This concludes my part of the presentation. I'm handing over to Marina now.
Thanks, Harold. I'll now go through our quarterly financial results. We generated revenue of EUR 205 million in the first quarter, which was flat compared to the last quarter last year. Our Telematics, licensing, and sport businesses grew strongly, and they broadly counterbalance the reduction in PND and automotive revenue. Consumer revenue was EUR 122 million, which was 3% down compared to last year, and this was caused by lower PND and related content and services revenue, which was partly offset by strong growth in sport. Our automotive business generated EUR 24 million in the quarter, down from EUR 29 million in the same quarter of last year. This decline was caused by the phasing out of certain older contracts. Our licensing revenue is EUR 29 million in the quarter, which was a 12% growth compared to the same quarter of last year.
The year-on-year increase was mainly caused by higher traffic revenue and to a lesser extent, by FX. Telematics revenue for the quarter was EUR 31 million, which was a 24% increase compared to last year. The recurring subscription revenue for the quarter increased by 32% year-on-year to EUR 23 million. Our monthly subscription ARPU decreased slightly year-on-year, owing to the impact of acquisitions, product mix changes, and regional mix changes. The strengthening of the U.S. dollar adversely impacted our first quarter results. This is reflected in the lower profitability levels which we have reported. The gross margin was 54%, which is three percentage points lower compared to 57% in Q1 2014. This is basically caused by the FX movements. At constant currency for the U.S. dollar and British pound, our gross margin and operating results were relatively flat year-on-year, and revenue was slightly down.
Operating expenses for the quarter were EUR 115 million, which was slightly below the same quarter of last year. This was mainly driven by lower charges for amortization of technology and databases, and that was partially offset by slightly higher SG&A expenses. The increase in SG&A partly reflects the amortization of acquired customer contracts following our recent acquisitions in Telematics. Marketing expenses were relatively flat year-on-year. The other financial result for the quarter was a charge of EUR 2.6 million, which mainly reflects the impact of losses resulting from the revaluation of foreign currency denominated monetary balance sheet items, which were not fully offset by the positive hedging results. The result for the quarter was a loss of EUR 6.9 million. The adjusted net result on a post-tax basis was EUR 2.4 million, and this translates into adjusted earnings per share of EUR 0.01 for the first quarter.
At the end of the quarter, we report a net cash position of EUR 77 million. Cash flow from operating activities for the quarter was EUR 13 million, which was slightly below last year's, and the cash flow used in investing activities was stable at EUR 24 million compared to last year. If we now turn to the outlook for 2015 as a whole, we're reiterating our guidance for the full year. We expect revenue to grow to around EUR 1 billion. This revenue growth will be weighted towards the second half of the year, and we are expecting to see growth in three out of the four of our business units this year. Not in automotive, where, as we've already flagged, we expect a modest decline, but the others will grow.
We're maintaining the level of investment both in terms of CapEx and OpEx in our core technologies at similar levels to last year. Despite the currency situation, we expect adjusted earnings per share to be maintained at around EUR 0.20. That concludes the formal part of the earnings call. Operator, we'd now like to start with the Q&A session, please.
Thank you. If you would like to ask a question, please press the star or asterisk key, followed by the digit one on your telephone. Please ensure that the mute function on your telephone is switched off to allow your signal to reach our equipment. Again, please press star one to ask a question. We will pause for just a moment to allow everyone to signal. We will now take our first question from Stuart Jeffrey from Nomura. Please go ahead.
Hi there. Thanks very much. Question on mapping industry. Now that Nokia's announced they're looking to sell HERE, is there any scope for you to be a bit disruptive in the intervening period and perhaps gain share? Are the sales cycles just too long to have any significant impact? Perhaps more broadly, could you just talk about how you see the industry in terms of the benefits of vertical integration versus being somewhat independent? Whether you have any particular concerns about one of the major players getting involved to vertically integrate the HERE business. Thank you.
