MiX Telematics Ltd ADR

Good morning, everyone, and thank you for participating in today's conference call to discuss MIX Telematics financial results for the second quarter of fiscal 2024, ended September 30th, 2023. Joining us today are MIX Telematics President and CEO, Stephan Joss, and the company's CFO, Paul Dell. Following their remarks, we'll open the call for any questions you may have. Please note this event is being recorded. 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 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 is 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 MixTelematics' President and CEO, Stefan Jos Solovitz. Jos?

Thank you, Paul, and good morning, everyone. It's been an exciting few weeks since we announced our proposed business combination with PowerFleet. This merger of equals will result in one of the largest global providers of connected vehicle SaaS solutions, and I firmly believe that this is the ideal path forward for our organization and shareholders. In addition to the benefits of a direct NASDAQ listing, which will provide us with significantly increased market exposure and an expanded investor base, the combined entity is expected to unlock further shareholder value through synergistic activities, and leveraging our combined best-in-class SaaS solutions to further capitalize on the significant global market opportunity. I'll dive into more details regarding the transaction a bit later, but let's first review our performance during the second quarter of fiscal 2024. We delivered another strong quarter with record subscriber growth, increased profitability, and solid free cash flow. With the macro environment remaining uncertain and volatility persisting across many of our markets, our model continues to be resilient and our balance sheet remains a strategic asset. We continue to accelerate subscriber growth, adding a record 47,400 subscribers in the quarter, and we expect this trend to continue. Subscription revenue of $32.4 million, which represents 86% of total revenue, increased 10% year-over-year on a constant currency basis, and I am pleased to report that our adjusted EBITDA margin expanded by 550 basis points from a year ago. We generated free cash flow of $2.1 million in the quarter, and we anticipate our performance in this regard remain positive through the remainder of our fiscal year and beyond. Our solutions are at the forefront of helping customers address multiple key business issues, including improving safety, energy and cost efficiency, and monitoring of ESG initiatives. We continue to see growing global demand for investment into our premium fleet solutions and accelerated demand for our integrated AI video platform from both new and existing customers. We also expect the future combination with Power Fleet's product suite to significantly increase our ability to compete with and acquire new customers in our regions and expand service revenue within our existing customers. In terms of notable wins and call-outs from the quarter, Africa continues to be our strongest performer with broad-based sector growth and increasing momentum in the light fleet market. We added some exciting new customer programs that bolstered new subscriber acquisition in Europe, LATAM, and Australia. We also continued to acquire new customers in the U.S. and increased our momentum with the onboarding of the nationwide fast food company. We discussed recent calls. Whilst the quarter yielded many positives, we were disappointed to receive notification from an energy sector customer that they would not be renewing their contract, which comes to an end in December this year. On the technology front, we are on track migration and integration of the Trimble FSM customers to the Mix platform. We should soon be able to leverage the new features and enhancements from this project to enter the construction vertically in other geographies and expand our offerings to existing mixed customers. During the quarter, we released further enhancements to our AI via telematics offering, as well as our data insights and visualization platform. Furthermore, our teams continue to deliver on strategic initiatives that are expected to bolster new customer acquisition in the short term. Now let's talk more about the proposed business combination with PowerFleet. As I have referenced on prior calls, we've had a dedicated team searching for accretive M&A opportunities over the past year. After evaluating a number of strategic opportunities, we strongly believe that PowerFleet's Unity Strategy and our combined scale perfectly positions us to transform the connected fleet SaaS industry and drive growth globally. On closing, the combined business will have a starting base of more than 1.7 million subscribers with the ability to cross-sell and upsell additive software solutions to a truly global set of customers. The combined R&D capabilities will accelerate our AI advancement and data integration capabilities. I'll let Paul walk through the details of the transactions, but we believe that joining forces with PowerFleet will dramatically accelerate our timeline towards stronger growth and scale in the United States and other key geographies, while also providing our combined and loyal customer base with increased value through a wider product offering. Organizationally, we see a symbiotic culture Each organization has a high net employee retention rate with motivated, energized, and deeply experienced teams. These are all key ingredients for ensuring customer satisfaction. We both apply ourselves on placing best-in-class customer experience at the heart of our approach, and our unification will be founded on not only maintaining, but also continuing to enhance our customer experience. We will also be very focused on optimizing systems and processes. We expect to leverage the best of both businesses to combine and accelerate operational efficiencies. After an extensive due diligence period and digging even deeper into Power Fleet's operations over the past few months, we are confident this will be a smooth and efficient integration process. The combined management structure, which will see our talented and experienced mixed executives playing high-profile roles, will be led by PowerFleet's CEO Steve To and CFO David Wilson. As stated previously, I intend to retire at the conclusion of this transaction. I plan to continue as a long-term shareholder of PowerFleet. I am impressed by what Steve has accomplished at PowerFleet since he took the helm in January of 2022. and I would like to reiterate that he has a proven track record of delivering exceptional results for customers, employees, and shareholders. His core skill sets are focused around building world-class organizations, driving innovative go-to-market product strategies, and successfully integrating accretive acquisitions. I am very confident that this is a great opportunity for both organizations to succeed and thrive in today's rapidly evolving marketplace. Scale is critical. We believe doing something this transformative gets us to the necessary scale very quickly and puts us in an excellent position to continue growing market share while unlocking value for shareholders. Before I hand over to Paul, I would like to remind everyone that we are scheduled to host both the Mix and Power Fleet investor and analysts in New York next week. Senior executives from both companies are excited to present the vision, market overview, unity platform strategy, and AI roadmap together with financial targets for the combined business. The event will also be webcast live and subsequently made available to investors under the investor relations section of our website. Paul, back over to you.