MIX TELEMATICS LIMITED
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our consolidated financial
statements and the accompanying notes included in Item 1 of this Quarterly
Report on Form 10-Q.
This discussion contains forward-looking statements that involve risks,
uncertainties and assumptions. Our future results may vary materially from those
indicated as a result of the risks that affect our business, including, among
others, those identified in "Forward-Looking Statements" and Part II "Item 1A.
Risk Factors".
Overview
We are a leading global provider of fleet and mobile asset management solutions
delivered as SaaS. Our solutions deliver a measurable return by enabling our
customers to manage, optimize and protect their investments in commercial
fleets, mobile assets or personal vehicles. We generate actionable intelligence
that enables a wide range of customers, from large enterprise fleets to small
fleet operators and consumers, to reduce fuel and other operating costs, improve
efficiency, enhance regulatory compliance, promote driver safety, manage risk
and mitigate theft. Our solutions mostly rely on our proprietary, highly
scalable technology platforms, which allow us to collect, analyze and deliver
information based on data from our customers' vehicles. Using intuitive,
web-based interface, reports or mobile applications, our fleet customers can
access large volumes of real-time and historical data, monitor the location and
status of their drivers and vehicles and analyze a wide number of key metrics
across their fleet operations.
We were founded in 1996 and we have 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).
We derive the majority of our revenues from subscriptions from our fleet and
mobile asset management solutions. Our subscriptions generally include access to
our SaaS solutions, connectivity, and in many cases, use of an in-vehicle
device. We also generate revenues from the sale of in-vehicle devices, which
enable customers to use our subscription-based solutions, installation services
of our in-vehicle-devices and driver training for fleet customers. We generate
sales through the efforts of our direct sales teams, staffed in our regional
sales offices, and through our global network of distributors and dealers. Our
direct sales teams focus on marketing our fleet solutions to global and
multinational enterprise accounts and to other large customer accounts located
in regions of the world where we maintain a direct sales presence. Our direct
sales teams have industry expertise across multiple industries, including oil
and gas, transportation and logistics, government and municipal, bus and coach,
rental and leasing, and utilities. In some markets, we rely on a network of
distributors and dealers to sell our solutions on our behalf. Our distributors
and dealers also install our in-vehicle devices and provide training, technical
support and ongoing maintenance for the customers they support.
Impact of COVID-19
In December 2019 , a novel strain of coronavirus was reported in China
("COVID-19"). In January 2020 , the World Health Organization ("WHO") declared
this outbreak a Public Health Emergency of international concern and,
subsequently, it was declared a pandemic in March 2020 . The outbreak continued
to spread globally, affecting global economic activity and financial markets. We
are unable to accurately predict the impact that COVID-19 will have due to
numerous uncertainties, including the severity of the disease, the duration of
the outbreak, actions that may be taken by governmental authorities, the impact
on our customers and other factors identified in Part II Item 1A. "Risk
Factors".
Business, employees and operations
Due to extensive measures implemented by various governments, all of our
employees were required to work remotely, with the exception of our staff
working in our monitoring centers, which were classified as an essential
service. We have implemented appropriate safeguards for these centers. In
addition, we have modified certain business and workforce practices (including
extended work from home requirements, suspension of certain business travel and
cancellation of physical participation in meetings, events and conferences) and
implemented new protocols to promote social distancing and enhance sanitary
measures in our offices and facilities to conform to government restrictions and
best practices encouraged by governmental and regulatory authorities.
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During the first quarter of fiscal year 2021, we implemented various cost-saving
measures, including headcount reductions, deferred salary increases, a hiring
freeze across the business, and significant reductions in discretionary
spending. We started to realize the benefit of these actions in the second
quarter. We expect the full benefit will be realized during the remainder of
fiscal year 2021 and beyond. As part of the headcount reductions in the first
nine months of fiscal 2021, we incurred a $1.0 million restructuring charge as
we committed to plans to restructure certain parts of our business as a measure
to minimize the adverse economic and business effect of the COVID-19 pandemic
and to re-align resources to our current business outlook and cost structure.
The restructuring activities mainly related to the CSO, Africa and North America
reporting segments.
COVID-19 has disrupted the operations of our customers and channel partners, our
operations and the results of our operations. COVID-19 currently has had and, we
believe, will continue to have an adverse impact on global economies and
financial markets. For example, the continued economic uncertainty in the oil
and gas sector has resulted in significant declines in our customer's fleet
sizes whilst similar disruption is evident in our bus and coach vertical
following significantly reduced demand for public transport as a result of
various governmental shut downs in multiple jurisdictions where we operate. This
has and will continue to have a negative impact on our revenue and our results
of operations, the size and duration of which we are currently unable to
predict. During the first nine months of fiscal year 2021, we experienced a
contraction of 69,000 subscribers as a result of the economic conditions
attributable to the COVID-19 pandemic. We expect further subscriber contraction
in the fourth quarter of fiscal year 2021, primarily driven by oil and gas and
asset tracking subscribers. The net contraction in subscribers resulted in a
decrease in reported subscription revenues.
Cash resources and liquidity
Based on our internal projections, we believe that we have sufficient cash reserves to support us for the foreseeable future. Further details on our cash resources and borrowings available under our credit facilities are provided in the liquidity and capital resources section below.
Financial position and impairments
We have taken into account the impact of COVID-19, to the extent possible, on
our financial statements as of the 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 and impairment
assessments, as well as expected credit losses. We will continue to evaluate the
nature and extent of the impact to our business, consolidated results of
operations, and financial condition.
