MiX Telematics Reports Preliminary Unaudited Fourth Quarter and Full Fiscal Year 2020 GAAP Financial Results

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 preliminary unaudited financial results for the fourth quarter and full fiscal year 2020, which ended March 31, 2020.

“MiX’s fourth quarter performance was solid in the context of the unprecedented uncertainty caused by the COVID-19 pandemic, significant related exchange rate volatility and challenges in the oil and gas market. Our mission at MiX is to continue providing the best-in-class software and support for our customers who rely on us as they adapt their businesses to the current situation,” said Stefan Joselowitz, Chief Executive Officer of MiX Telematics.

Joselowitz continued, “Although the near-term demand environment is uncertain, with our continued investments in our strategic initiatives, we strongly believe MiX is well positioned to meet our long-term subscription revenue growth and profitability targets as global economic conditions begin returning to normal.”

Financial Performance for the Three Months Ended March 31, 2020

Subscription Revenues: Subscription revenues were $31.5 million, a decrease of 0.7% compared with $31.7 million for the fourth quarter of fiscal 2019. Subscription revenues increased by 5.6% on a constant currency basis, year over year. Subscription revenue growth was primarily driven by the increase in the number of subscribers, which grew by approximately 9.1% compared to the same period in the prior year.

Total Revenues: Total revenues were $36.2 million, a decrease of 0.1% compared to $36.3 million for the fourth quarter of fiscal 2019. Total revenues increased by 6.0% on a constant currency basis, year over year. Hardware and other revenues were $4.8 million, an increase of 4.5%, compared to $4.6 million for the fourth quarter of fiscal 2019.

Gross Margin: Gross profit was $20.8 million, compared to $24.4 million for the fourth quarter of fiscal 2019. Gross profit margin was 57.4%, compared to 67.3% for the fourth quarter of fiscal 2019. The lower gross profit margin for the fourth quarter of fiscal 2020 is attributable to accelerated amortization of in-vehicle devices following contraction in certain fleets in the oil and gas vertical in the Americas segment.

Income From Operations: Income from operations was $3.7 million, compared to $6.8 million for the fourth quarter of fiscal 2019. Operating income margin was 10.3%, compared to 18.8% for the fourth quarter of fiscal 2019. Operating expenses of $17.1 million decreased by $0.5 million, or 2.8%, compared to the fourth quarter of fiscal 2019. Operating expenses represented 47.1% of total revenues compared to 48.5% of total revenues in the fourth quarter of fiscal 2019.

Net Loss and Earnings Per Share: Net loss was $2.4 million, compared to the net income of $5.5 million in the fourth quarter of fiscal 2019. Net loss included a net foreign exchange loss of $0.4 million before tax, as well as a $3.5 million deferred tax charge on a U.S. Dollar intercompany loan between MiX Limited and MiX Investments, a wholly-owned subsidiary of the Company. During the fourth quarter of fiscal 2019, net income included a net foreign exchange loss of $0.01 million and a $0.1 million deferred tax charge on a U.S. Dollar intercompany loan between MiX Limited and MiX Investments.

Earnings per diluted ordinary share were negative 0.4 U.S. cents, compared to positive 1 U.S. cent in the fourth quarter of fiscal 2019. For the fourth quarter of fiscal 2020 the calculation was based on diluted weighted average ordinary shares in issue of 547.7 million compared to 580.1 million diluted weighted average ordinary shares in issue during the fourth quarter of fiscal 2019. On a ratio of 25 ordinary shares to one American Depositary Share (“ADS”), earnings per diluted ADS was negative 11 U.S. cents compared to positive 24 U.S. cents in the fourth quarter of fiscal 2019.

The Group’s effective tax rate was 174.2%, compared to 20.3% in the fourth quarter of fiscal 2019. Ignoring the impact of net foreign exchange gains and losses net of tax, the tax rate which was used in determining non-GAAP net income below, was 28.7% compared to 18.7% in the fourth quarter of fiscal 2019. The low tax rate is due to tax incentive benefits of $0.5 million related to section 11D claims in MiX International, a wholly-owned subsidiary of the Group.

