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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
—————————
FORM 10-Q
—————————
(Mark One)
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2021

or

    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period ____ to ____

Commission File Number: 001-36027

MIX TELEMATICS LIMITED
(Exact name of Registrant as specified in its charter)
Republic of South AfricaNot Applicable
(State or other jurisdiction of incorporation or organization)(IRS Employer Identification No.)
750 Park of Commerce Blvd
Suite 100 Boca Raton
Florida33487
(Address of principal executive offices)(Zip Code)
+1(877)585-1088
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
American Depositary Shares, each representing
25 Ordinary Shares, no par value
MIXTNew York Stock Exchange
Ordinary Shares, no par valueNew York Stock Exchange (for listing purposes only)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [X] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of July 23, 2021, the registrant had 606,079,803 ordinary shares, of no par value, outstanding.



TABLE OF CONTENTS
 
Page
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets (unaudited)
Condensed Consolidated Statements of Income (unaudited)
Condensed Consolidated Statements of Comprehensive Income (unaudited)
Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited)
Condensed Consolidated Statements of Cash Flows (unaudited)
Notes to Condensed Consolidated Financial Statements (unaudited)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 6. Exhibits
Signatures
 


2


PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
MIX TELEMATICS LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
March 31,
2021
June 30,
2021
ASSETS
Current assets:
Cash and cash equivalents$45,489 $46,127 
Restricted cash8541,054
Accounts receivables, net of allowances for doubtful accounts of $5.6 million and $6.3 million, respectively
19,26520,381
Inventory, net3,109 3,541
Prepaid expenses and other current assets8,5099,826
Total current assets77,22680,929
Property and equipment, net23,46324,531
Goodwill43,93845,284
Intangible assets, net18,30319,422
Deferred tax assets3,782 4,607
Other assets4,434 4,556
Total assets$171,146 $179,329 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term debt$1,674 $2,998 
Accounts payables6,560 5,111
Accrued expenses and other liabilities17,33019,169
Deferred revenue5,7885,749
Income taxes payable1,345 2,940 
Total current liabilities32,69735,967
Deferred tax liabilities9,1878,610
Long-term accrued expenses and other liabilities5,8635,857
Total liabilities47,74750,434
Stockholders’ equity:
MiX Telematics Limited stockholders’ equity
Preference shares: 100 million shares authorized but not issued
  
Ordinary shares: 605.6 million and 606.1 million no-par value shares issued and outstanding as of March 31, 2021 and June 30, 2021, respectively
67,401 67,401 
Less treasury stock at cost: 53.8 million shares as of March 31, 2021 and June 30, 2021
(17,315)(17,315)
Retained earnings76,710 78,679 
Accumulated other comprehensive income1,924 5,087 
Additional paid-in capital(5,326)(4,962)
Total MiX Telematics Limited stockholders’ equity123,394 128,890 
Non-controlling interest5 5 
Total stockholders’ equity123,399 128,895 
Total liabilities and stockholders’ equity$171,146 $179,329 

The accompanying notes are an integral part of these condensed consolidated financial statements.
3



MIX TELEMATICS LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Three Months Ended June 30,
20202021
Revenue
Subscription$25,875 $31,090 
Hardware and other1,622 3,808 
Total revenue27,497 34,898 
Cost of revenue
Subscription7,349 9,127 
Hardware and other1,229 2,916 
Total cost of revenue8,578 12,043 
Gross profit18,919 22,855 
Operating expenses
Sales and marketing2,746 3,512 
Administration and other13,491 15,007 
Total operating expenses16,237 18,519 
Income from operations2,682 4,336 
Other expense98 135 
Net interest expense70 78 
Income before income tax expense2,514 4,123 
Income tax expense92 592 
Net income2,422 3,531 
Less: Net income attributable to non-controlling interest  
Net income attributable to MiX Telematics Limited$2,422 $3,531 
Net income per ordinary share
Basic$0.004 $0.01 
Diluted$0.004 $0.01 
Net income per American Depository Share
Basic$0.11 $0.16 
Diluted$0.11 $0.16 
Ordinary shares
Weighted average547,124 551,860 
Diluted weighted average558,702 565,020 
American Depository Shares
Weighted average21,885 22,074 
Diluted weighted average22,348 22,601 


