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MiX Telematics (MIXT)

Participants
John Granara CFO
Stefan Joselowitz President and CEO
Matt Pfau William Blair
Mike Walkley Canaccord Genuity
Brian Peterson Raymond James
Call transcript
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Operator

Greetings and welcome to the MiX Telematics Fiscal Fourth Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, John Granara, Chief Financial Officer for MiX Telematics. you. Thank

begin. may You

John Granara

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

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

of other could and discussion a our important refer those risks material our affect XX-K contained the filings. that Form SEC to in please results, other factors and For

Investor available of our the which website. are Relations All section of on

There non-GAAP our website Joss. We will our the that, on turn which located also with measures. available is currently these press to be reconciliation certain call I'll release, in and referring financial detailing results over schedule SEC. is with And the to filed a

Stefan Joselowitz

you of joining Thanks thanks to John, and all today's call. for

results Our MiX team. execution again once fourth by quarter strong reflected the entire

results year, more will of fourth expectations top and bottom later. we fiscal many in very to end and quickly as XXXX key our our challenging were the continued under circumstances. detail for MiX quarter in operational line ahead both results well will for the summarize modest fiscal markets. review their which Our everybody of and to efforts I financial of the our thank full-year quarter and full John during extraordinary I the for see want improvement

consecutive was reflects than of $XX.X was performance revenue expectations expected of quarter the X% over XX% QX X,XXX the and and flow good across in constant Adjusted decline Free decline 'XX. cash in currency. ended at cash XXX,XXX subscription decrease quarterly quarter business. strong with better million our was of million, our smallest which subscribers, well a EBITDA a fiscal $XX.X ahead which compared to was flow. cost million, discipline fourth year-over-year fourth the and a the We was For $X.X quarter margin, revenue

a was currency. For $XX.X constant Adjusted the And subscription of on our million record fourth which a cash modest performance we year expectations full year. the a flow in margin, in initial year, XX% quarter Overall, million, decrease revenue EBITDA improvements X% with markets. free was year-over-year much experienced exceeded of the cash $XX to at of our key million, year for generation. close easily $XXX.X in many the was of sequential our trends in continued which the subscriber path for

encouraged improvement, on portfolio what cautious some seen remain by and term. While recent quarters, our additions in in but levels. across the this customer new subscriber we've near customers demand in remains we high below historical engagement region, spending remain are Similar each and to overall

able as that be for renewal multi-year services was of pipeline our over our improve. use opportunities of several the energy economic with to will confident We largest quarter a time our its transaction more accelerate important we are sector the during An customer of exclusive conversion signed conditions growing extends years.

prior the accordance as in monthly customer to the contracted it this provides with ability the dollar flexibility our gain as a value customer modify upfront while figure to its is its and MiX market just the tremendous demand, this sign approximately of challenging commitment gives strategic a quarter, and continuing in multi-million paid many investment to agreement is through X when During $X.X fleet conditions improve. market This conditions. to and We downturn a them us clients. that believe validation making renewal the the gain prevailing dynamically then million us expand subscription

We as as also forward provides view this on renewal business, it and an trends. contraction clarity mutant oil encouraging for step our gas

the the vertical, potential of that of XX% opinion a in miles pre-pandemic have we below experienced which for as are activity even proxy We XX% most this to level driven, remains is contraction levels.

with of navigated as highlight confident in and the in reopen best to strong few expanding like agreements access fleet transport improve in Overall, oil market and to solutions number integrated see signed industry for part logistics including to in again. in agreement customers ensure multiple entire penetration from value-added multi-year start the their continue value X,XXX about position the our overall premium growth. efficiency. we a still is see this is are a the renewals It other in again. the noting are MiX signed renewal based leading examples of and Africa providers geographies. the one-third I'd MiX key and of contract gas great our new with We three a years, Reading evaluation of MiX's quarter. cycles MiX Buses, a conditions fleet turns MiX Telematics large down recently, benefit to customers. was superior customer we continually Vision we Until four over Australasia, adoption years. Reading premium rate its activity leading history, and customers high In to renewals the a to provide. due operator energy how subscribed vehicles utilizes operational of and MiX driving existing also in more program some that safety subscriptions solutions operations, our MiX's generate provider to know They consolidate its customers to of vertical monitor our its These operations. a is economies MiX's will we mining of still that important Imperial Solutions. fleet MiX fleet opportunity performance fourth South some of verticals to customer across wins management. growth on worth region. Telematics and retention Imperial, most XX%, services, fleet our group-wide securing and that chose public drive consistently and around will with and Imperial's of independent market divisions Having their we renewed risk typically their long-standing customers up to three conducted XX-year improve and expanding solutions utilizing when to the driving of with significant to U.K. from improve existing logistics,

