The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our consolidated financial
statements and the accompanying notes included in Item 1 of this Quarterly
Report on Form 10-Q.
This discussion contains forward-looking statements that involve risks,
uncertainties and assumptions. Our future results may vary materially from those
indicated as a result of the risks that affect our business, including, among
others, those identified in "Forward-Looking Statements" and Part II "Item 1A.
Risk Factors".
Overview
We are a leading global provider of connected fleet and mobile asset solutions
delivered as SaaS. Our solutions deliver a measurable return by enabling our
customers to manage, optimize and protect their investments in commercial fleets
or personal vehicles. We generate actionable insights that enable a wide range
of customers, from large enterprise fleets to small fleet operators and
consumers, to reduce fuel and other operating costs, improve efficiency, enhance
regulatory compliance, enhance driver safety, manage risk and mitigate theft.
Our solutions mostly rely on our proprietary, highly scalable technology
platforms, which allow us to collect, analyze and deliver information based on
data from our customers' vehicles. Using an intuitive, web-based interface,
dashboards or mobile applications, our fleet customers can access large volumes
of real-time and historical data, monitor the location and status of their
drivers and vehicles and analyze a wide number of key metrics across their fleet
operations.
We were founded in 1996 and we have offices in South Africa , the United Kingdom ,
the United States , Uganda , Brazil , Australia , Romania 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).
We derive the majority of our revenues from subscriptions to our fleet and
mobile asset management solutions. Our subscriptions generally include access to
our SaaS solutions, connectivity, and in many cases, use of an in-vehicle
device. We also generate revenues from the sale of in-vehicle devices, which
enable customers to use our subscription-based solutions, installation services
of our in-vehicle-devices and driver training for fleet customers. We generate
sales through the efforts of our direct sales teams, staffed in our regional
sales offices, and through our global network of distributors and dealers. Our
direct sales teams focus on marketing our fleet solutions to global and
multinational enterprise accounts and to other large customer accounts located
in regions of the world where we maintain a direct sales presence. Our direct
sales teams have industry expertise across multiple industries, including oil
and gas, transportation and logistics, government and municipal, bus and coach,
rental and leasing, and utilities. In some markets, we rely on a network of
distributors and dealers to sell our solutions on our behalf. Our distributors
and dealers also install our in-vehicle devices and provide training, technical
support and ongoing maintenance for the customers they support.
Impact of COVID-19
We have considered the impact of COVID-19 including its impact on expected
credit losses and potential goodwill impairments, however numerous uncertainties
remain, including the severity of the disease, the duration of the outbreak,
actions that may be taken by governmental authorities, the impact on our
customers and other factors identified in Part II Item 1A. "Risk Factors".
Business, employees and operations
Due to extensive measures implemented by various governments, all of our
employees were required to work remotely at the outset of the pandemic, except
for our staff working in our monitoring centers, who were classified as
essential workers. We have implemented appropriate safeguards for these centers.
In addition, we have subsequently modified certain business and workforce
practices (including extended work from home requirements, suspension of certain
business travel and cancellation of certain physical participation in meetings,
events and conferences) and implemented new protocols to promote social
distancing and enhance sanitary measures in our offices and facilities to
conform to government restrictions and best practices encouraged by governmental
and regulatory authorities.
COVID-19 has disrupted the operations of our customers and channel partners, our
operations and the results of our operations. COVID-19 currently has had and, we
believe, will continue to have an adverse impact on global
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economies and financial markets. This has and will continue to have a negative
impact on our revenue and our results of operations, the size and duration of
which we are currently unable to predict.
Cash resources and liquidity
Based on our internal projections, we believe that we have sufficient cash
reserves to support us for the foreseeable future. Further details on our cash
resources and borrowings available under our credit facilities are provided in
the liquidity and capital resources section below.
Financial position and impairments
We have taken into account the impact of COVID-19, to the extent possible, on
our financial statements as of the reporting date. However, future changes in
economic conditions related to COVID-19 could have an impact on future estimates
and judgements used, particularly those relating to goodwill sensitivities and
impairment assessments, as well as expected credit losses. We will continue to
evaluate the nature and extent of the impact on our business, consolidated
results of operations, and financial condition.
Key Financial Measures and Operating Metrics
In addition to financial measures based on our consolidated financial
statements, we monitor our business operations using various financial and
non-financial metrics.
Subscription Revenue
Subscription revenue represents subscription fees for our solutions, which
include the use of our SaaS fleet management solutions, connectivity, and in
many cases, our in-vehicle devices. Our subscription revenue is driven primarily
by the number of subscribers and the monthly price per subscriber, which varies
depending on the services and features customers require, hardware options,
customer size and geographic location.
