TomTom N.V. (TMOAF) CEO Harold Goddijn on Q3 2020 Results – Quick Version Earnings Call Transcript

TomTom N.V. (OTCPK:TMOAF) Q3 2020 Results Earnings Conference Call October 14, 2020 7:40 AM ET

Company Participants

Megan Daniell – Investor Relations Officer

Harold Goddijn – Chief Executive Officer

Taco Titulaer – Chief Financial Officer

Conference Call Participants

Francois Bouvignies – UBS

Marc Hesselink – ESA

Wim Gille – ABN AMRO

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Operator

[00:00:01] Good day, ladies and gentlemen, and welcome to TomTom, third quarter, twenty earnings conference call. At this time, all participants only 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 the Starbound one on your telephone. If at any time during the call you require audio assistance, feel free to press the in zero and a conference coordinator will be happy to assist you. Please note that this conference is being recorded today. I would now like to turn the call over to your host for today’s conference. Megan, Investor Relations Officer, please go ahead.

Megan Daniell

[00:00:44] Thank you, operator. Good afternoon and welcome to a conference call during which we will discuss operational and financial highlights for the first quarter of 2020. With me today, Ohio Kidane CEO and talk with you to see if we will start today’s call with Harold, who will discuss the key operational developments, followed by a more detailed look at the financial results from corporate. We will then take your questions as usual. I would like to point out the safe harbor replies. And then, Harold, I would like to hand over to you.

Harold Goddijn

[00:01:16] Thank you, Meghan, and welcome, ladies and gentlemen. Thank you for joining us today. We were pleased with the upward trend that we saw in market conditions, and that has continued over the last three months, it’s mostly best reflected in our automotive business, which has shown robust sequential operating revenue growth. And that’s a trend which we expect to continue in the next quarter. Our employees have shown agility and commitment to the company, response to the pandemic and the challenging environment has not slowed it down in achieving our strategic priorities. We continue to invest in R&D continuously developing and strengthening our product portfolio, and we believe that our ability to maintain course has also contributed to strong deal activity, which we have seen this year.

[00:02:11] I want to turn to the key operational highlights for the quarter for a brief discussion, as you have seen. We announced a multi-year extension. Expansion of our deal was over our full suite of maps, traffic and maps. APIs will help you to enhance the location enabled solutions. And that ensures a seamless mapping experience in your apps, including ride hailing and food delivery services. We deepen that relationship with you referred to as they will serve as a trusted map as in partner to us. Uber will collect on the ground insights from over 10000 cities in which they operate and correct the database if needed.

[00:02:58] In automotive, we announce that we will provide our full stack solutions of maps, navigation software and connected services massarotti in vehicle infotainment system. This is a full stack implementation and includes an automated map of data over the air. During the quarter, we also launched wrote check, it’s an entry first port by the vehicles that contributes to safer driving. The product addresses a key industry challenge. It’s a tool to define and control, under which circumstances car can safely operate in autonomous mode.

[00:03:39] This concludes my part of the presentation. I’m now handing over Toco for a closer look at the financials.

Taco Titulaer

[00:03:46] Thank you, Harold. I’ll make a couple of comments on the financials and outlook and then we’ll go to the Q&A. In the third quarter to 2020, we saw continued operational improvements in both automotive car production and consumer spending. These improvements translated into increased revenue compared with the second quarter, as we reported, revenue of one to forty eight million. Let me go through the revenue business by business. Our location technology business consists of automotive and enterprise and represents roughly 70 percent of our group revenue automotive reported revenue, reported revenue, 66 million euro, a strong increase from last quarter. Also supported by the start of production of new software platforms, car production volumes have continued to show recovery from the lows we experienced in April that led to similar trends of growth in our operational revenue, which is reported by automotive revenue adjusted for the movement in deferred and builds revenue. Our automotive operational revenue grew sequentially by twenty four percent to fifty nine million because we see the positive trends continuing in the fourth quarter. We expect that the sequential growth in automotive operational revenue will be similar to what we saw in twenty nineteen. That is in the 30 percent to 35 percent range. Enterprise reported revenue of 40 million, showing a modest decrease from last quarter. This decrease is because of a weakening of the U.S. dollar, as most of our enterprise contracts are enforced in us because we expect enterprise revenue to show a limited increase in the fourth quarter compared to the third quarter.

