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MiX Telematics Announces Financial Results for Third Quarter of Fiscal 2018MiX 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 2018, which ended December 31, 2017. "In Q3, MiX Telematics delivered the strongest quarter in the Company's history. This is evidenced by over 21% year-on-year subscription revenue growth on a constant currency basis and the addition of 24,700 net new subscribers," said Stefan Joselowitz, Chief Executive Officer of MiX Telematics. "In addition, we delivered record Adjusted EBITDA of R115 million at a margin of close to 26%. This was the sixth consecutive quarter of margin expansion and continues the great progress towards our longer-term target of 30% plus. MiX remains well positioned to maintain the momentum for the remainder of fiscal 2018 and beyond, given the ongoing strong demand from new and existing customers, as well as the growing pipeline of opportunities worldwide." Financial performance for the three months ended December 31, 2017 Subscription Revenue: Subscription revenue was R376.4 million ($30.4 million), an increase of 21.1% compared with R310.7 million ($25.1 million) for the third quarter of fiscal 2017. Subscription revenue increased more than 21% on a constant currency basis. Subscription revenue benefited from an increase of over 59,000 subscribers, representing an increase in the subscriber base of 9.8% from December 2016 to December 2017. Subscription revenue has also benefited from higher average revenue per user. Total Revenue: Total revenue was R442.1 million ($35.7 million), an increase of 10.2% compared to R401.4 million ($32.5 million) for the third quarter of fiscal 2017. Hardware and other revenue was R65.8 million ($5.3 million), a decrease of 27.5% compared to R90.7 million ($7.3 million) for the third quarter of fiscal 2017. Gross Margin: Gross profit was R288.6 million ($23.3 million), as compared to R267.3 million ($21.6 million) for the third quarter of fiscal 2017. Gross profit margin was 65.3%, compared to 66.6% for the third quarter of fiscal 2017. Operating Margin: Operating profit was R53.0 million ($4.3 million), compared to R47.9 million ($3.9 million) for the third quarter of fiscal 2017. Operating margin was 12.0%, compared to 11.9% for the third quarter of fiscal 2017. Operating expenses of R235.5 million ($19.0 million) have increased by R16.0 million ($1.3 million) or 7.3%, since the third quarter of fiscal 2017. Adjusted EBITDA: Adjusted EBITDA, a non-IFRS measure, was R114.5 million ($9.3 million) compared to R87.8 million ($7.1 million) for the third quarter of fiscal 2017. Adjusted EBITDA margin, a non-IFRS measure, for the third quarter of fiscal 2018 was 25.9%, compared to 21.9% for the third quarter of fiscal 2017. Profit for the Period and Earnings per Share: Profit for the period was R58.8 million ($4.8 million), compared to R35.1 million ($2.8 million) in the third quarter of fiscal 2017. Profit for the period includes a net foreign exchange loss of R2.1 million ($0.2 million) before tax. Profit for the period for the third quarter of fiscal 2017 included a net foreign exchange loss of R4.9 million ($0.4 million). Earnings per diluted ordinary share were 10 South African cents, compared to 6 South African cents in the third quarter of fiscal 2017. For the third quarter of 2018, the calculation was based on diluted weighted average ordinary shares in issue of 577.6 million compared to 567.0 million diluted weighted average ordinary shares in issue during the third quarter of fiscal 2017. The Company's effective tax rate for the quarter was (12.3%) compared to 19.2% in the third quarter of fiscal 2017. Ignoring the impact of net foreign exchange gains and losses, and related tax consequences, the tax rate which is used in determining adjusted earnings below, was 26.7% compared to 22.6% in the third quarter of fiscal 2017. On a U.S. Dollar basis, and using the December 31, 2017 exchange rate of R12.3689 per U.S. Dollar, and at a ratio of 25 ordinary shares to one American Depositary Share ("ADS"), profit for the period was $4.8 million, or 21 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, were R40.0 million ($3.2 million), compared to R37.4 million ($3.0 million) in the third quarter of fiscal 2017 and exclude the net foreign exchange losses of R2.1 million ($0.2 million) referred to above. Adjusted earnings for the third quarter of fiscal 2017 excluded the net foreign exchange loss of R4.9 million ($0.4 million) referred to above. Adjusted earnings per diluted ordinary share, also a non-IFRS measure, were 7 South African cents consistent with the third quarter of fiscal 2017. On a U.S. Dollar basis, and using the December 31, 2017 exchange rate of R12.3689 per U.S. Dollar, and at a ratio of 25 ordinary shares to one ADS, adjusted earnings for the period was $3.2 million, or 14 U.S. cents per diluted ADS. Statement of Financial Position and Cash Flow: At December 31, 2017, the Company had R247.1 million ($20.0 million) of net cash and cash equivalents, compared to R356.3 million ($28.8 million) at March 31, 2017. The Company generated R109.5 million ($8.9 million) in net cash from operating activities for the three months ended December 31, 2017 and invested R92.2 million ($7.5 million) in capital expenditures during the quarter (including investments in in-vehicle devices of R64.1 million or $5.2 million), leading to a free cash flow, a non-IFRS measure, of R17.3 million ($1.4 million), compared with free cash flow of R24.0 million ($1.9 million) for the third quarter of fiscal 2017. Capital expenditures were R18.9 million ($1.5 million) higher than in the third quarter of fiscal 2017 primarily as a result of increased investments in in-vehicle devices due to the continued increase in the number of bundled subscription contracts. Business Outlook MiX Telematics has translated U.S. Dollar amounts in this Business Outlook paragraph from South African Rand at the exchange rate of R11.9355 per $1.00, which was the R/$ exchange rate reported by Oanda.com as at January 29, 2018. Based on information as of today, February 1, 2018, the Company is issuing the following financial guidance for the full 2018 fiscal year:
For the fourth quarter of fiscal 2018 the Company expects subscription revenue to be in the range of R371 million to R375 million ($31.1 million to $31.4 million), which would represent subscription revenue growth of 15.3% to 16.6% compared to the fourth quarter of fiscal 2017. On a constant currency basis, this represents subscription revenue growth of 17.8% to 19.1% compared to the fourth quarter of fiscal 2017. 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 Company provides earnings guidance only on a non-IFRS basis and does not provide a reconciliation of forward-looking Adjusted EBITDA and Adjusted Earnings per Diluted Ordinary Share guidance to the most directly comparable IFRS financial measures because of the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations, including adjustments that could be made for foreign exchange gains/(losses) and related tax consequences, restructuring costs, share-based compensation costs, and other charges reflected in the Company's reconciliation of historic non-IFRS financial measures, the amounts of which, based on past experience, could be material. 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 1, 2018 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 managing over 664,000 assets in approximately 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 2018, 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, 2017, 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 finance income/(costs) including foreign exchange gains/(losses), 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, restructuring costs, profits/(losses) on the disposal or impairments of assets or subsidiaries, insurance reimbursements relating to impaired assets and certain litigation costs. 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 our 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 period and our 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 for investing activities. We believe that free cash flow provides useful information to investors and others in understanding and evaluating the Company's cash flows as it provides detail of the amount of cash the Company generates or utilizes after accounting for all capital expenditures including investments in in-vehicle devices and development expenditure. February 1, 2018
Notes to the 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 these financial results 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, 2017. No new or revised accounting pronouncements that became effective during fiscal 2018 have had 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, 2017 in South African Rand, supplementary information in U.S. Dollars has been prepared for the convenience of users of these financial results. Unless otherwise stated, the Group has translated U.S. Dollar amounts from South African Rand at the exchange rate of R12.3689 per $1.00, which was the R/$ exchange rate reported by Oanda.com as of December 31, 2017. The U.S. Dollar figures may not compute as they are rounded independently. 3. Earnings per Share/ADS data
4. Reconciliation of Adjusted Earnings to Profit for the Period
5. Reconciliation of Adjusted EBITDA to Profit for the Period
6. Reconciliation of Adjusted EBITDA Margin to Profit for the Period Margin
7. Reconciliation of Free Cash Flow to Net Cash Generated from Operating Activities
8. Dividends Paid In respect of the second quarter of fiscal 2018, a dividend of R14.0 million ($1.1 million) was declared on October 31, 2017 and paid on November 27, 2017. Using shares in issue of 559,380,738 (excluding 40,000,000 treasury shares), this equated to a dividend of 2.5 South African cents or 0.2 U.S. cents per share. 9. Share Repurchase On May 23, 2017, the MiX Telematics Board approved a share repurchase program of up to R270 million ($21.8 million) under which the Company may repurchase its ordinary shares, including American Depositary Shares ("ADSs"). The Company may repurchase its shares from time to time at its discretion through open market transactions and block trades, based on ongoing assessments of the capital needs of the Company, the market price of its securities and general market conditions. This share repurchase program may be discontinued at any time by the Board of Directors, and the Company has no obligation to repurchase any amount of its securities under the program. The repurchase program will be funded out of existing cash resources. As of December 31, 2017, the following purchases had been made under the share repurchase program:
Subsequent to the repurchase, the shares were de-listed and now form part of the authorized unissued share capital of the Company. At December 31, 2017, the Company had 562,231,288 ordinary shares of no par value in issue (excluding 40,000,000 treasury shares held by MiX Investments). No share repurchases were made during the quarter under review. 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 R44.9 million or $3.6 million. No loss is considered probable under this arrangement. 11. Taxation Section 11D allowances relating to tax assets recognized 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 No. 58 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. 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 in the 2013 and 2014 fiscal years did not, in the DST's opinion, constitute qualifying expenditure in terms of the Act. MiX International, through due legal process, had formally requested a review of the DST's decision not to approve this expenditure. While approvals were obtained for a portion of this project expenditure as a result of a further review performed by the DST in February 2017, we continue to seek approval for the remaining projects and as such the legal process is ongoing. In addition to the approvals that were subject to the legal process, further approvals have been obtained for certain project expenditure, relating to both current and prior financial years. However, at period end, an uncertain tax position remains in relation to S11D deductions in respect of which approvals remain pending. Since the introduction of the DST pre-approval process, the Group has recognized in the income statement cumulative tax incentives in addition to the incurred cost of R20.1 million ($1.6 million) in respect of S11D deductions, of which R0.4 million ($0.03 million) was recognized during the three months ended December 31, 2017. R17.3 million ($1.4 million) relates to deductions in respect of development project expenditure which has been approved by the DST. R2.8 million ($0.2 million) relates to an uncertain tax position in respect of projects where approvals have not yet been received from the DST. If the Group is unsuccessful in this regard, the Group will not recover the R2.8 million ($0.2 million) raised at December 31, 2017. 12. Dividend Declared On January 30, 2018 the Board declared that in respect of the third quarter of fiscal 2018, which ended on December 31, 2017, a dividend of 2.5 South African cents (0.2 U.S. cents) per ordinary share to be paid on Monday, February 26, 2018. The details with respect to the dividends declared for ordinary shareholders are as follows:
Share certificates may not be dematerialized or rematerialized between Wednesday, February 21, 2018 and Friday, February 23, 2018, 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:
13. Development costs historical data The table below sets out development costs incurred and capitalized for each of the last eight quarters including the period ended December 31, 2017.
For more information please visit our website at: www.mixtelematics.com
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