Subscription revenue has decreased as a percentage of total revenue due to an
increase in hardware and other revenue. In the three months ended September 30,
2020 and 2021, subscription revenue represented 89.3% and 85.6%, respectively,
of our total revenue. In the six months ended September 30, 2020 and 2021,
subscription revenue represented 91.5% and 87.3%, respectively, of our total
revenue.
Subscribers
Subscribers represent the total number of discrete services we provide to
customers at the end of the period.
As of September 30,
2020 2021
Subscribers 767,749 770,159
Basis of Presentation and Key Components of Our Results of Operations
In the second quarter of fiscal year 2022, we managed our business in six
segments which include Africa , Americas , Brazil , Europe and the Middle East and
Australasia (our regional sales offices ("RSOs")), and our central services
organization ("CSO"). CSO is the central services organization that wholesales
products and services to RSOs which, in turn, interface with our end-customers,
distributors and dealers. CSO is also responsible for the development of
hardware and software platforms and provides common marketing, product
management, technical and distribution support to each of the other reportable
segments. CSO is a reportable segment because it produces discrete financial
information which is reviewed by the chief operating decision maker ("CODM") and
has the ability to generate external revenues.
The CODM has been identified as the Chief Executive Officer who makes strategic
decisions. The performance of the reportable segments has been measured and
evaluated by the CODM using Segment Adjusted EBITDA, which is a measure that
uses net income excluding net interest income/(expense), foreign exchange gains
or losses, operating lease expenses, stock-based compensation costs,
restructuring costs, and gains or losses on the disposal or impairments of long-
23
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lived assets and subsidiaries. Product development costs are capitalized and
amortized and this amortization is excluded from Segment Adjusted EBITDA.
In determining Segment Adjusted EBITDA, the margin generated by CSO, net of any
unrealized intercompany profit, is allocated to the geographic region where the
external revenue is recorded by our RSOs. The costs remaining in CSO relate
mainly to research and development of hardware and software platforms, common
marketing, product management and technical and distribution support to each of
the RSOs.
Each RSO's results reflect the external revenue earned, as well as the Segment
Adjusted EBITDA earned (or loss incurred) before the remaining CSO and corporate
costs allocations. Segment assets are not disclosed because such information is
not reviewed by the CODM.
Revenue
The majority of our revenue is subscription-based. Consequently, growth in
subscribers influences our subscription revenue growth. However, other factors,
including, but not limited to, the types of new subscribers we add and the
timing of entry into subscription contracts also play a significant role. The
price and terms of our customer subscription contracts vary based on many
factors, including fleet size, hardware options, geographic region and
distribution channel. In addition, we derive revenue from the sale of in-vehicle
devices, which are used to collect, generate and transmit the data used to
enable our SaaS solutions.
Our customer contracts typically have a three to five year initial term.
Following the initial term, most fleet customers elect to renew for fixed terms
ranging from one to five years. Our third party dealers are typically billed
monthly based on active connections. Some of our customer agreements, including
our consumer subscriptions, provide for automatic monthly or yearly renewals
unless the customer elects not to renew its subscription. Our consumer customer
contracts in South Africa are governed by the Consumer Protection Act, which
allows customers to cancel without paying the full balance of the contract
amount. Our fleet contracts and our customer contracts outside of South Africa
are generally non-cancellable.
Cost of Revenue
Cost of revenue associated with our subscription revenue consists primarily of
costs related to cellular communications, infrastructure hosting, third-party
data providers, service contract maintenance costs, commission expense related
to third party dealers or distributors (commission is capitalized and amortized
unless the amortization period is 12 months or less) and depreciation of our
capitalized installed in-vehicle devices. Cost of sales associated with our
hardware revenue includes the cost of the in-vehicle devices, cost of hardware
warranty, shipping costs, custom duties, and commission expense related to
third-party dealers or distributors. We capitalize the cost of in-vehicle
devices utilized to service customers, for customers selecting our bundled
option, and we depreciate these costs from the date of installation over their
expected useful lives.
We expect that cost of revenue as a percentage of revenue will vary from period
to period depending on our revenue mix, including the proportion of our revenue
attributable to our subscription-based services. The majority of the other
components of our cost of revenue are variable and are affected by the number of
subscribers, the composition of our subscriber base, and the number of new
subscriptions sold in the period.
Operating Expenses
Sales and Marketing
Sales and marketing expenses consist primarily of salaries and wages to sales
and marketing employees, commissions paid to employees, travel-related expenses,
and advertising and promotional costs. We pay our sales employees commissions
based on achieving subscription targets and we capitalize commission and
amortize it (unless the amortization period is 12 months or less). Advertising
costs consist primarily of costs for print, radio and television advertising,
promotions, public relations, customer events, tradeshows and sponsorships. We
expense advertising costs as incurred. We plan to continue to invest in sales
and marketing to grow our sales and build brand and category awareness.
