MiX Telematics Ltd ADR

Greetings and welcome to the Mixed Telematics fiscal second quarter 2022 earnings conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I'd now like to turn the conference over to your host, Mr. John Granara, Chief Financial Officer for Mixed Telematics. Thank you, sir. You may begin.

Thank you, and good morning, everyone. We appreciate you joining us to review Mixed Telematics earnings results for the second quarter of fiscal year 2022, which ended on September 30, 2021. Today, we will be discussing the results announced in our press release issued a few hours ago. I'm John Guarnera, Mix's Chief Financial Officer, and I'm joined by Stephan Joselovitz, 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 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 SEC filings, 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 in our press release, which is located on our website and filed with the FCC. And with that, I will turn the call over to Jos.

Thanks, John. And thanks to all of you for joining the call today. MIPSA's second quarter financial results reflects continued improvement across our business and encouraging signs in some of our key end markets. We delivered our second consecutive quarter of year-over-year revenue growth and subscriber expansion since the start of the pandemic. Although market conditions have not yet returned to pre-COVID levels, our performance in the first half of the year is a clear demonstration that Mix is trending in the right direction. Our stated upfront number one objective for fiscal 22 is to return to growth, and we are delivering on that goal. Looking beyond fiscal 22, we see a number of encouraging market trends that we believe will support our ability to drive steady improvement towards our long-term financial targets of 15% to 20% constant currency subscription revenue growth and 30% adjusted EBITDA margins. We will continue to manage the business prudently. through the near-term challenges while ensuring that we are making the right product and go-to-market investments to fully capitalise on our growth opportunities when market conditions return to normal. I will quickly summarise our financial and operational results for the second quarter. We ended the quarter with a total base of 766,000 after adding 16,700 net new subscribers. This is nearly double the number of subscribers we added in Q1. Subscription revenue was $30.9 million, a 2.9% increase year over year in constant currency. Notably, our annual recurring revenue, or ARR, ended the quarter at $128 million, up 2.5% sequentially, and a 5% improvement year to date in constant currency. Adjusted EBITDA was $7.9 million at a 21.9% margin, which was in line with our expectations for the quarter. I'd now like to highlight some of our key wins. A large multinational customer in the construction industry renewed their global contract with us for another three years. We now help them manage over 9,000 vehicles and drivers in 18 countries. We signed a new win with McGill's Group, the largest independent bus operator in the United Kingdom, who chose Mix as its connected fleet provider. McGill's will be deploying our premium fleet and MixVision AI-powered camera solution into their buses as part of its efforts to improve driver training, compliance, safety, and overall efficiency. Newmont Corporation, a worldwide mining leader, has signed a global agreement with us covering North and South America, Africa, and Australia. Their aim is to improve overall fleet safety and compliance, reduce driver risks associated with remote site operations, and enhance operational efficiencies. Intercape, the largest intercity bus operator in southern Africa, renewed and expanded its agreement with Mix for their feature of over 300 vehicles for another five years. Intercape utilizes Mix's premium solution, including Mix Vision AI, to alert drivers and managers to unsafe or risky driving behavior that impacts road safety. We signed a multi-year extension with a major Australasian logistics company to deploy Mix Fleet Manager and Mix Vision to its 3,700 vehicles and assets. With our platform, this customer has been able to increase safety and fleet utilization, simplify regulatory compliance, and seamlessly connect 10 million trips worth of driving data into their business systems. OMV Petrom, a large energy sector operator and long-standing client of MIX, has upgraded their solution and renewed their contract, providing another long-term commitment for their full fleet in Romania. Overall, we are pleased with the improvement we saw in sales activity in the quarter. We continue to see strong growth in our pipeline across regions and product categories. and are now starting to see sales cycles normalizing in certain sectors as fleet customers gain confidence in the business outlook. Looking at our performance by solution category, our premium fleet business was the biggest contributor to subscriber ads during the quarter. We were particularly pleased with early signs of improvement in the energy sector. One of our largest oil and gas customers started adding back some of the vehicles it had previously parked during the COVID-19 downturn. There are bullish signs for this market, but it continues to be difficult to gauge the rate and pace of improvement going forward. We enjoyed a solid performance from our light fleet business. Gross subscriber ads continue to track well versus pre-pandemic levels, and we are seeing continued improvement in churn amongst this customer base. Our asset tracking results were mixed during the quarter. The B2B portion had a strong performance driven by meaningful subscriber increases amongst leasing customers. Conversely, the consumer portion experienced some challenges in South Africa. As you may know, South Africa experienced a few weeks of civil unrest in July, which resulted in many businesses pulling back from operations and exacerbating the near-term financial challenges faced by some consumers. This impacted our performance in the region for the first two months of the quarter before improving in September. Our expectation is for further improvement in the third quarter as the economy rebuilds. One of our key areas of focus this year is investing in our growth initiatives around product development and our go-to-market efforts. We recently made two announcements that reflect important progress for the business. The first is the release of our new dashboard solution, which provides enhanced embedded analytics and insights to feed customers. We have long been able to support third-party visualization and analytics tools on our open platform, but now users can enjoy an improved, fully integrated experience that harnesses the power of the data we collect every day. This is a great example of how we continually evolve, extend, and enhance the capabilities of our platform to provide greater value to customers. The second was the recent announcement of our collaboration with Ford. This will enable companies with Ford vehicles to subscribe to some of Mix's premium fleet services without the need to install our telematics hardware. It reduces the upfront costs, shortens sales cycles, and makes it quicker for customers to go from making a decision to deriving the benefits from our solutions. We believe OEM data integrations are an important evolution in the market that could eventually eliminate the need for the installation of third party hardware in a vehicle, which would increase the time to value, lower the cost of telematics investments, and ultimately lead to accelerated growth in our space. These announcements are further evidence of our ability to invest in our strategic initiatives while continuing to deliver high levels of profitability. Effectively balancing these two priorities is a core competency of our team, and we believe we are striking a smart balance between the two. Our investments will ensure that we are well positioned to maximize on the significant long-term opportunity we see for our business. As we enter the second half of the year, we continue to track well against our full-year financial objectives of mid- to high-single-digit constant currency subscription revenue growth low double-digit annual recurring revenue growth, and adjusted EBITDA margins in the low to mid 20s. We are optimistic the business environment will continue to improve over the course of the year, but we are mindful of the many potential economic and public health concerns that remain real challenges for customers. We also continue to navigate the current challenges facing the global supply chain. Throughout the year, we have taken proactive steps to secure the necessary components for our core hardware products. We have ample supply for the coming months, but recognize that sourcing inventory is getting harder and more expensive. Thankfully, close to 90% of our revenues are for providing recurring software services, and as such, are immune from the current supply chain challenges. Nonetheless, this is a situation that we are managing and monitoring closely. Let me wrap up by saying we are pleased with how we have performed in the first half of the year. We are benefiting from improved market conditions and strong execution. We are on track towards delivering our full-year financial objectives, and we are well-positioned to accelerate growth and profitability over time. I want to thank the mixed telematics team around the world for all their hard work. I would now like to turn the call back over to John to review our financial results in more detail. John?