Telematics revenue in Q3 '14 was €28 million, which reflects a 34% growth year on year
(Q3 '13: €21 million). The recurring SaaS revenue for the quarter was €20 million compared to €15 million in the same quarter last year, an increase of 32% year on year. This increase is driven by the ongoing growth of the WEBFLEET subscriber base, both organically as well as through the recent acquisition in France. At the end of the third quarter Telematics reported an installed base of 414,000 subscribers, a 34% increase compared to 310,000 at the end of Q3 '13. Telematics now services over 31,000 customers.
Year on year growth in hardware revenue in Q3 '14 included the impact of the introduction of the new PRO PND devices and PRO 8 series driver terminals in September. The new PRO 8 driver terminals are connected to the WEBFLEET platform, and are designed to seamlessly integrate information captured in the field into back-end systems enabling decision-making based on real-time data. The PRO 8 series offers additional integration capabilities for customised Apps using the new PRO.connect API. It also comes with a ready-to-use mobile device management platform which extends WEBFLEET capabilities to fully integrate mobile workforce applications.
Hardware and Content & Services revenue split6
Hardware revenue for the quarter was €133 million (Q3 '13: €143 million). Content & Services revenue in the quarter was €102 million (Q3 '13: €101 million). As a percentage of revenue, Content & Services revenue accounted for 43% of total revenue for the quarter (Q3 '13: 41%).
Gross margin
The gross margin of the quarter for the group was 56.8%, 0.5 percentage points higher compared to 56.3% in Q3 '13. The reported gross margin in both years includes one-off provision releases. Excluding these one-off effects, the gross margin would have been 54.6% in Q3 '14 and 54.0% in Q3 '13. The year on year increase in gross margin was mainly due to higher margins on certain hardware products.
Operating expenses
Total operating expenses for the quarter were €125 million, in line with the same quarter last year (Q3 '13: €124 million). Year on year we increased our marketing expenses by €6.2 million to €19 million driven by advertising campaigns launched around sport and traffic within our Consumer business. We accelerated the amortisation of some legacy Navigation technologies resulting in a year on year increase in our amortisation of technology and database line. Our SG&A expenses in the quarter were lower than the same quarter last year in part due to a one-off reduction in costs.
Financial income and expenses
The net interest charge for the quarter was €1.0 million compared to €0.8 million in Q3 '13. The interest expense on the loan facilities in the quarter amounted to €0.7 million. The other financial result was a loss of €0.7 million for the quarter, which consisted primarily of foreign exchange loss on the revaluation of monetary balance sheet items.
Income tax
The net income tax expense for the quarter was €0.6 million (Q3 '13: €2.0 million). The effective tax rate (ETR) for the quarter was 10% versus an ETR of 15% in Q3 '13. The relatively low ETR reflects benefits from tax incentives, which are made available for companies with significant research and development activities in the Netherlands.
Net result and adjusted¹ EPS
The net result for the quarter was €5.8 million (Q3 '13: €11.4 million). The adjusted1 EPS in Q3 '14 was €0.07 (Q3 '13: €0.10).
Balance sheet
At the end of the quarter, trade receivables plus other receivables totaled €168 million compared to €175 million at the end of Q3 '13. The inventory level was €55 million, slightly less than the same period last year (Q3 '13: €56 million). Cash and cash equivalents at the end of the quarter were €279 million versus €228 million at the end of Q3 '13.
Current liabilities excluding deferred revenue were €371 million compared to €331 million at the end of Q3 '13. The year on year increase is because part of our borrowings is classified as current. We are scheduled to repay €75 million by the end of the current year of the €175 term loan that matures at the end of Q1 in 2016.
Deferred revenue was €139 million at the end of Q3 '14, compared to €115 million at the end of the same quarter last year. The main reason for the year on year increase is an increase of deferred revenue related to our lifetime maps and traffic in PNDs.
At 30 September 2014 we reported a net cash position of €104 million (Q3 '13: net cash of €52 million). Net cash is the sum of the cash and cash equivalents at the end of the period (€279 million) minus the borrowings (€175 million).
Cash flow
