MiX Telematics Announces Financial Results for First Quarter of Fiscal Year 2020

An explanation of non-IFRS measures used in this press release is set out in the Non-IFRS financial measures section. A reconciliation of these non-IFRS measures to the most directly comparable IFRS measures is provided in the financial tables below, which accompany this press release.

References in this announcement to “R” are to South African Rand and references to “U.S. Dollars” and “$” are to United States Dollars. Unless otherwise stated, MiX Telematics has translated U.S. Dollar amounts from South African Rand at the exchange rate of R14.0840 per $1.00, which was the R/$ exchange rate reported by Oanda.com as of June 30, 2019.

First Quarter Highlights (year over year):

• Subscription revenue of R455 million ($32.3 million), up 16.5% or 11.1% on a constant currency basis
• Net subscriber additions of over 16,400 bringing the total base to over 766,000, up 11%
• Adjusted EBITDA of R155 million ($11.0 million), up 22%
• Adjusted EBITDA margin of 29.7%, up 200 basis points
• Diluted adjusted earnings per share of 10 South African cents, or 19 U.S cents per diluted ADS, up 25%

MIDRAND, South Africa–(BUSINESS WIRE)–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 2020, which ended June 30, 2019.

“MiX Telematics’ first quarter performance was a solid start to fiscal 2020. Subscription revenue grew more than 11% on a constant currency basis and adjusted EBITDA margin of 29.7% grew 200 basis points year-over-year, which was ahead of our expectations,” said Stefan Joselowitz, Chief Executive Officer of MiX Telematics. “With the improved momentum we started experiencing towards the end of quarter, we remain well positioned to achieve our financial objectives. The recent addition of John Granara as our Chief Financial Officer is an important step in the next phase of our growth strategy, capitalizing on our robust product portfolio and global footprint.”

Financial performance for the three months ended June 30, 2019

Subscription revenue: Subscription revenue was R455.0 million ($32.3 million), an increase of 16.5% or 11.1% on a constant currency basis compared with R390.4 million ($27.7 million) for the first quarter of fiscal year 2019. Subscription revenue benefited from an increase of 75,000 subscribers, representing an increase in subscribers of 10.8% from July 2018 to June 2019.

Total revenue: Total revenue was R521.7 million ($37.0 million), an increase of 14.2% or 8.5% on a constant currency basis compared to R456.8 million ($32.4 million) for the first quarter of fiscal year 2019. Hardware and other revenue was R66.8 million ($4.7 million), an increase of 0.5% compared to R66.4 million ($4.7 million) for the first quarter of fiscal year 2019. On a constant currency basis, hardware and other revenue decreased 6.3% year over year.

Gross margin: Gross profit was R342.8 million ($24.3 million), compared to R305.8 million ($21.7 million) for the first quarter of fiscal year 2019. Gross profit margin was 65.7%, compared to 66.9% for the first quarter of fiscal year 2019.

Operating margin: Operating profit was R81.8 million ($5.8 million), compared to R67.7 million ($4.8 million) for the first quarter of fiscal year 2019. Operating profit margin was 15.7%, compared to 14.8% for the prior year’s first quarter. Despite the lower gross margin described above, the operating margin expanded due to improved economies of scale and ongoing cost management initiatives. Operating expenses of R261.3 million ($18.6 million) increased by R23.2 million ($1.7 million) compared to the first quarter of fiscal 2019. Operating expenses represented 50.1% of revenue compared to 52.1% of revenue in the first quarter of fiscal year 2019.

Adjusted EBITDA: Adjusted EBITDA, a non-IFRS measure, was R154.8 million ($11.0 million) compared to R126.4 million ($9.0 million) for the first quarter of fiscal year 2019. Adjusted EBITDA margin, a non-IFRS measure, for the first quarter of fiscal year 2020 was 29.7%, compared to 27.7% for the first quarter of fiscal year 2019.

Profit for the period and earnings per share: Profit for the period was R66.7 million ($4.7 million), compared to R14.4 million ($1.0 million) for the first quarter of fiscal year 2019. Earnings per diluted ordinary share were 12 South African cents, compared to 2 South African cents in the first quarter of fiscal year 2019. For the first quarter of fiscal year 2020, the calculation was based on diluted weighted average ordinary shares in issue of 579.2 million compared to 586.6 million diluted weighted average ordinary shares in issue during the first quarter of fiscal year 2019.

Profit for the period included a net foreign exchange gain of R0.7 million ($0.05 million) before tax. A net foreign exchange loss of R0.2 million ($0.02 million) was recorded in the first quarter of fiscal year 2019. The Group’s effective tax rate for the quarter was 19.5%, compared to 78.7% for the first quarter of fiscal year 2019. Ignoring the impact of net foreign exchange gains and losses net of tax and share based compensation costs related to Performance Share Awards net of tax, the tax rate which is used in determining adjusted earnings below, was 29.1% compared to 28.4% in the first quarter of fiscal year 2019. The tax impact in respect of foreign exchange movements and share based compensation costs related to Performance Share Awards 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, 2019 exchange rate of R14.0840 per U.S. Dollar, and at a ratio of 25 ordinary shares to one American Depositary Share (“ADS”), profit for the period was $4.7 million, or 20 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 R60.6 million ($4.3 million), compared to R48.7 million ($3.5 million) for the first quarter of fiscal year 2019 and excludes a net foreign exchange gain of R0.7 million ($0.05 million). During the first quarter of fiscal year 2019, a net foreign exchange loss of R0.2 million ($0.02 million) was recorded. Adjusted earnings per diluted ordinary share, also a non-IFRS measure, were 10 South African cents, compared to 8 South African cents in the prior year comparative period.

