MiX Telematics Reports Third Quarter Fiscal 2021 U.S. GAAP Financial Results

Rhea-AI Summary

MiX Telematics reported its third-quarter financial results for the period ending December 31, 2020, showing a 10.2% decline in subscription revenues at $29.1 million. Total revenues fell by 6.5% to $34.1 million amid a challenging economic landscape due to COVID-19. The subscriber base contracted by 18,300, primarily affecting low ARPU asset tracking. However, the company noted strong profitability and free cash flow of $8.7 million and reported a net income of $5.9 million. Cash reserves improved to $44.0 million from $18.0 million earlier in the year.

Positive

• Free cash flow of $8.7 million, up from $1.3 million in Q3 FY2020.
• Net income increased to $5.9 million from $5.1 million in Q3 FY2020.
• Operating expenses decreased by $2.1 million, or 11.5%, to $16.3 million.
• Strong cash position with $44.0 million in cash and equivalents.

Negative

• Subscription revenues decreased by 10.2% from Q3 FY2020.
• Total revenues declined by 6.5% year-over-year.
• Subscriber base contracted by 18,300 due to economic factors.

MiX Telematics Limited (“MiX Telematics”) (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, in accordance with accounting principles generally accepted in the United States (“GAAP”), for the third quarter, which ended December 31, 2020.

“MiX Telematics reported third quarter results highlighted by sequential growth in subscription revenue and very strong profitability and free cash flow. We saw modestly improved performance in our premium and light fleet segments for the second straight quarter even as we continue to manage through the impact of COVID-19 on certain key vertical markets," said Stefan Joselowitz, Chief Executive Officer of MiX Telematics.

Joselowitz continued, “As we look ahead, we are very encouraged by the strategic conversations we are having with large fleet operators on the greater role telematics will play in their future operations. This gives us confidence MiX is well positioned to return to attractive subscription revenue growth rates once the economy normalizes.”

Financial Results for the Three Months Ended December 31, 2020

Subscription Revenues: Subscription revenues were $29.1 million, a decrease of 10.2% compared to $32.4 million for the third quarter of fiscal 2020. Subscription revenues represented 85.2% of total revenues during the third quarter of fiscal 2021. Subscription revenues decreased by 7.3% on a constant currency basis, year over year. The decline in constant currency subscription revenue was primarily due to the contraction in the Company’s subscriber base as a result of economic conditions attributable to the COVID-19 pandemic. During the third quarter of fiscal 2021, the Company’s subscriber base contracted by a net 18,300 subscribers. The contraction is primarily attributable to our low ARPU asset tracking subscribers.

The majority of our revenues and subscription revenues are derived from currencies other than the U.S. Dollar. Accordingly, the strengthening of the U.S. Dollar against these currencies (in particular against the South African Rand) following currency volatility arising from the economic disruption caused by COVID-19, has negatively impacted our revenue and subscription revenues reported in U.S. Dollars. Compared to the third quarter of fiscal year 2020, the South African Rand weakened by 6% against the U.S. Dollar. The Rand/U.S. Dollar exchange rate averaged R15.65 in the third quarter of fiscal year 2021 compared to an average of R14.71 during the third quarter of fiscal year 2020. The impact of translating foreign currencies to U.S. Dollars at the average exchange rates during the third quarter of fiscal 2021 led to a 2.9% reduction in reported U.S. Dollar subscription revenues.

Total Revenues: Total revenues were $34.1 million, a decrease of 6.5% compared to $36.5 million for the third quarter of fiscal 2020. Total revenues decreased by 3.6% on a constant currency basis, year over year. Hardware and other revenues were $5.0 million, an increase of 22.5%, compared to $4.1 million for the third quarter of fiscal 2020.

The impact of translating foreign currencies to U.S. Dollars at the average exchange rates during the third quarter of fiscal 2021 led to a 2.9% reduction in reported U.S. Dollar revenues.

Gross Margin: Gross profit was $21.3 million, compared to $23.5 million for the third quarter of fiscal 2020. Gross profit margin was 62.5%, compared to 64.6% for the third quarter of fiscal 2020.

Income From Operations: Income from operations was $5.0 million, compared to $5.2 million for the third quarter of fiscal 2020. Operating income margin was 14.8%, compared to 14.2% for the third quarter of fiscal 2020. Operating expenses of $16.3 million decreased by $2.1 million, or 11.5%, compared to the third quarter of fiscal 2020.

Net Income and Earnings Per Share: Net income was $5.9 million, compared to net income of $5.1 million in the third quarter of fiscal 2020. Net income included a net foreign exchange loss of $0.1 million before tax, as well as a $2.7 million deferred tax credit on a U.S. Dollar intercompany loan between MiX Telematics and MiX Telematics Investments Proprietary Limited (“MiX Investments”), a wholly-owned subsidiary of the Company. During the third quarter of fiscal 2020, net income included a net foreign exchange loss of $0.2 million and a $1.5 million deferred tax credit on a U.S. Dollar intercompany loan between MiX Telematics and MiX Investments.