Adjusted EBITDA: Adjusted EBITDA, a non-GAAP measure, was $10.6 million, compared to $11.2 million for the fourth quarter of fiscal 2019. Adjusted EBITDA margin, a non-GAAP measure, for the fourth quarter of fiscal 2020 was 29.2%, compared to 31.0% for the fourth quarter of fiscal 2019.

Non-GAAP Net Income and Earnings Per Share: Non-GAAP net income was $2.9 million, compared to $5.6 million for the fourth quarter of fiscal 2019. Non-GAAP earnings per diluted ordinary share was 0.5 U.S. cents, compared to 1 U.S. cent in the fourth quarter of fiscal 2019. At a ratio of 25 ordinary shares to one ADS, the non-GAAP earnings per diluted ADS was 13 U.S. cents compared to 24 U.S. cents in the fourth quarter of fiscal 2019.

Financial Performance for the Fiscal Year Ended March 31, 2020

Subscription Revenues: Subscription revenues increased to $127.6 million, an increase of 3.6% compared to $123.2 million for fiscal 2019. On a constant currency basis, subscription revenues increased by 8.7%. Subscription revenues benefited from an increase of 68,000 subscribers from April 2019 to March 2020 representing an increase in subscribers of 9.1% during fiscal 2020.

Total Revenues: Total revenues for fiscal 2020 were $145.7 million, an increase of 1.4% compared to $143.7 million for fiscal 2019. On a constant currency basis, total revenues increased by 6.3%. Hardware and other revenues were $18.1 million, compared to $20.6 million for fiscal 2019.

Gross Margin: Gross profit was $92.6 million, a decrease of 4.3% compared to $96.8 million for fiscal 2019. Gross profit margin was 63.6%, compared to 67.4% for fiscal 2019.

Income From Operations: Income from operations was $21.0 million, compared to $24.3 million in fiscal 2019. The operating income margin was 14.5%, compared to the 16.9% in fiscal 2019. Operating expenses represented 49.2% of total revenues compared to 50.5% of total revenues in fiscal 2019 due to ongoing cost management initiatives.

Net Income and Earnings Per Share: Net income for fiscal 2020 was $11.0 million, compared to $14.8 million in fiscal 2019. Net income included a net foreign exchange loss of $0.6 million, as well as a $4.3 million deferred tax charge on a U.S. Dollar intercompany loan between MiX Limited and MiX Investments, a wholly-owned subsidiary of the Company. During fiscal 2019, a net foreign exchange gain of $0.03 million was recognized and a $3.5 million deferred tax charge on a U.S. Dollar intercompany loan between MiX Limited and MiX Investments.

Earnings per diluted ordinary share were 3 U.S. cents, compared to 3 U.S. cents in fiscal 2019. For fiscal 2020, the calculation was based on diluted weighted average ordinary shares in issue of 567.9 million, compared to 583.7 million diluted weighted average ordinary shares in issue during fiscal 2019.

The effective tax rate was 47.2%, compared to 39.9% for fiscal 2019. Ignoring the impact of net foreign exchange gains and losses net of tax, the effective tax rate, which was used in calculating non-GAAP net income, was 27.1% compared to 25.7% in fiscal 2019.

Adjusted EBITDA: Adjusted EBITDA, a non-GAAP measure, was $41.7 million, compared to $41.5 million for fiscal 2019. The Adjusted EBITDA margin for fiscal 2020 was 28.6%, compared to 28.9% in fiscal 2019.

Non-GAAP Net Income and Earnings Per Share: Non-GAAP net income for fiscal 2020 was $15.6 million, compared to $18.3 million in fiscal 2019. Non-GAAP earnings per diluted ordinary share was 3 U.S. cents, compared to 3 U.S. cents for fiscal 2019. At a ratio of 25 ordinary shares to one ADS, the non-GAAP earnings per diluted ADS was 69 U.S. cents compared to 78 U.S. cents in fiscal 2019.

