MIXT - Earnings call transcript Q2 2020

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Operator

Greetings. Welcome to the MiX Telematics Fiscal 2020 Second Quarter Earnings Results Conference Call. [Operator Instructions]

I will now turn the conference over to your host John Granara, Chief Financial Officer.

You may begin.

John Granara

morning good and you everyone. Thank XXXX. joining We earnings which review XX Telematics' to for appreciate ended the September XXXX you results year second MiX fiscal us quarter on of announced Today in few we ago. discussing will the hours our release issued be press a results John Financial and by Telematics' I'm of you Chief as Joselowitz or many MiX know Granara, joined I'm Officer; Stefan him Joss. Chief Executive Telematics. Officer MiX and of President is He

and subject uncertainties statements call could relating make to to we material which business today's actual risks During our forward-looking are that materially. cause results will our differ also to

of our important filings our SEC discussion please website. Form affect a refer the that results of other and available For material on risks other our in XX-F factors the and to Investor contained those section could Relations

also and measures. to which SEC. schedule with will in be reconciliation a currently website financial release our these press is our filed non-IFRS detailing on certain There results is the located available referring We

call with over And turn that Joss. to let me the

Stefan Joselowitz

John. Thanks

I continued would growth today. quarter revenue you subscription adjusted joining also well additions of double-digit as highlight for thank QX as results MiX's EBITDA like in another subscriber to strength the call all that positive of our and expansion meaningful attractive remain global our can confident cash breadth flow. footprint of and margin substantial our diversified portfolio profitability. We and product growth core free support combination

subscribers USD in quarter. fiscal summary during Turning new line or quarter grew our million We performance XXXX added half basis revenue XX% our and subscription constant to XXXXX ZAR year-over-year first with currency was of million XX.X a and on the over of XXX second net guidance. a

net quarter The consecutive XXXXXX fleet by than in was growth asset our quarter more in to of reflects and base this businesses. our our tracking increases and strength light driven subscribers sixth growth. double-digit This

well fiscal adjusted first challenging XXXX. perform XX.X% revenue X.X% subscription up margins a environment Africa EBITDA year the half year-over-year despite to of and economic with continued of team Our for

they demonstrate to that unit achievable mass. Africa of believe largest are all our the towards continues in we as scale economies As business grow units critical of business our

below and XX.X% Our constant subscription quarter the strong. performed adjusted margins of revenue first Americas of business year our half in although grew EBITDA XX% remain currency the expectation and the

we on seeing been last some we As energy cautious volatility some global multinational call, behavior trade earnings driven amongst environment. our our mentioned, by of have and buying more customers the WordPress

Mix While to from contraction. customers part a seen line modest we Existing. new subscribers is have of core US this momentum, expand and effort. we the final generate growth our vertical our vertical, and expansion This tactics. strategies add In launching cautious subscriptions a to and lead-generation mix stages with have go fleet gaining seen more the continue our now to top instance our growth slower diversity from some we are we becoming one offering. now marketing includes and abroad our digital in strategy other market in and of are

sales the and environment. at verticals. to Overall outperform continues the diversification socioeconomic strategy in all in our and increasing accelerate categories a we light In by our we marketing challenging very Result to be market. fleet intend excited continue the investments in Americas across product opportunity to

of year-over-year XX.X% adjusted grew first from EBITDA increased the in for XXXX as XXXX. currency XX% revenues margins fiscal half up Subscription constant to year XX.X% fiscal

new customers extending existing or we as quarter contracts. well wins as expanding some which secured the During notable signing included

of with XXX the logistics the enhance to adopted U.S.A. its logistics a supplier Grupo of is with the comply one light leading trailers. heavy trucks the displacement ELD United the the to we nearly duty with competitive companies fleet. and which to its mandate and of in fleet pleased our similar first transportation Logistics Group This NOM-XXX In Wireline Mexico in across States. customer are fleet is solution Mexican premium compliance

