First Quarter Highlights:
- Net subscriber additions of 40,500, bringing the total base
to over 1,042,000 subscribers
- Total revenue of $36.4 million, up 15% year-over-year
(constant currency)
- Subscription revenue of $32.2 million, up 16% year-over-year
(constant currency)
- Annual recurring revenue (“ARR”) of $129.5 million, up 15%
year-over-year (constant currency)
- Net income of $1.6 million, up from $0.7 million in the
prior year
- Adjusted EBITDA of $8.7 million, at an adjusted EBITDA
margin of 23.8% (up 670 basis points from the prior year)
- Cash and cash equivalents of $27.1 million at quarter
end
MiX Telematics Limited (“MiX Telematics” or the “Company”)
(NYSE: MIXT) (JSE: MIX), a leading global Software-as-a-Service
(“SaaS”) provider of connected fleet management solutions, today
announced financial results, in accordance with accounting
principles generally accepted in the United States (“GAAP”), for
the first quarter of fiscal year 2024, which ended June 30,
2023.
Management Commentary
“We sustained our positive momentum and started the year with
quarterly results ahead of our internal expectations,” said CEO
Stefan Joselowitz. “We continued to expand our subscriber base with
an additional 40,500 net subscribers, while increasing ARR by over
15% on a constant currency basis and expanding our adjusted EBITDA
margin 670 basis points.
“While uncertainties remain in the macro-economic environment,
our team has been hard at work expanding our new customer pipeline,
evaluating M&A opportunities, and ensuring we’re efficiently
managing our cost base. With our commitment to appropriately
balancing growth and profitability, we are well positioned to meet
our financial expectations for fiscal 2024, ultimately reaching a
consistent ‘Rule of 40’ performance in the medium-term. We believe
demand remains strong for cloud-based telematics solutions and
anticipate continuing to capitalize on this opportunity to grow our
market share going forward.”
Financial Results for the Three Months Ended June 30,
2023
Subscription Revenue: Subscription revenue increased to
$32.2 million, compared to $31.0 million for the first quarter of
fiscal year 2023. The Field Service Management (“FSM”) business
acquired on September 2, 2022 contributed $2.1 million to the
subscription revenue for the first quarter of fiscal year 2024.
Subscription revenue increased by 15.6% on a constant currency
basis, year over year, of which 6.8% is attributable to the FSM
business acquisition. During the first quarter of fiscal year 2024,
the Company’s subscriber base increased by a net 40,500
subscribers, mainly due to the Africa segment. Subscription revenue
represented 88.6% of total revenue during the first quarter of
fiscal year 2024.
The majority of the Company’s total revenue and subscription
revenue 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), has
negatively impacted the Company’s revenue and subscription revenue
reported in U.S. Dollars. Compared to the first quarter of fiscal
year 2023, the South African Rand weakened by 20% against the U.S.
Dollar. The Rand/U.S. Dollar exchange rate averaged R18.65 in the
first quarter of fiscal year 2024 compared to an average of R15.55
during the first quarter of fiscal year 2023. The impact of
translating foreign currencies to U.S. Dollars at the average
exchange rates during the first quarter of fiscal year 2024 led to
a 11.6% decrease in reported U.S. Dollar subscription revenue.
Total Revenue: Total revenue increased to $36.4 million,
compared to $35.1 million for the first quarter of fiscal year
2023. During the first quarter of fiscal year 2024, total revenue
increased by 14.7% on a constant currency basis, year over year.
Hardware and other revenue was $4.1 million, which is in-line with
the first quarter of fiscal year 2023. On a constant currency
basis, hardware and other revenue increased by 7.9%.
The impact of translating foreign currencies to U.S. Dollars at
the average exchange rates during the first quarter of fiscal year
2024 led to a 11.0% decrease in reported U.S. Dollar total
revenue.
Gross Margin: Gross profit was $23.1 million, compared to
$21.7 million for the first quarter of fiscal year 2023. Gross
profit margin increased 160 basis points to 63.6%, compared to
62.0% for the first quarter of fiscal year 2023. The subscription
revenue margin during the first quarter of fiscal year 2024 was
68.3%, compared to 67.5% for the first quarter of fiscal year
2023.