Yeah, sure. Thank you. It's difficult to anticipate what will happen. We're at the beginning of this process. I don't want to speculate what it will mean at this stage for the industry or whether that present additional opportunities for us. Needless to say that we follow the developments very closely and of what's going on in the industry. In terms of being disruptive, I think what we hear from our customers is that they like what we're doing in terms of technology. I think the ability to make maps in real-time, to connect all sorts of sensors, crowdsourced information to our platform, and our ability to process that in a highly automated way is seen as fundamental to future use cases. I would also like to point out that we do have a very cost-effective way of making maps and publishing those maps.
I think the combination of having that real-time platform
The ability to process sensor data and other data from external parties and from our customers, indeed, in combination with a low-cost platform, gives us a good position going forward. We feel good about that. I think the recent successes we've had in automotive and the wins we had in 2015 or 2014 are proof of that, and we don't see that slowing down in 2015. As far as we are concerned, we are planning for growth in automotive, substantial growth in automotive 2016. We have our technology sorted out. We're running a tight ship. We can make maps and content at much lower cost than anyone else. I think those are very sound foundations to further win market share and deliver the products that the market is asking for.
Can I just add as a sort of add-on, when you say you can make maps at a much lower cost than anyone else, how do you benchmark that, and what is the enabler of that?
Well, we don't have the exact numbers, but we know how much we spend, of course, internally. We have a good estimate of what others are spending. If you look at the end result, then I think it's safe to say for us that we are a lot more efficient. We get a lot more bang for buck than some of the other map makers in the industry.
Great. Thank you.
We will now take our next question from Andrew Humphrey from Morgan Stanley. Please go ahead.
Hi. Thank you for taking my question. I just wanted to drill down a bit more on the mix in the consumer business. Clearly, you're seeing some strength in ASPs there, which is leading to overall growth in spite of a flattish market share. How should we think about that over the remainder of the year? Are you seeing those trends lasting for a period of time? Could we see even more upside in terms of mix on pricing? Also maybe on the sports side there, is the growth you've seen there in Q1 consistent with your aims of significantly increasing revenue that you've seen?
Yeah. Let me handle that. ASPs are on an upward trend. I think that's partly an effect of the strengthening U.S. dollar, which means there is less opportunity for cost reduction, price reduction. All of our competitors and similar products are all calculated and priced in U.S. dollars. We would expect that over time, prices for consumer electronic goods that are manufactured in U.S. dollar-denominated components will trend upwards as a result of the weakening Euro. Indeed, we hope that that will take place throughout the year, and that by the end of 2015, if we don't see big currency movements again, we would be trending towards normal growth margin levels that we have been enjoying in the past. If I look at sports, yeah, it's going well. I think we are on track to deliver substantial growth.
We want to double our revenue in the sports sector in 2015. We are on track to deliver that in Q1.
Great. Thank you very much.
We will now take our next question from Marc Hesselink from ABN AMRO. Please go ahead.
Yeah, thank you. Also, on automotive. Firstly, on the comment you just made, that you expect substantial growth as of 2016. To me, that sounds a bit more enthusiastic than before. I think earlier they talked about growth as of 2016. Did that really change, or is that just wording for now? Secondly, on some more fundamentals behind it, what are you seeing at take rates in automotive? I heard some positive comments from the tier 1s that take rates are increasing more than on average. What's your view there? On the pricing that you see in automotive, is it stable? Going up, going down? What do you see there?
Yeah. Revenue in the automotive sector for 2016 will be substantially higher than what we do in 2015. It has to be. 2015 is lower than 2014. 2014 was also not a great year. We started to recover ground in 2014 by booking EUR 220 million in orders. If you project that against the scheduled deliveries for 2016, we can be quite confident that revenue will go up substantially in 2016 in the automotive segment. On your other question, take rates are indeed on the up. It's still surprisingly low. It's below 30%, but it's on an upward trend that creates a larger market, that's partially offset by price pressure on maps itself. If I look at our mix is what we sell to the automotive industry, that mix is now improving.