[00:05:44] Our consumer business reported 42 million euro revenue in the quarter, an increase of 12 million euro from last quarter as consumers generally spend more of the summer holiday period. This was also supported by the return to more normal levels of retail activity following the lockdown’s we experienced in April and May in the fourth quarter. We expect that consumer revenue will show a sequential decrease similar to twenty nineteen. That is a decline in the 20 percent to thirty four thirty five percent range. Our underlying gross margin trend continues to improve as it benefits from positive mix effect of more software revenue exposed to the effects of sparkly asset during the quarter. By the start of the production of new automotive software platforms, including the new Mazzotti platform, which lowered the third quarter gross margin. This means that the gross margin was slightly down compared with the same quarter last year. However, this decrease is also increased by one also included in the gross margin in Q3. Twenty nineteen if we exclude this one. Also last year the trend would have shown a modest two percentage points increase from last year. Our gross margin will trend To around 80 percent on average.

[00:07:12] Total operating expenses decreased slightly from the same quarter last year to one point eighty million and is reflected mainly in marketing and selling general and administrative costs, partly due to discretionary cost control measures. Free cash flow in the quarter was an expected outflow of 20 million. We have a net cash position of three point forty six million at the end of the third quarter. Let me go to the next slide, quarter on quarter developments, the covid-19 pandemic resulted in automotive factory closures during the year as automotive revenue is based on the number of cars produced. This impacted our automotive operational revenue. We saw the biggest impact in April when most factories were under a total lockdown as factories started to reopen. We saw gradual improvements within the second quarter. You can see here that this trend has continued this third quarter, showing strong sequential increase in automotive operational revenue. As mentioned before, we expect that this growth will continue and that the increase in the fourth quarter will be similar to the trend we saw last year. However, we expect that most of these operations revenue uplift will be placed on the balance sheet and deferred to later periods.

[00:08:38] You can see similar trends in our free cash flow over the course, we expect that the continued improvements in automotive operational revenue, combined with seasonal cash receipts, will result in a positive free cash flow of around 30 million in the fourth quarter. The next slide is the twenty 20 outlook for the full year outlook, we expect that the group revenue will be around five 30 million euro, with a gross margin of around 80 percent. As explained on the previous slide. We expect a positive free cash flow of about 30 million in the fourth quarter. This means that we will have a full year of free cash flow without the negative minus 30 million translating into a net cash position of around three to seventy five million at the end of the year. While we have seen notable improvements to revenue over the last few months, we still believe that the economic circumstances remain too uncertain to resume. Our share buyback program will continue to assist the opposition as revenue of free cash flow generation imposes. Operator will now like to start the Q&A session.

Question-and-Answer Session

Operator

[00:10:00] Thank you. We will now begin the question and answer session, if you have a question, please press star, then the one on your touchtone phone. If you wish to be removed from the queue, please press the hash key or the pound sign. If you are using the speakerphone, you may need to pick up the handset before person before pressing the numbers. Once again, if you have a question, please press star one on your telephone. Your first question comes from the line of Francois Bouvignies from UBS.

Francois Bouvignies

[00:10:36] I thank you very much for taking the questions. My first question is around the time your activity did activity around, you mentioned in your opening remarks that the activity is strong and given that we are nowhere in sight. I mean, October and that you have nine months visibility, I guess you have a pretty good idea of where the order intake and backlog, how is it trending versus maybe last year. So could you share with us a bit more color around, you know, the backlogs we expect in Q4, maybe not giving obviously the number, but just a trend that’s increasing maybe. And can you explain a bit more as well, the activity? You know, what are you talking about? What kind of products clients is doing well at the moment would be great to have follow ups after effect, if I may. Thank you.