Earnings per diluted ordinary share was 1.1 U.S. cents, compared to 0.9 U.S. cents in the third quarter of fiscal 2020. For the third quarter of fiscal 2021, the calculation was based on diluted weighted average ordinary shares in issue of 559.8 million compared to 562.4 million diluted weighted average ordinary shares in issue during the third quarter of fiscal 2020. On a ratio of 25 ordinary shares to one American Depositary Share (“ADS”), earnings per diluted ADS was 26 U.S. cents compared to 23 U.S. cents in the third quarter of fiscal 2020.

The Company’s effective tax rate was negative 18.7%, compared to negative 2.4% in the third quarter of fiscal 2020. Ignoring the impact of net foreign exchange losses net of tax, the tax rate used in determining non-GAAP net income below was 34.3% compared to 25.9% in the third quarter of fiscal 2020.

Adjusted EBITDA: Adjusted EBITDA, a non-GAAP measure, was $9.5 million, compared to $10.1 million for the third quarter of fiscal 2020. Adjusted EBITDA margin, a non-GAAP measure, for the third quarter of fiscal 2021 was 28.0%, compared to 27.8% for the third quarter of fiscal 2020.

Non-GAAP Net Income and Non-GAAP Net Income Per Share: Non-GAAP net income was $3.4 million, compared to $3.8 million for the third quarter of fiscal 2020. Non-GAAP net income per diluted ordinary share was 0.6 U.S. cents, compared to 0.7 U.S. cents in the third quarter of fiscal 2020. At a ratio of 25 ordinary shares to one ADS, the non-GAAP net income per diluted ADS was 15 U.S. cents compared to 17 U.S. cents in the third quarter of fiscal 2020.

Cash and Cash Equivalents and Cash Flow: At December 31, 2020, the Company had $44.0 million of cash and cash equivalents, compared to $18.0 million at March 31, 2020.

Net cash provided by operating activities for the three months ended December 31, 2020 was $10.2 million compared to $7.3 million for the three months ended December 31, 2019. The Company invested $1.5 million in capital expenditures (including investments in in-vehicle devices of $0.4 million), leading to free cash flow, a non-GAAP measure, of $8.7 million in the quarter. The Company generated free cash flow of $1.3 million for the third quarter of fiscal 2020 when the Company invested $6.0 million in capital expenditures (including investments in in-vehicle devices of $4.5 million).

Net cash utilized by financing activities amounted to $1.7 million for the third quarter of fiscal 2021, compared to $0.2 million utilized during the third quarter of fiscal 2020. The cash utilized by financing activities during the third quarter of fiscal 2021 consisted of dividends paid of $1.4 million and $0.3 million from a reduction in facilities utilized. The cash utilized in financing activities during the third quarter of fiscal 2020 consisted of dividends paid of $1.5 million offset by facilities utilized of $1.3 million.

During the quarter, the South African Rand strengthened against the U.S. Dollar from R17.00 at September 30, 2020 to R14.65 at December 31, 2020 and as a result, cash increased by $3.1 million due to foreign exchange gains.

Quarterly Dividend

The most recent dividend payment of 4 South African cents (0.3 U.S. cents) per ordinary share and 1 South African Rand (7 U.S. cents) per ADS was paid on November 23, 2020 to shareholders on record on November 20, 2020. A dividend of 4 South African cents per ordinary share and 1 South African Rand per ADS will be paid on March 9, 2021 to shareholders on record as of the close of business on February 19, 2021.

The details with respect to the dividends declared for holders of our ADSs are as follows:

Ex dividend on New York Stock Exchange (NYSE)					Thursday, February 18, 2021
Record date					Friday, February 19, 2021
Approximate date of currency conversion					Monday, February 22, 2021
Approximate dividend payment date					Tuesday, March 9, 2021

Share Repurchases

No shares were repurchased during the three months ended December 31, 2020.

Business Outlook

Due to the uncertainty surrounding the level of business disruption as a result of the spread of COVID-19, the Company has suspended its practice of issuing financial guidance and as a consequence no guidance has been issued for the full 2021 fiscal year.

Conference Call Information

MiX Telematics management will host a conference call and audio webcast at 8:00 a.m. (Eastern Daylight Time) and 3:00 p.m. (South African Time) on Thursday, January 28, 2021 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 +1-877-451-6152 (within the United States) or 0 800 983 831 (within South Africa) or +1-201-389-0879 (outside of the United States). The conference ID is 13715107.
• 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 13715107.
• 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 749,000 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.

Forward-Looking Statements

This press release includes certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including without limitation, statements regarding our position to execute on our growth strategy, and our ability to expand our leadership position. These forward-looking statements include, but are not limited to, Company’s beliefs, plans, goals, objectives, expectations, assumptions, estimates, intentions, future performance, other statements that are not historical facts and statements identified by words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “seeks”, “estimates” or words of similar meaning. 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. Although we believe that our plans, intentions, expectations, strategies and prospects as reflected in, or suggested by, these forward-looking statements are reasonable, we can give no assurance that the plans, intentions, expectations or strategies will be attained or achieved.