The to decision. has of increased all additional efficiencies in meaningful of to signed their flexibility needs Brazil of realized current compliance expansion to a solution XXXX. XXX was their driver ELD central customer who meet and fuel ability its We This coach of our with our and a behavior MiX customer in its vehicles improvements and through base consumption solutions. added an use reduced bus

adopting we pizza premium vehicles. industry Postal deepest, XXXX ago, the year Belgium A that for our over announced leading solution Service was

the in our nearly XXXX pleased bringing to now the are service, total will an be additional announce subscriptions. to that adding We XX they point to vehicles

visit originally additional with a than Finally, in to contract company years, mixes premium differentiators energy mix, Some seed existing an competitive footprint of which XXX are and our quality XXXX including extension of offering. as and from such added is was the signed its our breadth extending more subscriptions plus key mix, three leading value integrated for Australia based next the services in product management global solution, stickers

and subscribers streams. in light product from fleet of mix broad premium fluctuate the product asset-tracking as generate strategy well breadth continually our go-to-market of footprint international regions our quarter-to-quarter. our will diversified cause to to We portfolio growth and of power as leverage different revenue The our ARPU

our our performance ARPU with caused strong blended light example growth to this fleet products moderate For quarter. asset-tracking and our

fleet of to benefit strategy We beginning meaningful are deal also flow. is bundled generate premium seeing which our cash the in

first contracts. even the half ZAR over for million bundled XX% in XX XXXX ZAR of in-vehicle devices half investing of in cash after million in first XXX up fiscal fiscal generated the We flow free XXXX

XXXXXX quarter $X.X we approximately the American program. for general of the under depository During million shares our equivalent repurchase share repurchased

buying also back stock value. reflective generate however to shareholder We continue own way another levels to actively possible opportunities is identify and our current at believe evaluate acquisition we

are the and in in outlook. we business the near-term of while sales outlook second experiencing of aspects to the the performing larger our some is the many cycles a half muted well more are customers Turning we of more combination longer a resulting of year cautious of

decisions. to leading as sales trade defer For is some uncertainty cycles increasing the longer tensions companies of these customers global from

revenue more adjusted detail provide guidance. revenue will Even with we growth. later. healthy these are John subscription to margin But total XXXX fiscal reducing challenges EBITDA our generate we still modestly guidance subscription expect and and

in XXXX margins half modestly Americas will revenues in second and fiscal subscription continued the the impact sales investment our in lower organization. of primarily of the business reflect Our

in us year XXXX for of a summary fiscal unique So first on positions investments presence made have solid our strategic we our based the half the years. global and over

reflects additional updated uncertainties the outlook of more verticals. Our challenges in some and macro-sensitive

EBITIDA another to margins revenue expect plus deliver flow. improving We growth and year XX% cash free adjusted of

can market execute our on We as time even over oil headwinds the strategy. better and we are confident subside gas further we results and deliver in diversification

me John details the on quarter. to run to let turn With over back through the that it

John Granara

Joss. Thanks

Please otherwise. in by XXX the I'll to discuss mind say the year-over-year refer for QX for I are all second at figures will revenue start full XXXX financial came that keep our for first unless outlook the reviewing the quarter and comparisons changes total results P&L I and Starting and the million. fiscal year. all ZAR with QX then in

total year-over-year to ongoing range. goal and on were million positive line up currency trend or a this strong of all revenues Subscription This with XX% now categories towards the was continues our geographies. revenue. our by XXX subscribers portfolio driven constant performance a long-term on up XX.X% diverse broad basis of and across XX.X% and traction guidance total revenue basis from a represents Of ZAR subscription and in

subscribers a XXXXX of year-over-year. and ended than million more added increase of XXXXXX over was base other of the an Hardware in quarter down ZAR with flat sequentially year-over-year. and revenue and XX% XX We XX.X%