Harold Goddijn

[00:11:36] Yeah, first of all, thank you. Yeah, yeah, as you know, orientation is always lumpy. You know, it’s a binary process. It can vary from quarter to quarter. But if I give you the general trend and I seen this for you asking for, we saw, first off, very strong activity with a number of awards. Very pleased with that over the several months this slow down. And that is also to be expected. Nothing unusual that in that, I think for the last quarter is it’s hard to predict where we’ll end up. We’re working on things, but it’s not sure whether there will be awarded this year. And so we’re not sure that will be awarded to us, of course. But I think the overall activity level is still a good at a good level and probably stronger than what we have seen last year.

Francois Bouvignies

[00:12:40] Ok, and what kind of products is doing? Well, I mean, at the moment in your in your is global maps with global products, or is it the particular features that.

Harold Goddijn

[00:12:55] Oh, no, it’s generic, just not a big change. I think we see more way to a dust type of content in the automotive industry. We saw way obviously revealed automotive, but still it was an important deal for us that that came through. So that’s a positive. I think the biggest plus for us was that we won also contracts for new technologies and we will start shipping in 21, 22. You know, we said in earlier discussions that we fully moving towards online presence of all of our products and services. And that has been well received by the industry. And we warn early subscribers to that vision earlier this year. So it’s full steam at. Very happy also that it is clear direction to all the engineering teams, the product teams. The route we’ve chosen is being validated by those early wins. And it gets a lot of direction and generally speaking, a move to an online life. And I think that’s a bit further down the line. There’s going to be very important because we see further opportunities for simplifying our offering. When everything is go online, we can really concentrate our efforts in that domain and that will help us to reduce complexity in our overall product portfolio. To give you a bit more color on that, if everything is embedded there, are there variants of different flavors, different operating systems, different screen sizes and so on and so forth? All those products require significant localization installation efforts, and those efforts often run in the millions of euros per contract. And we think that we can leverage these online technologies to reduce those costs and concentrate more on core product activity development and that you, you know, should lead us to a to a better and better place and better future.

Francois Bouvignies

[00:15:30] Mm hmm, that’s interesting. Your online comments and I mean, how do you price them into a customer? I mean, the value of the contract increased because of the online or because of map pricing may be going down. So it kind of offsets this decline. And basically, you think the costs will decrease more than the price increases. How should we think about this?

Harold Goddijn

[00:15:54] I think I think the longer term effects is a further simplification of our product portfolio. That’s really what we are trying to achieve, should get more concentration in core products we’re doing really well. And then the integration costs typically will go down when services are delivered in line, a framework. We don’t see a big impact on pricing as if as a result of going online, I think it’s generally speaking, a wash. But we’re excited about the direction it will deliver a much improved and user experience, which allows us to better compete with mobile experiences. And generally speaking, the quality of our products will go to a higher level than what we have seen before and a higher level of end user satisfaction.

Francois Bouvignies

[00:16:54] And maybe just on you talked about before, you don’t know if you’re going to get rewarded, but certainly for Q4. But do you see any change in the competitive landscape? I mean, it’s a very dynamic industry. The mapping we see a lot of, you know, startups or local startup, I should say. So Google trying for maybe more into the contract in the last three months or so. I mean, do you see any change on the on, you know, people you are or companies that you are competing with?

Harold Goddijn

[00:17:32] It’s we haven’t seen a big shift or big wins that we’re all aware of, it’s always a tricky environment. You’re right, there’s a lot of flux in the industry. But I think we so far we’re holding course and everything is going to go according to plan. So no major shift in the competitive landscape that we are that we have seen in the last quarter.

Francois Bouvignies

[00:17:59] Ok, that’s. And last one for me and I will leave the floor to my peers around heightmap. So we talked about a dust’s content, you know, going up. Obviously, the pandemic created some uncertainty around the roadmap for autonomous driving, like you described last quarter. How is it going? Your HD maps? I mean, now we are three months. Probably your customers have more visibility. You know, do you see the activity resuming for four HD maps? And how should we think about the contracts compared to, for example, what you said last year at your capital markets, that you were rewarded, of course, on the small value market of 60 percent of the deals? You know, how is it evolving these HD maps in your in your pipeline?

