Change percentages are based on non-rounded figures

Telematics generated revenue of €25 million in the quarter, which represents 29% growth year on year (Q1 '13: €19 million). This revenue increase was driven by strong growth in the WEBFLEET subscriber base and the related recurring revenue. The acquired Spanish business Coordina also contributed well. The recurring SaaS revenue amounted to €17 million for the quarter, 35% higher compared to Q1 '13. At the end of the quarter, Telematics reported an installed base of 348,000 active subscribers, which is an increase of 38% compared to the first quarter of last year.

In Q1 '14, Telematics launched LINK200, an entry-level track and trace product that can help small businesses take advantage of connected car technology. The device plugs directly into a vehicle’s on-board diagnostic system (OBD) port, allowing for self-installation by customers, which eliminates installation charges. LINK200 is offered on a rental basis as part of the newly introduced WEBFLEET Lite subscription and reflects Telematics’ introduction of bundled hardware and software rental models.

Telematics strengthened its product offering by entering into a partnership with Zebra Technologies, a global printing, barcode and radio frequency identification (RFID) specialist. This partnership will add additional fleet management data and mobile printing, such as receipts, invoices and barcodes on RFID labels, through our recently introduced LINK.connect API. This API allows third parties and integrators to connect additional in-vehicle devices and sensors via the new Bluetooth interface of Telematics LINK boxes.

Hardware and Content & Services revenue split⁵

Hardware revenue for the quarter was €106 million compared to €101 million in Q1 '13. Content & Services revenue in the quarter was €99 million, 1% lower compared to Q1 '13, mainly due to lower Licensing revenue. As a percentage of revenue, Content & Services revenue accounted for 48% of total revenue in Q1 '14.

Gross margin

The gross margin for the quarter was 57.1%, which is 1.3 percentage points higher compared to 55.8% in Q1 '13. The year on year increase was mainly due to higher margins on certain hardware products partly due to the strengthening of the euro against the US dollar.

Operating expenses

Total operating expenses for the quarter were €116 million (Q1 '13: €112 million). The increase in operating expenses reflects an increase in R&D expenses and amortisation of technology and databases, offset by slightly lower marketing expenses. The year on year increase in R&D expenses results from an amendment to the level of subsidies claimed against R&D personnel costs.

Financial income and expenses

The net interest charge for the quarter was €1.0 million versus an interest charge of €1.1 million in Q1 '13. The other financial result primarily comprises of foreign exchange losses of €1.2 million (Q1 '13: loss of €1.0 million).

Income tax

The net income tax gain for the quarter was €8.1 million versus a net income tax expense of €0.4 million in Q1 '13. The income tax gain in the current quarter was caused by a release of a tax provision following the finalisation of an overseas tax audit. Excluding the impact of the tax settlement the normalised effective tax rate (ETR) for the quarter was close to nil versus an ETR of 21.4% in Q1 '13. The lower 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 €7.6 million, of which €8.1 million reflects the above-mentioned tax settlement (Q1 '13: €2.2 million loss). The adjusted¹ EPS for Q1 '14 was €0.08, of which €0.04 relates to the above-mentioned tax settlement.

Balance sheet

Trade receivables at the end of the quarter equalled €110 million compared to €115 million at the end of Q4 '13. Inventory at the end of Q1 '14 was €46 million, €4 million higher compared to Q4 '13. Cash and cash equivalents decreased from €258 million at the end of Q4 '13 to €219 million at the end of Q1 '14.

At the end of Q1 '14 the carrying value of our outstanding borrowings was €174 million (Q4 '13: €173 million). The nominal amount of the outstanding borrowings excluding transaction costs was €175 million (Q4 '13: €175 million).

Current liabilities excluding deferred revenue were €333 million at the end of Q1 '14 (Q4 '13: €383 million). The quarter on quarter decrease was mainly driven by lower trade payables, tax and social securities and other accruals in Q1 '14. Trade payables amounted to €74 million,

€8 million lower compared to Q4 '13. Tax and social securities decreased by €9 million mainly due to the release of an income tax provision following the finalisation of the aforementioned overseas tax audit. Other liabilities and accruals at the end of the quarter equalled €131 million versus €174 million at the end of Q4 '13. The main reason for this decrease related to the settlement of sales related accruals and employee incentive plans, in some cases in a different quarter than last year.