Key Financial Measures and Operating Metrics
In addition to financial measures based on our consolidated financial
statements, we monitor our business operations using various financial and
non-financial metrics.
Subscription Revenue
Subscription revenue represents subscription fees for our solutions, which
include the use of our SaaS fleet management solutions, connectivity, and in
many cases, our in-vehicle devices. Our subscription revenue is driven primarily
by the number of subscribers and the monthly price per subscriber, which varies
depending on the services and features customers require, hardware options,
customer size and geographic location.
In the three months ended December 31, 2019 and 2020, subscription revenue
represented 88.7% and 85.2% respectively, of our total revenue. On a year to
date basis subscription revenue has increased as a percentage of total revenue
due to a reduction in hardware and other revenue. In the nine months ended
December 31, 2019 and 2020, subscription revenue represented 87.8% and 89.2%
respectively, of our total revenue.
Subscribers
Subscribers represent the total number of discrete services we provide to customers at the end of the period.
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As of December 31,
2019 2020
Subscribers 812,773 749,493
Basis of Presentation and Key Components of Our Results of Operations
In the third quarter of fiscal year 2021, we managed our business in six
segments which include Africa , Americas , Brazil , Europe and the Middle East and
Australasia (our regional sales offices ("RSOs")), and our CSO. CSO is our
central services organization that wholesales our products and services to our
RSOs which, 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.
The CODM, who is responsible for allocating resources and assessing performance
of the reportable segments, has been identified collectively as the executive
committee and the Chief Executive Officer who make strategic decisions. Segment
performance is measured and evaluated by the CODM using Segment Adjusted EBITDA,
which is a non-GAAP 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 , we
published results under IFRS only, which is the reason for the CODM continuing
to use a segment performance measure based on IFRS.
In determining Segment Adjusted EBITDA, the margin generated by CSO, net of any
unrealized intercompany profit, is allocated to the geographic region where the
external revenue is recorded by our RSOs. The costs remaining in CSO relate
mainly to research and development of hardware and software platforms, common
marketing, product management and technical and distribution support to each of
the RSOs.
Each RSO's results reflect the external revenue earned, as well as the Segment
Adjusted EBITDA earned (or loss incurred) before the remaining CSO and corporate
costs allocations. Segment assets are not disclosed as this information is not
reviewed by the CODM.
Revenue
The majority of our revenue is subscription-based. Consequently, growth in
subscribers influences our subscription revenue growth. However, other factors,
including, but not limited to, the types of new subscribers we add and the
timing of entry into subscription contracts also play a significant role. The
price and terms of our customer subscription contracts vary based on a number of
factors, including fleet size, hardware options, geographic region and
distribution channel. In addition, we derive revenue from the sale of in-vehicle
devices, which are used to collect, generate and transmit the data used to
enable our SaaS solutions.
Our customer contracts typically have a three to five year initial term.
Following the initial term, most fleet customers elect to renew for fixed terms
ranging from one to five years. Our third party dealers are typically billed
monthly based on active connections. Some of our customer agreements, including
our consumer subscriptions, provide for automatic monthly or yearly renewals
unless the customer elects not to renew its subscription. Our consumer customer
contracts in South Africa are governed by the Consumer Protection Act, which
allows customers to cancel without paying the full balance of the contract
amount. Our fleet contracts and our customer contracts outside of South Africa
are generally non-cancellable.
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Cost of Revenue
Cost of revenue associated with our subscription revenue consists primarily of
costs related to cellular communications, infrastructure hosting, third-party
data providers, service contract maintenance costs, commission expense related
to third party dealers or distributors (commission is capitalized and amortized
unless the amortization period is 12 months or less) and depreciation of our
capitalized installed in-vehicle devices. Cost of sales associated with our
hardware revenue includes the cost of the in-vehicle devices, cost of hardware
warranty, shipping costs, custom duties, and commission expense related to
third-party dealers or distributors. We capitalize the cost of in-vehicle
devices utilized to service customers, for customers selecting our bundled
option, and we depreciate these costs from the date of installation over their
expected useful lives.
We expect that cost of revenue as a percentage of revenue will vary from period
to period depending on our revenue mix, including the proportion of our revenue
attributable to our subscription-based services. The majority of the other
components of our cost of revenue are variable and are affected by the number of
subscribers, the composition of our subscriber base, and the number of new
subscriptions sold in the period.
Operating Expenses
Sales and Marketing
Sales and marketing expenses consist primarily of salaries and wages,
commissions paid to employees, travel-related expenses, and advertising and
promotional costs. We pay our sales employees commissions based on achieving
subscription targets and we capitalize commission and amortize it (unless the
amortization period is 12 months or less). Advertising costs consist primarily
of costs for print, radio and television advertising, promotions, public
relations, customer events, tradeshows and sponsorships. We expense advertising
costs as incurred. We plan to continue to invest in sales and marketing in order
to grow our sales and build brand and category awareness.
Administration and Other Charges
Administration and other charges consist primarily of salaries and wages for
administrative staff, travel costs, professional fees (including audit and legal
fees), real estate leasing costs, expensed research and development costs and
depreciation of fixed assets including vehicles and office equipment and
amortization of intangible assets. We expect that administration and other
charges will increase in absolute terms as we continue to grow our business.
Research and Development
For additional disclosures in respect of research and development, technology
and intellectual property please refer to "Item 1. Business" in our Annual
Report on Form 10-K for the year ended March 31, 2020 , which we filed with the
Securities and Exchange Commission on July 23, 2020 .