It's not just maps, but it's also services, including traffic information, navigation software, server-based applications and services for which we see increased levels of demand. That will also give us protection for price decrease and compensates for a price decrease as a whole. If I look at the amount of money we make per car, that looks good. As I said, order intake in 2014 will translate in sales in 2016. 2015 will be lower, but we expect, as of Q4 this year, the trend to reverse and sales volumes to go up.
One follow-up to clarify. Does that mean that the feedback that you're receiving so far, now that you've started with replacing with the new map platform, made you more confident that you have a strong position, or is that the same as, let's say, a quarter ago?
No, I think the outlook has not changed. We continue to deliver against our plans. Q1 bookings were in line with expectations, supportive of further growth. I think we're doing okay. We're doing well, and that will result in growth. It's going well in that part of our business. It has to go well as well. Let's not underestimate that our market share is not where it should be. We're claiming some of that. There are a lot of opportunities for growth in the automotive segment. We're investing heavily, and I'm pleased to see that the returns now start to come in.
That's clear. Thanks.
We will now take our next question from Gareth Jenkins from UBS. Please go ahead.
Thanks. Just a follow-up on that last question. I wondered if you could talk, you've talked helpfully about the order bookings in automotive in the past. Just wondered if you could give us a sense of how the order pipeline is shaping there. Secondly, just on sports revenues. You mentioned the doubling this year. Could you talk about the margin profile thereon and whether there's any other verticals that you're interested in addressing? I noticed, obviously, one of your competitors addresses things like aviation and marine. I just wonder if that's something that you'd be interested in over time. Thanks.
Thank you. I think the margin profile on the first question was the margin profile on sports watches, I think.
Order pipeline.
The auto pipeline.
Yep.
Yeah. When we book an order, a contract, or we win a contract in automotive, the typical profile of such a contract win is that you start shipping about, on average, 2 years after you have won the deal. The total lifetime of those deals is approximately 4 years, give or take. That is the average. As in last year, we booked EUR 220 million in orders. If they were all of that profile, then you start seeing one-fourth of EUR 220 million coming through the P&L in 2016 for a period of 4 years. That's the way to look at it. It's not all the same. There's a bit of variation. Some contracts take longer, have a longer lifetime. Others a slightly shorter lifetime, that is more or less the profile.
What you can say is that if you continue to book EUR 220 million in orders for a number of years, your revenue will trend to that EUR 220 million on an annual basis over time. That's how to look at it. Order intake in 2014 was EUR 220 million. Our expectation for this year is to exceed that number. It's not always that easy to plan and to say so. It can be quite jittery, big deals in one quarter, they can be postponed. It's not a continuous order intake, it can be dependent on quite substantial programs. What we see in the market is high levels of quoting activities, good percentage of wins. I think all in all, we're on the right track, and we're gaining momentum in that part of the business.
Yeah, there's not a lot more I can say at this stage, I think you get the picture.
Thank you.
Sports. Margins on sports products are slightly higher than they are in the PND sector. That's okay. Growth is happening there as we had anticipated. Last year, we shipped 500,000 sports watches. Our aim is to double that this year. Last question, other verticals. We don't give guidance for product introductions. We keep that for commercial reasons, we don't disclose that. If you look aviation, I can safely say that's not an area we're interested in. I think for boating, it's also a very specific market, so there's no immediate plans to enter those verticals, if you like.
Thank you.
Other than that, I can't say much.
Thanks.
We will now take our next question from Martijn den Drijver from SNS Securities. Please go ahead.
Yes, thank you. Can you provide us a little bit more granularity about the performance of the acquired Telematics companies in terms of client attrition and growth? That would be the first question. The second question relates to GO Mobile. I know it's very early days. It's a global launch. It's not even been a month, but can you update us a little bit about your experience so far with this pricing model, the 75 km and the freemium or the upgrade? The final one, can you update us a little bit more about how the partnerships with Bosch SoftTec and VW Research are progressing in terms of cooperation between the two companies, initial product development? Any information there would be useful. Thank you.