24
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Administration and Other Charges
Administration and other charges consist primarily of salaries and wages for
administrative staff, travel costs, professional fees (including audit and legal
fees), real estate leasing costs, unbillable customer support, expensed research
and development costs and depreciation of fixed assets including vehicles and
office equipment and amortization of intangible assets. We expect that
administration and other charges will increase in absolute terms as we continue
to grow our business.
Research and Development
For additional disclosures in respect of research and development, technology
and intellectual property please refer to "Item 1. Business" in our Annual
Report on Form 10-K for the year ended March 31, 2021 , which we filed with the
Securities and Exchange Commission on June 14, 2021 .
Taxes
During the three months endedSeptember 30, 2020 and 2021 our effective tax rates were 22.0% and 65.7%, respectively, and during the six months endedSeptember 30, 2020 and 2021 our effective tax rates were 15.4% and 38.9%, respectively, compared to a South African statutory rate of 28%. Taxation mainly consists of normal statutory income tax paid or payable and deferred tax on any temporary differences. Our effective tax rate may vary primarily according to the mix of profits made in various jurisdictions and the impact of certain non-deductible/(non-taxable) foreign exchange movements, net of tax. Further information on this is disclosed in Note 8. Income Taxes contained in the "Notes to Condensed Consolidated Financial Statements" included in Part I of this Quarterly Report on Form 10-Q. As a result, significant variances in future periods may occur. 25
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Results of Operations
The following table sets forth certain consolidated statement of income data:
Three Months Ended Six Months Ended
September 30, September 30,
2020 2021 2020 2021
(In thousands)
Total revenue $ 30,948 $ 36,074 $ 58,445 $ 70,972
Total cost of revenue 10,297 13,106 18,875 25,149
Gross profit 20,651 22,968 39,570 45,823
Sales and marketing 2,447 3,872 5,193 7,384
Administration and other 13,631 15,366 27,122 30,373
Income from operations 4,573 3,730 7,255 8,066
Other (expense)/income (77) 199 (175) 64
Net interest expense 70 141 140 219
Income tax expense 974 2,489 1,066 3,081
Net income for the period 3,452 1,299 5,874 4,830
Net income attributable to MiX
Telematics Limited stockholders 3,452 1,299 5,874 4,830
Net income attributable to
non-controlling interest - - - -
Net income for the period
5,874
The following table sets forth, as a percentage of revenue, consolidated statement of income data:
Three Months Ended Six Months Ended
September 30, September 30,
2020 2021 2020 2021
(Percentage)
Total revenue 100.0 % 100.0 % 100.0 % 100.0 %
Total cost of revenue 33.3 36.3 32.3 35.4
Gross profit 66.7 63.7 67.7 64.6
Sales and marketing 7.9 10.7 8.9 10.4
Administration and other 44.0 42.6 46.4 42.8
Income from operations 14.8 10.3 12.4 11.4
Other (expense)/income (0.2) 0.6 (0.3) 0.1
Net interest expense 0.2 0.4 0.2 0.3
Income tax expense 3.1 6.9 1.8 4.3
Net income for the period 11.3 3.6 10.1 6.8
Net income attributable to MiX
Telematics Limited stockholders 11.3 3.6 10.1 6.8
Net income attributable to
non-controlling interest - - - -
Net income for the period 11.3 3.6 10.1 6.8
26
-------------------------------------------------------------------------------- Results of Operations for the Three Months EndedSeptember 30, 2020 and 2021 Revenue Three Months Ended September 30, 2020 2021 % Change % Change at constant currency (In thousands, except for percentages) Subscription revenue $ 27,623$ 30,885 11.8 % 2.9 % Hardware and other revenue 3,325 5,189 56.1 % 46.6 % $ 30,948$ 36,074 16.6 % 7.6 % Our total revenue increased by$5.1 million , or 16.6%, from the second quarter of fiscal year 2021. The principal factors affecting our revenue growth included: •Subscription revenues increased by 11.8% to$30.9 million , compared to$27.6 million for the second quarter of fiscal year 2021. Subscription revenues represented 85.6% of total revenues during the second quarter of fiscal year 2022. Subscription revenues increased by 2.9% on a constant currency basis, year over year. FromJune 30, 2021 toSeptember 30, 2021 , our subscriber base grew by a net 16,700 subscribers to 770,000 subscribers atSeptember 30, 2021 . The majority of our revenues and subscription revenues are derived from currencies other than theU.S. Dollar. Accordingly, the weakening of theU.S. Dollar against these currencies (in particular against the South African Rand) following currency volatility arising from the economic disruption caused by COVID-19, has positively impacted our revenue and subscription revenues reported inU.S. Dollars. Compared to the second quarter of fiscal year 2021, the South African Rand strengthened by 14% against theU.S. Dollar. The Rand/U.S. Dollar exchange rate averaged R14.62 in the current quarter compared to an average of R16.91 during the second quarter of fiscal year 2021. The impact of translating foreign currencies toU.S. Dollars at the average exchange rates during the second quarter of fiscal year 2022 led to a 8.9% increase in reportedU.S. Dollar subscription revenues.
