MiX Telematics Ltd ADR

Thank you for standing by. This is the conference operator. Welcome to the MIX Telematics Fiscal First Quarter 2022 Earnings Results Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there'll be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star then zero. I would now like to turn the conference over to John Granara, Chief Financial Officer. Please go ahead.

Thank you, and good morning, everyone. We appreciate you joining us to review Mixx Telematics earnings results for the first quarter of fiscal year 2022, which ended on June 30, 2021. Today, we will be discussing the results announced in our press release issued a few hours ago. I'm John Granara, Mixx's Chief Financial Officer, and I'm joined by Stefan Joselovits, or as many of you know him, Jos. He is President and Chief Executive Officer of Mixed Telematics. During today's call, we will make forward-looking statements related to our business, which are subject to material risks and uncertainties that could cause our actual results to differ materially. For a discussion of the material risks and other important factors that could affect our results, please refer to those contained in our Form 10-K and other FCC filings, including our current report on Form 8-K that was filed today, all of which are available on the Investor Relations section of our website. We will also be referring to certain non-GAAP financial measures. There's a reconciliation schedule detailing these results currently available on our press release, which is located on our website and filed with the FCC.

And with that, I will turn the call over to Josh. Thanks, John. and thanks to all of you for joining the call today. MIX began fiscal 2022 with improved financial and operational results that were ahead of expectations on both the top and bottom line. The highlight for the quarter was our return to year-over-year revenue growth and sequential expansion of our subscriber base. While conditions remain challenging in certain markets due to the continuing impact of the COVID-19 pandemic, we are now confident that the worst is behind us. Returning to growth is our primary focus in fiscal 2022, and based on our first quarter performance and outlook for the remainder of the year, we feel good about our ability to achieve this objective. We are increasingly confident that we can steadily return to our long-term financial targets of 15% to 20% constant currency subscription revenue growth and adjusted EBITDA margins of 30% plus in a normalised economic environment. How quickly we'll be able to do so remains hard to gauge given the continued uncertainty in the market. I will begin by quickly summarising our financial and operational results for the first quarter. We returned to positive subscriber growth adding close to 9,000 subscribers to end the quarter with a total base of 753,000. Subscription revenue was $31.1 million, a 3.5% increase year-over-year in constant currency. Notably, our annual recurring revenue ended the quarter at $125.6 million, up 2.5% sequentially. Adjusted EBITDA was $8.3 million at a 23.8% margin, which was well ahead of our expectations and reflects better than expected revenue performance and good cost discipline across the business. As we've noted in recent quarters, we have a healthy and growing pipeline of enterprise opportunities, which continued the same trajectory in the first quarter. We signed several large and important wins across different verticals and geographies, and these successes reinforced our positive outlook as economic conditions continue to improve. I'd like to provide some more color on these new contracts secured during the quarter. We signed two sizable wins in the United States with utility companies that were close to $1 million in ARR. Firstly, Qualtech. a provider of technical labor and program management to the renewables, recovery, and telco industry, signed a deal for more than 2,000 subscribers. This was a highly competitive process where our technology set us apart from other vendors. And secondly, Avingrid Renewables, which is a U.S. subsidiary of EBITROLA, a global energy pioneer with whom we signed a global deal in the prior quarter. We were able to leverage our initial success with EBIT Roller in Spain to secure a significant contract for 3,000 additional vehicles with Avangrid in the US. These wins are great examples of the opportunity and utility vertical, which has become an attractive market for us. This vertical has many of the attributes where we have historically been successful. Firstly, a large fleet market that has significant operational complexity. And secondly, customer interest in driving greater operational efficiency and employee safety by leveraging the growing amount of real-time data from their fleets. We also signed three substantial contracts in South Africa with Citi Logistics, MSI Banrep, and Massmart, who are all industry leaders in their respective markets. Citi Logistics, a leading logistics provider operating throughout Southern Africa, signed a long-term strategic partnership with MIX to support the 1,800 mobile assets. Our decades-long experience and proven solutions for improving efficiency and driver safety were the key factors in this one. Looking at our business performance by solution category, We reached an important milestone in the quarter as gross churn across premium fleet, light fleet, and asset tracking all returned to pre-pandemic levels. In particular, we have seen a notable reduction in premium fleet contraction. Our light fleet business performed well in the quarter. The fastest growing of our portfolio before the onset of COVID, light fleet has seen consistent improvements in recent quarters, Gross ads in this market are now back to pre-COVID levels and we have a strong pipeline for the remainder of the year. Premium Fleet saw continued improvement during the quarter and is now within 10 to 15% of its pre-COVID levels. Gross ads have seen continued improvement but remain below trend given the ongoing pressure in certain geographies. As mentioned, we saw significant reduction in gross churn during the quarter, primarily due to the reset we've experienced in the oil and gas sector in recent quarters. Our energy customers are now operating in a more predictable and stable environment. We are now largely through the contraction cycle with these clients and have started positive discussions about new investments as they position themselves for the next growth cycle. It's too soon to know when this growth but it's becoming clearer that fleets will begin to expand and we know we are in a great position to benefit when investments accelerate. Overall we're increasingly optimistic about the outlook for our premium fleet business and the recent trends in this vertical but it's premature to have a good read on the continued pace of improvement given current market volatility. Our asset tracking business continues to feel the most acute impact from COVID in terms of subscriber trends. Gross ads still remain well below pre-pandemic levels as lockdown travel restrictions still impact rental fees. The biggest driver of this is our South African business, which has been through multiple lockdowns related to COVID-19 and is our largest asset tracking market. As a reminder, asset tracking is our lowest RQ business at $5 per month. So weakness in this market will typically have a bigger impact on subscriber trends and a relatively smaller impact to revenue growth. Turning to profitability, we continue to do a good job effectively delivering strong adjusted EBITDA margins while continuing to invest in our growth initiatives. Our balanced investment approach and consistent operational discipline has served Nix well throughout multiple cycles. Adjusted EBITDA margin of 23.8% was better than expected in the quarter and was driven primarily by the revenue outperformance. From an investment perspective, we made good progress on our sales and marketing initiatives. We are adding high-quality talent to the team, expanding our indirect channel, and increasing investments in demand generation. As I've noted, we believe the business environment is improving, and we will invest to make sure we are best positioned to maximize on this opportunity. Based on our first quarter performance and outlook for the remainder of the year, we are tracking well against the financial targets we set out on our last earnings call. To wrap up, Mix performed well in the first quarter. We have returned to growth, and we are realizing the benefits of the investments in our customer relationships, products, and go-to-market efforts in recent quarters. We are increasingly confident in our ability to generate faster growth and expanding margins over time as we execute on our strategy and benefit from an improved economic outlook. I would like to take this opportunity to thank our teams around the world to make our customers successful. I would now like to turn the call over to John to review our financial results in more detail. John?