in obviously the fleets. XXXX was fiscal this contraction due in not case Although, experienced to the many

meaningful base, as within our embedded is and growing customer businesses fleet improved there start existing believe we growth forward, a again. opportunity their Going sizes

through out As spent we have executed exceptionally the with challenging fiscal each. our am history. the We company most how pleased we year against close managed environment goals, the well focused on in XXXX, three and I core

focus on than success the was year our position, to customers they as Many first and significant partner. ever. the The needed challenges rely customer operations strengthen vendors past in a strategic our in could and more upon and faced of trust

the philosophy for best years. Our essential customers outcome MiX. ensure confident business in will at this to both accrue the we benefit to do is willingness coming work our our how to parties I'm with to long-term

the preserve to was objective sheet. balance maintain profitability and second The strong

modestly metric, prudent fiscal expense our to declined. took adjusted to we every and to structure, proactive this manage were measures were EBITDA even as While we Due able margin phenomenally we revenue 'XX, in expand regard. successful in

is for temporary While while growth of in COVID-XX continuing some to of benefit invest model. expenses, was to manage savings, to of due scalability example cost an this nature the our business ability our excellent

close $XX year year. up record nearly a a times with drive of X.X which $XX is cash helped exited flow. of balance performance from XXXX profitability with We cash the of strong million, prior free million Our generation fiscal cash to

the Finally, an our to year was made Vision our marketing Most video third launched key significant opportunity. in update offering. product in recently, AI, and road to sales extensive progress continue initiatives, investing Telematics to our investing as the MiX as in long-term We we map. objective well business development the maximize throughout

while corrective driver technology, hazards numerous the in can and vision road so taken machine safety, action outside leveraging can AI and significantly care MiX time, real potential Vision example that We we improve are be emerging monitoring already deliver technologies product While seeing value enhance great we and occurs. demand. strong we customers, incident the how to can believe to this leverage an is inside a before of

end, quarter to which will subsequent MiX Vision for a the secured fact, our deal AI X,XXX of we over coming quarters. In first roll vehicles, fleet out

resilient returning the fiscal it, primary our in the growth. to stronger, XX% company. subscription business focus We of focused our us, economic have is XX% come growth While progressing towards XXXX I environment. a margins hopefully on to the XXXX fiscal more behind growth enter of fiscal worst plus repeat EBITDA target business and with and will that financial long-term adjusted a normalized challenging, in was XXXX we to returning XX% revenue through

into We opportunity. and the substantial on ahead our to market us capitalize are leaning in investing several of possibilities areas

light invest believe channels our expanding this return interest are there our including in We growing potential indirect well and marketing efforts. demand Telematic further sophisticated from retention premium amongst fleet our making we high and distribution great First, projects, see in throughout the and marketing sales will and efforts sales investments, world. sales generation and placed our growing trend. fleet extending Solutions, for to customer is operators benefit We enhancing we and team,

great product a more do development success harness fleet efficiency our and we solution them. new and Vision actionable, gains of from our products in last to continue for insights, are with safety The and to And AI, this We ideally we're will operations. in Secondly, is MyMiX year even are working feedback bringing achieve of we robust to we that the data pipeline the innovation, ways for portfolio. had to market and positioned looking expanding MyMiX they towards. Tracking release invest driven customers greater to have

improvement we will when will revenue but activity balanced over of 'XX and partner a track low great puts business. the many of as and and has a for timing does. annual with The benefit sales makes us double in continue digit constant we this to estimate, MiX to approach level, lastly, fiscal as to will tough high us now. trusted we And growth growth discipline we COVID-XX. increasingly manage role high even confident, well core footprint of subscription have our when record our meaningful a we currency At Our mid served years and digit in revenue recurring growth recent will that more operating through for performance a our believe profitability, take still customers. generate a show expand investing philosophy This a to continue proven the is doing is impact position lingering it to we single

expect in to the of also another to year XXs. deliver We margins strong EBITDA adjusted low with mid profitability