Let me take the first question about the performance of the acquired businesses of Telematics. We've made three, and each time we took on subscriber databases of around, I think, 27,000 each time. The way we run these acquisitions is that the management teams of the acquired companies are put onto earn-outs, which are all geared around converting the subscriber bases that we acquire onto our Webfleet platform over a period that takes about 18 months. The first acquisition we made, Coordina, has gone right through the earn-out period now, and that finished at the end of December. And in terms of the attrition level, so the level of the installed subscriber base that was lost in terms of how the earn-out was put together. I think it was a very low percentage of subscribers were lost from that.
I think, having gone through that, we're kind of pleased with where we got to in the end. A few percent, sub 5%, I don't know the exact number. The second acquisition, DAMS, we're still going through the earn-out phase at the moment. Progress is okay at the moment, but we won't know until we get right through to the end, and Fleetlogic hasn't started yet. I think so far so good. We learn more each time we do an acquisition and try to do it better next time. I think we can conclude that so far, pretty successful.
Just to follow up on that, the growth profile of these three, has that been similar? If so, similar to TomTom's, and if so, has that continued at the same rate after the acquisition?
What happens is we merge it all together. After a period of time, it's just part of the sales process for the individual countries. Are we selling at the same level that we should be, whether it's organic or acquired? I haven't seen anything that says that's gone off track. No. I think it's fine.
All right.
Okay.
Yes.
Your second question, I think, was around the downloads.
Yeah, the GO Mobile and.
GO Mobile
the global launch.
I prefer to Harold on this one.
Yeah, we adopted our pricing for the Android market . We made a premium application available. That is still early days. The initial experience is positive. We had about 750,000 downloads for that application.
It's too early to tell you what the conversion there is. What we can say now is that it's in any case not worse than the fully paid upfront application that we saw previously. We expect an upturn in revenue for those applications, but also a large number of downloads and a big install base.
What was the conversion rates of similar types of applications previously?
Previously, you had to pay for the application, there was no conversion at all. You just paid, you got it, you could use it indefinitely. Now you get it free as a download, after 75 kilometers of usage, you need to pay a usage fee.
Yeah.
Yeah. That's the way it works.
The final question was about the update on the partnerships with Bosch SoftTec and VW Research.
All that is going according to plan. Close cooperation. In the VW case, it's research and development oriented, very much focusing on highly automated driving, and the technology you need for that. There's a number of trials, a number of tests that are being performed. We're learning from that. VW is learning from that. We're close to taking what we call 3D maps. The maps that you need for highly automated driving, very close to making first production samples of that product as a result of that partnership. That's going in line with expectation. With Robert Bosch, we're also working closely together with NDS Maps, linking sensor data from the car to our map-making platform, and move to automated map-making. A number of trials and developments are on the way there, which are also very encouraging.
I would describe those partnerships as healthy, inspiring, and also for us, essential to have a good understanding of future needs for our products and our technologies.
Okay. Thank you.
We will now take our next question from Alexander Peterc from Exane. Please go ahead.
Yes. Hi there. Thanks for taking my question. I would like you to dwell a little bit on the licensing bit of the business, which actually showed good growth this quarter. If you could tell us, is that tracking ahead of your plans? I understand that traffic is a big part of that. Could you maybe tell us how much of licensing is down to traffic licenses to non-auto clients? Then the second question would be on automotive. How well would that business scale as you move into very high growth? In other words, are you going to have to ramp OpEx to any extent in automotive when you switch into higher gears in growth there? Thanks.
Okay. If I talk first of all about licensing and how it's performed in the first quarter of the year. Yeah, it's tracking a little bit ahead of our expectations. We're pleased with that performance. If you look at it, we had a growth of EUR 3 million year-on-year. Half a million EUR of that came from FX, leaving EUR 2.5 million that comes in the main part from traffic, that's a number of deals that have come in. It isn't one specifically. It is deals across both sales into governments and regional bodies and that type of thing, but also from agreements with companies like Clear Channel as well, which is one of our customers in that space. There are a number of different ones.