Income From Operations: Income from operations was $4.4
million, compared to $2.4 million for the first quarter of fiscal
year 2023. Operating income margin increased 520 basis points to
12.1%, compared to 6.9% for the first quarter of fiscal year 2023.
Operating expenses of $18.7 million decreased by $0.6 million, or
3.0%, compared to the first quarter of fiscal year 2023. The
decrease in operating expenses was mainly due to cost savings from
the restructuring activity implemented in March 2023.
Net Income and Earnings Per Share: Net income was $1.6
million, compared to net income of $0.7 million in the first
quarter of fiscal year 2023. During the first quarter of fiscal
year 2024, net income included a net foreign exchange loss of $0.7
million before tax and a $0.4 million charge from the income tax
effect of net foreign exchange losses (which includes a $0.7
million deferred tax charge 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, offset by a $0.3 million deferred tax credit on other
foreign exchange losses). During the first quarter of fiscal year
2023, net income included a net foreign exchange gain of $0.8
million before tax and a $2.0 million charge from the income tax
effect of net foreign exchange gains (which includes a $1.8 million
deferred tax charge on a U.S. Dollar intercompany loan between MiX
Telematics and MiX Investments and a $0.2 million deferred tax
charge on other foreign exchange losses).
Earnings per diluted ordinary share was 0.3 U.S. cents, compared
to 0.1 U.S. cents in the first quarter of fiscal year 2023. For the
first quarter of fiscal year 2024, the calculation was based on
diluted weighted average ordinary shares in issue of 555.5 million
compared to 556.7 million diluted weighted average ordinary shares
in issue during the first quarter of fiscal year 2023. On a ratio
of 25 ordinary shares to one American Depositary Share (“ADS”),
earnings per diluted ADS were 7 U.S. cents compared to 3 U.S. cents
in the first quarter of fiscal year 2023.
Adjusted EBITDA and Adjusted EBITDA Margin: Adjusted
EBITDA, a non-GAAP measure, increased to $8.7 million, compared to
$6.0 million for the first quarter of fiscal year 2023. Adjusted
EBITDA margin, a non-GAAP measure, for the first quarter of fiscal
year 2024 increased 670 basis points to 23.8%, compared to 17.1%
for the first quarter of fiscal year 2023.
Adjusted Net Income and Adjusted Net Income Per Share:
Adjusted net income, a non-GAAP measure, was $2.8 million, compared
to $1.9 million for the first quarter of fiscal year 2023. Adjusted
net income per diluted ordinary share was 0.5 U.S. cents, compared
to 0.3 U.S. cents in the first quarter of fiscal year 2023. At a
ratio of 25 ordinary shares to one ADS, the adjusted net income per
diluted ADS was 12 U.S. cents compared to 8 U.S. cents in the first
quarter of fiscal year 2023.
Adjusted Effective Tax Rate: The Company’s effective tax
rate was 53.4%, compared to 82.2% in the first quarter of fiscal
year 2023. Adjusted effective tax rate, a non-GAAP measure which
excludes the impact of net foreign exchange gains and losses,
restructuring costs and contingent consideration remeasurement, net
of tax, is the tax rate used in determining adjusted net income.
Adjusted effective tax rate was 33.9% compared to 37.0% in the
first quarter of fiscal year 2023.
Cash and Cash Equivalents, Cash Flow and Free Cash Flow:
At June 30, 2023, the Company had $27.1 million of cash and cash
equivalents, compared to $29.9 million at March 31, 2023.
Net cash provided by operating activities for the first quarter
of fiscal year 2024 increased to $5.0 million compared to $0.7
million net cash used in operating activities for the first quarter
of fiscal year 2023. The Company invested $5.0 million in capital
expenditures (including investments in in-vehicle devices of $3.4
million), leading to a break-even free cash flow, a non-GAAP
measure, in the quarter. The Company incurred negative free cash
flow of $7.4 million for the first quarter of fiscal year 2023 when
the Company invested $6.7 million in capital expenditures
(including investments in in-vehicle devices of $4.9 million).