•Hardware and other revenue increased by
quarter of fiscal year 2021.
The impact of translating foreign currencies to
exchange rates during the second quarter of fiscal year 2022 led to a 9.0%
increase in reported
27
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A breakdown of third-party revenue by segment is shown in the table below:
Three Months Ended
2020 2021 2020 2021 2020 2021
(In thousands)
Total Revenue Subscription Revenue Hardware and Other Revenue
Africa$ 16,490 $ 20,282 $ 14,855 $ 18,686 $ 1,635 $ 1,596 Americas 5,026 3,912 4,786 3,444 240 468 Europe 3,393 4,750 2,919 3,413 474 1,337 Middle East and Australasia 5,066 5,957 4,118 4,207 948 1,750 Brazil 956 1,137 928 1,121 28 16 CSO 17 36 17 14 - 22 Total$ 30,948 $ 36,074 $ 27,623 $ 30,885 $ 3,325 $ 5,189 In theAfrica segment, subscription revenue increased by$3.8 million , or 25.8%. On a constant currency basis, the increase in subscription revenue was 10.1%. Subscribers decreased by 0.6% sinceOctober 1, 2020 . Hardware and other revenue decreased by 2.4%. Total revenue increased by$3.8 million , or 23.0%. Total revenue increased by 7.8% on a constant currency basis. In theAmericas segment, subscription revenue declined by$1.3 million , or 28.0% as a result of a 17.3% decrease in subscribers sinceOctober 1, 2020 . Hardware and other revenue increased by$0.2 million , or 95.0%. Total revenue declined by$1.1 million , or 22.2%. In theEurope segment, subscription revenue increased by$0.5 million , or 16.9%. On a constant currency basis, subscription revenue increased by 14.4%. Subscribers increased by 14.6% sinceOctober 1, 2020 . Total revenue increased by$1.4 million , or 40.0%, also due to an increase in hardware and other revenues of$0.9 million compared to the three months endedSeptember 30, 2020 . Total revenue increased by 36.5% on a constant currency basis. Subscription revenue in theMiddle East andAustralasia segment increased by$0.1 million or 2.2%. On a constant currency basis, the increase in subscription revenue was 2.3%. Subscribers increased by 3.8% sinceOctober 1, 2020 . Hardware and other revenue increased by$0.8 million , or 84.6%. Total revenue increased by$0.9 million , or 17.6%. Total revenue in constant currency increased by 15.4%. In theBrazil segment, subscription revenue increased by$0.2 million , or 20.8%. On a constant currency basis, subscription revenue increased by 17.4%. Subscribers increased by 5.4% sinceOctober 1, 2020 . Hardware and other revenue decreased by 42.9%. Total revenue increased by$0.2 million , or 18.9%. On a constant currency basis, total revenue increased by 15.6%. Cost of Revenue Three Months Ended September 30, 2020 2021 (In
thousands, except for percentages)
Cost of revenue - subscription $ 7,676$ 9,219 Cost of revenue - hardware and other 2,621 3,887 Gross profit$ 20,651 $ 22,968 Gross profit margin 66.7 % 63.7 % Gross profit margin - subscription 72.2 % 70.2 % Gross profit margin - hardware and other 21.2 % 25.1 % Compared to an increase in total revenue of$5.1 million , or 16.6%, cost of revenues increased by$2.8 million , or 27.3%, from the second quarter of fiscal year 2021. This together with the higher levels of hardware and other revenue resulted 28 -------------------------------------------------------------------------------- in a lower gross profit margin of 63.7% in the second quarter of fiscal year 2022 compared to 66.7% in the second quarter of fiscal year 2021. Subscription revenue, which generates a higher gross profit margin than hardware and other revenue, contributed 85.6% of total revenue in the second quarter of fiscal year 2022 compared to 89.3% in the second quarter of fiscal year 2021. During the second quarter of fiscal year 2022, hardware and other margins were higher than in the second quarter of fiscal year 2021, mainly due to the geographical sales mix and the distribution channels. Hardware sales via our dealer channel generate lower gross margins. Sales and Marketing Three Months Ended September 30, 2020 2021 (In thousands, except for percentages) Sales and