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MiX Telematics Announces Financial Results for Third Quarter of Fiscal Year 2016MiX Telematics Limited (NYSE:MIXT) (JSE:MIX), a leading global provider of fleet and mobile asset management solutions delivered as Software-as-a-Service ("SaaS"), today announced financial results for its third quarter of fiscal year 2016, which ended December 31, 2015. "MiX Telematics continues to post mid-teens subscription revenue growth and high teens adjusted EBITDA margins in the face of increasingly difficult trading conditions globally," said Stefan Joselowitz, Chief Executive Officer of MiX Telematics. "We continue to see an increasing number of our customers opt for fully-bundled contracts increasing the long term value of these relationships. Our innovation engine continues to yield leading-edge new offerings and we have established a new partnership to bring our revolutionary Beam-e offering to the Americas. We are confident that we can persevere through the energy crisis, sustaining both growth and profitability, and intend to maintain our focus on the initiatives that have made us a global leader in fleet management." Financial performance for the three months ended December 31, 2015 Revenue: Total revenue was R378.6 million ($24.4 million), an increase of 7.7% compared to R351.5 million ($22.6 million) for the third quarter of fiscal year 2015. Subscription revenue was R294.5 million ($18.9 million), an increase of 16.1% compared with R253.7 million ($16.3 million) for the third quarter of fiscal year 2015. Growth in subscription revenue was driven primarily by an increase of over 55,000 subscribers, which resulted in an increase in subscribers of 11.2% from December 2014 to December 2015. Hardware and other revenue was R84.1 million ($5.4 million), a decrease of 14.0% compared to R97.8 million ($6.3 million) for the third quarter of fiscal year 2015. Gross Margin: Gross profit was R257.6 million ($16.6 million), as compared to R230.6 million ($14.8 million) for the third quarter of fiscal year 2015. Gross profit margin was 68.0%, compared to 65.6% for the third quarter of fiscal year 2015. In the third quarter of fiscal 2016, subscription revenue, which generates a higher gross profit margin than hardware and other revenue, contributed 77.8% of total revenue compared to 72.2% in the third quarter of fiscal 2015. Operating Margin: Operating profit was R33.7 million ($2.2 million), compared to R31.0 million ($2.0 million) for the third quarter of fiscal year 2015. Operating margin was 8.9%, compared to 8.8% for the third quarter of fiscal year 2015. Adjusted EBITDA: Adjusted EBITDA, a non-IFRS measure, was R71.0 million ($4.6 million) compared to R69.1 million ($4.4 million) for the third quarter of fiscal year 2015. Adjusted EBITDA margin, a non-IFRS measure, for the third quarter of fiscal year 2016 was 18.8%, compared to 19.7% for the third quarter of fiscal year 2015. Profit for the period and earnings per share: Profit for the period was R57.9 million ($3.7 million), compared to R31.9 million ($2.1 million) in the third quarter of fiscal year 2015. Profit for the period includes a net foreign exchange gain of R68.8 million ($4.4 million) before tax. The net foreign exchange gain includes R68.6 million ($4.4 million) related to a foreign exchange gain on the IPO proceeds which are maintained in U.S. Dollars and are therefore sensitive to R:$ exchange rate movements. During the third quarter of fiscal 2015 the net foreign exchange gain was R17.7 million ($1.1 million). Earnings per diluted ordinary share were 8 South African cents, compared to 4 South African cents in the third quarter of fiscal year 2015. For the third quarter of 2016, the calculation was based on diluted weighted average ordinary shares in issue of 770.9 million compared to 804.4 million diluted weighted average ordinary shares in issue during the third quarter of fiscal 2015. The Company's effective tax rate for the quarter was 43.9% in comparison to 37.3% in the third quarter of fiscal 2015. On a U.S. Dollar basis, and using the December 31, 2015 exchange rate of R15.5419 per U.S. Dollar, and at a ratio of 25 ordinary shares to one American Depositary Share ("ADS"), profit for the period was $3.7 million, or 12 U.S. cents per diluted ADS. Adjusted earnings for the period and adjusted earnings per share: Adjusted earnings for the period, a non-IFRS measure, was R16.4 million ($1.1 million), compared to R20.4 million ($1.3 million) in the third quarter of fiscal 2015 and excludes a net foreign exchange gain of R68.8 million ($4.4 million). Adjusted earnings per diluted ordinary share, also a non-IFRS measure, were 2 South African cents, compared to 3 South African cents in the third quarter of fiscal year 