MiX Telematics Announces Financial Results for First Quarter of Fiscal Year 2019
MIDRAND, South Africa--(BUSINESS WIRE)--Aug 2, 2018--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 first quarter of fiscal year 2019, which ended June 30, 2018.
“ The first quarter marked a very strong start to the fiscal year. Subscription revenue grew more than 18% on a constant currency basis and adjusted EBITDA margin of close to 28% expanded over 450 basis points year-over-year,” said Stefan Joselowitz, Chief Executive Officer of MiX Telematics. “Our results were driven by ongoing robust demand globally from our premium fleet customers, across all verticals. MiX is well positioned to deliver against our long-term goals given our differentiated portfolio of products, a growing pipeline of global opportunities, and multiple levers to generate further margin accretion. ”
Financial performance for the three months ended June 30, 2018
Subscription revenue: Subscription revenue was R390.4 million ($28.4 million), an increase of 16.4% compared with R335.4 million ($24.4 million) for the first quarter of fiscal year 2018. Subscription revenue increased by 18.4% year over year on a constant currency basis. Subscription revenue benefited from an increase of over 66,000 subscribers, representing an increase in subscribers of 10.6% from July 2017 to June 2018. Subscription revenue also benefited from an increase in average revenue per user.
Total revenue: Total revenue was R456.8 million ($33.3 million), an increase of 12.6% compared to R405.7 million ($29.6 million) for the first quarter of fiscal year 2018. Total revenue increased by 14.4% year over year on a constant currency basis. Hardware and other revenue was R66.4 million ($4.8 million), a decrease of 5.5% compared to R70.3 million ($5.1 million) for the first quarter of fiscal year 2018.
Gross margin: Gross profit was R305.8 million ($22.3 million), as compared to R271.5 million ($19.8 million) for the first quarter of fiscal year 2018. Gross profit margin was 66.9%, consistent with the prior year’s first quarter.
Operating margin: Operating profit was R67.7 million ($4.9 million), compared to R42.9 million ($3.1 million) for the first quarter of fiscal year 2018. Operating profit margin was 14.8%, compared to 10.6% for the prior year’s first quarter. The margin expansion was attributable primarily to revenue growth leveraging our fixed overhead and ongoing cost management initiatives. Operating expenses of R238.0 million ($17.3 million) have increased by R6.5 million ($0.5 million) since the first quarter of fiscal 2018. Despite the 12.6% revenue increase described above, the increase in operating costs was limited to 2.8%.
Adjusted EBITDA: Adjusted EBITDA, a non-IFRS measure, was R126.4 million ($9.2 million) compared to R93.9 million ($6.8 million) for the first quarter of fiscal year 2018. Adjusted EBITDA margin, a non-IFRS measure, for the first quarter of fiscal year 2019 was 27.7%, compared to 23.1% for the comparative prior year period. The company reported a 28.7% Adjusted EBITDA margin in the fourth quarter of fiscal 2018, including a 1.3% uplift related to hardware sales not repeated in the current quarter.
Profit for the period and earnings per share: Profit for the period was R14.4 million ($1.1 million), compared to R33.9 million ($2.5 million) for the first quarter of fiscal year 2018. Earnings per diluted ordinary share were 2 South African cents, compared to 6 South African cents in the first quarter of fiscal year 2018. For the first quarter of fiscal year 2019, the calculation was based on diluted weighted average ordinary shares in issue of 586.6 million compared to 567.0 million diluted weighted average ordinary shares in issue during the first quarter of fiscal year 2018.
Profit for the period includes a net foreign exchange loss of R0.2 million ($0.02 million) before tax. A net foreign exchange loss of R5.0 million ($0.4 million) was recorded in the first quarter of fiscal year 2018. The Company’s effective tax rate for the quarter was 78.7%, compared to 14.0% for the first quarter of fiscal year 2018. Ignoring the impact of net foreign exchange gains and losses, and related tax consequences, the tax rate which is used in determining adjusted earnings below, was 28.4% compared to 30.8% in the first quarter of fiscal year 2018. The tax impact in respect of foreign exchange movements is set out in the reconciliation of adjusted earnings in the financial tables which accompany this press release.
On a U.S. Dollar basis, and using the June 30, 2018 exchange rate of R13.7255 per U.S. Dollar, and at a ratio of 25 ordinary shares to one American Depositary Share (“ADS”), profit for the period was $1.1 million, or 4 U.S. cents per diluted ADS.
