MIDRAND, South Africa –
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 third quarter of fiscal 2019, which ended December 31, 2018.
“In Q3, MiX Telematics delivered another strong quarter, evidenced by 16% year over year subscription revenue growth, and Adjusted EBITDA margins that again exceeded 30%, and we are now focused on our recently revised long-term target of 35%-plus. Moreover, our attractive combination of strong growth and a highly scalable business model is leading to increased cash generation,” said Stefan Joselowitz, Chief Executive Officer of MiX Telematics. “Our results were driven by ongoing robust demand globally for our services from our customers across all verticals. Additionally, we are already seeing early traction with our newly announced light fleet solution, MiX Now, and have already closed several deals. We are confident the strength of our diversified portfolio of subscribers will enable us to maintain our market momentum for the balance of fiscal 2019 and beyond.”
Financial performance for the three months ended December 31, 2018
Subscription Revenue: Subscription revenue was R438.9 million ($30.5 million), an increase of 16.6% compared with R376.4 million ($26.1 million) for the third quarter of fiscal 2018. Subscription revenue increased 15.6% on a constant currency basis. Subscription revenue benefited from a net increase of over 71,200 subscribers from January 2018 to December 2018, representing an increase in the subscriber base of 10.7% during that period. Subscription revenue has also benefited from higher average revenue per user.
Total Revenue: Total revenue was R514.4 million ($35.7 million), an increase of 16.3% compared to R442.1 million ($30.7 million) for the third quarter of fiscal 2018. Hardware and other revenue was R75.5 million ($5.2 million), an increase of 14.8% compared to R65.8 million ($4.6 million) for the third quarter of fiscal 2018.
Gross Margin: Gross profit was R337.8 million ($23.5 million), as compared to R288.6 million ($20.0 million) for the third quarter of fiscal 2018. Gross profit margin was 65.7%, compared to 65.3% for the third quarter of fiscal 2018.
Operating Margin: Operating profit was R86.7 million ($6.0 million), compared to R53.0 million ($3.7 million) for the third quarter of fiscal 2018. Operating margin was 16.8%, compared to 12.0% for the third quarter of fiscal 2018. The margin expansion was attributable primarily to improved economies of scale and ongoing cost management initiatives. Operating expenses of R251.5 million ($17.5 million) have increased by R16.0 million ($1.1 million) or 6.8% compared to total revenue growth of 16.3% since the third quarter of fiscal 2018. Operating expenses represented 48.9% of revenue compared to 53.3% of revenue in the third quarter of fiscal 2018.
Adjusted EBITDA: Adjusted EBITDA, a non-IFRS measure, was R155.8 million ($10.8 million) compared to R114.5 million ($8.0 million) for the third quarter of fiscal 2018. Adjusted EBITDA margin, a non-IFRS measure, for the third quarter of fiscal 2019 was 30.3%, compared to 25.9% for the third quarter of fiscal 2018.
Profit for the Period and Earnings per Share: Profit for the period was R56.6 million ($3.9 million), compared to R58.8 million ($4.1 million) in the third quarter of fiscal 2018. Profit for the period includes a net foreign exchange gain of R0.2 million ($0.01 million) before tax. Profit for the period for the third quarter of fiscal 2018 included a net foreign exchange loss of R2.1 million ($0.1 million).
Earnings per diluted ordinary share were 10 South African cents, consistent with the third quarter of fiscal 2018. For the third quarter of 2019, the calculation was based on diluted weighted average ordinary shares in issue of 579.6 million compared to 577.6 million diluted weighted average ordinary shares in issue during the third quarter of fiscal 2018.
The Company’s effective tax rate for the quarter was 34.5% compared to (12.3%) in the third quarter of fiscal 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 28.3% compared to 26.7% in the third quarter of fiscal 2018.
On a U.S. Dollar basis, and using the December 31, 2018 exchange rate of R14.3960 per U.S. Dollar, and at a ratio of 25 ordinary shares to one American Depositary Share (“ADS”), profit for the period was $3.9 million, or 17 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, were R63.5 million ($4.4 million), compared to R40.0 million ($2.8 million) in the third quarter of fiscal 2018. Adjusted earnings per diluted ordinary share, also a non-IFRS measure, were 11 South African cents, compared to 7 South African cents in the third quarter of fiscal 2018.
On a U.S. Dollar basis, and using the December 31, 2018 exchange rate of R14.3960 per U.S. Dollar, and at a ratio of 25 ordinary shares to one ADS, adjusted earnings for the period was $4.4 million, or 19 U.S. cents per diluted ADS.