Net cash used in investing activities for the first quarter of
fiscal year 2024 was $5.0 million, compared to $6.7 million net
cash used in investing activities for the first quarter of fiscal
year 2023.
Net cash used in financing activities amounted to $1.8 million
for the first quarter of fiscal year 2024, compared to $0.4 million
used during the first quarter of fiscal year 2023. The cash used in
financing activities during the first quarter of fiscal year 2024
mainly consisted of dividends paid of $1.3 million and ordinary
shares repurchased of $0.5 million, offset by short-term debt
facilities utilized of $0.1 million. The cash used in financing
activities during the first quarter of fiscal year 2023 consisted
of dividends paid of $1.4 million, offset by short-term debt
facilities utilized of $1.0 million.
During the quarter, the South African Rand weakened against the
U.S. Dollar from R17.98 at March 31, 2023 to R18.73 at June 30,
2023 and as a result, cash decreased by $1.0 million due to foreign
exchange losses.
Quarterly Dividend
The last recent dividend payment of 4.50000 South African cents
(0.2 U.S. cents) per ordinary share and 1.12500 South African Rand
(6 U.S. cents) per ADS was paid on June 29, 2023 to ADS holders on
record on June 16, 2023. A dividend of 4.50000 South African cents
per ordinary share and 1.12500 South African Rand per ADS will be
paid on September 7, 2023 to ADS holders on record as of the close
of business on August 25, 2023.
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, August 24, 2023
Record date
Friday, August 25, 2023
Approximate date of currency
conversion
Monday, August 28, 2023
Approximate dividend payment date
Thursday, September 7, 2023
Share Repurchases
In the first quarter of fiscal year 2024, the Company
repurchased 1,716,207 ordinary shares on the open market at
prevailing market prices, for a total consideration of $0.5
million.
Conference Call Information
MiX Telematics management will host a conference call and audio
webcast at 8:00 a.m. (Eastern Daylight Time) and 2:00 p.m. (South
African Time) on Wednesday, August 2, 2023 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 1-888-886-7786 (within the United
States) or 0-800-994-942 (within South Africa) or 1-416-764-8658
(outside of the United States). The conference ID is 44708350.
- 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 44708350.
- 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 connected fleet
and mobile asset solutions delivered as SaaS to over 1,042,000
subscribers in over 120 countries. The Company’s products and
services provide enterprise fleets, small fleets and consumers with
solutions for efficiency, safety, compliance and security. MiX
Telematics was founded in 1996 and has offices in South Africa, the
United Kingdom, the United States, Uganda, Brazil, Australia,
Romania and the United Arab Emirates as well as a network of more
than 130 fleet value-added resellers 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, the 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:
- 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 and the use of artificial intelligence;
- competition from industry consolidation and new entrants into
the industry;
- 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;
- the impact of the global component shortage and supply chain
disruptions;
- our dependence on key suppliers and vendors to manufacture our
hardware;
- our dependence on our network of dealers and distributors to
sell our solutions;
- our ability to navigate and adapt in adverse global economic
and market conditions;
- the impact of climate change and increased focus on
environmental, social and governance matters;
- 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 ensure compliance with export laws, customs and
import regulations, economic sanctions and Export Administration
Regulations;
- 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;
- our reliance on electricity generated and supplied by Eskom
(The South African Power Utility) and the impact of intermittent
electricity supply in South Africa;
- 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, adjusted net
income, adjusted net income per share, adjusted effective tax rate,
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 and Key Business
Metrics.” 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,
2023
June 30,
2023
ASSETS
Current assets:
Cash and cash equivalents
$
29,876
$
27,101
Restricted cash
781
763
Accounts receivables, net
24,194
25,930