Adjusted earnings for the period and adjusted earnings per share: Adjusted earnings for the period, a non-IFRS measure, was R48.7 million ($3.6 million), compared to R30.7 million ($2.2 million) for the first quarter of fiscal year 2018 and excludes a net foreign exchange loss of R0.2 million ($0.02 million). During the first quarter of fiscal year 2018, a net foreign exchange loss of R5.0 million ($0.4 million) was recorded. Adjusted earnings per diluted ordinary share, also a non-IFRS measure, were 8 South African cents, compared to 5 South African cents in the prior year comparative period.
On a U.S. Dollar basis, and using the June 30, 2018 exchange rate of R13.7255 per U.S. Dollar, and at a ratio of 25 ordinary shares to one ADS, adjusted earnings for the period was $3.6 million, or 15 U.S. cents per diluted ADS.
Statement of financial position and cash flow: At June 30, 2018, the Company had R225.6 million ($16.4 million) of net cash and cash equivalents, compared to R290.5 million ($21.2 million) at March 31, 2018. The Company generated R22.8 million ($1.7 million) in net cash from operating activities for the three months ended June 30, 2018 and invested R78.3 million ($5.7 million) in capital expenditures during the quarter, including investments in in-vehicle devices of R57.3 million ($4.2 million), leading to negative free cash flow, a non-IFRS measure, of R55.5 million ($4.0 million) for the first quarter of fiscal year 2019, compared with negative free cash flow of R64.0 million ($4.7 million) for the first quarter of fiscal year 2018. The Company utilized R19.1 million ($1.4 million) in financing activities in the first quarter of fiscal 2019, which included dividends paid of R16.9 million ($1.2 million). The Company utilized R30.0 million ($2.2 million) in financing activities in the first quarter of fiscal 2018. The cash utilized in financing activities in the first quarter of fiscal 2018 included the repurchase of 5.0 million ordinary shares, which resulted in a cash outflow of R18.7 million ($1.4 million) and dividends paid of R11.3 million ($0.8 million).
MiX Telematics has translated U.S. Dollar amounts in this Business Outlook paragraph from South African Rand at the exchange rate of R13.1760 per $1.00, which was the R/$ exchange rate reported by Oanda.com as of July 30, 2018.
Based on information as of today, August 2, 2018, the Company is issuing the following financial guidance for the full 2019 fiscal year:Subscription revenue - R1,624 million to R1,645 million ($123.3 million to $124.8 million), which would represent subscription revenue growth of 13.2% to 14.7% compared to fiscal year 2018. On a constant currency basis, this would represent subscription revenue growth of 13.5% to 15.0%. This constant currency growth is unchanged from our previous guidance. Total revenue - R1,864 million to R1,895 million ($141.5 million to $143.8 million), which would represent revenue growth of 8.8% to 10.7% compared to fiscal year 2018. On a constant currency basis, this would represent revenue growth of 9.1% to 10.9%. This constant currency growth is unchanged from our previous guidance. Adjusted EBITDA - R526 million to R545 million ($39.9 million to $41.4 million), which would represent an increase in Adjusted EBITDA of 19.0% to 23.3% compared to fiscal year 2018. Adjusted earnings per diluted ordinary share of 31.2 to 33.2 South African cents based on 587 million diluted ordinary shares in issue, and based on an effective tax rate of 28% to 31%. At a ratio of 25 ordinary shares to one ADS, this equates to adjusted earnings per diluted ADS of 59 to 63 U.S. cents.
For the second quarter of fiscal year 2019 the Company expects subscription revenue to be in the range of R401 million to R406 million ($30.4 million to $30.8 million) which would represent subscription revenue growth of 14.8% to 16.2% compared to the second quarter of fiscal year 2018. On a constant currency basis, this would represent subscription revenue growth of 15.1% to 16.6%.
The key assumptions used in deriving the forecast are as follows:Growth in subscription revenue and subscribers are based on expected growth rates related to market conditions and takes into account growth rates achieved previously. Achieving hardware sales according to expectations. Hardware sales are dependent on the volumes of bundled solutions selected by customers. An average forecast exchange rate for the 2019 fiscal year of R13.0900 per $1.00.
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 ” section complies with the disclosure requirements of paragraph 8.38 of the JSE Listings Requirements, which addresses profit forecasts.
