MiX Telematics Announces Financial Results for Second Quarter and First Half of Fiscal Year 2014

07 Nov 2013

Midrand, South Africa,  Nov. 7, 2013 — MiX Telematics Limited (NYSE: MIXT, JSE: MIX), a leading global provider of fleet and mobile asset management solutions delivered as Software-as-a-Service (SaaS), today announced financial results for its second quarter and first half of fiscal year 2014, each of which ended September 30,  2013.

“We are pleased to report strong second quarter results, which were highlighted by 25% subscription revenue growth and over 27,000 subscriber additions that pushed our total subscriber base over the 400,000 milestone,” said Stefan Joselowitz, Chief Executive Officer of MiX Telematics. “Adoption of both fleet and consumer products is increasing in our target markets, and MiX Telematics is well positioned to be a prime beneficiary of growth opportunities as we have already achieved meaningful scale, built a global distribution network, and offer scalable, state-of-the-art solutions that yield a powerful return on investment.”

Financial Performance for the three months ended September 2013

Revenue: Total revenue was R315.0 million ($31.2 million), an increase of 10.9% compared to R284.0 million ($28.1 million) for the second quarter of fiscal year 2013. Subscription revenue was R207.1 million ($20.5 million), an increase of 25.5% compared with R165.0 million ($16.3 million) for the second quarter of fiscal year 2013. This was driven primarily by an increase of over 89,000 vehicles under subscription since the end of the second quarter of fiscal year 2013. Hardware and other revenue was R107.9 million ($10.7 million), a decrease of 9.3% compared to R119.0 million ($11.8 million) for the second quarter of fiscal year 2013, when hardware revenues were elevated due to the upfront hardware purchases associated with two major contracts in the North American fleet solutions segment.

Gross Profit: Gross profit was R204.2 million ($20.2 million), an increase compared to R185.5 million ($18.4 million) for the second quarter of fiscal year 2013. Gross profit margin was 64.8%, compared to 65.3% for the second quarter of fiscal year 2013.

Operating Profit: Operating profit was R44.2 million ($4.4 million), representing an operating margin of 14.0% and compared to R41.6 million ($4.1 million) for the second quarter of fiscal year 2013 when the operating margin was 14.6%. The second quarter of fiscal year 2014 included additional investments in headcount, expenses incurred by the start-up operation in Brazil and non-recurring expenses of R8.5 million ($0.8 million) related to the initial public offering (“IPO”) of ADRs on the NYSE. These additional costs were partially offset by an unrealized foreign exchange gain of R10.5 million ($1.0 million) relating to the IPO proceeds, which are maintained in U.S. dollars and are therefore sensitive to R:$ exchange rate movements. The combination of these factors had a slightly dilutive effect on the quarter’s operating margin.

Profit for the period: Profit for the period was R30.3 million ($3.0 million), compared to R28.8 million ($2.9 million) in the second quarter of fiscal year 2013. Earnings per diluted ordinary share was 4 South African cents, consistent with the second quarter of fiscal year 2013.

On a U.S. dollar basis, and using the September 30, 2013 exchange rate of 10.1012 rands per U.S. dollar, and at a ratio of 25 ordinary shares to one ADR, profit for the period was $3.0 million, or 10 U.S. cents per diluted ADR.

Adjusted EBITDA: Adjusted EBITDA, a non-IFRS measure, was R66.9 million ($6.6 million) a decrease of 3.5% compared to R69.3 million ($6.9 million) for the second quarter of fiscal year 2013. The Adjusted EBITDA margin for the second quarter of fiscal year 2014 was 21.2%, down from the 24.4% Adjusted EBITDA margin in the second quarter of fiscal year 2013 due primarily to increased operating costs as a result of an investment in headcount, as well as the impact of the expected losses incurred by the start-up operation in Brazil. Operating profit was R44.2 million ($4.4 million) representing an operating margin of 14.0% and compared to R41.6 million ($4.1 million) for the second quarter of fiscal year 2013 when the operating margin was 14.6%. Adjusted EBITDA is defined as profit for the period before income taxes, net interest income/(expense), depreciation of property, plant and equipment including capitalized customer in-vehicle devices, amortization of intangible assets including capitalized in-house development costs, share-based compensation costs, transaction costs arising from the acquisition of a business, restructuring costs, profits/(losses) on the disposal or impairments of assets or subsidiaries, certain non-recurring initial public offering costs, and unrealized foreign exchange gains/(losses).