Inventory, net
4,936
4,271
Prepaid expenses and other current
assets
9,950
9,462
Total current assets
69,737
67,527
Property, plant and equipment, net
36,779
37,380
Goodwill
39,258
38,415
Intangible assets, net
21,895
21,124
Deferred tax assets
2,090
1,877
Other assets
6,804
7,768
Total assets
$
176,563
$
174,091
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Short-term debt
$
15,253
$
14,817
Accounts payables
6,120
5,428
Accrued expenses and other liabilities
21,486
22,677
Contingent consideration
3,569
3,279
Deferred revenue
5,295
4,669
Income taxes payable
298
427
Total current liabilities
52,021
51,297
Deferred tax liabilities
12,357
12,767
Long-term accrued expenses and other
liabilities
3,368
3,382
Total liabilities
67,746
67,446
Stockholders’ equity:
MiX Telematics Limited stockholders’
equity
Preference shares: 100 million shares
authorized but not issued
—
—
Ordinary shares: 608.8 million and 607.8
million no-par value shares issued as of March 31, 2023 and June
30, 2023, respectively
64,001
63,455
Less treasury stock at cost: 53.8 million
shares as of March 31, 2023 and June 30, 2023
(17,315
)
(17,315
)
Retained earnings
79,024
79,291
Accumulated other comprehensive loss
(13,399
)
(15,532
)
Additional paid-in capital
(3,499
)
(3,259
)
Total MiX Telematics Limited
stockholders’ equity
108,812
106,640
Non-controlling interest
5
5
Total stockholders’ equity
108,817
106,645
Total liabilities and stockholders’
equity
$
176,563
$
174,091
MIX TELEMATICS LIMITED
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
(In thousands, except per share
data)
(Unaudited)
Three Months Ended June
30,
2022
2023
Revenue
Subscription
$
30,963
$
32,211
Hardware and other
4,096
4,140
Total revenue
35,059
36,351
Cost of revenue
Subscription
10,053
10,213
Hardware and other
3,273
3,025
Total cost of revenue
13,326
13,238
Gross profit
21,733
23,113
Operating expenses
Sales and marketing
4,332
3,506
Administration and other
14,975
15,215
Total operating expenses
19,307
18,721
Income from operations
2,426
4,392
Other income/(expense)
899
(709
)
Interest income
750
269
Interest expense
263
502
Income before income tax
expense
3,812
3,450
Income tax expense
3,134
1,842
Net income
678
1,608
Less: Net income attributable to
non-controlling interest
—
—
Net income attributable to MiX
Telematics Limited
$
678
$
1,608
Net income per ordinary share
Basic
$
0.001
$
0.003
Diluted
$
0.001
$
0.003
Net income per American Depositary
Share
Basic
$
0.03
$
0.07
Diluted
$
0.03
$
0.07
Ordinary shares
Weighted average
551,367
554,841
Diluted weighted average
556,665
555,464
American Depositary Shares
Weighted average
22,055
22,194
Diluted weighted average
22,267
22,219
MIX TELEMATICS LIMITED
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended June
30,
2022
2023
Cash flows from operating
activities:
Cash (used in)/generated from
operations
$
(1,278
)
$
4,925
Interest received
336
258
Interest paid
(165
)
(376
)
Income tax received
422
172
Net cash (used in)/provided by
operating activities
(685
)
4,979
Cash flows from investing
activities:
Acquisition of property, plant and
equipment – in-vehicle devices
(4,887
)
(3,447
)
Acquisition of property, plant and
equipment – other
(305
)
(169
)
Proceeds from the sale of property, plant
and equipment
33
—
Acquisition of intangible assets
(1,492
)
(1,355
)
Net cash used in investing
activities
(6,651
)
(4,971
)
Cash flows from financing
activities:
Cash paid for ordinary shares
repurchased
—
(546
)
Cash paid on dividends to MiX Telematics
Limited stockholders
(1,416
)
(1,331
)
Movement in short-term debt
1,044
63
Net cash used in financing
activities
(372
)
(1,814
)
Net decrease in cash and cash equivalents,
and restricted cash
(7,708
)
(1,806
)
Cash and cash equivalents, and restricted
cash at beginning of the period
34,719
30,657
Effect of exchange rate changes on cash
and cash equivalents, and restricted cash
(1,385
)
(987
)
Cash and cash equivalents, and
restricted cash at end of the period
$
25,626
$
27,864
Segment Information
Our operating segments are based on the geographical location of
our Regional Sales Offices (“RSOs”) and also include our Central
Services Organization (“CSO”). CSO is our central services
organization that wholesales our products and services to our RSOs
who, in turn, interface with our end-customers, distributors and
dealers. CSO is also responsible for the development of our
hardware and software platforms and provides common marketing,
product management, technical and distribution support to each of
our other operating segments.