On a U.S. Dollar basis, and using the June 30, 2019 exchange rate of R14.0840 per U.S. Dollar, and at a ratio of 25 ordinary shares to one ADS, adjusted earnings for the period was $4.3 million, or 19 U.S. cents per diluted ADS.

Statement of financial position and cash flow: At June 30, 2019, the Group had R323.9 million ($23.0 million) of net cash and cash equivalents, compared to R353.2 million ($25.1 million) at March 31, 2019. The Group generated R90.9 million ($6.5 million) in net cash from operating activities for the three months ended June 30, 2019 and invested R80.0 million ($5.7 million) in capital expenditures during the quarter, including investments in in-vehicle devices of R51.8 million ($3.7 million), leading to positive free cash flow, a non-IFRS measure, of R10.9 million ($0.8 million) for the first quarter of fiscal year 2020, compared with negative free cash flow of R55.5 million ($3.9 million) for the first quarter of fiscal year 2019. The Group utilized R25.2 million ($1.8 million) in financing activities in the first quarter of fiscal 2020, which included the capital repayment of lease liabilities of R2.9 million ($0.2 million) and dividends paid of R22.3 million ($1.6 million). The Group utilized R19.1 million ($1.4 million) in financing activities in the first quarter of fiscal 2019. The cash utilized in financing activities in the first quarter of fiscal 2019 included the capital repayment of lease liabilities of R2.2 million ($0.2 million) and dividends paid of R16.9 million ($1.2 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 R14.2275 per $1.00, which was the R/$ exchange rate reported by Oanda.com as of July 29, 2019.

Based on information as of today, August 1, 2019, for the second quarter of fiscal year 2020 the Group expects subscription revenue to be in the range of R465 million to R471 million ($32.7 million to $33.1 million) which would represent subscription revenue growth of 10.7% to 12.1% compared to the second quarter of fiscal year 2019. On a constant currency basis, this would represent subscription revenue growth of 10.4% to 11.8%.

The Group is maintaining its previously issued financial guidance for the full 2020 fiscal year:

• Subscription revenue – R1,935 million to R1,955 million ($136.0 million to $137.4 million), which would represent subscription revenue growth of 14.3% to 15.5% compared to fiscal year 2019. On a constant currency basis, this would represent subscription revenue growth of 12.8% to 14.0%.
• Total revenue – R2,182 million to R2,212 million ($153.4 million to $155.5 million), which would represent revenue growth of 10.4% to 12.0% compared to fiscal year 2019. On a constant currency basis, this would represent revenue growth of 8.9% to 10.5%.
• Adjusted EBITDA – R680 million to R701 million ($47.8 million to $49.3 million), which would represent an increase in Adjusted EBITDA of 12.8% to 16.3% compared to fiscal year 2019.
• Adjusted earnings per diluted ordinary share of 45.1 to 50.2 South African cents based on 585 million diluted ordinary shares in issue, and based on an effective tax rate of 28.0%. At a ratio of 25 ordinary shares to one ADS, this equates to adjusted earnings per diluted ADS of 79.2 to 88.2 U.S. cents.

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 2020 fiscal year of R14.3000 per $1.00.

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

The Group 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 Group’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” 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 Group 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 Thursday, August 1, 2019 to discuss the Group’s financial results and current business outlook:

• The live webcast of the call will be available at the “Investor Information” page of the Group’s website, http://investor.mixtelematics.com.
• To access the call, dial +1-887-451-6152 (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 13692610.
• 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 13692610.
• 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 766,000 assets in more than 120 countries. The Group’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, Mexico, Australia, Romania, Thailand and the United Arab Emirates as well as a network of over 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 second quarter and full year of fiscal 2020, 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 Group’s Annual Report on Form 20-F filed with the Securities and Exchange Commission (the “SEC”) for the fiscal year ended March 31, 2019, as updated by other reports that the Group files with or furnishes to the SEC. The Group 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 Group 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 Group’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 Group has included Adjusted EBITDA and Adjusted EBITDA margin in this press release because they are key measures that the Group’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 Group’s core business. Accordingly, the Group believes that Adjusted EBITDA and Adjusted EBITDA margin provide useful information to investors and others in understanding and evaluating its operating results.

The Group’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 Group’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 Group; 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 year 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 Limited, 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 Group’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 Group’s operating results.

Free cash flow

Free cash flow is determined as net cash generated from operating activities less capital expenditures for investing activities. We believe that free cash flow provides useful information to investors and others in understanding and evaluating the Group’s cash flows as it provides detail of the amount of cash the Group 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 R14.0840 per $1.00, which was the R/$ exchange rate reported by Oanda.com as at June 30, 2019.

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.

Contacts

Investors:

Brian Denyeau

ICR for MiX Telematics

[email protected]

+1-855-564-9835

August 1, 2019

JSE sponsor

Java Capital

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