TomTom profit returns but investors focus on weaker H2 margins
TomTom's Financial Performance and Market Reaction
Second Quarter Results and Market Response
July 15 (Reuters) - Dutch digital mapping specialist TomTom said on Wednesday it expected weaker margins in the second half of the year, sending its shares down 10% despite returning to operating profit in the second quarter.
The company, whose customers include Microsoft, Uber and Volkswagen, posted a first-half operating margin of 8% but reaffirmed full-year guidance of around 3%, implying a sharp slowdown in profitability in the second half.
EBIT and Revenue Details
Earnings before interest and taxes (EBIT) turned positive at €8.5 million, beating a consensus of €8 million as cost cuts boosted profitability.
Revenue fell 8% in the second quarter to €134.6 million ($153.8 million), compared with €135 million expected by analysts in a company-provided consensus.
Analyst Insights on Margins and Cash Flow
Margin Outlook for Second Half
The first-half performance implies second-half margins will be close to break-even, ING analyst Marc Hesselink told Reuters.
He said lower capitalisation was expected to weigh modestly on margins, partially reversing the first-half overperformance.
Free Cash Flow Analysis
TomTom's free cash flow swung to an outflow of €8 million in the second quarter from an inflow of €14 million a year earlier.
Long-Term Perspective
Hesselink said the deterioration in free cash flow was largely driven by working capital movements and did not alter his longer-term view.
Outlook and Future Growth
TomTom confirmed its full-year revenue outlook and sees a return to growth in 2027 after a year of transition between old and new contracts.
($1 = 0.8754 euros)
(Reporting by Mathias de Rozario in Gdansk and Ronan Corcoran; editing by Matt Scuffham and Bartosz Dabrowski)