marketing$ 2,447 $ 3,872 As a percentage of revenue 7.9 % 10.7 % Sales and marketing costs increased by$1.4 million , or 58.2%, from the second quarter of fiscal year 2021 to the second quarter of fiscal year 2022 against a 16.6% increase in total revenue. The increase in the second quarter of fiscal year 2022 was primarily as a result of increases of$0.6 million in advertising costs,$0.7 million in employee costs and$0.1 million in bonuses. In the second quarter of fiscal year 2022, sales and marketing costs represented 10.7% of revenue compared to 7.9% of revenue in the second quarter of fiscal year 2021. Administration and Other Expenses Three Months Ended September 30, 2020 2021 (In thousands, except for percentages) Administration and other$ 13,631 $ 15,366 As a percentage of revenue 44.0 % 42.6 % Administration and other expenses increased by$1.7 million , or 12.7%, from the second quarter of fiscal year 2021 to the second quarter of fiscal year 2022. The increase mainly relates to increases of$0.9 million in salaries and wages,$0.1 million in bonuses,$0.2 million in information & technology costs,$0.4 million in professional fees and$0.1 million in training and recruitment costs. Taxation Three Months Ended September 30, 2020 2021 (In thousands, except for percentages) Income tax expense $ 974$ 2,489 Effective tax rate 22.0 % 65.7 % Taxation expense increased by$1.5 million . In the second quarter of fiscal year 2022, the income tax expense included a$0.9 million deferred tax charge on aU.S. Dollar intercompany loan between MiX Telematics Limited andMiX Telematics Investments Proprietary Limited ("MiX Investments"), a wholly-owned subsidiary. During the second quarter of fiscal year 2021, the income tax expense included a$0.3 million deferred tax credit on aU.S. Dollar intercompany loan between MiX Telematics Limited and MiX Investments. Ignoring the impact of net foreign exchange gains/losses net of tax, the tax rate which was used in determining non-GAAP net income, was 38.6% in the second quarter of fiscal year 2022 compared to 28.4% in the second quarter of fiscal year 2021. 29 --------------------------------------------------------------------------------
Results of Operations for the Six Months Ended
Revenue
Six Months Ended September 30,
2020 2021 % Change % Change at
constant currency
(In thousands, except for percentages)
Subscription revenue $ 53,498 $ 61,975 15.8 % 3.1 %
Hardware and other revenue 4,947 8,997 81.9 % 66.9 %
$ 58,445 $ 70,972 21.4 % 8.5 %
Our total revenue increased by $12.5 million , or 21.4%, from the first half of
fiscal year 2021. The principal factors affecting our revenue growth included:
•Subscription revenues increased by 15.8% to $62.0 million , compared to $53.5
million for the first half of fiscal year 2021. Subscription revenues
represented 87.3% of total revenues during the first half of fiscal year 2022.
Subscription revenues increased by 3.1% on a constant currency basis, year over
year. From March 31, 2021 to September 30, 2021 , our subscriber base grew by a
net 25,500 subscribers to 770,000 subscribers at September 30, 2021 .
The majority of our revenues and subscription revenues are derived from
currencies other than the U.S. Dollar. Accordingly, the weakening of the U.S.
Dollar against these currencies (in particular against the South African Rand)
following currency volatility arising from the economic disruption caused by
COVID-19, has positively impacted our revenue and subscription revenues reported
in U.S. Dollars. Compared to the first half of fiscal year 2021, the South
African Rand strengthened by 18% against the U.S. Dollar. The Rand/U.S. Dollar
exchange rate averaged R14.38 in the current six month period compared to an
average of R17.44 during the first half of fiscal year 2021. The impact of
translating foreign currencies to U.S. Dollars at the average exchange rates
during the first half of fiscal year 2022 led to a 12.7% increase in reported
U.S. Dollar subscription revenues.
•Hardware and other revenue increased by
half of fiscal year 2021.