XXXX in fiscal as up, ahead we investments economic we of trigger some reflect in profitability later We us. opportunities wrap incremental enter will increasingly positive To the growth extensive 'XX about outlook. As cost of outline value-added COVID-XX John are an and will strengthened support and relationships, incredibly customer and with solutions of move our beyond improving normalization, portfolio initiatives.

about of results. excited over what to to shareholders. our significant like call I the generate are our ahead financial would turn We John lies for value and John? us to ability now review to

John Granara

Thanks, XXXX for otherwise. to Joss. comparisons I of unless and fourth mind to for are in fiscal turn changes, QX. now figures Please financial refer our year-over-year all the say to that like results the keep all the I'd quarter

rand U.S. reminder, fiscal reported revenues contributing X.X% increase dollar. As of compared the year against than a majority the fourth XXXX, strengthened from are US quarter revenues. the currencies African of our the a The dollar to our South derived to in other

is our decline Joss contraction revenue that weakened year-over-year revenue primarily company's and due energy X%. were was US year, Starting a decrease to related The the respectively. million, in full customer and to the dollar in rand P&L, against million approximately decreased reported the of the by one-time in contract There on basis at currency subscription item renewal X% a revenues sector For subscriber $XX.X constant total X.X% subscription base. also with revenues revenue with subscription and referenced. a came the $XX.X in the

the did the part As subscription less over recognition contract, quarter with on context more in during the X% decrease very of related fleet majority The revenue subscriber and continue retention and X% the the with we the some rate by year-over-year fiscal have despite primarily fleet revenue we a not initial that and to revenue XX million in million future. contraction accelerated contract. This and of grow than note than reduction customers customer in ended It's This in the subscribers, XX% driven fleets a size, the $X.X base subscriber vehicles. loss contraction fleets customer the bundled XX% We XXX,XXX large provide trends average customer high presents due we the the our $X.X vehicles. with year, To expansion a of benefited was to fleet of fleets were base to rate, attractive that quarter. the more than retention an down Hardware of customers. XX% XXX the fleet quarter-over-quarter. these of retention of for subscriber premium rate also base, year, reduction by during our on less other in and the of XXXX important opportunity year-over-year. with with to

quarter-to-quarter. hardware As a reminder, and be can revenue other volatile

accelerated year some gas compared expenses. ago the depreciation of $XX.X were to our stock-based year. and to ago gross and which expenses million to oil margin year XX.X% Americas fleet at in some in and impacted of on compared strong contraction XX.X% operating and related was to X% period. remained before XX.X% Gross compensation margin to compared Operating customers. prior by restructuring was period, the margin Moving XX.X% down Subscription was

flat of or performance was reflects completed as of compared expenses over of essentially $XX.X the year. the of of streamline actions have actions the were last for we by targeted Our million million the cost our June. Sequentially, $XX.X quarter, past cost cost to XX.X% EBITDA consecutive taken Adjusted most year. the or impact end revenue revenue XX.X% to second cumulative were

finish XXXX. in period. the was excellent up $X.X X.X% additional fourth million, in million $X.X prior positively foreign losses, XXX.X% quarter Non-GAAP The mentioned the an one-time the adjusted fiscal net of tax impact for $X of ago earlier, year. exchange was the approximately terrific by Ignoring a The year. to EBITDA and performance I quarter year to company's revenue, tax of fourth profitability million Our from quarter income the impacted compared was rate effective or in XX.X%, XX.X% to compared gains the XX.X% rate was margin.