Harold Goddijn

[00:18:59] Well, as I said, so agea maps are applied in different ways throughout the technology stack. But if I look at the market for self driving, the progress that we’ve seen there, I have to say that has disappointed this year. I think there are two things playing a role here. First is the complexity of self driving technology thing that has been underestimated to step from, let’s say two and a half level two and a half to three is a little bigger than most car makers had anticipated, is our impression. And the second one is justification of the system cost. The total bill of material for self driving seems to be higher than originally anticipated, and the ability for the market to absorb those costs seems to be limited. So overall, it’s been disappointing in that domain. I don’t think car makers are losing sight of the end game. They’re still working and investing and so is our tier ones and all the suppliers and working hard to make the technology better and cheaper and democratize that. But net, net, I think the developments in 2020 for us as a vendor, as a system component for automotive self-driving systems in large scale applications, that’s been disappointing.

Francois Bouvignies

[00:20:43] Mm hmm. And what can you do about that? I mean, do you do you intend to change, therefore maybe the investment or the development of HD? Because you see that is not, you know, very high demand at the moment. So all you want to continue invest and see how it looks like in, let’s say, one year, six months time.

Harold Goddijn

[00:21:07] Well, there are two levels of cost and investment going into creation of the maps. One is the technology itself to produce what we call the pipeline. And there we keep motoring. We keep investing in optimizing that pipeline for creation of energy maps. And again, this is not just for H.M.S. is also atus features. So this is a combination of video processing, a lot of processing, applying of machine learning and visual recognition, all that. That’s a complete domain of technologies and pipeline that we worry, worry quite heavily investing in. And that is, you know, overall to make the production of maps as maps, as maps, scalable, affordable and to a high standard of quality. And that that investment is continuing. If you look at the other side, so the actual production of HD maps, we have slowed it down to an extent or we have not increased activity there. We’re not extending our coverage at this stage. So we are we have a product for the major roads in North America and Western Europe, where we provide maps to the industry for development as well and so forth. That will continue. But we are not accelerating the coverage. The main effort now is to reduce cost of production and maintenance of those maps, and that continues unabated.

Francois Bouvignies

[00:23:06] That’s a great thing, Carol. Thank you. Thank you.

Operator

[00:23:12] Thank you. That’s a reminder. Ladies, gentlemen, the. And what if you wish to ask a question? Your next question comes from the line of Marc Hesselink from ESA.

Marc Hesselink

[00:23:24] Hi, it’s Mark, my first question on the on the Uber contract. Could you explain a bit more? Was it a request for proposal from the company or was it because you’re already in a continuous discussion with them, an extension of that initial contract? And could you maybe share why they selected you? And then what is X traffic versus the earlier contract that that you had with Uber and maybe, for example, also includes the app that’s being used by Michael Juneau’s.

Harold Goddijn

[00:24:04] Yeah, so location, location, technology obviously is super important to her and it and it’s a big ingredient of the primary process is for allocation of trips, calculating capacity. If you if you improve there a little bit, it has a big impact on the bottom line, waiting times, customer service and so forth. So for Uber, it’s really important to have good control over the software to run those systems. They are a core part of their core IP and core technology base that makes Uber what it is. And of course, they don’t want to rely on standard stuff. They want to have a great deal of influence to find to teach those train systems to make them better over time. Our relationship with Uber goes back a long time. We can provide them with all the technology they need to do that, you know, all that that planning and all that really reliable. It’s a function of the network. Disneyfication attributes speed profiles, traffic information, instant data, poage and so on. So that platform has been growing and they have built it over the years.

[00:25:40] And there’s now heavy users of the platform as well, and hence the desire to continue that partnership and extend that relationship and extend extended licensing contract. So it’s a continuation of a partnership that’s been in the making for some member. Exactly. We’re probably for five years always takes time for those technologies to mature. But there’s now a solid body of technology running on top of our maps are rooting and data and traffic information. And it was a logical step to extend that, but also deepen that. So one of the things we are keen about is that if there are areas in the map that we have any text that sells better or additions to the map that are relevant to certain customers or certain use cases, then we give Uber full control to edit and change.