The impact of translating foreign currencies to
exchange rates during the first half of fiscal year 2021 led to a 12.9% increase
in reported
A breakdown of third-party revenue by segment is shown in the table below:
Six Months Ended
2020 2021 2020 2021 2020 2021
(In thousands)
Total Revenue Subscription Revenue Hardware and Other Revenue
Africa$ 31,014 $ 40,208 $ 28,778 $ 37,397 $ 2,236 $ 2,811 Americas 9,356 7,730 8,961 7,067 395 663 Europe 6,377 9,384 5,769 6,786 608 2,598 Middle East and Australasia 9,656 11,411 7,999 8,556 1,657 2,855 Brazil 2,010 2,189 1,959 2,141 51 48 CSO 32 50 32 28 - 22 Total$ 58,445 $ 70,972 $ 53,498 $ 61,975 $ 4,947 $ 8,997 In theAfrica segment, subscription revenue increased by$8.6 million , or 29.9%. On a constant currency basis, the increase in subscription revenue was 9.1%, despite a 0.6% decrease in subscribers sinceOctober 1, 2020 . The subscription revenue increase is attributable to growth in the higher ARPU premium subscribers which offset the contraction in the lower 30 -------------------------------------------------------------------------------- ARPU asset tracking subscribers. Hardware and other revenue increased by$0.6 million , or 25.7%. Total revenue increased by$9.2 million , or 29.6%. On a constant currency basis, the total revenue increase was 9.2%. In theAmericas segment, subscription revenue declined by$1.9 million , or 21.1%, as a result of a 17.3% decrease in subscribers sinceOctober 1, 2020 . Energy customer fleet sizes contracted during the second half of fiscal 2021 and the first quarter of fiscal year 2022 as a result of the economic conditions in the oil and gas vertical following the COVID-19 pandemic. Following recent improvements in the oil price, this vertical returned to growth during the second quarter of fiscal year 2022. Hardware and other revenue increased by$0.3 million , or 67.8%. Total revenue declined by$1.6 million , or 17.4%. In theEurope segment, subscription revenue growth was$1.0 million , or 17.6%. On a constant currency basis, the growth in subscription revenue was 12.0% as a result of a 14.6% increase in subscribers sinceOctober 1, 2020 . Total revenue increased by$3.0 million , or 47.2%, following an increase in hardware and other revenues of$2.0 million compared to the six months endedSeptember 30, 2020 . Total revenue increased by 40.0% on a constant currency basis. Subscription revenue in theMiddle East andAustralasia segment increased by$0.6 million or 7.0%. On a constant currency basis, the increase in subscription revenue was 1.3%. Subscribers increased by 3.8% sinceOctober 1, 2020 . Hardware and other revenue increased by$1.2 million , or 72.3%. Total revenue increased by$1.8 million , or 18.2%. Total revenue in constant currency increased by 11.1%. In theBrazil segment, subscription revenue increased by$0.2 million , or 9.3%. On a constant currency basis, subscription revenue increased by 7.2%. The increase was mainly due to an increase in subscribers of 5.4% sinceOctober 1, 2020 . Total revenue increased by$0.2 million , or 8.9%. On a constant currency basis, total revenue increased by 6.8%. Cost of Revenue Six Months Ended September 30, 2020 2021 (In thousands, except for percentages) Cost of revenue - subscription$ 15,025 $ 18,346 Cost of revenue - hardware and other 3,850 6,803 Gross profit$ 39,570 $ 45,823 Gross profit margin 67.7 % 64.6 % Gross profit margin - subscription 71.9 % 70.4 % Gross profit margin - hardware and other 22.2 %
24.4 %
Compared to an increase in total revenue of$12.5 million , or 21.4%, cost of revenues increased by$6.3 million , or 33.2%, from the first half of fiscal year 2021. This, together with the higher levels of hardware and other revenue, resulted in a lower gross profit margin of 64.6% in the first half of fiscal year 2022 compared to 67.7% in the first half of fiscal year 2021. Subscription revenue, which generates a higher gross profit margin than hardware and other revenue, contributed 87.3% of total revenue in the first half of fiscal year 2022 compared to 91.5% in the first half of fiscal year 2021. During the first half of fiscal year 2022, hardware and other margins were higher than in the first half of fiscal 2021, mainly due to the geographical sales mix and the distribution channels. Hardware sales via our dealer channel generate lower gross margins. Sales and Marketing Six Months Ended September 30, 2020 2021 (In thousands, except for percentages) Sales and marketing$ 5,193 $ 7,384 As a percentage of revenue 8.9 % 10.4 % 31
-------------------------------------------------------------------------------- Sales and marketing costs increased by$2.2 million , or 42.2%, from the first half of fiscal year 2021 to the first half of fiscal year 2022 against a$12.5 million , or 21.4%, increase in total revenue. The increase in the first half of fiscal year 2022 was primarily as a result of increases of$0.9 million in advertising costs,$1.0 million in employee costs and$0.2 million in bonuses. In the first half of fiscal year 2022, sales and marketing costs represented 10.4% of revenue compared to 8.9% of revenue in the first half of fiscal year 2021. Administration and Other Expenses Six Months Ended September 30, 2020 2021 (In thousands, except for percentages) Administration and other$ 27,122 $ 30,373 As a percentage of revenue 46.4 % 42.8 % Administration and other expenses increased by$3.3 million , or 12.0%, from the first half of fiscal year 2021 to the first half of fiscal year 2022. The increase mainly relates to increases of$2.1 million in salaries and wages,$0.1 million in bonuses,$0.6 million in information & technology costs,$0.9 million in professional fees,$0.3 million in training and recruitment costs and other increases of$0.2 million , none of