2015. On a U.S. Dollar basis, and using the December 31, 2015 exchange rate of R15.5419 per U.S. Dollar, and at a ratio of 25 ordinary shares to one ADS, adjusted earnings for the period was $1.1 million, or 3 U.S. cents per diluted ADS. Statement of Financial Position and Cash Flow: At December 31, 2015, the Company had R907.5 million ($58.4 million) of cash and cash equivalents, compared to R875.7 million ($56.3 million) in the third quarter of fiscal year 2015. The Company generated R26.6 million ($1.7 million) in net cash from operating activities for the three months ended December 31, 2015 and invested R66.6 million ($4.3 million) in capital expenditures during the quarter, leading to negative free cash flow, a non-IFRS measure, of R40.0 million ($2.6 million), compared with free cash flow of R29.3 million ($1.9 million) for the third quarter of fiscal year 2015. An explanation of non-IFRS measures used in this release is set out in the Non-IFRS financial measures section of this press release. A reconciliation of these non-IFRS measures to the most directly comparable IFRS measures is provided in the financial tables that accompany this release. Business Outlook MiX Telematics has translated U.S. Dollar amounts in this Business Outlook paragraph from South African Rand at the exchange rate of R15.9492 per $1.00, which was the R/$ exchange rate reported by Oanda.com as of February 1, 2016. Based on information as of today, February 4, 2016, the Company is issuing the following financial guidance for the full 2016 fiscal year:
For the fourth quarter of fiscal year 2016 the Company expects subscription revenue to be in the range of R304 million to R321 million ($19.1 million to $20.1 million) which would represent subscription revenue growth of 14% to 21% compared to the fourth quarter of fiscal year 2015. The key assumptions used in deriving the forecast are as follows:
The forecast is the responsibility of the Board of Directors and has not been reviewed or reported on by the Company's external auditors. The Company's policy is to give guidance on a quarterly basis, if necessary, and does not update guidance between quarters. The information disclosed in this "Business Outlook" paragraph complies with the disclosure requirements in terms of paragraph 8.38 of the JSE Listings Requirements which deals with profit forecasts. Quarterly Reporting Policy in respect of JSE Listings Requirements Following the listing of the Company's ADSs on the New York Stock Exchange, the Company has adopted a quarterly reporting policy. As a result of such quarterly reporting the Company is, in terms of paragraph 3.4(b)(ix) of the JSE Listings Requirements, not required to publish trading statements in terms of paragraph 3.4(b)(i) to (viii) of the JSE Listings Requirements. Conference Call Information MiX Telematics management will also host a conference call and audio webcast at 8:00 a.m. (Eastern Standard Time) and 3:00 p.m. (South African Time) on February 4, 2016 to discuss the Company's financial results and current business outlook:
About MiX Telematics Limited MiX Telematics is a leading global provider of fleet and mobile asset management solutions delivered as SaaS to customers in more than 120 countries. The Company's products and services provide enterprise fleets, small fleets and consumers with solutions for safety, efficiency, risk and security. MiX Telematics was founded in 1996 and has offices in South Africa, the United Kingdom, the United States, Uganda, Brazil, Australia, Romania, Thailand and the United Arab Emirates as well as a network of more than 130 fleet partners worldwide. MiX Telematics shares are publicly traded on the Johannesburg Stock Exchange (JSE: MIX) and MiX Telematics American Depositary Shares are listed on the New York Stock Exchange (NYSE: MIXT). For more information visit www.mixtelematics.com. Forward-Looking Statements This press release includes certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including without limitation, statements concerning our financial guidance for the fourth quarter and full year of fiscal year 2016, our position to execute on our growth strategy, and our ability to expand our leadership position. These forward-looking statements reflect our current views about our plans, intentions, expectations, strategies and prospects, which are based on the information currently available to us and on assumptions we have made. Actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors that are beyond our control including, without limitation, those described under the caption "Risk Factors" in the Company's Annual Report on Form 20-F filed with the Securities and Exchange Commission (the "SEC") for the fiscal year ended March 31, 2015, as updated by other reports that the