Furthermore, actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of known and unknown risks and uncertainties, some of which are beyond our control including, without limitation:

• the severity and duration of the COVID-19 pandemic, the pandemic’s economic impact on the geographical locations of our regional service organizations and central service organization, the impact of the pandemic on our customers’ ability to meet their financial obligations, our ability to implement cost containment and business recovery strategies during the pandemic, local and foreign government regulations implemented to combat the pandemic and any future developments on the pandemic;
• our ability to attract, sell to and retain customers;
• our ability to improve our growth strategies successfully, including our ability to increase sales to existing customers;
• our ability to adapt to rapid technological change in our industry;
• competition from industry consolidation;
• loss of key personnel or our failure to attract, train and retain other highly qualified personnel;
• our ability to integrate any businesses we acquire;
• the introduction of new solutions and international expansion;
• our dependence on key suppliers and vendors to manufacture our hardware;
• our dependence on our network of dealers and distributors to sell our solutions;
• businesses may not continue to adopt fleet management solutions;
• our future business and system development, results of operations and financial condition;
• expected changes in our profitability and certain cost or expense items as a percentage of our revenue;
• changes in the practices of insurance companies;
• the impact of laws and regulations relating to the Internet and data privacy;
• our ability to protect our intellectual property and proprietary technologies and address any infringement claims;
• our ability to defend ourselves from litigation or administrative proceedings relating to labor, regulatory, tax or similar issues;
• significant disruption in service on, or security breaches of, our websites or computer systems;
• our dependence on third-party technology;
• fluctuations in the value of the South African Rand;
• economic, social, political, labor and other conditions and developments in South Africa and globally;
• our ability to issue securities and access the capital markets in the future; and
• other risks set forth in our filings with the U.S. Securities Exchange Commission.

We assume no obligation to update any forward-looking statements contained in this press release and expressly disclaim any obligation to do so, whether as a result of new information, future events or otherwise, except as required by law.

Use of Non-GAAP Financial Measures

This press release and the accompanying tables include references to Adjusted EBITDA, Adjusted EBITDA margin, non-GAAP net income and non-GAAP net income per share, free cash flow and constant currency, which are non-GAAP financial measures. For a description of these non-GAAP financial measures, including the reasons management uses these measures, please see Annexure A titled “Non-GAAP Financial Measures”. A reconciliation of these non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with GAAP is provided in Annexure A.

MIX TELEMATICS LIMITED CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share amounts) (Unaudited)
		March 31, 2020				December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents		$	17,953			$	43,999
Restricted cash		699				780
Accounts receivables, net		24,100				19,483
Inventory, net		3,271				3,476
Prepaid expenses and other current assets		7,375				7,789
Total current assets		53,398				75,527
Property and equipment, net		30,019				26,514
Goodwill		37,923				44,388
Intangible assets, net		15,007				18,585
Deferred tax assets		3,108				3,992
Other assets		4,200				4,543
Total assets		$	143,655			$	173,549
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term debt		$	2,367			$	2,892
Accounts payables		5,251				4,511
Accrued expenses and other liabilities		14,839				21,517
Deferred revenue		5,077				7,670
Total current liabilities		27,534				36,590
Deferred tax liabilities		11,436				8,448
Long-term accrued expenses and other liabilities		5,660				5,389
Total liabilities		44,630				50,427
Stockholders’ equity:
MiX Telematics Limited stockholders’ equity
Preferred stock: 100 million shares authorized but not issued		—				—
Common stock: 600.9 million and 605.1 million no-par value shares issued and outstanding as of March 31, 2020 and December 31, 2020, respectively		66,522				67,376
Less treasury stock at cost: 54 million shares as of March 31, 2020 and December 31, 2020		(17,315)				(17,315)
Retained earnings		67,482				75,381
Accumulated other comprehensive (loss)/income		(11,070)				3,314
Additional paid-in capital		(6,599)				(5,639)
Total MiX Telematics Limited stockholders’ equity		99,020				123,117
Non-controlling interest		5				5
Total stockholders’ equity		99,025				123,122
Total liabilities and stockholders’ equity		$	143,655			$	173,549

MIX TELEMATICS LIMITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data) (Unaudited)
	Three Months Ended December 31,								Nine Months Ended December 31,
	2019				2020				2019				2020
Revenue
Subscription	$	32,362			$	29,072			$	96,099			$	82,570
Hardware and other	4,107				5,032				13,314				9,979

FAQ

What were MiX Telematics' subscription revenue results for Q3 FY2021?

MiX Telematics reported subscription revenues of $29.1 million for Q3 FY2021, a decrease of 10.2% compared to $32.4 million in Q3 FY2020.

How did MiX Telematics perform in terms of net income for Q3 FY2021?

The company reported a net income of $5.9 million for Q3 FY2021, up from $5.1 million in Q3 FY2020.

What is the outlook for MiX Telematics' subscription revenue growth?

The company expressed confidence in returning to attractive subscription revenue growth rates as the economy normalizes.

What factors impacted MiX Telematics' revenues in Q3 FY2021?

The decline in revenues was primarily attributed to the contraction in the subscriber base due to economic conditions resulting from COVID-19.

Did MiX Telematics declare any dividends recently?

Yes, MiX Telematics declared a dividend of 4 South African cents per ordinary share, payable on March 9, 2021.