which were individually significant, offset by$0.9 million saving due to restructuring costs incurred during the first half of fiscal year 2021. Taxation Six Months Ended September 30, 2020 2021 (In thousands, except for percentages) Income tax expense$ 1,066 $ 3,081 Effective tax rate 15.4 % 38.9 % Taxation expense increased by$2.0 million , or 189.0%. In the first half of fiscal year 2022, the income tax expense included a$0.3 million deferred tax charge on aU.S. Dollar intercompany loan between MiX Telematics Limited and MiX Investments. During the first half of fiscal year 2021, the income tax expense included a$1.0 million deferred tax credit on aU.S. Dollar intercompany loan between MiX Telematics Limited and MiX Investments. Ignoring the impact of net foreign exchange losses net of tax, the tax rate which was used in determining non-GAAP net income, was 35.0% in the first half of fiscal year 2022 as compared to 29.0% in the first half of fiscal year 2021. 32 -------------------------------------------------------------------------------- Non-GAAP Financial Information We use certain measures to assess the financial performance of our business. Certain of these measures are termed "non-GAAP measures" because they exclude amounts that are included in, or include amounts that are excluded from, the most directly comparable measure calculated and presented in accordance with GAAP, or are calculated using financial measures that are not calculated in accordance with GAAP. These non-GAAP measures include Adjusted EBITDA, Adjusted EBITDA margin, non-GAAP net income, non-GAAP net income per share and constant currency information. An explanation of the relevance of each of the non-GAAP measures, a reconciliation of the non-GAAP measures to the most directly comparable measures calculated and presented in accordance with GAAP and a discussion of their limitations is set out below. We do not regard these non-GAAP measures as a substitute for, or superior to, the equivalent measures calculated and presented in accordance with GAAP or those calculated using financial measures that are calculated in accordance with GAAP. Adjusted EBITDA and Adjusted EBITDA Margin Adjusted EBITDA and Adjusted EBITDA margin are two of the profit measures reviewed by the CODM. We define Adjusted EBITDA as the income before income taxes, net interest income/(expense), net foreign exchange gains/(losses), depreciation of property and equipment including capitalized customer in-vehicle devices, amortization of intangible assets including capitalized internal-use software development costs and intangible assets identified as part of a business combination, stock-based compensation costs, restructuring costs and profits/(losses) on the disposal or impairments of assets or subsidiaries. We define Adjusted EBITDA margin as Adjusted EBITDA divided by total revenue. We have included Adjusted EBITDA and Adjusted EBITDA margin in this Quarterly Report on Form 10-Q because they are key measures that our management and Board of Directors use to understand and evaluate our 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, we believe that Adjusted EBITDA and Adjusted EBITDA margin provide useful information to investors and others in understanding and evaluating our operating results. A reconciliation of net income (the most directly comparable financial measure presented in accordance with GAAP) to Adjusted EBITDA for the periods shown is presented below. 33 -------------------------------------------------------------------------------- Reconciliation of Net Income to Adjusted
EBITDA for the Period
Three Months Ended September 30, Six Months Ended September 30,
2020 2021 2020 2021
(In thousands)
Net income $ 3,452 1,299 $ 5,874 $ 4,830
Plus: Income tax expense 974 2,489 1,066 3,081
Plus: Net interest expense 70 141 140 219
Plus: Foreign exchange
losses/(gains) 78 (60) 183 16
Plus: Depreciation (1) 2,946 2,650 5,782 5,344
Plus: Amortization (2) 890 1,018 1,682 2,003
Plus: Impairment of long-lived
assets 1 28 1 28
Plus: Stock-based compensation
costs 301 330 594 694
Plus: Net loss/(profit) on sale
of property and equipment 7 (43) 8 (43)
Plus: Restructuring costs 153 51 997 52
Adjusted EBITDA $ 8,872 $ 7,903 $ 16,327 $ 16,224
Adjusted EBITDA margin 28.7 % 21.9 % 27.9 % 22.9 %
(1) Includes depreciation of owned equipment (including in-vehicle devices).
(2) Includes amortization of intangible assets (including intangible assets
identified as part of a business combination).
Our use of Adjusted EBITDA and Adjusted EBITDA margin have limitations as
analytical tools, and should not be considered as performance measures in
isolation from, or as a substitute for, analysis of our results as reported
under GAAP.
Some of these limitations are:
•although depreciation and amortization are non-cash charges, the assets being
depreciated and amortized may have to be replaced in the future, and Adjusted
EBITDA does not reflect cash capital expenditure requirements for such
replacements or for new capital expenditure requirements;
•Adjusted EBITDA does not reflect changes in, or cash requirements for, our
working capital needs;
•Adjusted EBITDA does not consider the potentially dilutive impact of
equity-based compensation;
•Adjusted EBITDA does not reflect tax payments that may represent a reduction in
cash available to us;
•other companies, including companies in our industry, may calculate Adjusted
EBITDA differently, which reduces its usefulness as a comparative measure; and
•certain of the adjustments (such as restructuring costs, impairment of
long-lived assets and others) made in calculating Adjusted EBITDA are those that
management believes are not representative of our underlying operations and,
therefore, are subjective in nature.