Taxes
During the three months endedDecember 31, 2019 and 2020 our effective tax rates were negative 2.4% and negative 18.7% respectively, and during the nine months endedDecember 31, 2019 and 2020 our effective tax rates were 23.3% and 1.1% respectively, compared to a South African statutory rate of 28%. Taxation mainly consists of normal statutory income tax paid or payable and deferred tax on any temporary differences. Our effective tax rate may vary primarily according to the mix of profits made in various jurisdictions and the impact of certain non-deductible/(non-taxable) foreign exchange movements, net of tax. Further information on this is disclosed in Note 7. Income Taxes contained in the "Notes to Condensed Consolidated Financial Statements" included in Part I of this Quarterly Report on Form 10-Q. As a result, significant variances in future periods may occur. 25 -------------------------------------------------------------------------------- Non-GAAP Financial Information We use certain measures to assess the financial performance of our 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, non-GAAP net income, non-GAAP net income per share 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. 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 the income before income taxes, net interest income, net foreign exchange gains/(losses), depreciation of property 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 costs, restructuring costs and profits/(losses) on the disposal or impairments of assets or subsidiaries. We define Adjusted EBITDA margin as Adjusted EBITDA divided by total revenue. We have included Adjusted EBITDA and Adjusted EBITDA margin in this Quarterly Report on Form 10-Q because they are key measures that our 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 our core business. Accordingly, we believe that Adjusted EBITDA and Adjusted EBITDA margin provide useful information to investors and others in understanding and evaluating our 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. Reconciliation of Net Income to Adjusted EBITDA for the Period Nine Months Ended Three Months Ended December 31, December 31, 2019 2020 2019 2020 (In thousands) Net income $ 5,094$ 5,933 $ 13,436 $ 11,807 (Less)/plus: Income tax (benefit)/expense (119) (936) 4,079 130 Plus/(less): Net interest expense/(income) 20 (58) (57) 82 Plus: Foreign exchange losses 173 105 162 288 Plus: Depreciation (1) 3,821 3,132 10,563 8,914 Plus: Amortization (2) 1,009 967 2,920 2,649 Plus: Impairment of long-lived assets - 6 - 7 Plus: Stock-based compensation costs 144 366 433 960 (Less)/plus: Net (profit)/loss on sale of property and equipment (17) - (373) 8 Plus/(less): Restructuring costs - 31 (1) 1,028 Adjusted EBITDA$ 10,125 $ 9,546 $ 31,162 $ 25,873 Adjusted EBITDA margin 27.8 % 28.0 % 28.5 % 28.0 %
(1) Includes depreciation of owned equipment (including in-vehicle devices). (2) Includes amortization of intangible assets (including intangible assets identified as part of a business combination).
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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 us;
•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
operating profit, profit for the period and our other results.
Basic and Diluted Non-GAAP Net Income Per Share
Non-GAAP net income is defined as net income excluding net foreign exchange
gains/(losses) net of tax.
We have included non-GAAP net income per share in this quarterly report because
it provides a useful measure for period-to-period comparisons of our core
business by excluding net foreign exchange gains/(losses) from earnings.
Accordingly, we believe that non-GAAP net income per share provides useful
information to investors and others in understanding and evaluating our
operating results.
Reconciliation of net income to non-GAAP net income
Three Months Ended Nine Months Ended
December 31, December 31,
2019 2020 2019 2020
(In thousands)
Net income for the period $ 5,094 $ 5,933 $ 13,436 $ 11,807
Net foreign exchange losses 173 105 162 288
Income tax effect of net foreign
exchange losses (1,450) (2,688) (832) (3,691)
Non-GAAP net income $ 3,817 $ 3,350 $ 12,766 $ 8,404
Weighted average number of ordinary shares in issue
Basic 550,133 551,106 555,635 548,752
Diluted 562,412 559,845 570,531 559,172
Constant Currency Information
Constant currency information has been presented in the sections below to
illustrate the impact of changes in currency rates on our results. The constant
currency information has been determined by adjusting the current financial
reporting quarter's results to the prior quarter's average exchange rates,
determined as the average of the monthly exchange rates applicable to the
quarter. The measurement has been performed for each of our 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 quarter results.
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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 provide the constant currency reconciliation to the most
directly comparable GAAP measure for the periods shown:
Subscription Revenue
Three Months Ended December 31, Nine Months Ended December 31,
2019 2020 % Change 2019 2020 % Change
(In thousands, except for percentages)
Subscription revenue as
reported $ 32,362 $ 29,072 (10.2) % $ 96,099 $ 82,570 (14.1) %
Conversion impact of U.S.
Dollar/other currencies - 928 2.9 % - 6,994 7.3 %
Subscription revenue on a
constant currency basis $ 32,362 $ 30,000 (7.3) % $ 96,099 $ 89,564 (6.8) %
Hardware and Other Revenue
Three Months Ended December 31, Nine Months Ended December 31,
2019 2020 % Change 2019 2020 % Change
(In thousands, except for percentages)
Hardware and other revenue as
reported $ 4,107 $ 5,032 22.5 % $ 13,314 $ 9,979 (25.0) %
Conversion impact of U.S.
Dollar/other currencies - 124 3.0 % - 461 3.4 %
Hardware and other revenue on
a constant currency basis $ 4,107 $ 5,156 25.5 % $ 13,314 $ 10,440 (21.6) %
Total Revenue
Three Months Ended December 31, Nine Months Ended December 31,
2019 2020 % Change 2019 2020 % Change
(In thousands, except for percentages)
Total revenue as reported $ 36,469 $ 34,104 (6.5) % $ 109,413 $ 92,549 (15.4) %
Conversion impact of U.S.
