TomTom NV said revenue for the third quarter reached €375 million ($483.8 mm), up 3% from the prior year and up 4% from the second quarter. The Dutch maker of GPS gear said it grew market share significantly in both in Europe and the United States, but that profits fell by more than a third due largely to the strengthening of the U.S. dollar.


The company said its gross margin shrank 400 basis points to 48% from the same quarter a year ago. EBITDA margins also shrank by 400 points to 22% from the year ago quarter.


The company reported an operating result of €55 million ($71.0 mm), down 21% from the third quarter of 2009 on a 400 point decline in operating margin. Net profit fell by 37% to €19 million ($26.5 mm).


Marketing expenses for the quarter amounted to €17 million ($21.9 mm), a sequential decrease of 28% and a year on year decrease of 19% (Q2 2010: €24 million; Q3 2009: €21 million). This sequential decrease results from the seasonal pattern of TomTom's business with higher marketing spend in the second and especially the fourth quarters. Total marketing expenses represented 5.9% of Consumer revenue, a decrease of 2.9 percentage points sequentially and 1.4 percentage point decrease year on year (Q2 2010: 8.8%; Q3 2009: 7.3%). Marketing expenses will increase significantly in the fourth quarter.


Balance sheet


As of the end of Q3 2010, accounts receivable together with other receivables had decreased by €9 million m($11.6 mm) to €283 million ($365.1 mm). The inventory level was €80 million ($103.2 mm), an increase of €17 million, or 27%, in comparison to the previous quarter and an increase of €2.2 million or 3% compared to the same quarter last year (Q2 2010: €63 million; Q3 2009: €78 million). Cash and cash equivalents at the end of the quarter were €268 million ($345.7 mm) as a result of cash generated from operating activities in the quarter of €43 million offset by the early debt repayment of €125 million and investments in intangible assets and property, plant & equipment of €16 million.

Guidance


The company said it remains on track to meet its earlier guidance for the full year of broadly flat revenue and EPS compared to 2009. That forecast calls for flat sales into the consumer market, which includes personal GPS devices used for fitness and outdoor. The revenue of the Consumer business unit over the past quarter amounted to €293 million ($378.0 mm) and was flat compared to the same quarter of last year. A reduction in hardware sales was fully offset by growth in content and services. Sequentially Consumer revenue increased by 7% (Q2 2010: €273 million) driven by higher PND units and increased content and services sales.

“Our Consumer business unit performed well in a soft market through strengthened market share, slowing price declines and an increased contribution from service and subscription sales,” said TomTom’s CEO Harold Goddijn. “We made good progress in securing new automotive contracts and our Business Solutions unit continues to deliver strong increases in subscriber numbers. We are focused on broadening our revenue base and on rolling out high quality content and services to our customers and I am pleased with the progress we are making.”