ended representing a with in capacity was the March to XXX% million key we this sheet It compared sheet, and and $XX balance XX, equivalents $XX.X ensuring cash we through as challenging more the the us our period. priority XXXX to fiscal of than balance invest financial of Turning quarter growth. cash million to to strengthen XXXX, have for

includes net use $X.X quarters with our device both the as capital performance capitalize fourth opportunity fully generated as improvement $X.X cash cost could activities from we million. operating market the So on to The of cash in-vehicle the in throughout in a invested free quarter, we conditions flow as devices million improved. and of in and million recent of cash $X.X in-vehicle a flow In in investments the investments. reflects consistently the million. $X.X in strong lower expenditures, leading We're year well pleased structure cash

levels. As from current to the investments IVD would we to increase business to growth, starts anticipate return

flow ordinary cash again quarterly dividend balance share. of to per a declare ZAR free once and us X.XX strong Our sheet enabled

to year business conditions. on and quarter-by-quarter continue will fiscal market based a our dividends on this We basis evaluate

our a perspective For some I fiscal up, for would provide wrap additional expectations to like XXXX. on

Joss is this return year. our As plan to growth mentioned, to

by a the overhang New worked will business since subscriber contraction economic our been know good through quickly trends is for of sequential exactly market, much quarters. makes potential have most that COVID-XX. difficult the few uncertainty in it and markets to of have There recover. the business how shown impacted we've in And a which situation the still improvement amount

have ARR the subscription annual and In will enough prior periods revenue tightly revenue been recurring to subscription growth, constant aligned. or we visibility in be do we revenue have generate However, growth. that confident currency

the However, constant a the and decline X% more we that of ARR timing XXXX revenue growth ended fiscal our faster nature We the and basis. grow of XXXX in will investments given model, a $XXX million, recurring of be approximately subscription leading with indicator. helpful on expect ARR fiscal of currency a than

that will basis. fiscal currency by expectation revenue on in and single-digits is XXXX grow constant low to current subscription ARR will mid double-digits a Our grow high

another a we two XXs. profitability, function in things. of low expect to margin EBITDA year-over-year The change mid the of terms year with to largely margins in adjusted In deliver strong are

is structure. returning cost normalized first more The simply a to

undertook beyond not of hiring will As which COVID-XX. freezes, items move one-time continue like We we fiscal number and XXXX. a salary in

In addition, to year expect COVID travel at we resume albeit this spending on pre not levels.

in In product development, capacity. outlined, addition, Joss as investments and generation and our sales increase will growth demand we

opportunities of to number the about optimistic to time. subscription over have return are XX% growth to revenue we We XX%

able we XX% be XXXX, margin we'll a targets. fiscal plus and confident EBITDA towards beyond adjusted Looking move to margins expand are

In the second investments making of will to these terms the of the half the year. and growth begin that we seeing the revenue start benefit incremental in expect first progression of in and half for the ARR quarterly year, year

to to did Before great a up want of on job the fiscal XXXX. reiterate we our control open executing questions, in within I things just that we

our now business focused and the fully growth to the capitalizing market on in returning are market. Telematics leadership on We

we We and shareholders. targets value can our long-term are for confident generate financial return meaningful to

Now up the we'd like for line questions. open Operator? to

Operator

[Operator Instructions] your Pfau comes Our line Matt first proceed Blair. question with William of Please question. with the from

Matt Pfau

sounds transit previously into see at fleets about you you're But you were the back contraction contraction Wanted as or bring the most the base. verticals starting fleets like within to shut some are of those your transportation look and these we're of of anticipated through that some like to down? public also ask it that fleet impacted, vehicles

Stefan Joselowitz

Yes, thanks.