Dollar/other currencies - 1,052 2.9 % - 7,455 6.8 %
Total revenue on a constant
currency basis $ 36,469 $ 35,156 (3.6) % $ 109,413 $ 100,004 (8.6) %
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Results of Operations
The following table sets forth certain consolidated statement of income data:
Three Months Ended Nine Months Ended
December 31, December 31,
2019 2020 2019 2020
(In thousands)
Total revenue $ 36,469 $ 34,104 $ 109,413 $ 92,549
Total cost of revenue 12,920 12,804 37,593 31,679
Gross profit 23,549 21,300 71,820 60,870
Sales and marketing 3,481 2,882 10,210 8,075
Administration and other 14,895 13,384 44,297 40,506
Income from operations 5,173 5,034 17,313 12,289
Other (expense)/income (178) (95) 145 (270)
Net interest (expense)/income (20) 58 57 (82)
Income tax expense 119 936 (4,079) (130)
Net income for the period 5,094 5,933 13,436 11,807
Net income attributable to MiX
Telematics Limited stockholders 5,094 5,933 13,436 11,807
Net income attributable to
non-controlling interest - - - -
Net income for the period $ 5,094 $ 5,933 $
13,436
The following table sets forth, as a percentage of revenue, consolidated statement of income data:
Three Months Ended Nine Months Ended
December 31, December 31,
2019 2020 2019 2020
(Percentage)
Total revenue 100.0 % 100.0 % 100.0 % 100.0 %
Total cost of revenue 35.4 37.5 34.4 34.2
Gross profit 64.6 62.5 65.6 65.8
Sales and marketing 9.5 8.5 9.3 8.7
Administration and other 40.8 39.2 40.5 43.8
Income from operations 14.3 14.8 15.8 13.3
Other (expense)/income (0.5) (0.3) 0.1 (0.3)
Net interest (expense)/income (0.1) 0.2 0.1 (0.1)
Income tax benefit/(expense) 0.3 2.7 (3.7) (0.1)
Net income for the period 14.0 17.4 12.3 12.8
Net income attributable to MiX
Telematics Limited stockholders 14.0 17.4 12.3 12.8
Net income attributable to
non-controlling interest - - - -
Net income for the period 14.0 17.4 12.3 12.8
29-------------------------------------------------------------------------------- Results of Operations for the Three Months EndedDecember 31, 2019 and 2020 Revenue Three Months Ended December 31, 2019 2020 % Change % Change at constant currency (In thousands, except for percentages) Subscription revenue $ 32,362$ 29,072 (10.2) % (7.3) % Hardware and other revenue 4,107 5,032 22.5 % 25.5 % $ 36,469$ 34,104 (6.5) % (3.6) % Our total revenue decreased by$2.4 million or 6.5%, from the third quarter of fiscal year 2020. The principal factors affecting our revenue contraction included: •Subscription revenues decreased by 10.2% to$29.1 million , compared to$32.4 million for the third quarter of fiscal year 2020. Subscription revenues represented 85.2% of total revenues during the third quarter of fiscal year 2021. Subscription revenues decreased by 7.3% on a constant currency basis, year over year. The decline in constant currency subscription revenue was primarily due to the contraction in our subscriber base as a result of economic conditions attributable to the COVID-19 pandemic. FromSeptember 30, 2020 toDecember 31, 2020 , our subscriber base contracted by 18,300 subscribers. The contraction is attributable to our low ARPU asset tracking subscribers. The majority of our revenues and subscription revenues are derived from currencies other than theU.S. Dollar. Accordingly, the strengthening of theU.S. Dollar against these currencies (in particular against the South African Rand) following currency volatility arising from the economic disruption caused by COVID-19, has negatively impacted our revenue and subscription revenues reported inU.S. Dollars. Compared to the third quarter of fiscal year 2020, the South African Rand weakened by 6.4% against theU.S. Dollar. The Rand/U.S. Dollar exchange rate averaged R15.65 in the current quarter compared to an average of R14.71 during the third quarter of fiscal year 2020. The impact of translating foreign currencies toU.S. Dollars at the average exchange rates during the third quarter of fiscal year 2021 led to a 2.9% reduction in reportedU.S. Dollar subscription revenues. •Hardware and other revenue increased by$0.9 million , or 22.5%, from the third quarter of fiscal year 2020. The increase was primarily related to theAfrica segment due to increased revenue from the minerals and exploration vertical.
The impact of translating foreign currencies to
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A breakdown of third-party revenue by segment is shown in the table below:
Three Months Ended
2019 2020 2019 2020 2019 2020
(In thousands)
Total Revenue Subscription Revenue Hardware and Other Revenue
Africa $ 19,183 $ 18,063 $ 17,936 $ 16,205 $ 1,247 $ 1,858
Americas 6,021 4,818 5,573 4,582 448 236
Europe 3,895 4,421 3,010 3,116 885 1,305
Middle East and Australasia 5,859 5,770 4,460 4,174 1,399 1,596
Brazil 1,482 1,005 1,355 978 127 27
CSO 29 27 28 17 1 10
Total $ 36,469 $ 34,104 $ 32,362 $ 29,072 $ 4,107 $ 5,032
In the Africa segment, subscription revenue declined by $1.7 million , or 9.7%.
On a constant currency basis, the contraction in subscription revenue was 4.6%.