[00:26:39] Those data have been certified following all sorts of training programs, and that helps us to keep the cost of maintenance down, but also improve the accuracy and freshness of our maps. So although you see a type of partnership that works well in every dimension, so, you know, it was a great result for us, but also I think for Uber that we found a good way forward and start a next chapter in that in a partnership.

Marc Hesselink

[00:27:17] I think and the consumer to come to you sometime or

Harold Goddijn

[00:27:17] No that is that may be, but that’s probably not on the charts, a driver at the back office or based on the total technology, but the linking to the user information is typically done to a native application like Google Maps or Apple Maps.

Marc Hesselink

[00:27:50] Quickly, a second question is, I can remember from the previous quarter that you had to adjust your backlog value a bit because some of the old automotive contracts, given the covid-19 impact, became a bit less. What have you seen over the over the third quarter if your expectations are changed? And did you see any of that impact again in this quarter?

Harold Goddijn

[00:28:16] Well, I think we’re kind of struggling to see from the trees, from the from the from the movie is a couple of things that are playing up here. So we had of course, we had capacity issues for pure production during the lockdown period. We’ve seen movements in stock levels at car makers and inventory levels. We have seen movements in demand. But it’s not clear whether we have reached a new state, a new level for where we can start planning. It’s difficult to weigh all those different elements for all car makers collectively. So we also don’t know whether they’re a spend of demand, the kind of unfulfilled demand during the time period, whether that showed up all of a sudden in September or whether it will show up in Q4. It’s just a little bit early to say how those different events and effects influence the underlying demand for new cars. And I think if you look a little bit forward to 2021, then, you know, I have a hard time predicting what the overall economic outlook for 2020 will look like and how that will affect car manufacturing. 2021, I don’t know. I don’t think it’s going to be a complete disaster at this point, I think. But I also don’t think that we will go back to the levels we have seen in 2019, but it quite a bit of bandwidth between that and that bandwidth will have a significant impact on the calculation of our backlog as well. And we see that that mixed messaging coming from the car makers as well. We ask them and they change their outlook much more frequently and significantly than what we are used to in the car industry. And it’s also kind of an indicator of a level of uncertainty that we haven’t seen before. But again, I’m not planning for disaster. I think it will be OK. But I also don’t think that we will reach the volumes that we have seen in in the pre covid period. I think there’s quite a quite a significant bandwidth in between those outlooks. You know, we learn with every month and every quarter and may be the forecasts from the car makers will also show a trend to solidifying and less variation.

Marc Hesselink

[00:31:11] Ok, thank you. And a final question about the last couple of years, obviously a very gradual increase in the take rates and more recently as a big jump, but also in electrification, the sales of those, uh, vehicles deals who see that as a positive effect when you’re on the take rates. Is that something that’s already visible for you?

Harold Goddijn

[00:31:35] Well, I would overestimate the volumes, the volumes we see this, all the signs are hungry. Let’s face it, so massive investment programs, new cars coming off the line more frequently than what we have seen before and also much higher end user acceptance of electric cars. And we see really the beginning of a significant shift. But it’s the beginning and we’re coming from very, very low numbers. I think we were used to two percent of the total manufacturing base was electric. But it’s going up and it’s changing and shifting and it has a positive effect on the attachment rate. So a lot of the key things in this is Ranger for four vehicles. An accurate range prediction has a positive effect both on the peace of mind, but also the bill of material, the car. And it has a positive effect on you because you don’t have to put excess capacity to reduce that range anxiety.

[00:32:58] So it is very, very important drive to get a rate prediction and if it’s routine sorted and provide drivers with accurate views on actual range, real life range, not the sales brochure type of range that we that we’re used to the what it means in reality for me as a driver. And we will see limitations of this technology, you know, most likely in 100 percent of the vehicles. That’s our expectation, maybe 90 percent. But I have a hard time to believe that this will be a standard feature in most, if not all electric vehicles. And that ties in very neatly in the location technology and the navigation and the mapping and the routine and the elevation data in weather data and so on and so forth. So we’re assembling a complete suite of technologies to anticipate the demand. We are already the train has left the station, as you can imagine, to our shipping rerouting process already, but a significant body of investment, of research going into improving those products and collecting all the relevant data that are needed to come to a high degree of accuracy. Net, net, yes. Positive growing percentage of electrical vehicles. That means higher attachment rates than what we’re used to. But the real effects of our PNL now is still limits.