European business. revenues due strong orders to hardware were higher our in year Last

the XXX was result down mix XX.X% Gross was margin the that XX% quarter with distribution through basis year. profit hardware our a gross year-to-date from third-party dealer consistent second than higher prior year. last Our was points margin greater decline of Subscription primarily sales from channel. went margin

as contracts margins longer XX% go includes As contracts. related increase profit generate and gross a in to high-value and which the to of bundled term. expected used in-vehicle profit towards through depreciation renewal we devices to expect certain higher trend drive ARPUs are fleet our reminder peripherals in up contract an in gross charges cycles they These

operating total leverage compared business. of XX% share-based XXX revenue were highlights before quarter reduction our The of of in to year. as percent operating expenses revenue revenue last basis expenses point the in Operating compensation in second the XX% a

are planning and make marketing. to strategic a in we sales investment discussed we As

We expect half in expenses capitalized. second costs R&D include of costs see G&A our ramp the the not to that the associated year. Recall

million For those a and provided of historical capitalization revenue or our in year-over-year table release. XXX interested Adjusted to you press we expense XX% see improvement. of a basis point XX.X% ZAR development to have earnings EBITDA increased our XXX cost

the return adjusted and are improvement our growth on We while demonstrates continued to investments. for with ability which margin, EBITDA pleased successfully a leveraging invest historical our

we ramp with second this our which the Adjusted was XX the up in million that per rate Effective XX expect from tax XX.X% Rand term, or for earnings to million some share. sands investments Rand XX to see margin as year. mind South in is in compared diluted half we the Keep fluctuation African quarter village, African for quarter strategic XX.X%. South XX short of fiscal for the up

determining was which The rate tax compared adjusted is used earnings in XX% XX.X%. to

which a the earnings press included the reconciliation financial tables release. have in accompany of We adjusted

continues cash million XXX sheet $XX.X quarter be we debt. or very ended to have Our of We ZAR no with strong. balance million and the

ZAR perspective pursue and expenditures create with free sheet the shareholder From provides a activities operating flow to in balance is cash leading invested to million us strategic cash XX XXX from flow asset value. of the in rand generated ZAR we ZAR million net our believe for a We company million. to and flexibility opportunities cash XX capital

ZAR generated driven half year free the the compared in the in in-vehicle to same use XX.X our investments is period cash million year. of devices last demand for XX of of We is offering. bundled includes the The of million which cash first which XX% ZAR up by

is is close and our outlook how discussed is as quarterly annual to on to order turning objectives. achieve this have we do our not our deals to in focus on wish to management intention Now financial we focused previously terms targets suboptimal as

we have predictability level the and highest which largest component of visibility our of revenue the area fastest-growing where discussed of business. the is The highest is margin revenue subscription and we as have

a Before our quick guidance numbers comments. moving few on to

First with as we the line guidance. were talked QX in call earlier in results our about

we buying As fleet cautious schedules more some are seeing in from customers. certain Joss rollout activity mentioned

we opportunities the maintain in sales orders XXXX. are a pipeline half expecting firm While we still and of second dynamic similar fiscal a of strong

of of fiscal to ZAR XXXX revenue ZAR subscription X.XXX currently expecting to billion X.X% XX.X%. constant For year-over-year the X.XXX currency to billion full ZAR X.XXX growth and of represents billion are total we year revenue which X.XXX ZAR billion

translates and to of range. ADS. guidance the this XX.XX ZAR of Based to Adjusted on EBITDA million is adjusted be exchange now to midpoint ZAR USD X.XXX million ZAR of the ZAR an the XXX rate per expected EPS X.XXX U.S. XXX to at dollar

This guidance an of million is effective tax to based ordinary diluted XXX rate XX% shares and on XX%.

year-over-year the to quarter ZAR targeting XXXX of million currency the million are represent X.X% of constant revenues of ZAR to XXX on we subscription X% basis. to For growth a third in range XXX

the strategy. In results summary quarter of solid MiX that diverse benefits reported second our demonstrate

priorities best on the better executing certain markets on financial when subside. in deliver headwinds focused to company are our macro We even positioned strategic to the is ensure results

begin I to Q&A operator will now hand it session. back to over the

Operator

The [Operator Peterson is Raymond ahead. James. Brian first Please Instructions] question of go from