Statement of Financial Position and Cash Flow: At December 31, 2018, the Company had R284.1 million ($19.7 million) of net cash and cash equivalents, compared to R290.5 million ($20.2 million) at March 31, 2018.
The Company generated R133.0 million ($9.2 million) in net cash from operating activities for the three months ended December 31, 2018 and invested R72.6 million ($5.0 million) in capital expenditures during the quarter (including investments in in-vehicle devices of R47.8 million or $3.3 million), leading to a free cash flow, a non-IFRS measure, of R60.4 million ($4.2 million), compared with free cash flow of R17.3 million ($1.2 million) for the third quarter of fiscal 2018. The Company utilized R91.0 million ($6.3 million) in financing activities, compared to R11.1 million ($0.8 million) utilized during the third quarter of fiscal 2018. The cash utilized in financing activities during the third quarter of fiscal 2019 mainly consisted of share repurchases of R73.6 million ($5.1 million), dividends paid of R16.8 million ($1.2 million) and the payment of lease liabilities of R3.4 million ($0.2 million), offset by proceeds from the issuance of shares in respect of employee share options of R2.7 million ($0.2 million). The cash utilized in financing activities during the third quarter of fiscal 2018 mainly consisted of dividends paid of R14.0 million ($1.0 million) and the acquisition of non-controlling interest of R1.4 million ($0.1 million), offset by proceeds from the issuance of shares in respect of employee share options of R4.2 million ($0.3 million).
Business Outlook
MiX Telematics has translated U.S. Dollar amounts in this Business Outlook paragraph from South African Rand at the exchange rate of R13.6466 per $1.00, which was the R/$ exchange rate reported by Oanda.com as at January 28, 2019.
Based on information as of today, January 31, 2019, the Company is issuing the following financial guidance for the full 2019 fiscal year:
For the fourth quarter of fiscal 2019 the Company expects subscription revenue to be in the range of R443 million to R451 million ($32.5 million to $33.0 million), which would represent subscription revenue growth of 18.6% to 20.7% compared to the fourth quarter of fiscal 2018. On a constant currency basis, this represents subscription revenue growth of 12.3% to 14.4% compared to the fourth quarter of fiscal 2018.
The key assumptions used in deriving the forecast are as follows:
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 Company provides earnings guidance only on a non-IFRS basis and does not provide a reconciliation of forward-looking Adjusted EBITDA and Adjusted Earnings per Diluted Ordinary Share guidance to the most directly comparable IFRS financial measures because of the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations, including adjustments that could be made for foreign exchange gains/(losses) and related tax consequences, restructuring costs, share-based compensation costs, and other charges reflected in the Company’s reconciliation of historic non-IFRS financial measures, the amounts of which, based on past experience, could be material.
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 Listings Requirements
Following the listing of the Company’s ADSs 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 Standard Time) and 3:00 p.m. (South African Time) on Thursday, January 31, 2019 to discuss the Company’s financial results and current business outlook:
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 736,000 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 concerning our financial guidance for the fourth 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
Adjusted EBITDA
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 provide 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:
Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including operating profit, profit for the period and our 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, excluding net foreign exchange gains/(losses) net of tax and share based compensation costs related to Performance Share Awards net of tax, divided by the weighted average number of ordinary shares in issue during the period.
We have 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, as well as share based compensation costs related to Performance Share Awards. Performance Share Awards were awarded under the MiX Telematics Long-Term Incentive Plan for the first time in November 2018 and are aimed at incentivising management to achieve cumulative subscription revenue and Adjusted EBITDA targets for the 2019 and 2020 fiscal years.
Accordingly, we believe 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 expenditure for investing activities. We believe 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.
Constant currency and U.S. Dollar financial information
Financial information presented in United States Dollars and constant currency financial information presented as part of the commentary constitute pro-forma financial information under the JSE Listings Requirements. Unless otherwise stated, MiX Telematics has translated U.S. Dollar amounts from South African Rand at the exchange rate of R14.3960 per $1.00, which was the R/$ exchange rate reported by Oanda.com as at December 31, 2018.
Constant currency information has been presented to illustrate the impact of changes in currency rates on the Group’s results. The constant currency information has been determined by adjusting the current financial reporting period results to the prior period average exchange rates, determined as the average of the monthly exchange rates applicable to the period. The measurement has been performed for each of the Group’s currencies, including the U.S. Dollar and British Pound. The constant currency growth percentage has been calculated by utilizing the constant currency results compared to the prior period results.