Company files with or furnishes to the SEC. The Company assumes no obligation to update any forward-looking statements contained in this press release as a result of new information, future events or otherwise. Non-IFRS financial measures Adjusted EBITDA To provide investors with additional information regarding its financial results, the Company has disclosed within this press release, Adjusted EBITDA and Adjusted EBITDA margin. Adjusted EBITDA is a non-IFRS financial measure, it does not represent cash flows from operations for the periods indicated and should not be considered an alternative to net income as an indicator of the Company's results of operations or as an alternative to cash flows from operations as an indicator of liquidity. Adjusted EBITDA is defined as the profit for the period before income taxes, net interest income/(expense), depreciation of property, plant and equipment including capitalized customer in-vehicle devices, amortization of intangible assets including capitalized in-house development costs and intangible assets identified as part of a business combination, share-based compensation costs, transaction costs arising from the acquisition of a business or investigating strategic alternatives, restructuring costs, profits/(losses) on the disposal or impairments of assets or subsidiaries, insurance reimbursements relating to impaired assets, certain litigation costs and foreign exchange gains/(losses). The Company has included Adjusted EBITDA and Adjusted EBITDA margin in this press release because they are key measures that the Company's management and Board of Directors use to understand and evaluate its core operating performance and trends; to prepare and approve its annual budget; and to develop short- and long-term operational plans. In particular, the exclusion of certain expenses in calculating Adjusted EBITDA and Adjusted EBITDA margin can provide a useful measure for period-to-period comparisons of the Company's core business. Accordingly, the Company believes that Adjusted EBITDA and Adjusted EBITDA margin provides useful information to investors and others in understanding and evaluating its operating results. The Company's use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider this performance measure in isolation from or as a substitute for analysis of the Company's results as reported under IFRS. Some of these limitations are:
Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including operating profit, profit for the year and the Company's other results. Adjusted Earnings and Adjusted Earnings Per Share Adjusted earnings per share is defined as profit attributable to owners of the parent, MiX Telematics Limited, excluding net foreign exchange gains/(losses) net of tax, divided by the weighted average number of ordinary shares in issue during the period. We have included Adjusted earnings per share in this press release because it provides a useful measure for period-to-period comparisons of the Company's core business by excluding net foreign exchange gains/(losses) from earnings. Accordingly, we believe that Adjusted earnings per share provides useful information to investors and others in understanding and evaluating the Company's operating results. Free cash flow Free cash flow is determined as net cash generated from operating activities less capital expenditure per investing activities.
Notes to condensed consolidated income statements, statements of financial position, statements of cash flows and other financial and operating data 1. Accounting policies The condensed consolidated statements of financial position, income statements and statements of cash flows included in this announcement have been prepared in accordance with IFRS accounting policies. The accounting policies are consistent in all material respects with those applied in the preparation of the consolidated financial statements for the year ended March 31, 2015. Amendments to IFRSs effective for the fiscal year ending March 31, 2016 are not expected to have a material impact on the Group. The results have not been audited or reviewed by the Group's external auditors. 2. Presentation currency and convenience translation The Group's presentation currency is South African Rand. In addition to presenting these condensed consolidated financial results for the quarter ended December 31, 2015 in South African Rand, supplementary information in U.S. Dollars has been prepared for the convenience of users of this report. Unless otherwise stated, the Group has translated U.S. Dollar amounts from South African Rand at the exchange rate of R15.5419 per $1.00, which was the R/$ exchange rate reported by Oanda.com as of December 31, 2015. The U.S. Dollar figures may not compute as they are rounded independently.