Brian Peterson

I appreciate macro. the color all on Joss So the

premium seen or and You maybe into gas you know oil anything that vertical is of others you there side more well global Can as well. the comments talk volatility or have that? buying price made oil the as vehicles if cautious curious about other on and trade. some that in extends I'm areas specifically the fleet were on

Stefan Joselowitz

gas. It and broader oil purely I should think mean than

think slowing around So there's our a as general as concerned global concern multinational I customers far growth. are

impact the course more is XX-XX% concerned Of within energy far sector our as business our observable it because of the business. represents is much

perspective. it's of that So course from magnified

Brian Peterson

still think know subscription mix fleet the about you those the tracking about came and the of maybe is subs. second fleet for above what half as light asset on model referenced the premium tracking year? light and you fleet expectations numbers And we doing pretty our the well. And the in I asset businesses the revenue and Can and think you between obviously talk is

Stefan Joselowitz

category so Sure ARPU primary and our then asset light fleet tracking. know is the as obviously premium different fleet you is the very fleet highest our ARPU our for then

could premium in slowdown our the reasonably where fleet was the it a start below performed year. were be well during fiscal this have so we but we certainly it quarter hoping at fleet So portfolio premium of

So that overweight on generating an revenue. has impact subscription

by doing or nicely Our portfolio. quarter lot accident. fastest portfolio we me it's We're reported more John our in I'm performing is if vertical into for globally correct And portfolio wrong. light putting which effort not light us. fleet was just the fleet our a

fleet it mid-teens I like our in of sort think we light something that? grew XX-XX%

John Granara

relation That's coming of still Day. correct. it fastest Brian That we or to year-over-year. from in segment the spread growing category the is those Investor with with at was reported And our consistent what revenue the December

So XX% it's and XX% asset fleet about premium tracking. XX% fleet light

So have that's reason maintained haven't in the percentages the meaningful why those part same. seen because ARPUs of you relatively the movement

Brian Peterson

understanding or one the guys into next continuing the referenced. strategic half more just you're year marketing. going a on in be you well? year about going that's the from me maybe think to to to if Any And And new I as sales be that investments of help on thinking there's ramp-up limited and if back

John Granara

-- Yes we going could to say we're

Stefan Joselowitz

John you generally to percentage detail it. around to as it want of more But maybe some in revenue. expect do we Yes, a fill just rise

John Granara

approach maintain make the annual supports to going has margin half even manner. to disciplined growth year. maintain the guidance and company that as still we're second those with the we're We're the planning of to as the continued same in profitability our year-over-year EBITDA And to still investments to top-line expecting expand that that balanced in our

we X planning investments ramp to categorize I in are up. categories. would So those different

investments You two and to is which which expenses; making. ongoing one-time be we'd will have incremental be one recurring be going

I And faster continue work so perspective expanding a say expand from at we're that than profitability going our revenue. to on rate and would that

long-term increase. value a would But be our we expect the That will of always portion for framework creation.

said what I to we've is So model XX% the long-term for right XX% is now. probably think

Operator

from go ahead. is Blair. Pfau question next of The Matt William Please

Matt Pfau

to that ask I wanted you're marketing sales on making the the and investment in Americas. in

performed the said also some segment where expectations. from as And So macro of your headwinds. these pressure that's you area you're that below obviously an seeing

like the to because that decide in increase understand sales guess just investment I investment. marketing Americas you something you is there I'm and in must order trying see to that clearly So in where going that to

Stefan Joselowitz

significant we do something that that more still will organically this we for that faster see believe some of us region mature a than our be Yes businesses. and like we over time grow will

in that mentioned the board be the So we should are as making the are our are really but investments focused I efforts. call diversification across on really

we've that's light our energy So people place we putting in We efforts. more got in premium enough and are fleet in place in our well-covered. both obviously believe extremely and fleet sector

on But of as another on to concerned. and diversifying increasing there's we be that's generation investment increasing areas are our in and to terms efforts we're over certainly focusing that going then be focus we area people where and our far above tactics. resources where going there's lead is as And

of digital half get ultimately the on our as decent far investment to moving return the side this up expect marketing we on as on And year to second that's investment So into be that. we concerned. ramping intend a

the that's we're So direction heading.