This pro-forma financial information is the responsibility of the Group’s Board of Directors and is presented for illustrative purposes. Because of its nature, the pro-forma financial information may not fairly present MiX Telematics’ financial position, changes in equity, results of operations or cash flows. The pro-forma financial information does not constitute pro-forma information in accordance with the requirements of Regulation S-X of the SEC or generally accepted accounting principles in the United States. In addition, the rules and regulations related to the preparation of pro-forma financial information in other jurisdictions may also vary significantly from the requirements applicable in South Africa. The information contained in this report has not been reviewed or audited by the Group’s auditors.
JSE Sponsor
Java Capital
January 31, 2019
MIX TELEMATICS LIMITED | ||||||||||||
CONDENSED CONSOLIDATED INCOME STATEMENT | ||||||||||||
South African Rand | United States Dollar | |||||||||||
Three months
ended |
Three months ended |
Three months ended |
Three months ended |
|||||||||
December 31, | December 31, | December 31, | December 31, | |||||||||
Figures are in thousands unless otherwise stated | 2018 | 2017 | 2018 | 2017 | ||||||||
Unaudited | Unaudited | Unaudited | Unaudited | |||||||||
Revenue | 514,407 | 442,125 | 35,733 | 30,712 | ||||||||
Cost of sales | (176,622 | ) | (153,526 | ) | (12,269 | ) | (10,664 | ) | ||||
Gross profit | 337,785 | 288,599 | 23,464 | 20,048 | ||||||||
Other income/(expenses) - net | 367 | (98 | ) | 25 | (7 | ) | ||||||
Operating expenses | (251,481 | ) | (235,485 | ) | (17,469 | ) | (16,358 | ) | ||||
-Sales and marketing | (51,720 | ) | (49,739 | ) | (3,593 | ) | (3,455 | ) | ||||
-Administration and other charges | (199,761 | ) | (185,746 | ) | (13,876 | ) | (12,903 | ) | ||||
Operating profit | 86,671 | 53,016 | 6,020 | 3,683 | ||||||||
Finance (costs)/income - net | (245 | ) | (676 | ) | (17 | ) | (47 | ) | ||||
-Finance income | 2,567 | 1,996 | 178 | 139 | ||||||||
-Finance costs | (2,812 | ) | (2,672 | ) | (195 | ) | (186 | ) | ||||
Profit before taxation | 86,426 | 52,340 | 6,003 | 3,636 | ||||||||
Taxation | (29,855 | ) | 6,439 | (2,074 | ) | 447 | ||||||
Profit for the period | 56,571 | 58,779 | 3,929 | 4,083 | ||||||||
Attributable to: | ||||||||||||
Owners of the parent | 56,572 | 58,780 | 3,929 | 4,083 | ||||||||
Non-controlling interest |
(1 | ) | (1 | ) | * | * | ||||||
56,571 | 58,779 | 3,929 | 4,083 | |||||||||
* Amount less than $1,000 |
MIX TELEMATICS LIMITED | ||||||||||||
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION | ||||||||||||
South African Rand | United States Dollar | |||||||||||
December 31, | March 31, | December 31, | March 31, | |||||||||
Figures are in thousands unless otherwise stated | 2018 | 2018 | 2018 | 2018 | ||||||||
Unaudited | Audited | Unaudited | Unaudited | |||||||||
ASSETS | ||||||||||||
Non-current assets | ||||||||||||
Property, plant and equipment | 476,217 | 334,038 | 33,080 | 23,204 | ||||||||
Intangible assets | 941,351 | 898,527 | 65,390 | 62,415 | ||||||||
Deferred tax assets | 44,737 | 40,717 | 3,108 | 2,828 | ||||||||
Capitalized commission assets | 52,653 | — | 3,657 | — | ||||||||
Total non-current assets | 1,514,958 | 1,273,282 | 105,235 | 88,447 | ||||||||
Current assets | ||||||||||||
Assets classified as held for sale (Note 7) | 17,058 | 17,058 | 1,185 | 1,185 | ||||||||
Inventory | 66,124 | 57,013 | 4,593 | 3,960 | ||||||||
Trade and other receivables | 361,094 | 286,406 | 25,083 | 19,895 | ||||||||
Taxation | 3,440 | 30,373 | 239 | 2,110 | ||||||||
Restricted cash | 23,211 | 20,935 | 1,612 | 1,454 | ||||||||
Cash and cash equivalents | 316,339 | 308,258 | 21,974 | 21,413 | ||||||||
Total current assets | 787,266 | 720,043 | 54,686 | 50,017 | ||||||||
Total assets | 2,302,224 | 1,993,325 | 159,921 | 138,464 | ||||||||
EQUITY | ||||||||||||
Stated capital | 786,631 | 846,405 | 54,642 | 58,794 | ||||||||
Other reserves | 66,949 | (51,614 | ) | 4,651 | (3,585 | ) | ||||||
Retained earnings | 821,694 |
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