Marc Hesselink

[00:34:47] Ok, very clear. Thank you.

Operator

[00:34:51] Thank you. The next question comes from the line of Wim Gille. Your line is open.

Wim Gille

[00:34:59] Yes, a very good afternoon, maybe in a couple of questions, for starters, you mentioned during the call that if you look at the bigger picture, the developments for HD maps has been quite or somewhat disappointing for you. However, if I look at the robotics world, I predominantly Winmar, but also the big Chinese guys, they are progressing quite fine. In fact, they are moving to the next level, which will facilitate autonomous driving also for consumers. So how should I look at this divergence in the technology race with the TESTI continue to advance while the OEMs are falling behind? It’s still going to be a problem for your strategic positioning further down the road. That would be my first my first question. The other question I would have is another kind of change that we see or which we saw in the quarter. If you look at the IP operating systems, traditionally the that market was dominated by Linux and BlackBerry. But we see that Android is making some inroads in that area. Despite the fact that they don’t have any safety certificates and what have you. Is the fact that Android is making inroads into the operating system of the IBAI units. Is that going to be a issue for you from a strategic point of view, or would you say that for you? That doesn’t really make a big difference, given the products that you have in the market. And last question I would have is in the press release or do you mention that you process close to two billion changes a month? On top of my mind, you were ready. You were already processing two billion a month when you presented the last numbers to the capital markets day. So what is kind of the this is like more of a rounding thing or the other productivity gains, if you will? Are those plateauing at the moment?

Harold Goddijn

[00:37:33] Yeah, these things, uh, make quick note so on the on the map, and it’s so I don’t forget. So first, some thoughts around Robotech. She’s so Robotech typically operate in a confined geographical area. But are using all the road types in that geographical area, so, you know, from our perspective, you cover a defined predefined geographical area in its entirety. The second element is that in taxes, the pressure for building material is a little less high because they are capital goods amortized over long periods of time, low of kilometers. So it’s OK to stuff those cars with a ton of sensors and computing power. And it does have a big impact on the economics. So the technology that’s used there and economic conditions are kind of opposite of what the car industry needs.

[00:38:59] Car industry is looking for all the roads in North America and so you get long stretch of road. Initially, the highways, the closed access roads are completely covered. And secondly, there’s a high pressure on the building material. So it needs to run in a limited footprint and storage, processing power and so and so forth. So you’re really trying to solve a different product problem there in the automotive space? Our technology is mostly geared towards the automotive customer base.

[00:39:44] We are playing around a little bit in the robo taxi market, but it’s very you know, it is more clear technology standard. There is not a clear route forward, but we have you know, we have our toe into that market, but we don’t see it for us as a critical part of we can complain because the problem is we need to solve for volume applications and technology deployed. There are of different nature. Second question are Android. I think it can be a little bit confusing, but Android and Google are different things. So Android is the open source operating system, does runs on top of Linux, and we see this operating system making inroads in all sorts of devices, consumer devices, mobile phones, obviously tablets. All sorts of hardware sparked by the end of the operating system, and that is because it’s free of charge, there’s no license fee there, and it’s very well supported by the silicon industry as well. So there’s a ton of hardware and a ton of experience in integrating and running Android on top of kind of vanilla flavor hardware. We really encourage the automotive industry to go that route as well because it makes life easier for everybody. You have a much richer environment. You have hardware speculators. You can go faster at lower cost and make. And have lower integration costs as well. So I think it’s a good thing for the industry if there is some level of standardization that will make it easier to deliver end user experiences to meet the expectations of today and tomorrow. Then second, production of maps has a two billion number, it’s a kind of a useful indicator because it gives you a flavor of the, you know, the throughput and the amount of processing that’s happening and keeping those maps up to date. And we have we have internal metrics as well for change. And, you know, the weight of a certain change is to change has an effect on the real quality and the end user experiences it. So I wouldn’t put too much weight on that that that single number. But what I can tell you is that we’re making we’re feeling good about process progress we’re making on our mapmaking technologies and we see efficiency improvements coming through everywhere. I spoke about HD image recognition, all those technologies. We are really seeing significant improvements in throughput and reduction in cost for modification. And that is itself good news. But it’s also a necessity. It’s not that we are. So there’s a real urgency to make further improvements there because the requirements are going up all the time. People are more accurate maps, better maps, more detail, more attributes, bigger geographical coverage. So improving efficiency for us is a is a key driver of our of our strategy. And we think we can make further progress and significant progress in building that efficient mapmaking platform. We alluded also adding partnerships, what we do with where we do as other companies as well. That also helps us to find high value changes in the data database that we can then process at low cost. So there’s is a big, big effort and a lot of focus on making that platform efficient, high throughput and deliver value for money.