I'd to situation normality. many Clearly, global in normal yet. seeing geographies certainly are the to back We not return steady is call a what

certainly to certainly Is geographies verticals But exposure the the currently aware. we better at countries to is beginning big have certainly looking public of as we're so transportation. than that four of and dipping where out it when picture in the we we was that in months ago have like what the were are speak. you're restrictions, So and observing pandemic,

Matt Pfau

that And growing that the sub for XX the vehicle segments. fleet and the base customer year you mentioned by driven was

now give that So that mix what's I initiative. us would there? on with that Maybe guess just nice update some you're success having imply and on an going

Stefan Joselowitz

good we're are the not lot exclusively that improvements ticking certainly one thing in arguments. States the we're mentioning seeing time. United for seeing fleet efforts, geographies, worth we Yes, upwards which is a is improvements a and seeing is Actually multiple restricted

enhancing work enhancing our So we range. on efforts, continue to of teams product our digital expanding and course generation sales our lead

think have So combination the seeing. I of overall, a that it's we're towards things that contributed improvement

Matt Pfau

one Last achieve just from in you're around customers, discussions some ESG me discussions goals? with bigger those in to help a Joss, your curious looking to if them sort prospective of terms of them was adopt solutions role Thanks. - of initiatives seeing play

Stefan Joselowitz

and inception in the answer is customers offer obviously a you point one yes, the is it lowering a byproduct, question. playing great since The is been bigger And substantial we Thank a a fuel carbon is as benefits which key the of usage, we've making, that emissions. it's role. clearly reduction

we by money, forecast terms a save only the of improving in customers performance. them lot not of so to it And able our enables their to help are efficiencies, also improve ESG but

feature think, And it's resonating of a sake. key now feature a XX that's than definitely argument's certainly it with it's better for was So customers ago selling I years selling ours.

about trend. excited that we're So

Operator

of with Please comes your Walkley proceed next Genuity. Canaccord Mike from question. the line Our with question

Mike Walkley

on my the navigating taking year. question. for and yes tough hope thanks everybody well And congrats Great, is

Stefan Joselowitz

Thank you, Mike.

Mike Walkley

any the from growth excited are that this markets year? end the Joss in most in of others or ramping to get geographies there objectives your really as or any to your of the - than pace just you're more me terms sales the is reinvesting about where question you geographies recovery, business,

Stefan Joselowitz

really of our we're is in our the from all So, news good seeing that geographies. perspective, opportunities

So investments the we investments. making terms that as of I great across remain in portfolio. our part overweight repeat are focus will Americas an of

industry terms we're of relatively new fact here. virtue I of looking think, overweight here. opportunities at by relatively our the that, And see in we still

in the with a very focusing in States the United effort of lot a or about geographies yet stellar Yes excited is seeing trends sad done are the got job is we terms has the So we're great in Conversely, attention. the we're done that other have a pandemic. job haven't here. issues. recent dealing less of clearly, months, And of of and recovery, part the that on top there world

level on But the in regions. going restrictions the they're geographies murkier, the citizens economies a on picture have on some those the remain team, to on they adapt. management of to So have grapple as we still that effect the of as knock and impose hence will

And return see we the and overall, we're real necessary, continue our excited to watch ahead believe to when carefully growth that treat we us this an steps efforts. opportunity, we of But so opportunity about year. to

Mike Walkley

modeling on just may a John, And just follow-up some question be questions.

quarter, strong. gross gross of came payment to benefit think a and margin. forward the give this do For margins those upfront kind did going we How quite in of

So should tie your into EBITDA we guidance? temper that adjusted a XX little bit low to kind of

John Granara

the XX impact subs we a basis those a I reference XX I that with been negative now. - actually right both basis And good. to running margin out will to discrete one-time blended hope on think think event The said level have is typically we still made that, I good XX% XX% points. ranges is XX% had margin are previously on

would percentage of XX% actually was actually think, been one have I And margin so we closer at over subscription point. -

blended had reported at we with a a actually of gross a the XX% on little subscriptions this think it basis knock forward, XX%. But quarter. on So XX%, bit margins, I moving

I think fair. that's

Mike Walkley

over it? grow throughout really think a good to to I of heavily good years on about pretty that year investments travel you is around travel to back unique front upfront and as And But reduces just it COVID the your highlighted. hopefully just the top still know into your then loaded layers end as continues indicating, as the globe. So to get investment guidance, comes OpEx way