Subscribers decreased by 9.6% since January 1, 2020 . Hardware and other revenue
increased by $0.6 million , or 49.0%. Total revenue declined by $1.1 million , or
5.8%. On a constant currency basis, total revenue was consistent with the third
quarter of fiscal 2020.
In the Americas segment, subscription revenue declined by $1.0 million , or 17.8%
as a result of both a 13.6% decrease in subscribers since January 1, 2020 and as
a result of economic conditions in the oil and gas vertical. Hardware and other
revenue declined by $0.2 million , or 47.3%. Total revenue declined by $1.2
million , or 20.0%.
In the Europe segment, subscription revenue growth was $0.1 million , or 3.5%. On
a constant currency basis, subscription revenue declined by 1.2%. Subscribers
increased by 1.3% since January 1, 2020 . Total revenue increased by $0.5
million , or 13.5%, due to an increase in hardware and other revenues of $0.4
million compared to the three months ended December 30, 2019 . Total revenue
increased by 8.6% on a constant currency basis.
Subscription revenue in the Middle East and Australasia segment declined by $0.3
million or 6.4%. On a constant currency basis, the decline in subscription
revenue was 9.4%. Subscribers decreased by 1.4% since January 1, 2020 . Hardware
and other revenue increased by $0.2 million or 14.1%. Total revenue declined by
$0.1 million or 1.5%. Total revenue in constant currency declined by 4.8%.
In the Brazil segment, subscription revenue declined by $0.4 million or 27.8%.
On a constant currency basis, subscription revenue decreased by 5.0%.
Subscribers increased by 3.8% since January 1, 2020 which was offset by pricing
concessions granted to customers as a result of economic conditions attributable
to the COVID-19 pandemic. Hardware and other revenue declined by $0.1 million ,
or 78.7%. Total revenue declined by $0.5 million or 32.2%. On a constant
currency basis, total revenue decreased by 10.9%.
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Cost of Revenue
Three Months Ended December 31,
2019 2020
(In thousands, except for percentages)
Cost of revenue - subscription $ 10,078 $ 8,889
Cost of revenue - hardware and other 2,842 3,915
Gross profit $ 23,549 $ 21,300
Gross profit margin 64.6 % 62.5 %
Gross profit margin - subscription 68.9 % 69.4 %
Gross profit margin - hardware and other 30.8 % 22.2 %
Compared to a decrease in total revenue of$2.4 million or 6.5%, cost of revenues only decreased by$0.1 million , or 0.9%, from the third quarter of fiscal year 2020. This together with the higher levels of hardware and other revenue resulted in a lower gross profit margin of 62.5% in the third quarter of fiscal year 2021 compared to 64.6% in the third quarter of fiscal year 2020. Subscription revenue, which generates a higher gross profit margin than hardware and other revenue, contributed 85.2% of total revenue in the third quarter of fiscal year 2021 compared to 88.7% in the third quarter of fiscal year 2020. During the third quarter of fiscal year 2021, hardware and other margins were lower than in the third quarter of fiscal year 2020, mainly due to the geographical sales mix and the distribution channels. Hardware sales via our dealer channel generate lower gross margins. Sales and Marketing Three Months Ended December 31, 2019 2020 (In thousands, except for percentages) Sales and marketing$ 3,481 $ 2,882
As a percentage of revenue 9.5 % 8.5 %
Sales and marketing costs decreased by $0.6 million , or 17.2%, from the third
quarter of fiscal year 2020 to the third quarter of fiscal year 2021 against a
6.5% decrease in total revenue. The decrease in the third quarter of fiscal year
2021 was primarily as a result of savings of $0.3 million in employee costs and
$0.2 million in travel costs. In the third quarter of fiscal year 2021, sales
and marketing costs represented 8.5% of revenue compared to 9.5% of revenue in
the third quarter of fiscal year 2020.
Administration and Other Expenses
Three Months Ended December 31,
2019 2020
(In thousands, except for percentages)
Administration and other $ 14,895 $13,384
As a percentage of revenue 40.8 % 39.2 %
Administration and other expenses decreased by $1.5 million , or 10.1%, from the
third quarter of fiscal year 2020 to the third quarter of fiscal year 2021.
The decrease mainly relates to savings of $0.8 million in salaries and wages,
bonuses of $0.6 million primarily due to the decline in subscription revenue as
a result of COVID-19, travel costs of $0.2 million , offset by increases in
expected credit loss provision of $0.1 million .
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Taxation
Three Months Ended December 31,
2019 2020
(In thousands, except for percentages)
Income tax credit $ 119 $ 936
Effective tax rate 2.4 % 18.7 %
Taxation credit increased by $0.8 million . In the third quarter of fiscal year
2021, the income tax credit included a $2.7 million deferred tax credit on a
U.S. Dollar intercompany loan between MiX Telematics Limited and MiX Telematics
Investments Proprietary Limited ("MiX Investments"), a wholly-owned subsidiary.
During the third quarter of fiscal 2020, the income tax credit included a $1.5
million deferred tax credit on a U.S. Dollar intercompany loan between MiX
Telematics Limited and MiX Investments. Ignoring the impact of net foreign
exchange losses net of tax, the tax rate which was used in determining non-GAAP
net income, was 34.3% in the third quarter of fiscal year 2021 compared to 25.9%
in the third quarter of fiscal year 2020.