Quarterly Reporting Policy in respect of JSE Listings Requirements
As a NYSE listed company, we have 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 Daylight Time) and 2:00 p.m. (South African Time) on August 2, 2018 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 +1-888-394-8218 (within the United States) or 0-800-980-520 (within South Africa) or +1-323-701-0225 (outside of the United States). The conference ID is 7581568. A replay of this conference call will be available for a limited time at +1-844-512-2921 (within the United States) or +1-412-317-6671 (within South Africa or outside of the United States). The replay conference ID is 7581568. A replay of the webcast will also be available for a limited time at http://investor.mixtelematics.com.
About MiX Telematics Limited
MiX Telematics is a leading global provider of fleet and mobile asset management solutions delivered as SaaS to customers managing over 691,000 assets in approximately 120 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, Romania, Thailand 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 shares are listed on the New York Stock Exchange (NYSE:MIXT). For more information visit www.mixtelematics.com.
This press release includes certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including without limitation, statements concerning our financial guidance for the second quarter and full year of fiscal 2019, our position to execute on our growth strategy, and our ability to expand our leadership position. These forward-looking statements reflect our current views about our plans, intentions, expectations, strategies and prospects, which are based on the information currently available to us and on assumptions we have made. Actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors that are beyond our control including, without limitation, those described under the caption “Risk Factors” in the Company’s Annual Report on Form 20-F filed with the Securities and Exchange Commission (the “SEC”) for the fiscal year ended March 31, 2018, as updated by other reports that the Company files with or furnishes to the SEC. The Company assumes no obligation to update any forward-looking statements contained in this press release as a result of new information, future events or otherwise.
Non-IFRS financial measures
To provide investors with additional information regarding its financial results, the Company has disclosed within this press release, Adjusted EBITDA and Adjusted EBITDA margin. Adjusted EBITDA and Adjusted EBITDA margin are non-IFRS financial measures, and they do not represent cash flows from operations for the periods indicated, and should not be considered an alternative to net income as an indicator of the Company’s results of operations, or as an alternative to cash flows from operations as an indicator of liquidity. Adjusted EBITDA is defined as the profit for the period before income taxes, net finance income/(costs) including foreign exchange gains/(losses), depreciation of property, plant and equipment including capitalized customer in-vehicle devices and right-of-use assets, amortization of intangible assets including capitalized in-house development costs and intangible assets identified as part of a business combination, share-based compensation costs, restructuring costs, profits/(losses) on the disposal or impairments of assets or subsidiaries, insurance reimbursements relating to impaired assets and certain litigation costs.
The Company has included Adjusted EBITDA and Adjusted EBITDA margin in this press release because they are key measures that the Company’s management and Board of Directors use to understand and evaluate its core operating performance and trends; to prepare and approve its annual budget; and to develop short- and long-term operational plans. In particular, the exclusion of certain expenses in calculating Adjusted EBITDA and Adjusted EBITDA margin can provide a useful measure for period-to-period comparisons of the Company’s core business. Accordingly, the Company believes that Adjusted EBITDA and Adjusted EBITDA margin provides useful information to investors and others in understanding and evaluating its operating results.
The Company’s use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider this performance measure in isolation from or as a substitute for analysis of our results as reported under IFRS. Some of these limitations are:although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; Adjusted EBITDA does not reflect changes in, or cash requirements for, the Company’s working capital needs; Adjusted EBITDA does not consider the potentially dilutive impact of equity-based compensation; Adjusted EBITDA does not reflect tax payments or the payment of lease liabilities that may represent a reduction in cash available to the Company; and other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure.
Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including operating profit, profit for the period and the Company’s other results.
Adjusted Earnings and Adjusted Earnings Per Share
Adjusted earnings per share is defined as profit attributable to owners of the parent, MiX Telematics Limited, excluding net foreign exchange gains/(losses) net of tax, divided by the weighted average number of ordinary shares in issue during the period.
The Company has included Adjusted earnings per share in this press release because it provides a useful measure for period-to-period comparisons of the Company’s core business by excluding net foreign exchange gains/(losses) from earnings. Accordingly, the Company believes that Adjusted earnings per share provides useful information to investors and others in understanding and evaluating the Company’s operating results.
Free cash flow
Free cash flow is determined as net cash generated from operating activities less capital expenditures for investing activities. The Company believes that free cash flow provides useful information to investors and others in understanding and evaluating the Company’s cash flows as it provides detail of the amount of cash the Company generates or utilizes after accounting for all capital expenditures including investments in in-vehicle devices and development expenditure.
August 2, 2018
JSE sponsor Java Capital Trustees and Sponsors Proprietary Limited
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