John Granara

Yes, the marketing. majority sales of the you'll investments see and in

making have investments going as back. sales a as But much and as of travel expense that mention not example Now in to material we're will the we that's come an marketing. did impact an

our see is of uptick what to that's out we'll So first And cadence benefit start see I mentioning but from this of you're I the of majority made half worth are think that mentioned, sales year. and we it's past marketing in in to year. making investments of year, quarterly investments the Joss think again, those. half But laid standpoint, we the the the on in incremental the made And being the top of second now. the going what we're investments as

Mike Walkley

pass you line of new any question kind model? me of drive Joss, just of in that coming the so Last more on introductions to year? that terms about you from I'll into the expect the it you any timing you're is for products in there growth of for are I revenue this of of guess products terms both some guess I thinking to future - new of impact Are just product working

Stefan Joselowitz

top customers Bear innovations we we - the that our market increasing started Yes, it year. of progresses, expand do we some fleet. broader AI in some Vision in be including in development out MiX mind as the of a we to of believe we've this added generating we year revenue existing an products for we've us. is, launched Vision for. large fiscal which fleet certainly Nonetheless, the call value it's the Jay And that an our existing And expect should make we've service, with on we into an believe is Tracking, opening niche MyMiX will that that did up rolling XX,XXX existing their expect already see which of reference areas solution our impact announced, incremental from app-based that units particularly think this solutions.

excited we're made. about the So investments generally, we

Operator

from James. Please Raymond comes your the Our next Peterson Brian of question with keep question. line

Brian Peterson

Thanks, strong really where gentlemen, a that it. quarter had on is way and ahead congrats I revenue of number

Joss may start with you. be, I’ll So

valuations I'd seen private get about some in of how last growth a to months. the as curious space, terms kind seeing in you're of M&A We U.S. sector and thoughts over and forward? what the particularly going be on in the your thinking company M&A you're that several have

Stefan Joselowitz

continue appreciate we we and certainly has continued the valuations And the some certainly had Yes, transactions matrix. created we available time, not environment of active into company quarter. the strong in some a announced thank and you years. Yes, look And that call and been you our in as know, matters I believer going priority we're stupid performance and conversations a as already we've of It's at information words. one it's to the five has certainly number but over kind last we priority evidence scale over remain the M&A the about certainly opportunities. engage all on of the a get to but a guess that seeing not visibility

We anything we have. like haven't rushed into

think around taken have to a so. continue I We few things. will And we do

market. out certainly extra And it's an all in keep shop for So opportunities. and to continue we engage discussions where appropriate, we'll continue to

Brian Peterson

talk rates about period Maybe year. that appreciate understand payback investments maybe I know, some me the is T&E you're growth for making help you know can And this is impact the of this Thanks, digital, I setting directionally or that year, I guys. the half those us that the back you but up growth some And we of these for one back. can growth hiring investments? the should John just really see for coming maybe we long-term? really sales in

John Granara

I beyond fiscal Sure, made year. in as as more - go so current year, the the meaningfully, year. see expect front start don't meaningful the benefit we'll half we investments that but the until a the second are of of half we even to did the being

the at first going leading indicator to the it see regard. lag And think than probably revenue revenue, the more in see you're I a will subs benefits. looking we that that's six that in to a remarks lag ARR, better be that's they'll is a making. investments subs in when why of prepared So you because have we're because Typically, the start to between said we XX months

So the end will meaningfully meaningful most next benefit that's the so, and year. the into happen fiscal year towards of the

Operator

comments. final the session. Ladies and concludes question our to that any and back you. I'll Thank answer floor for turn gentlemen, Joss

Stefan Joselowitz

Melissa. Thanks joining your the you so all really us And much, MiX today call. in appreciate of We for on interest thanks Telematics. to

investors to meeting you virtually families with And time. healthy. in look later next this remain thanks and forward fact, And be I speaking William Annual that the will and We Blair hope some meantime, we Growth quarter, then. Stock at for your the safe your In again you Conference. week of

Operator

This today's conference. you. concludes Thank

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