MiX Telematics Ltd ADR

Good morning, everyone, and thank you for participating in today's conference call to discuss Mixed Telematics financial results for the fiscal first quarter 2024, ended June 30th, 2023. Joining us today are Mixed Telematics President and CEO, Stefan Jeselowitz, and the company's CFO, Paul Dell. Following their remarks, we'll open the call for any questions you may have. I'd now like to turn the conference over to Mixed Telematics Chief Financial Officer, Paul Dell, as he reads the company's safe harbor statement regarding forward-looking statements. Paul, please go ahead.

Thank you, and good morning, everyone. Before we continue, I'd like to remind all participants that during today's call, we will make certain 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 SEC. With that, I would like to turn the call over to Mixed Telematics' president and CEO, Stefan Joselovits. Jos?

Thank you, Paul. And good morning, everyone. MIX began fiscal 2024 with strong financial and operational results. We sustained our positive momentum and started the year with results ahead of our internal expectations. We continued to grow our subscriber base and on a year-over-year basis, constant currency ARR increased by over 15%, while our adjusted EBITDA margin expanded by 670 basis points. Our organization continues to perform well against a challenging macroeconomic backdrop. Following our achievement of reaching 1 million subscribers in Q4 of last fiscal year, we added over 40,000 net new subscribers in Q1. Our growing subscriber base drives a high-quality, globally diversified recurring SaaS revenue stream, which positions us well for continued profitable future growth. Looking at our Q1 revenue in more detail, subscription revenue comprised 89% of total revenue, and was up nearly 16% year-over-year in constant currency, with 7% of the increase attributable to the FSM acquisition. Our results continue to be driven by strong performance within our Africa segment, with particular strength across our asset tracking and light fleet categories. We are also seeing growing global demand for our Mixed Vision AI camera solutions from both new and existing customers. While current macroeconomic conditions continue to elongate our premium fleet sales cycles, we remain confident that our expanding global pipeline will further accelerate growth as economic conditions normalize. We're already seeing signs of this in the US and in Europe. Our broad product portfolio provides a wide array of solutions for customers and drives significant operational value to their businesses. We help customers save money through achieving fuel and cost efficiencies that come from improved driving behavior. We make key contributions to our customer ESG initiatives by assisting with the reduction of their carbon footprint. Furthermore, a key driver of adoption of our premium solutions is safety. The combination of our real-time driver feedback and post-trip coaching tools dramatically reduces key driving risks such as fatigue, distraction, and other dangerous behaviors. This premium fleet recipe transforms not only fleet performance, but also saves the lives of drivers, passengers, and other road users. During the quarter, we signed several large and important wins across different verticals and geographies. In addition to expanding market adoption of our asset tracking and light fleet solutions, Our Africa team continued its success with seven significant new commercial fleet wins, primarily within the transportation and energy verticals. These wins included over 3,500 additional vehicles in the region being equipped with at least one mixed solution. Five of those new client wins included multi-product contracts, such as pairing our mixed premium fleet solution with mixed vision AI. This is a great testament to the exponential value our solutions provide when used in combination. In Australia, a transport company is deploying our trailer tracking solution into more than 200 assets, which is in addition to the premium fleet solutions we already had in their trucks. In fact, the trailer deployment displaced a competitor, and our solution is working well for their 24-7 transport operations. We've also seen strong demand from our existing customer base to re-sign with MIX as we upgrade from 3G to 4G in that geography. One large oil and gas service company upgraded over 500 subscriptions for their assets and added additional subscriptions for our MIX Vision AI solution after seeing how we detect driver fatigue. Lastly, we've added multiple new logos in Australia from the mining sector, which demands best-in-class driver safety solutions. The expansion of a major US fast food retailer accelerated in Q1, with significantly more franchisees coming on board, signaling great momentum for the remainder of the financial year. We also had considerable success with MixVision AI upsells into existing customers, while a major US client expanded their subscriber base with us by adding over 500 new connections. And in June, our Europe region had its highest month of new business orders placed since October 2021. During the quarter, we continued to invest in technology as we consistently innovate our product portfolio to meet the evolving needs of our current and potential customers. We completed the development of an electric vehicle operations module to help customers manage their electric or hybrid fleets. This is especially critical in Europe and other regions where the trend towards fleet electrification is growing exponentially. Exciting new video features were also deployed, making it even easier for customers to view, manage, and act on the footage from our Mixed Vision AI solutions. Turning to profitability and cash flow, we reported adjusted EBITDA of $8.7 million, up 44% from a year ago. with our adjusted EBITDA margin of nearly 24%, up 670 basis points compared to Q1 of last year. We are pleased with this result, which again underlines the scalability of our recurring revenue model. While unknowns continue to exist in the broader environment, we intend to continue executing on our strategy of balancing growth and profitability and expect further margin expansion and strong free cash flow performance during the remainder of fiscal 2024. We reported break-even free cash flow and ended the quarter with cash and cash equivalents of $27.1 million. We continue to view our unleveraged balance sheet as a strategic advantage, particularly given our current M&A efforts. When it comes to our capital allocation strategy, we will continue to invest in product development and expanding our sales force while also pursuing strategic M&A opportunities. While I don't have any material updates on the ladder today, know that we have a dedicated team that is constantly evaluating potential opportunities. Our leadership team and board of directors are deeply invested in growing the overall value proposition of our platform and are looking closely for accretive options that can enhance shareholder value. Looking ahead to the remainder of fiscal 2024, we are reiterating the guidance we provided on our last call. For the full year, we continue to expect that we can deliver mid to high single digit organic ARR growth and an adjusted EBITDA margin north of 25%. We believe our balanced approach towards growth and profitability will drive our success as we continue to progress towards our goal of delivering consistent, rule of 40 performance in the medium term. Before I hand over to Paul, I would like to emphasise that we were pleased with our strong Q1 results and remain confident in our ability to continue growing and expanding margins over time as we execute on our strategy and benefit from an improved economic outlook.