Results of Operations for the Nine Months Ended
Revenue
Nine Months Ended December 31,
2019 2020 % Change % Change at
constant currency
(In thousands, except for percentages)
Subscription revenue $ 96,099 $ 82,570 (14.1) % (6.8) %
Hardware and other revenue 13,314 9,979 (25.0) % (21.6) %
$ 109,413 $ 92,549 (15.4) % (8.6) %
Our total revenue decreased by $16.9 million or 15.4%, from the first nine
months of fiscal year 2020. The principal factors affecting our revenue
contraction included:
•Subscription revenues decreased by 14.1% to $82.6 million , compared to $96.1
million for the first nine months of fiscal year 2020. Subscription revenues
represented 89.2% of total revenues during the first nine months of fiscal year
2021. Subscription revenues decreased by 6.8% on a constant currency basis, year
over year. The decline in constant currency subscription revenue was primarily
due to the contraction in our subscriber base as a result of economic conditions
attributable to the COVID-19 pandemic. From March 31, 2020 to December 31, 2020 ,
our subscriber base contracted by 69,000 subscribers primarily due to
significantly lower gross additions. Furthermore, we experienced fleet
contraction in a number of key verticals such as the oil and gas vertical,
consumer vertical and leasing vertical which impacted both our subscriber-count
and subscription revenue line.
The majority of our revenues and subscription revenues are derived from
currencies other than the U.S. Dollar. Accordingly, the strengthening of the
U.S. Dollar against these currencies (in particular against the South African
Rand) following currency volatility arising from the economic disruption caused
by COVID-19, has negatively impacted our revenue and subscription revenues
reported in U.S. Dollars. Compared to the first nine months of fiscal year 2020,
the South African Rand weakened by 15.4% against the U.S. Dollar. The Rand/U.S.
Dollar exchange rate averaged R16.84 in the current nine month period compared
to an average of R14.59 during the first nine months of fiscal year 2020. The
impact of translating foreign currencies to U.S. Dollars at the average exchange
rates during the first nine months of fiscal year 2021 led to a 7.3% reduction
in reported U.S. Dollar subscription revenues.
•Hardware and other revenue decreased by $3.3 million , or 25.0%, from the first
nine months of fiscal year 2020 primarily as a result of a global economic
slowdown following the disruption caused by the COVID-19 pandemic. As shown in
the table below, hardware and other revenue was lower across all geographical
segments, except Africa which was marginally higher.
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The impact of translating foreign currencies to U.S. Dollars at the average
exchange rates during the first nine months of fiscal year 2021 led to a 6.8%
reduction in reported U.S. Dollar revenues.
A breakdown of third-party revenue by segment is shown in the table below:
Nine Months Ended
2019 2020 2019 2020 2019 2020
(In thousands)
Hardware and Other
Total Revenue Subscription Revenue RevenueAfrica$ 57,556 $ 49,077 $ 53,490 $ 44,983 $ 4,066 $ 4,094 Americas 18,698 14,174 16,910 13,543 1,788 631 Europe 10,861 10,798 8,659 8,885 2,202 1,913 Middle East and Australasia 17,683 15,426 13,038 12,173 4,645 3,253 Brazil 4,496 3,015 3,922 2,937 574 78 CSO 119 59 80 49 39 10 Total$ 109,413 $ 92,549 $ 96,099 $ 82,570 $ 13,314 $ 9,979 In theAfrica segment, subscription revenue declined by$8.5 million , or 15.9%. On a constant currency basis, the contraction in subscription revenue was 4.2%, primarily as a result of a 9.6% decrease in subscribers sinceJanuary 1, 2020 . Hardware and other revenue increased marginally by 0.7%. Total revenue declined by$8.5 million , or 14.7%. On a constant currency basis, the total revenue decline was 3.0%. In theAmericas segment, subscription revenue declined by$3.4 million , or 19.9% as a result of both a 13.6% decrease in subscribers sinceJanuary 1, 2020 and pricing concessions granted to customers as a result of economic conditions attributable to the COVID-19 pandemic. Hardware and other revenue declined by$1.2 million , or 64.7%. Total revenue declined by$4.5 million , or 24.2%. In theEurope segment, subscription revenue growth was$0.2 million , or 2.6%. On a constant currency basis, the growth in subscription revenue was 0.3%. Subscribers increased by 1.3% sinceJanuary 1, 2020 . Total revenue decreased by$0.1 million , or 0.6%, following a decrease in hardware and other revenues of$0.3 million compared to the nine months endedDecember 31, 2019 . Total revenue declined by 2.9% on a constant currency basis. Subscription revenue in theMiddle East andAustralasia segment declined by$0.9 million or 6.6%. On a constant currency basis, the decline in subscription revenue was 7.3%. Subscribers decreased by 1.4% sinceJanuary 1, 2020 . Hardware and other revenue declined by$1.4 million or 30.0%. Total revenue declined by$2.3 million or 12.8%. Total revenue in constant currency declined by 13.4%. In theBrazil segment, subscription revenue declined by$1.0 million or 25.1%. On a constant currency basis, subscription revenue increased by 0.7%. The increase was mainly due to an increase in subscribers of 3.8% sinceJanuary 1, 2020 partially offset by pricing concessions granted to customers as a result of economic conditions attributable to the COVID-19 pandemic. Hardware and other revenue declined by$0.5 million , or 86.4%. Total revenue declined by$1.5 million or 32.9%. On a constant currency basis, total revenue decreased by 9.8%. 34 --------------------------------------------------------------------------------