Preliminary Financial Information

The unaudited financial information set forth in this release is preliminary and subject to potential adjustments. Adjustments to the consolidated financial statements may be identified when audit work has been finalized for the year-end audit, which could result in potential differences from this preliminary unaudited condensed financial information. Actual results could differ materially. The Company expects to finalize its financial results and file its Annual Report on Form 10-K no later than July 29, 2020.

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 (6 U.S. cents) per ADS was paid on March 6, 2020 to shareholders on record on February 21, 2020. A dividend of 4 South African cents per ordinary share and 1 South African Rand per ADS will be paid on July 2, 2020 to shareholders on record as of the close of business on June 19, 2020.

Share Repurchase

In the fourth quarter of fiscal 2020, the Company repurchased 2,872,636 ordinary shares on the open market at prevailing market prices, for a total consideration of $1.5 million. For the full year, the Company repurchased 16,856,001 ordinary shares on the open market at prevailing market prices for a cumulative consideration of $9.7 million.

Section 11D Allowances Relating To Tax Assets Recognized

MiX Telematics International Proprietary Limited (“MiX International”), a subsidiary of the Company, is eligible for a 150% allowance for research and development spend in terms of section 11D of the South African Income Tax Act. During the 2013 and 2014 fiscal years, the additional 50% tax deduction was disallowed on certain projects because the South African Department of Science and Innovation (“DSI”) was of the view that the amounts claimed did not constitute qualifying expenditure. After a lengthy legal process, the DSI advised during January 2020 that this expenditure has now been approved, resulting in the recognition of a current tax asset of $0.5 million.

Events After the Reporting Period

Global Outbreak of COVID-19

The global outbreak of COVID-19 has had and, we believe, will continue to have an adverse impact on global economies and financial markets. We have taken into account the impact of COVID-19, to the extent possible, on our financial statements as at reporting date. However, future changes in economic conditions related to COVID-19 could have an impact on future estimates and judgements used, particularly those relating to Goodwill sensitivities and impairment assessments.

GAAP Conversion

As previously announced, effective April 1, 2020, the Company began to file periodic reports on U.S. domestic issuer forms with the Securities and Exchange Commission. Accordingly, unless otherwise indicated, the financial results and estimates provided herein have been prepared in accordance with accounting principles generally accepted in the United States. There are certain differences in these financial results and estimates prepared in accordance with GAAP compared to such financial results and estimates prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standard Board, and therefore the financial results and estimates provided herein are not directly comparable to the Company’s prior disclosure. For a description and reconciliation of the differences between GAAP and IFRS financial results and estimates, please see Annexure B titled “Impact of Adopting GAAP”.

For the year ended March 31, 2020, the Company’s Annual Report on Form 10-K will present results in accordance with GAAP.

Business Outlook

Due to the uncertainty surrounding the level of business disruption as a result of the spread of COVID-19, the Company is suspending its practice of issuing financial guidance for the full 2021 fiscal year and the first quarter of fiscal 2021.

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, May 28, 2020 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 13702389.
• 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 13702389.
• 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 818,000 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, Mexico, 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. Forward-looking statements also include statements regarding the projected impact of the recent global outbreak of COVID-19 on our business activities, operating results, cash flows and financial 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. 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 economic impact of 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’s outbreak, 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 implement our growth strategies successfully, including our ability to increase sales to existing customers, the introduction of new solutions and international expansion; 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; our dependence on our network of dealers and distributors to sell our solutions; our dependence on key suppliers and vendors to manufacture our hardware; 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 litigations 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 elsewhere in this press release.

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, non-GAAP net income, non-GAAP earnings 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.

Supplementary Financial Information

The Company has elected to disclose the following quarterly financial data:

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 which uses net income, determined under International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board, as a starting point. Prior to the publication of the financial results for the year ended March 31, 2020, the Company published results under IFRS only, which is the reason for the CODM using a performance measure based on IFRS.