Each RSO’s results reflect the external revenue earned, as well
as its performance before the remaining CSO and corporate costs
allocations. Segment performance is measured and evaluated by the
chief operating decision maker (“CODM”) using Segment Adjusted
EBITDA, which is a measure that uses income before income tax
expense excluding the contingent consideration remeasurement,
interest expense, interest income, net foreign exchange
gains/losses, net profit on sale of property, plant and equipment,
restructuring costs, stock-based compensation reversal/costs,
depreciation, amortization, operating lease costs and corporate and
consolidation entries. Product development costs are capitalized
and amortized and this amortization is excluded from Segment
Adjusted EBITDA.
The segment information provided to the CODM is as follows (in
thousands and unaudited):
Three Months Ended June 30,
2022
Subscription
Revenue
Hardware and
Other Revenue
Total Revenue
Segment Adjusted
EBITDA
Regional Sales Offices
Africa
$
19,061
$
1,672
$
20,733
$
7,937
Europe
3,145
489
3,634
1,236
Americas
3,412
690
4,102
173
Middle East and Australasia
4,099
885
4,984
1,838
Brazil
1,235
360
1,595
435
Total Regional Sales Offices
30,952
4,096
35,048
11,619
Central Services Organization
11
—
11
(2,767
)
Total Segment Results
$
30,963
$
4,096
$
35,059
$
8,852
Three Months Ended June 30,
2023
Subscription
Revenue
Hardware and
Other Revenue
Total Revenue
Segment Adjusted
EBITDA
Regional Sales Offices
Africa
$
18,375
$
1,155
$
19,530
$
8,516
Europe
3,092
357
3,449
1,138
Americas
4,827
285
5,112
533
Middle East and Australasia
4,153
1,807
5,960
2,588
Brazil
1,757
536
2,293
970
Total Regional Sales Offices
32,204
4,140
36,344
13,745
Central Services Organization
7
—
7
(2,462
)
Total Segment Results
$
32,211
$
4,140
$
36,351
$
11,283
The following table (unaudited and shown in thousands)
reconciles total Segment Adjusted EBITDA to income before income
tax expense for the periods shown:
Three Months Ended June
30,
2022
2023
Segment Adjusted EBITDA
$
8,852
$
11,283
Corporate and consolidation entries
(2,174
)
(1,979
)
Operating lease costs (1)
(334
)
(312
)
Product development costs (2)
(343
)
(332
)
Depreciation and amortization
(3,746
)
(4,012
)
Stock-based compensation reversal/(costs)
(3)
192
(240
)
Restructuring costs
—
(23
)
Net profit on sale of property, plant and
equipment
33
4
Net foreign exchange gains/(losses)
845
(730
)
Interest income
750
269
Interest expense
(263
)
(502
)
Contingent consideration remeasurement
—
24
Income before income tax
expense
$
3,812
$
3,450
Description of reconciling items:
- For the purposes of calculating Segment Adjusted EBITDA,
operating lease expenses are excluded from the Segment Adjusted
EBITDA. Therefore, in order to reconcile Segment Adjusted EBITDA to
income before income tax expense, the total lease expense in
respect of operating leases needs to be deducted.
- For segment reporting purposes, product development costs,
which do not meet the capitalization requirements under ASC 730
Research and Development or under ASC 985 Software, are capitalized
and amortized. The amortization is excluded from Segment Adjusted
EBITDA. In order to reconcile Segment Adjusted EBITDA to income
before income tax expense, product development costs capitalized
for segment reporting purposes need to be deducted.
- The Executive Vice President and Chief Financial Officer, John
Granara, resigned with effect from June 24, 2022. The reversal for
the three months ended June 30, 2022 relates to the forfeiture of
stock appreciation rights and restricted share units as a result of
the resignation during the period.