Cost of Revenue
Nine Months Ended December 31,
2019 2020
(In thousands, except for percentages)
Cost of revenue - subscription $ 28,790 $ 23,914
Cost of revenue - hardware and other 8,803 7,765
Gross profit $ 71,820 $ 60,870
Gross profit margin 65.6 % 65.8 %
Gross profit margin - subscription 70.0 % 71.0 %
Gross profit margin - hardware and other 33.9 % 22.2 %
Compared to a decrease in total revenue of$16.9 million or 15.4%, cost of revenues decreased by$5.9 million , or 15.7%, from the first nine months of fiscal year 2020. This resulted in a higher gross profit margin of 65.8% in the first nine months of fiscal year 2021 compared to 65.6% in the first nine months of fiscal year 2020. Subscription revenue, which generates a higher gross profit margin than hardware and other revenue, contributed 89.2% of total revenue in the first nine months of fiscal year 2021 compared to 87.8% in the first nine months of fiscal year 2020. During the first nine months of fiscal year 2021, hardware and other margins were lower than in the first nine months of fiscal 2020, mainly due to the geographical sales mix and the distribution channels. Hardware sales via our dealer channel generate lower gross margins. Sales and Marketing Nine Months Ended December 31, 2019 2020 (In thousands, except for percentages) Sales and marketing$ 10,210 $ 8,075 As a percentage of revenue 9.3 %
8.7 %
Sales and marketing costs decreased by$2.1 million , or 20.9%, from the first nine moths of fiscal year 2020 to the first nine months of fiscal year 2021 against a 15.4% decrease in total revenue. The decrease in the first nine months of fiscal year 2021 was primarily as a result of savings of$1.0 million in employee costs,$0.2 million in bonuses and$0.6 million in travel costs. In the first nine months of fiscal year 2021, sales and marketing costs represented 8.7% of revenue compared to 9.3% of revenue in the first nine months of fiscal year 2020. Administration and Other Expenses Nine Months EndedDecember 31, 2019 2020 (In thousands, except for percentages)
Administration and other $ 44,297 $40,506
As a percentage of revenue 40.5 % 43.8 %
Administration and other expenses decreased by $3.8 million , or 8.6%, from the
first nine months of fiscal year 2020 to the first nine months of fiscal year
2021.
The decrease mainly relates to savings of $2.9 million in salaries and wages,
bonuses of $1.7 million primarily due to the decline in subscription revenue as
a result of COVID-19, travel costs of $0.6 million , and other decreases of $0.5
million , none of which were individually significant, offset by restructuring
costs of $1.0 million and increases in the expected credit loss provision of
$0.9 million .
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Taxation
Nine Months Ended December 31,
2019 2020
(In thousands, except for percentages)
Income tax expense $ (4,079) $ (130)
Effective tax rate (23.3) % (1.1) %
Taxation expense decreased by $3.9 million , or 96.8%. In the first nine months
of fiscal year 2021, the income tax expense decreased due to lower profitability
and also included a $3.7 million deferred tax credit on a U.S. Dollar
intercompany loan between MiX Telematics Limited and MiX Investments. During the
first nine months of fiscal 2020, the income tax expense included a $0.8 million
deferred tax credit on a U.S. Dollar intercompany loan between MiX Telematics
Limited and MiX Investments. Ignoring the impact of net foreign exchange losses
net of tax, the tax rate which was used in determining non-GAAP net income, was
31.3% in the first nine months of fiscal year 2021 as compared to 27.8% in the
first nine months of fiscal 2020.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with GAAP.
Management believes that there have not been any significant changes in our
critical accounting policies and estimates during the first nine months of
fiscal year 2021 as compared to the items that we disclosed as our critical
accounting policies and estimates in the Management's Discussion and Analysis of
Financial Condition and Results of Operations in our Annual Report on Form 10-K
for the year ended March 31, 2020 , which we filed with the Securities and
Exchange Commission on July 23, 2020 .
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Liquidity and Capital Resources
We believe that our cash and borrowings available under our credit facilities
will be sufficient to meet our liquidity requirements for the foreseeable
future. Liquidity risk is reduced due to the recurring nature of our income and
the availability of the cash resources set out below.
The following tables provide a summary of our cash flows for each of the nine
months ended December 31, 2019 and 2020:
Nine Months Ended
December 31,
2019 2020
(In thousands)
Net cash provided by operating activities $ 21,878 $ 30,934
Net cash used in investing activities (16,622) (6,189)
Net cash used in financing activities (10,988) (2,619)
Net (decrease)/increase in cash and cash equivalents and restricted cash
(5,732) 22,126
Cash and cash equivalents, and restricted cash at beginning of the period
27,838 18,652
Effect of exchange rate changes on cash and cash equivalents, and restricted cash
309 4,001
Cash, and cash equivalents and restricted cash at the end of the period
We fund our operations, capital expenditure and acquisitions through cash generated from operating activities, cash on hand and our undrawn borrowing facilities.