# Amount less than $0.01
5. Reconciliation of Adjusted EBITDA to Profit for the Period During the current fiscal year, the Adjusted EBITDA definition was amended to exclude all foreign exchange gains/losses. The amended measure is the profit measure reviewed by the chief operating decision maker ("CODM"). Prior year figures have been restated to reflect this change.
(1) Includes depreciation of property, plant and
equipment (including in-vehicle devices).
8. Share Repurchase Program As of September 11, 2015, the MiX Telematics Board approved a share repurchase program under which the Group could repurchase up to 40,000,000 of its ordinary shares (up to 1,600,000 ADSs) through to March 15, 2016. As of December 31, 2015, 40,000,000 shares had been repurchased at a total cost of R123.8 million or $8.0 million (at an average price of R3.09 or $0.20 per share) and therefore no more shares may be repurchased under the program. The following terms were applicable to the share repurchase program:
During the quarter ended September 30, 2015, the following purchases had been made under the share repurchase program:
During the quarter ended December 31, 2015, the following additional purchases had been made under the share repurchase program:
9. Dividend Paid In respect of the second quarter of fiscal year 2016, a dividend of 2 South African cents or 0.1 U.S. cents per share (December 2014: Nil) was declared during the period and paid on November 30, 2015. 10. Contingent Liabilities Service agreement In terms of an amended network services agreement with Mobile Telephone Networks Proprietary Limited ("MTN"), MTN is entitled to claw back payments from MiX Telematics Africa Proprietary Limited in the event of early cancellation of the agreement or certain base connections not being maintained over the term of the agreement. No connection incentives will be received in terms of the amended network services agreement. The maximum potential liability under the arrangement is R45.8 million or $2.9 million (December 2014: R52.8 million or $3.4 million). No loss is considered probable under this arrangement. 11. Taxation MiX Telematics International Proprietary Limited ("MiX International"), a subsidiary of the Group, historically claimed a 150% allowance for research and development spend in terms of section 11D ("S11D") of the South African Income Tax Act of 1962 ("the Act"). As of October 1, 2012, the legislation relating to the allowance was amended. The amendment requires pre-approval of development project expenditure on a project specific basis by the South African Department of Science and Technology ("DST") in order to claim a deduction of the additional 50% over and above the expenditure incurred (150% allowance). Since the amendments to S11D of the Act, MiX International had been claiming the 150% deduction resulting in a recognized tax benefit of R8.5 million ($0.5 million). MiX International has complied with the amended legislation by submitting all required documentation to the DST in a timely manner, commencing in October 2012. In June 2014, correspondence was received from the DST indicating that the research and development expenditure on certain projects for which the 150% allowance was claimed did not, in the DST's opinion, constitute qualifying expenditure in terms of the Act. MiX International continues, through due legal process, to formally seek a review of the DST's decision not to approve the expenditure. This process is unresolved. Consequently, at December 31, 2015, MiX International has an uncertain tax position relating to S11D deductions. MiX International has paid the R8.5 million ($0.5 million) related to the S11D deductions to the South African Revenue Service. The Group has considered this uncertain tax position and recognized a tax asset of R8.5 million ($0.5 million) at December 31, 2015. If the Group is unsuccessful in obtaining DST approval in this specific matter, the Group will not recover the tax asset and will incur an additional taxation expense of up to R8.5 million ($0.5 million) relating to the additional 50% claimed. 12. Dividend Declared On February 4, 2016 the Board has declared that in respect of the third quarter of fiscal year 2016 which ended on December 31, 2015 a dividend of 2 South African cents (0.1 U.S. cents) per ordinary share to be paid on February 29, 2016. The details with respect to the dividends declared for ordinary shareholders are as follows:
Share certificates may not be dematerialized or rematerialized between Monday, February 22, 2016 and Friday, February 26, 2016, both days inclusive. Shareholders are advised of the following additional information:
The details with respect to the dividends declared for holders of our ADSs are as follows:
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