Annexure A: Non-GAAP Financial Measures and
Key Business Metrics
We use certain measures to assess the financial performance of
the business. Certain of these measures are termed “non-GAAP
measures” because they exclude amounts that are included in, or
include amounts that are excluded from, the most directly
comparable measure calculated and presented in accordance with
GAAP, or are calculated using financial measures that are not
calculated in accordance with GAAP. These non-GAAP measures include
adjusted EBITDA, adjusted EBITDA margin, adjusted net income,
adjusted net income per share, adjusted effective tax rate, free
cash flow and constant currency information.
An explanation of the relevance of each of the non-GAAP
measures, a reconciliation of the non-GAAP measures to the most
directly comparable measures calculated and presented in accordance
with GAAP and a discussion of their limitations is set out below.
We do not regard these non-GAAP measures as a substitute for, or
superior to, the equivalent measures calculated and presented in
accordance with GAAP or those calculated using financial measures
that are calculated in accordance with GAAP.
In addition to providing the non-GAAP financial measures
mentioned above, we disclose ARR to give investors supplementary
indicators of the value of our current recurring revenue contracts.
ARR represents the estimated annualized value of recurring revenue
for subscription contracts that have commenced revenue recognition
as of the measurement date.
Non-GAAP Financial Measures
Adjusted EBITDA and Adjusted EBITDA Margin
Adjusted EBITDA and adjusted EBITDA margin are two of the profit
measures reviewed by the CODM. We define adjusted EBITDA as net
income before income taxes, interest expense, interest income, net
foreign exchange gains/losses, depreciation of property, plant and
equipment including capitalized customer in-vehicle devices,
amortization of intangible assets including capitalized
internal-use software development costs and intangible assets
identified as part of a business combination, stock-based
compensation reversal/costs, net profit on sale of property, plant
and equipment, restructuring costs and the contingent consideration
remeasurement. We define adjusted EBITDA margin as adjusted EBITDA
divided by total revenue.
We have 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.
A reconciliation of net income (the most directly comparable
financial measure presented in accordance with GAAP) to adjusted
EBITDA for the periods shown is presented below (in thousands and
unaudited):
Three Months Ended June
30,
2022
2023
Net income
$
678
$
1,608
Plus: Income tax expense
3,134
1,842
Plus: Interest expense
263
502
Less: Interest income
(750
)
(269
)
(Less)/plus: Net foreign exchange
(gains)/losses
(845
)
730
Plus: Depreciation (1)
2,626
2,567
Plus: Amortization (2)
1,120
1,445
(Less)/plus: Stock-based compensation
(reversal)/costs (3)
(192
)
240
Less: Net profit on sale of property,
plant and equipment
(33
)
(4
)
Plus: Restructuring costs
—
23
Less: Contingent consideration
remeasurement
—
(24
)
Adjusted EBITDA
$
6,001
$
8,660
Adjusted EBITDA margin
17.1
%
23.8
%
- Includes depreciation of owned assets (including in-vehicle
devices).
- Includes amortization of intangible assets (including
capitalized internal-use software development costs and intangible
assets identified as part of a business combination).
- The Executive Vice President and Chief Financial Officer, John
Granara, resigned with effect from June 24, 2022. The reversal for
the three months ended June 30, 2022 relates to the forfeiture of
stock appreciation rights and restricted share units as a result of
the resignation during the period.
Our use of adjusted EBITDA and adjusted EBITDA margin have
limitations as analytical tools, and should not be considered as
performance measures in isolation from, or as a substitute for,
analysis of our results as reported under GAAP.
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, our working capital needs;
- Adjusted EBITDA does not consider the potentially dilutive
impact of equity-based compensation;
- Adjusted EBITDA does not reflect tax payments that may
represent a reduction in cash available to the Company;
- other companies, including companies in our industry, may
calculate adjusted EBITDA differently, which reduces its usefulness
as a comparative measure; and
- certain of the adjustments (such as restructuring costs,
impairment of long-lived assets and others) made in calculating
adjusted EBITDA are those that management believes are not
representative of our underlying operations and, therefore, are
subjective in nature.