Wim Gille

[00:44:06] And maybe as a bit of a follow up on your remarks, which is very consistent with some of the things we’ve heard in the past, that if you look at Robotech sees that they are essentially solving a different puzzle which need to have upon this driving, which is working on every road in every jurisdiction and circumstance, which is different from a global action. But given the fact that if you if you if you look at kind of the simple picture, it is basically the same problem sets that we have to solve. This is quite a bit more complex than the problems that the OEM, the technology or robotics you guys need to solve. So how come you also hear technologies, for that matter, are more or less well embedded in the robotics? You will. And why do these guys do everything themselves and why they try to invent the wheel themselves rather than basically rely on the market standards which you inherited from the Shah?

Harold Goddijn

[00:45:26] Well, that is because they are systems that are in development and they can use different technology, digital technologies to deploy don’t need to scale. You know, if I go driving around with a glider and I just record old data stored on the hard days of God knows how many megabytes on a on a disk of how many megabytes. That’s not a problem. I don’t have to do much in order to create that map because it’s very it’s not compressed or the need for compression is not really there. There are other problems that are much more urgent for those robotics guys. And because those are closed proprietary systems, the additional cost of scanning a neighborhood or city are not prohibitive. If they had to do that for the whole world, you would be trying to solve a different problem, but that’s not a state where the industry is the state.

Wim Gille

[00:46:36] Then maybe lastly, obviously, you announce to the partnership with Microsoft already quite, quite a few quarters ago. Can you give us a bit of an update on where you stand in terms of the number of API calls and also maybe some of the recent news around, let’s say, the progress that that Microsoft is making into the automotive space?

Harold Goddijn

[00:47:07] I don’t have the actual API calls, but what we can see is further deepening of the relationship. So the traffic is going up, the use cases are expanding. We’re moving into the being a mapping platform now that will also drive a lot more traffic and interaction. So I would say that that relationship, a partnership with Microsoft, is on track and developing in line with our expectations. They have a kind of an independent activity in automotive, they’re coming from a different angle, and that is provide to provide a cloud platform to collect vehicle data, interact as customers, do data analytics and so on and so forth. They can do it independent from us or any other unit vendor. We are aware of their plans. We are aware of the commercial success. We collaborate where possible. That is a good exchange and collaboration there. But they are different products. So you have a cloud based data analytics platform and a more embedded or inka location technology platform that we are providing and our ways to connect those two systems, obviously. But I think it’s important for us is at the commercial level, that’s all. Well, and we have a fairly good picture of what’s happening in the marketplace.

Wim Gille

[00:48:55] It’s very much. Thank you.

Operator

[00:49:00] We have no further questions if you wish to continue.

Megan Daniell

[00:49:04] Thanks. There are no further questions I’d like to thank you all for joining us this afternoon. An operator, as you can see, close the call.

Operator

[00:49:13] Thank you, ladies and gentlemen, that does conclude today’s presentation. Thank you all for participating. And you may now disconnect.

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