Matt Pfau

of a guidance customers. was from that outlook longer for and cycle on cited then sales wanted up more reasons the large some then muted the the sort you I to X And follow reduced

So the as customers referencing that they're muted you're those just on behind more fast Just some comment with you contemplating not large be thought? is outlook; reducing they're fleet detail meaning as that what's expanding that would helpful. size

Stefan Joselowitz

the to vertical certainly this We've in combination. whilst it's quarter it years much as was we of a last certainly grew this growth. in I compared slower mentioned So seen couple

But below we year. muted. growth at some that we finish the out we have we growth the planned that contraction. to not of quarter on we'll our be was and expansion with beginning more an reference it net year much eye widespread but So was expecting It's when were keep did fleet signs of And some early the seen also closely.

Operator

The question Canaccord from is go of Mike next Walkley Please Genuity. ahead.

Mike Walkley

market. verticals Joss you to you and market? market? kind more share North opportunity strong what see question in most And Can you to stages marketing you the us follow separate up your gain outside learning how the the with in energy solutions wanted America the America to invest what share add see a of that I on and as market; you. Thank region guys you that salespeople then again look to sales and do of MiX of your on ripe just are in as Now you ramping the North from for grow as share early

Stefan Joselowitz

But our momentum. good and us Certainly Sure. heading also in MiX still yet. curve a mentioned expectations not learning direction there as I for with Now. position yet we're it's that in the we're I'm we exceeding this that are not right a seeing report pragmatic to I'm in because is

more the be do to will So this it mention direction. that in expect wouldn't right mover certainly needle it in got year. heading for I is in fiscal again to event and I we've But work a any

right the where is cause as quarter not as our it's we So far now of are current concerned.

invest which As to we area in not something on. our only increasingly people. again on big is more intending more that's move that focus certainly forward handle improving we're particular we're that a generation It's a lead in getting and

Mike Walkley

And move just just do market to get building your as you there? look within highlighted you the solutions an balance some strong opportunities with sheet. are get say to a think that way acquisition you to ripe areas verticals you Or that solution for new fastest see to your into? the is that growth Americas into on salesforce for expanding Do

Stefan Joselowitz

be not and it's a it's up deal up do stupid secret a evaluate our of do pace secret But should U.S. deal. we're going the to at business. in scaling to opportunities we love ramping terms no Yes which we'd we no also

around difficult for it us deal. valuation So at our our makes to heads current it a levels get

going anything. And we're force to not

in to and that I'm we we've organic that into sustain could awash that historical some with we're XX% kind not rate. opportunities support we necessarily were this rate And that can rate the certainly the of well double-digit growth the business year. in got up get we improve So seeing the growth last believe interim we sure growth

view we moment organically. lot we're better certainly the But in do can than a doing at our

to remain not will more on force board which to a a Paul anything. got pipeline open but we So still gives opportunities. opportunities through on retaining we're We've our capacity to team lot us John going whilst of now work

Mike Walkley

me from question line. pass Last the and I'll

are upgrading customers did the you market. you in But You've in quite and slowing any certainly regions and companies quarter buying the just seen some displacing others as a industrial MiX customer in highlight you you of macro Are change of given wins. any are seeing A that some highlighted. uncertainty some truck industrial tough compared nicely lot dynamics the competitive some in still guys are the group? benefiting to fleets growing