Licensing income, today, is still much more about maps than it is about traffic is growing faster than maps.
Okay.
Your question about automotive, and our ability to scale that business. I think it's important to understand that we are building platform products. Software components, technology components that are used by third-party developers which can be tier ones or OEs themselves, or independent software developers who can use those components to quickly build route policy navigation solutions for connected cars. In that respect, the business scales infinitely. At the same time, when you have more customers, you have more customer demands for specifics, for specials and what have you. It's not linear, it's not completely scalable. This business can grow very substantially, without us having to add a lot of overhead. That is the whole principle, how we build this business and how we structure it, and that seems to work.
Just a quick follow-up, if I may, on automotive revenue growth. You now seem to be saying it's going to be from Q4 onwards. That's where the inflection point is happening. Has anything new happened there or do you have just better visibility as you progress over time? Thanks.
I think what we're trying to say is that by Q4 of this year, the decline that we see year-on-year going on at the moment in automotive will stop. I think, that's just paving the way for growth to come through in 2016. That's the way to look at it. Stop the decline, then start to grow.
Thank you very much.
We will now take our next question from Hans Slob from Rabobank. Please go ahead.
Yes, good afternoon. Thanks for taking my questions. Question on the outlook for TomTom Consumer. Consumer saw a 6% underlying sales decline in Q1. Do you expect growth for 2015 for the full year? Will this only be driven by growth for your sport watch business, or do you also expect a further improvement for PND as well, throughout the year? My second question is also related to TomTom Traffic. Can you indicate the growth and the bookings for TomTom Traffic and how large that revenue stream is as a percentage of your total sales now? Thanks.
Let me talk about the consumer side. Overall for the year, what we aim with the PND side of the business, we've got an underlying market that is declining, albeit at a lower rate. Pricing is good. My best guess at this point in time would be that, or best estimate at this point in time would be that we'll see a slight decline overall for the year. Sport will grow strongly, overall, that should put consumer into a growth overall for the year.
Okay. Thanks.
Okay. Roughly, that's how it should shape.
On TomTom Traffic?
Yeah. Your question was how much overall of our revenue comes from Traffic today?
Yeah. How fast is the growth for TomTom Traffic in its sales or in bookings?
Yeah. The thing about how we report our business at the moment is it's geared around the four business units. I can't give you an answer to that straight off the bat, because some of it's in each of the businesses, and I'd need to come back to you on that one, I'm afraid, at the moment. Clearly in terms of growth, we're seeing growth in a number of different areas, so it's good. It's at a strong level. I think we need to come back to you overall on how much revenue is coming from TomTom Traffic as a whole at the moment.
Yeah, that would be much appreciated. Maybe a final one, when do you expect the impact from the phasing out of the older automotive contracts to disappear? Is this also Q4?
Yeah. This backs to the previous question, actually. In Q4, what we expect is that automotive revenue will stop declining, and then we kick into growth in 2016. That's how that will come out.
Okay. Thanks very much.
Okay.
We will now take our next question from Shyam Kumar from TT International. Please go ahead.
Hi there, thanks a lot. Can I just follow up on the first question regarding Nokia HERE and the strategic elements in the industry? How should I think about, I guess, your asset base, your maps, your navigation, your traffic versus HERE's in terms of the size, the scale, the quality? They've obviously got a bigger business in terms of their licensing and their auto revenue, I'm just trying to ascertain if it is a strategic buyer, one of the big tech giants who actually takes hold of HERE. I'm just trying to think how I would think about valuation read-acrosses and similarities in your assets.
Yeah. That's a broad question. I'm not so sure how I can best address that. I think we're both in the mapping business. I think I cannot talk for HERE's strategy and how they do things. I think where we differ mostly, so the similarities, obviously, the type of products we are selling and licensing to the industry. I think what we have been focusing on as TomTom, is to create a really cost-effective business, highly automated. Provide tools to our customers to use that data in a cost-effective way, runtime maps and navigation software, ease to integrate traffic. Have we stopped short of taking on ourselves big integration jobs or what have you. We really take a platform approach, providing the core components that our customers need, and focusing on doing that, as best as we can, and as cost effective as we can.
