MiX Telematics Ltd ADR

Greetings and welcome to the Mixed Telematics Fiscal Third Quarter 2022 Earnings Results 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 today's conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn this conference over to your host, Mr. John Granara, Chief Financial Officer. Thank you, sir. You may begin your presentation.

thank you and good morning everyone we appreciate you joining us to review mixed telematics earnings results for the third quarter fiscal year 2022 which ended on december 31 2021. today we will be discussing the results announced in our press release issued a few hours ago i'm john granara mix's chief financial officer and i'm joined by stefan jossie lovitz or as many of you know him joss 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 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 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 Jos.

Thanks, John. And thanks to all of you for joining the call today. I would like to start by thanking many of you who have reached out offering condolences on the recent passing of our mother back in South Africa. Turning to our third quarter results, our performance reflected strong execution by the entire mixed team as we continue to meet our objectives to return to sustainable revenue growth. Underlying sales momentum in our business continues to improve and we're encouraged by the increase in deal activity in most of our key regions and in markets. We have done so despite the continued presence of COVID and the emergence of Omicron during the quarter, which did have some impact on performance. We added 20,300 subscribers to end the quarter with a base of over 790,000. This is our best performance since before the pandemic, and all three of our solution categories contributed to the strong growth, including solid new premium fleet customer additions. We have successfully executed on our objectives to return to sustainable revenue growth, and we are increasingly optimistic on our ability to deliver over the longer term Our financial targets are 15% to 20% constant currency subscription revenue growth and 30% plus adjusted EBITDA margins. Of course, we will continue to manage the business with a balanced approach. However, our performance so far in fiscal 2022 and the demand indicators we see across the business are giving us confidence to lean into our key investment priorities that will support our long-term growth targets. I would now like to quickly summarize our financial and operational results for the third quarter. Annual recurring revenue ended the quarter at $119 million, up 1.3% sequentially and 6.3% year-to-date. I would note that our ARR result was impacted by two items. Firstly, a sizable energy customer in the US liquidated as part of its bankruptcy process, removing approximately $500,000 from ARR. Secondly, we had a strong bookings quarter, but with much of it coming at the end of the period. As a result, we have more committed backlog waiting to be implemented than is typical. Subscription revenue was $30.3 million, a 3.5% increase year over year in constant currency. Adjusted EBITDA was $7.1 million at a 19.6% margin which was modestly below our expectations for the quarter due to a very large unbundled win where the customer is paying for the hardware up front. As we roll out this fleet, this low margin hardware sale will steadily convert into high margin subscribers. Our premium fleet performance was particularly encouraging and reflected a couple of important trends. Firstly, as we noted in recent quarters, demand for enterprise opportunities has been strong and led to meaningful pipeline growth, renewals and subscriber expansion in both Q1 and Q2. In this latest quarter, we saw an increase in large deal activity as evidenced by the following premium fleet wins across multiple verticals. We signed a significant transaction with an emerging mobility fintech company that provides revenue-based vehicle financing to entrepreneurs across parts of Africa, Europe, and Asia. Under this multi-year contract, they will deploy our premium fleet solution, including Mixed Vision AI, to more than 12,500 vehicles and will be purchasing the associated hardware upfront. This is an example of the opportunity Mix has to be the technology partner of choice to cutting-edge companies who are introducing new and disruptive ways of doing business in multiple geographies. In South Africa, we were awarded a significant contract expansion by an existing Mix customer and the country's largest utility provider, who is adding our MixVision AI solution to their fleet of more than 11,000 vehicles. A key differentiator in this one was the value our video telematics solution delivers for driver and passenger safety. In the United Kingdom, Monks Contractors, a waste management company, chose Mix as their new telematics partner. Operating for over 25 years, the company wanted a telematics solution that can provide real-time driver coaching that would enable more efficient fleet management and improve road safety. And finally, in Brazil, we signed a leading public transport company for over 350 vehicles with an opportunity to add an additional 1,000. The reliability of our solution to lower fuel consumption and increase efficiency, together with our best-in-class customer support, made Mix the chosen partner. We also continue to make good progress in our product roadmap. In Q3, we have further extended the integrated dashboard solution launched last quarter. The solution now includes embedded analytics specifically relating to driver performance, leveraging our standard scoring algorithms, as well as unique client configurable scorecards. We will continue to ramp up our investment in data engineering, analytics, and AI over the years ahead to provide ongoing value and insights to our subscriber base and Mixer's internal operations. As we approach the end of fiscal 2022, we feel good about how the business has performed and the steps we have taken to position the company for even better financial performance going forward. In particular, bookings are tracking ahead of our expectations for the year, which we believe is the best indication of the underlying health and momentum in our business. In terms of the specific goals we laid out at the beginning of the year, we are now tracking towards subscription revenue growth in the low to mid single digits, and ARR growth of 9% to 10%. John will discuss in more detail some of the near-term dynamics that are causing a lag between bookings and the time it takes to contribute to ARR expansion and subscription revenue. I want to be clear that this is solely a function of timing. In fact, we have booked enough contracted revenue year-to-date to comfortably generate double-digit ARR growth if the bulk of it can be implemented by year-end. At the same time, we are on pace to meet our profitability target of low to mid 20% adjusted EBITDA margins, even as we invest more in our product development and go-to-market efforts. Our consistent cost discipline and targeted investment philosophy has served us well through multiple cycles over the past 25 years, and we are confident it will lead to improved growth and profitability in the future. I'd like to end by reiterating that we are tracking well to the objectives we laid out for fiscal 2022 and were encouraged by the improvements in customer demand in recent months. We believe we are entering a cycle of increased focus on telematics investments and that MIX is well positioned to benefit from this trend. We are confident in our ability to achieve our long-term financial targets and believe we can generate significant value for our shareholders. I want to thank all of Mixer's employees around the world for their efforts that contribute to ongoing success. I would now like to turn the call over to John to review our financial results in more detail. John?