Because of these limitations, adjusted EBITDA and adjusted
EBITDA margin should be considered alongside other financial
performance measures, including income from operations, net income
and our other results.
Adjusted Net Income
Adjusted net income is defined as net income excluding net
foreign exchange gains/losses, restructuring costs and contingent
consideration remeasurement, net of tax.
We have included adjusted net income in this press release
because it provides a useful measure for period-to-period
comparisons of our core business by excluding net foreign exchange
gains/losses, restructuring costs and contingent consideration
remeasurement, net of tax and associated tax consequences, from
earnings. Accordingly, we believe that adjusted net income provides
useful information to investors and others in understanding and
evaluating our operating results.
The following table (in thousands, except per share data, and
unaudited) reconciles net income to adjusted net income for the
periods shown:
Three Months Ended June
30,
2022
2023
Net income
$
678
$
1,608
Net foreign exchange (gains)/losses
(845
)
730
Income tax effect of net foreign exchange
gains/(losses)
2,036
425
Restructuring costs
—
23
Income tax effect of restructuring
costs
—
(5
)
Contingent consideration remeasurement
—
(24
)
Income tax effect of contingent
consideration remeasurement
—
5
Adjusted net income
$
1,869
$
2,762
Adjusted Net Income Per Share
Adjusted net income per share is defined as adjusted net income
divided by the weighted average number of ordinary shares or ADSs
in issue during the period.
We have included adjusted net income per share in this press
release because it provides a useful measure for period-to-period
comparisons of our core business by excluding net foreign exchange
gains/losses, restructuring costs and contingent consideration
remeasurement, net of tax and associated tax consequences, from
earnings. Accordingly, we believe that adjusted net income per
share provides useful information to investors and others in
understanding and evaluating our operating results.
The following tables (unaudited) reconcile diluted net income
per ordinary share or ADS to diluted adjusted net income per
ordinary share or ADS for the periods shown:
Three Months Ended June
30,
2022
2023
Net income per ordinary share –
diluted
$
0.001
$
0.003
Effect of net foreign exchange
(gains)/losses to net income
(0.002
)
0.001
Income tax effect of net foreign exchange
gains/(losses)
0.004
0.001
Restructuring costs
—
#
Income tax effect of restructuring
costs
—
#
Contingent consideration remeasurement
—
#
Income tax effect of contingent
consideration remeasurement
—
#
Adjusted net income per ordinary share –
diluted
$
0.003
$
0.005
# Amount less than $0.001
Three Months Ended June
30,
2022
2023
Net income per ADS – diluted
$
0.03
$
0.07
Effect of net foreign exchange
(gains)/losses to net income
(0.04
)
0.03
Income tax effect of net foreign exchange
gains/(losses)
0.09
0.02
Restructuring costs
—
*
Income tax effect of restructuring
costs
—
*
Contingent consideration remeasurement
—
*
Income tax effect of contingent
consideration remeasurement
—
*
Adjusted net income per ADS – diluted
$
0.08
$
0.12
* Amount less than $0.01
Adjusted Effective Tax Rate
The adjusted effective tax rate is defined as income tax expense
excluding the income tax effect of net foreign exchange
gains/losses, restructuring costs and contingent consideration
remeasurement divided by income before income tax expense excluding
net foreign exchange gains/losses, restructuring costs and
contingent consideration remeasurement.