I think we are now seeing some real traction of that strategy coming through with higher levels of income that we can generate on those assets.
That will give us four further opportunities to grow and do what we are already doing. There is for us, I think, because we're the smaller player, quite a bit to gain there as well in terms of market share, and obviously that's one of our core objectives to actually do that and deliver that growth.
Okay. I guess in terms of the underlying asset, the database, the scale, the number of countries covered, you guys are quite similar?
There's a high level of similarity. I wouldn't say-
Okay
It's exactly the same, but it's a high level of similarity. I think the thing that we are really trying to get across is that map making in the old way is not going to work. It's too expensive. We need to find more effective ways of doing that, and more effective platforms to deliver those maps and maintain those maps, and do that to a high degree of automation. That's where we've been focusing on.
Okay.
That gives us, in our view, an edge over anyone else in the industry.
Perfect. Thank you.
As a reminder to ask a question today, please press star one. We will now take our next question from Marc Zwartsenburg from ING. Please go ahead. Caller, please go ahead, your line is open.
Good afternoon. It's Marc Zwartsenburg, ING. Thank you for taking my questions. My first question is on the outlook statement to maintain the level of investments on the OpEx side. Q1 was more or less in line with last year. Should we take that outlook statement as being the coming quarters, the OpEx roughly in line with last year? That's my first question. My second question is on the gross margin. I think, Harold, I heard you mention that you expect the gross margin, give and take the ForEx remaining at current levels, that the gross margin will get back to normal levels again later this year. Can you perhaps give me a bit of color how that should migrate back? Because the ForEx impact is ForEx impact. How do you see that trending back? Then a final one.
I think, Harold, I also heard you talk about revenue for automotive in the longer term to trend towards EUR 220 million revenues. Did I hear that correctly, or am I mistaken here? Thank you.
Yeah, let me take the question about OpEx then. What we've said, overall for the year, our OpEx will be flat to up a little bit on last year. What we have to deal with is that we have got portions of our employees who are outside the Eurozone, and that's put some upwards pressure with ForEx on the run rate for OpEx. We're managing that as carefully as we can. I think overall, as I say, we'll be flat, but maybe up a bit on last year. That's pretty consistent with what we've said since we gave our guidance. In terms of the quarterly variation on that, you may see variations year-over-year in the quarters. We've been very flat in Q1, but to some extent it will be dependent on the timing, for example, of marketing campaigns and when they actually happen.
Because those investments are lumpy, and if they fall in a different quarter one year to another, that can cause quarterly variations.
Is there already some visibility on the timing of that?
We have some plans internally. They're still fluid. They're not cast in stone yet. I'd rather not be prescriptive about that at this stage. It wouldn't be right.
Okay. Thank you.
Okay.
There are no further.
Your second question, I think, was around gross margin.
Yep
What's happening on gross margins. The point we're making is that over time, businesses need to adapt to the new reality with the exchange rates and adjust their businesses, which will happen as new products come in, through actions in the supply chain. Over time, the industry will adjust and gross margins will move back in the direction that they started off in. Again, exact timing on that, we work at it as fast as we can, clearly, because it's having an impact on our results. I can't commit that we'll be back at the same levels by the end of this year. We will report on progress on that as things become clearer.
Okay. The last one on automotive.
Yeah, I think you need to be careful. This is by way of example, and a pure mathematical explanation. If you book a certain level of order intake per year, and you do that for a long time, then your actual revenue will trend to that same number. It's not indicative for our order intake, what we expect in 2015 or 2016 and beyond. That is too early to comment on that. Other than what we've said so far is that order intake in automotive was EUR 220 million in 2014, and we expect a similar or higher level of order intake in 2015.
Okay. That's very clear. Thank you very much.
As there are no further questions in the queue, that will conclude today's questions and answer session. I would now like to turn you back to the host for any additional or closing remarks.
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 us 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.