It is currently our policy to pay regular dividends, and we consider such dividend payments on a quarter-by-quarter basis. OnMay 23, 2017 , our Board approved a share repurchase program of up to R270 million (equivalent of$18.4 million as ofDecember 31, 2020 ) under which we may repurchase our ordinary shares, including ADSs. We expect any repurchases under this share repurchase program to be funded out of existing cash resources. During the nine months endedDecember 31, 2020 , there were no additional share repurchases. Refer to "Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases ofEquity Securities " in our Annual Report on Form 10-K for the year endedMarch 31, 2020 , which we filed with theSecurities and Exchange Commission onJuly 23, 2020 , for information regarding our share repurchase program. Operating Activities Net cash provided by operating activities during the nine months endedDecember 31, 2019 consisted of our cash generated from operations of$24.9 million , net interest received of$0.4 million and taxes paid of$3.4 million . Net cash provided by operating activities increased from$21.9 million in the nine months endedDecember 31, 2019 to$30.9 million during the nine months endedDecember 31, 2020 , which is primarily attributable to improved cash generated from operations of$8.3 million , lower net interest received of$0.2 million and decreased taxation paid of$0.9 million . The improved cash generated from operations is primarily as a result of improved working capital management of$12.7 million (specifically a decrease in accounts receivables of$10.0 million due to improved management of receivables and lower revenues, a decrease in inventories of$0.5 million , foreign currency translation adjustments of$2.3 million , prepaid expenses and other current assets of$0.7 million and capitalized commissions of$1.4 million , partially offset by a decrease in accounts payables of$2.4 million ), offset by lower net income (after excluding non-cash charges) of$4.4 million . Net cash provided by operating activities during the nine months endedDecember 31, 2020 consisted of our cash generated from operations of$33.2 million , net interest received of$0.2 million and taxes paid of$2.4 million . 37 -------------------------------------------------------------------------------- Investing Activities Net cash used in investing activities in the nine months endedDecember 31, 2019 was$16.6 million . Net cash used in investing activities during the nine months endedDecember 31, 2019 primarily consisted of capital expenditures of$17.6 million and loans to external parties of$0.3 million . Capital expenditures during the nine months included purchases of intangible assets of$4.0 million , and cash paid to purchase property and equipment of$13.6 million , which included in-vehicle devices of$13.0 million , partially offset by proceeds from sales of property and equipment and intangible assets of$1.3 million . Net cash used in investing activities in the nine months endedDecember 31, 2020 decreased to$6.2 million from$16.6 million in the nine months endedDecember 31, 2019 . Net cash used in investing activities during the nine months endedDecember 31, 2020 primarily consisted of capital expenditures of$6.2 million . Capital expenditures during the nine months included purchases of intangible assets of$3.0 million and cash paid to purchase property and equipment of$3.2 million , which included in-vehicle devices of$3.0 million . The$12.7 million decline in in-vehicle device purchases during the nine months endedDecember 31, 2020 is primarily due to lower sales activity following the disruption caused by the COVID-19 pandemic. Financing Activities In the nine months endedDecember 31, 2019 , the cash used in financing activities of$11.0 million primarily consisted of$8.2 million for the repurchase of ordinary shares and dividends paid of$4.6 million , offset by facilities utilized of$1.8 million . In the nine months endedDecember 31, 2020 , the cash used in financing activities of$2.6 million includes dividends paid of$3.9 million , offset by proceeds of$0.9 million from the issue of ordinary shares in relation to the exercise of stock options and$0.4 million from facilities utilized. Credit Facilities As ofDecember 31, 2020 , our principal sources of liquidity were net cash balances of$41.1 million (consisting of cash and cash equivalents of$44.0 million less short-term debt (bank overdraft) of$2.9 million ) and unutilized borrowing capacity of$4.4 million available through our credit facilities. Our principal sources of credit are our facilities with Standard Bank Limited and Nedbank Limited. We have an overdraft facility of R64.0 million (equivalent of$4.4 million as ofDecember 31, 2020 ), an unutilized working capital facility of R25.0 million (equivalent of$1.7 million as ofDecember 31, 2020 ) and an unutilized vehicle and asset finance facility of R8.5 million (equivalent of$0.6 million as ofDecember 31, 2020 ) with Standard Bank Limited that bear interest at South African Prime less 1.2%. As ofDecember 31, 2020 ,$2.9 million was utilized under the overdraft facility. We use this facility as part of our foreign currency hedging strategy. We draw down on this facility in the applicable foreign currency in order to fix the exchange rate on existing balance sheet foreign currency exposure that we anticipate settling in that foreign currency. Our obligations under the overdraft facility with Standard Bank Limited are guaranteed by MiX Telematics Limited and our wholly-owned subsidiaries,MiX Telematics Africa Proprietary Limited andMiX Telematics International Proprietary Limited , and secured by a pledge of accounts receivable by MiX Telematics Limited andMiX Telematics International Proprietary Limited . During fiscal year 2020, we entered into a R25.0 million (equivalent of$1.7 million as ofDecember 31, 2020 ) working capital facility from Standard Bank Limited that bears interest at South African Prime less 0.25%. As ofDecember 31, 2020 , the facility was undrawn. We use this facility for working capital purposes in ourAfrica operations. During fiscal year 2014, we entered into a R10.0 million (equivalent of$0.7 million as ofDecember 31, 2020 ) facility from Nedbank Limited that bears interest at South African Prime less 2%. As ofDecember 31, 2020 , the facility was undrawn. We use this facility for working capital purposes in ourAfrica operations. Our credit facilities with Standard Bank Limited and Nedbank Limited contain certain restrictive clauses, including without limitation, those limiting our and our guarantor subsidiaries', as applicable, ability to, among other things, incur indebtedness, incur liens, or sell or acquire assets or businesses. These facilities are not subject to any financial covenants such as interest coverage or gearing ratios. 38 -------------------------------------------------------------------------------- Off-balance sheet arrangements We do not engage in any off-balance sheet financing activities. We do not have any interest in entities referred to as variable interest entities, which include special purpose entities and other structured finance entities which are not consolidated. Tabular disclosure of contractual obligations
As a "smaller reporting company", we are not required to provide this information.
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