A reconciliation of Adjusted EBITDA and Adjusted EBITDA margin for the three months ended September 30, 2013 and 2012 is provided in the financial tables that accompany this release.

Statement of Financial Position and Cash Flow: At September 30, 2013, MiX Telematics had R767.8 million ($76.0 million) of cash and cash equivalents, an increase from R150.3 million ($14.9 million) at June 30, 2013 due primarily to the R649.9 million ($65.5 million) in net proceeds (before expenses) raised from the IPO during the second quarter.

MiX Telematics generated R44.3 million ($4.4 million) in net cash from operating activities for the three months ended September 30, 2013 and invested R32.8 million ($3.2 million) in capital expenditures during the quarter, leading to free cash flow of R11.5 million ($1.1 million) for the second quarter of fiscal year 2014, compared with free cash flow of R9.1 million ($0.9 million) for the second quarter of fiscal year 2013. Free cash flow is determined as net cash generated from operating activities less capital expenditure per investing activities.

Financial Performance for the six months ended September 2013

Revenue: Total revenue for the first six months of fiscal year 2014 was R613.4 million ($60.7 million), an increase of 8.7% compared to R564.3 million ($55.9 million) for the first half of fiscal year 2013. Subscription revenue increased to R401.3 million ($39.7 million), up 23.7% from R324.4 million ($32.1 million) for the first half of last year. Subscription revenue growth was driven primarily by the increased number of vehicles under subscription since the first half of fiscal year 2013.

Operating Profit: Operating profit for the first six months of fiscal year 2014 was R80.3 million ($7.9 million), up from R76.3 million ($7.6 million) posted in the first half of last year. The operating margin for the first half of fiscal year 2014 was 13.1%, compared to the 13.5% posted in the first half of last year.

Adjusted EBITDA: Adjusted EBITDA was R132.1 million ($13.1 million) compared to R129.9 million ($12.9 million) in the first half of fiscal year 2013. The Adjusted EBITDA margin for the first half of this year was 21.5%, slightly below the 23.0% posted in the first half of fiscal year 2013, primarily due to increased operating costs as a result of an investment in headcount, as well as the impact of the expected losses incurred by the start-up operation in Brazil. Adjusted EBITDA is defined as profit for the period before income taxes, net interest income/(expense), depreciation of property, plant and equipment including capitalized customer in-vehicle devices, amortization of intangible assets including capitalized in-house development costs, share-based compensation costs, transaction costs arising from the acquisition of a business, restructuring costs, profits/(losses) on the disposal or impairments of assets or subsidiaries, certain non-recurring initial public offering costs, and unrealized foreign exchange gains/(losses).

A reconciliation of Adjusted EBITDA and Adjusted EBITDA margin for the six months ended September 30, 2013 and 2012 is provided in the financial tables that accompany this release.

Segment commentary for the six months ended September 2013

Regional performance

Africa: Total revenue from the Africa region represented 52.5% of our business for the first half of the fiscal year.

Africa consumer solutions: The Africa consumer business contributed 27.0% of the total revenue for the first half of the fiscal year. Subscribers under management grew 13.3% and subscription revenue growth was up approximately 10%. Adjusted EBITDA of R49.1million ($4.9 million) grew 23.3% versus the comparative period last year. While total revenue was flat year over year, the first half of the fiscal year 2013 included R10.7 million ($1.1 million) of revenue related to connection incentive bonuses from our cellular network provider, which we opted to forgo from July 2012 in favor of lower data costs.

Africa fleet solutions: The Africa fleet business contributed 25.5% of total revenue and was up 16.6% compared to the prior fiscal year. At an Adjusted EBITDA level it grew 12.8% compared to the first half of fiscal year 2013 and posted a 29.9% margin.

Europe fleet solutions: The European business represented 11.2% of our total revenue for the first half of fiscal year 2014 and despite continuing economic headwinds in the region, grew subscribers by 14.6%. The restructuring actions undertaken in the first quarter contributed to Europe showing a small positive contribution at the Adjusted EBITDA level for the first half of fiscal year 2014.

North America fleet solutions: The Americas represented 10.2% of our total revenue. North American subscribers grew by 16.7% compared to the first half of fiscal year 2013. We believe the premium fleet market is highly under penetrated in the Americas, and are investing in sales and distribution capacity in the region. The region posted a loss of R2.1 million ($0.2 million) at the Adjusted EBITDA level.

Middle East and Australasia fleet solutions: The Middle East and Australasia region grew 42.5% year over year, and represented 25.1% of total first half revenue. The Adjusted EBITDA was flat primarily due to an investment in headcount and infrastructure necessary to support continued growth in this region.