A reconciliation of the effective tax rate (the most directly
comparable financial measure presented in accordance with GAAP) to
the adjusted effective tax rate for the periods shown is presented
below (in thousands and unaudited):
Three Months Ended June
30,
2022
2023
Income before income tax expense
$
3,812
$
3,450
Net foreign exchange (gains)/losses
(845
)
730
Restructuring costs
—
23
Contingent consideration remeasurement
—
(24
)
Income before income tax expense
excluding net foreign exchange (gains)/losses, restructuring costs
and contingent consideration remeasurement
$
2,967
$
4,179
Income tax expense
$
(3,134
)
$
(1,842
)
Income tax effect of net foreign exchange
gains/(losses)
2,036
425
Income tax effect of restructuring
costs
—
(5
)
Income tax effect of contingent
consideration remeasurement
—
5
Income tax expense excluding income tax
effect of net foreign exchange gains/(losses), restructuring costs
and contingent consideration remeasurement
$
(1,098
)
$
(1,417
)
Effective tax rate
82.2
%
53.4
%
Adjusted effective tax rate
37.0
%
33.9
%
Free Cash Flow
Free cash flow is determined as net cash used in/provided by
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.
The following table (in thousands and unaudited) reconciles net
cash used in/provided by operating activities to free cash flow for
the periods shown:
Three Months Ended June
30,
2022
2023
Net cash (used in)/provided by operating
activities
$
(685
)
$
4,979
Less: Capital expenditure payments
(6,684
)
(4,971
)
Free cash flow
$
(7,369
)
$
8
Constant Currency
Constant currency information has been presented to illustrate
the impact of changes in currency rates on the Company’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 Company’s currencies, including the South
African Rand and British Pound. The constant currency growth
percentage has been calculated by utilizing the constant currency
results compared to the prior period results.
The constant currency information represents non-GAAP
information. We believe this provides a useful basis to measure the
performance of our business as it removes distortion from the
effects of foreign currency movements during the period.
Due to the significant portion of our customers who are invoiced
in non-U.S. Dollar denominated currencies, we also calculate our
subscription revenue growth rate on a constant currency basis,
thereby removing the effect of currency fluctuation on our results
of operations.
The following tables (in thousands, except year over year
change) provide the unaudited constant currency reconciliation to
the most directly comparable GAAP measure for the periods
shown:
Subscription Revenue:
Three Months Ended June
30,
Year Over Year
Change
2022
2023
Subscription revenue as reported
$
30,963
$
32,211
4.0
%
Conversion impact of U.S. Dollar/other
currencies
—
3,581
11.6
%
Subscription revenue on a constant
currency basis
$
30,963
$
35,792
15.6
%
Hardware and Other Revenue:
Three Months Ended June
30,
Year Over Year
Change
2022
2023
Hardware and other revenue as reported
$
4,096
$
4,140
1.1
%
Conversion impact of U.S. Dollar/other
currencies
—
280
6.8
%
Hardware and other revenue on a constant
currency basis
$
4,096
$
4,420
7.9
%
Total Revenue:
Three Months Ended June
30,
Year Over Year
Change
2022
2023
Total revenue as reported
$
35,059
$
36,351
3.7
%
Conversion impact of U.S. Dollar/other
currencies
—
3,861
11.0
%
Total revenue on a constant currency
basis
$
35,059
$
40,212
14.7
%
Key Business Metrics
Annual Recurring Revenue
We believe that ARR is a key indicator of the trajectory of our
business performance and serves as an indicator of future
subscription revenue growth. We define ARR as the annualized value
of subscription contracts that have commenced revenue recognition
as of the measurement date. ARR is calculated by taking the
subscription revenue for the last month of the period, multiplied
by 12. It provides a 12-month forward view of revenue, assuming
unit numbers, pricing and foreign exchange rates (the average
monthly exchange rates applicable to the last month of the period)
remain unchanged during the year. Constant currency ARR growth has
been determined by adjusting the prior financial reporting period
results to the last month of the current period average exchange
rates, determined as the average monthly exchange rates applicable
to the last month of the period.
ARR does not have a standardized meaning and is not necessarily
comparable to similarly titled measures presented by other
companies. ARR should be viewed independently of revenue and is not
intended to be combined with or to replace it. ARR is not a
forecast and the active contracts at the date used in calculating
ARR may or may not be extended or renewed.
ARR is included in the following table (in thousands and
unaudited):
June 30,
2022
2023
Annual Recurring Revenue
$
123,210
$
129,529
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230728915676/en/
Investor Relations Contact Matt Glover and Cody Cree
Gateway Group, Inc. MIXT@gateway-grp.com +1-949-574-3860
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