Stefan Joselowitz

There's resulted lot the M&A certainly And the conclusive have we from market. with perspective how open impact changes. the environment to a speak certainly on playing believe ownership changes yet an people compete of eye do will in in we that on been this in battlefield lot a in change whilst field hasn't any of an so the consolidation that sleep one ultimately so and

exciting lot perspective. some displacing energy but And our which only and things time. from I be need of; way do. very the the we is be to is that our focus new successful to as that a business it in our But successful strengths that's business referenced for as to a on And We there's some deal which and probably space. we continue market will stand believe there's in of winning still greenfield currently what continue we we in many of fragmented remain always not competitors

fact closing XX% the we're grow that's year. vertical basis that in still It despite business we're We're to that I some times our the going it's it. fact So new through space. that that to healthy on this not want tough of still business. signing in a to And is just in a we're tough that overexposed particular that expecting vertical a despite make environment point

an So that's sign. exciting

Operator

Please [Operator Analysis. Instructions] from ahead. of The next First Gearhart question is David go

David Gearhart

us energy Thanks you you quick so the macro if MiX. exposure what for recap we on could taking mean current could a appreciate for just I MiX's questions. could and exposures mentioned better environment beyond Joss give it my and wondered

Stefan Joselowitz

Certainly we correctly of kind if exposure I that understand have? the vertical the question

David Gearhart

Yes absolutely.

Stefan Joselowitz

in different verticals subscription and et still single the the is and some we've energy around construction really the bus largest single-digits: of cetera, so coach about mining And et the our cetera. teens. high of our digits are got far by transport some high single-digits which lot logistics Yes in XXs of revenue. in that them We've XX% high a in the got below them around in which then vertical and low is of

really we So subscribers of X We fleets that outside we've smaller got on. look our added new at ones. reported the quarter a very to XXXXX well-diversified from just by big We of bulk business. far close in that verticals this and was

have business. it it - A actively a we on the are is of need in our of well-diversified we and XX% our But the business to overexposed which sign to close to saying spread. that doing of business. we So energy still do years improve continue because built recognize to initiatives a United health ago we was it invest that States XXX%. few in the - represents are by question we way I will

David Gearhart

I the the I in side new range. And hardware purposes? you'd Is the mid-XXs know mentioned it's exposure of kind I for been XXs upper And where think remarks channel. consider it review prepared indirect and then margin was normal the to just was contemplated. think the gross wanted sales modeling that. consecutive of should to past I what quarters been we that the that XX% in on at

John Granara

Sure.

about would the say level And the So call year. I right for we think XX% be this term the think think in short I XX. last I did

get a we're there. continues from One long-term up couple to XX%. we're in gross still some to we'll as is now areas. that a of of revenue margin come expecting revenues subscription natural If going expansion since That's total to terms increase the expansion increase modeling to In line. of percentage continues our

expansion those as total about and talked when renewal for see to XX% through bundled there get stated our to the long-term contracts go some we'll margin. And strategy is cycle gross objective how well. we've Secondly the

think true XX% we'll uplift and year still after. that still and that's see years That being goal. happen year said and So next that expansion we this begin we it's an for the probably holds and natural think achievable to

Operator

end have question-and-answer Stefan the the We over reached to call of for turn will I session. the now closing remarks. Joselowitz back

Stefan Joselowitz

you. for presenting Thank I'd Raymond I John the will in like call early all And you to thank joining York City and New be the James today. conference. next month at

there. hope time. So you. to see of Thank some your Appreciate you

Operator

This concludes today’s conference call.

may you time. your You at disconnect this participation. lines your Thank for

Paul Dell	Head of Finance, Americas
Stefan Joselowitz	President and CEO
John Granara	CFO
Brian Peterson	Raymond James
Matt Pfau	William Blair
Mike Walkley	Canaccord Genuity
David Gearhart	First Analysis

MiX Telematics (MIXT) 2 Nov 192020 Q2 Earnings call transcript