Brazil fleet solutions: Our Brazil operation launched last quarter in São Paulo and showed modest revenue for the six month period. Brazil made an expected loss amounting to R5.4 million ($ 0.5 million) at the Adjusted EBITDA level and is not expected to break even for the current fiscal year.

International CSO fleet solutions and development: MiX International is a central services organization that wholesales our products and services to our regional operations and distributors who in turn, interface with our end-customers. MiX International showed growth both at the revenue and Adjusted EBITDA level.

Business Outlook

MiX Telematics has translated U.S. dollar amounts in this Business Outlook paragraph from South African rand at the exchange rate of R10.1658 per $1.00, which was the R/$ exchange rate reported by the South African Reserve Bank as of November 5, 2013.

Based on information as of today, November 7, 2013, the Company is issuing the following financial guidance for the full 2014 fiscal year:

  • Revenue - R1,270 million to R1,300 million ($124.9 million to $127.9 million), which would represent revenue growth of 8% to 11% compared to fiscal year 2013.
  • Subscription revenue - R825 million to R833 million ($81.2 million to $81.9 million), which would represent subscription revenue growth of 20% to 21% compared to fiscal year 2013.
  • Adjusted EBITDA - R270 million to R280 million ($26.6 million to $27.5 million).
  • Earnings per diluted ordinary share of 15 to 16 South African cents based on 770 million diluted ordinary shares in issue, an exchange rate of R10.1658 per $1 and based on an effective tax rate of 28% to 31%. At a ratio of 25 ordinary shares to one ADR, this equates to earnings per diluted ADR of 37 to 39 U.S. cents.

For the third quarter of fiscal year 2014 the Company expects subscription revenue to be in the range of R209 million to R214 million ($20.6 million to $21.1 million) which would represent subscription revenue growth of 19% to 22% compared to the third quarter of fiscal year 2013.

The key assumptions used in deriving the forecast are as follows:

  • Growth in subscription revenue and vehicles under subscription are based on expected growth rates related to market conditions and takes into account growth rates achieved previously.
  • Costs have been increased to take into account the Company's strategy of investing in sales and marketing and development and also include costs necessary to operate as a U.S. listed company.

The forecast is the responsibility of the board of directors and has not been reviewed or reported on by the Company’s external auditors. The Company’s policy is to give guidance on a quarterly basis, if necessary, and does not update guidance between quarters.

The information disclosed in this “Business Outlook” paragraph complies with the disclosure requirements in terms of paragraph 8.38 of the JSE Listings Requirements which deals with profit forecasts.

Quarterly Reporting Policy in respect of JSE Listing Requirements

Following the listing of the Company’s ADRs on the New York Stock Exchange, the company has adopted a quarterly reporting policy. As a result of such quarterly reporting the company is, in terms of paragraph 3.4(b)(ix) of the JSE Listings Requirements, not required to publish trading statements in terms of paragraph 3.4(b)(i) to (viii) of the JSE Listings Requirements.

Conference Call Information

MiX Telematics management will also host a conference call and audio webcast at 8:00 a.m. Eastern Time (3:00 p.m. South African Time) today, November 7, 2013 to discuss the Company's financial results and current business outlook.
The live webcast of the call will be available at the “Investor Information” page of the Company’s website, http://investor.mixtelematics.com.

To access the call, dial 1-888-500-6950 (within the United States) or 0 800 999 558 (within South Africa) or 1-719-325-2495 (outside of the United States).

A replay of this conference call will be available for a limited time at 1-877-870-5176 (within the United States) or 1-858-384-5517 (within South Africa or outside of the United States). The replay conference ID is 1605602.

A replay of the webcast will also be available for a limited time at http://investor.mixtelematics.com.

About MiX Telematics

MiX Telematics is a leading global provider of fleet and mobile asset management solutions delivered as SaaS to customers in 112 countries. The Company’s products and services provide enterprise fleets, small fleets and consumers with solutions for safety, efficiency,risk and security. MiX Telematics was founded in 1996 and has offices in South Africa, the United Kingdom, the United States, Uganda, Brazil, Australia and the United Arab Emirates as well as a network of more than 130 fleet partners worldwide. MiX Telematics shares are publicly traded on the Johannesburg Stock Exchange (JSE: MIX) and MiX Telematics American Depositary Receipts are listed on the New York Stock Exchange (NYSE: MIXT). For more information visit www.mixtelematics.com.

 

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