Because of these limitations, Adjusted EBITDA and Adjusted EBITDA margin should
be considered alongside other financial performance measures, including income
from operations, net income and our other results.
Basic and Diluted Non-GAAP Net Income Per Share
Non-GAAP net income is defined as net income 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 non-GAAP net income per share in this quarterly report because
it provides a useful measure for period-to-period comparisons of our core
business by excluding net foreign exchange gains/(losses) net of tax and
associated tax consequences from earnings. Accordingly, we believe that non-GAAP
net income per share provides useful information to investors and others in
understanding and evaluating our operating results.
34
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Reconciliation of net income to non-GAAP net income
Three Months Ended Six Months Ended
September 30, September 30,
2020 2021 2020 2021
(In thousands)
Net income for the period $ 3,452 $ 1,299 $ 5,874 $ 4,830
Net foreign exchange
losses/(gains) 78 (60) 183 16
Income tax effect of net foreign
exchange (losses)/gains (305) 1,052 (1,003) 310
Non-GAAP net income $ 3,225 $ 2,291 $ 5,054 $ 5,156
Weighted average number of ordinary shares in issue
Basic 548,008 552,386 547,569 552,124
Diluted 558,951 565,622 558,829 565,322
Constant Currency Information
Constant currency information has been presented in the sections below to
illustrate the impact of changes in currency rates on our results. The constant
currency information has been determined by adjusting the current financial
reporting quarter's results to the prior quarter's average exchange rates,
determined as the average of the monthly exchange rates applicable to the
quarter. The measurement has been performed for each of our currencies,
including the South African Rand and British Pound. The constant currency growth
percentage has been calculated by utilizing the constant currency results
compared to the prior quarter results.
The constant currency information represents non-GAAP information. We believe
this provides a useful basis to measure the performance of our business as it
removes distortion from the effects of foreign currency movements during the
period.
Due to the significant portion of our customers who are invoiced in non-U.S.
Dollar denominated currencies, we also calculate our subscription revenue growth
rate on a constant currency basis, thereby removing the effect of currency
fluctuation on our results of operations.
The following tables provide the constant currency reconciliation to the most
directly comparable GAAP measure for the periods shown:
Subscription Revenue
Three Months Ended Six Months Ended
September 30, September 30,
2020 2021 % Change 2020 2021 % Change
(In thousands, except for percentages)
Subscription revenue as reported $ 27,623 $ 30,885 11.8 % $ 53,498 $ 61,975 15.8 %
Conversion impact of U.S.
Dollar/other currencies - (2,461) (8.9) % - (6,819) (12.7) %
Subscription revenue on a
constant currency basis $ 27,623 $ 28,424
2.9 %$ 53,498 $ 55,156 3.1 % 35
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Hardware and Other Revenue
Three Months Ended Six Months Ended
September 30, September 30,
2020 2021 % Change 2020 2021 % Change
(In thousands, except for percentages)
Hardware and other revenue as
reported $ 3,325 $ 5,189 56.1 % $ 4,947 $ 8,997 81.9 %
Conversion impact of U.S.
Dollar/other currencies - (313) (9.5) % - (739) (15.0) %
Hardware and other revenue on a
constant currency basis $ 3,325 $ 4,876 46.6 % $ 4,947 $ 8,258 66.9 %
Total Revenue
Three Months Ended Six Months Ended
September 30, September 30,
2020 2021 % Change 2020 2021 % Change
(In thousands, except for percentages)
Total revenue as reported $ 30,948 $ 36,074 16.6 % $ 58,445 $ 70,972 21.4 %
Conversion impact of U.S.
Dollar/other currencies - (2,774) (9.0) % - (7,559) (12.9) %
Total revenue on a constant
currency basis $ 30,948 $ 33,300
7.6 %$ 58,445 $ 63,413 8.5 % Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with GAAP. Management believes that there have not been any significant changes in our critical accounting policies and estimates during the first three months of fiscal year 2022 as compared to the items that we disclosed as our critical accounting policies and estimates in the Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year endedMarch 31, 2021 , which we filed with theSecurities and Exchange Commission onJune 14, 2021 . 36 -------------------------------------------------------------------------------- Liquidity and Capital Resources We believe that our cash and borrowings available under our credit facilities will be sufficient to meet our liquidity requirements for the foreseeable future. Liquidity risk is reduced as a result of stable income due to the recurring nature of our income, available cash resources, as well as unutilized facilities which are available.
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