The accompanying notes are an integral part of these condensed consolidated financial statements.
4



MIX TELEMATICS LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
Three Months Ended June 30,
20202021
Net income$2,422 $3,531 
Other comprehensive income
Foreign currency translation adjustments, net of tax2,084 3,163 
Total comprehensive income4,506 6,694 
Less: Total comprehensive income attributable to non-controlling interest  
Total comprehensive income attributable to MiX Telematics Limited$4,506 $6,694 

The accompanying notes are an integral part of these condensed consolidated financial statements.






































5



MIX TELEMATICS LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited)
Three Months Ended June 30, 2020 and 2021
Common StockTreasury StockAccumulated Other Comprehensive Income/(Loss)Additional Paid-In CapitalRetained EarningsTotal MiX Telematics Limited Stockholders’ EquityNon-Controlling InterestTotal Stockholder’s Equity
SharesAmount
Balance as of April 1, 2020600,934$66,522 $(17,315)$(11,070)$(6,599)$67,482 $99,020 $5 $99,025 
Net income— — — — — 2,422 2,422 — 2,422 
Other comprehensive loss— — — 2,084 — — 2,084 — 2,084 
Issuance of common stock in relation to stock options and SARs exercised85 — — — — — — — — 
Stock-based compensation— — — — 293 — 293 — 293 
Dividends of 4 South African cents (0.2 U.S. cents) per ordinary share declared
— — — — — (1,217)(1,217)— (1,217)
Balance as of June 30, 2020601,019 $66,522 $(17,315)$(8,986)$(6,306)$68,687 $102,602 $5 $102,607 
Balance as of April 1, 2021605,579$67,401 $(17,315)$1,924 $(5,326)$76,710 $123,394 $5 $123,399 
Net income— — — — — 3,531 3,531 — 3,531 
Other comprehensive income— — — 3,163 — — 3,163 — 3,163 
Issuance of common stock in relation to SARs exercised501 — — — — — — — — 
Stock-based compensation— — — — 364 — 364 — 364 
Dividends of 4 South African cents (0.3 U.S. cents) per ordinary share declared
— — — — — (1,562)(1,562)— (1,562)
Balance as of June 30, 2021606,080 $67,401 $(17,315)$5,087 $(4,962)$78,679 $128,890 $5 $128,895 


The accompanying notes are an integral part of these condensed consolidated financial statements.





6



MIX TELEMATICS LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended June 30,
20202021
Cash flows from operating activities
Cash generated from operations$9,189 $5,419 
Interest received112 123 
Interest paid(83)(81)
Income tax received/(paid)139 (735)
Net cash provided by operating activities9,357 4,726 
Cash flows from investing activities
Acquisition of property and equipment – in-vehicle devices
(992)(2,946)
Acquisition of property and equipment – other
(84)(64)
Proceeds from the sale of property and equipment 12 
Acquisition of intangible assets(1,044)(1,342)
Net cash used in investing activities (2,120)(4,340)
Cash flows from financing activities
Cash paid on dividends to MiX Telematics Limited stockholders(1,216)(1,549)
Movement in short-term debt147 1,290 
Net cash used in financing activities(1,069)(259)
Net increase in cash and cash equivalents, and restricted cash6,168 127 
Cash and cash equivalents, and restricted cash at beginning of the period18,652 46,343 
Effect of exchange rate changes on cash and cash equivalents, and restricted cash450 711 
Cash and cash equivalents, and restricted cash at end of the period$25,270 $47,181 

The accompanying notes are an integral part of these condensed consolidated financial statements.



7


MIX TELEMATICS LIMITED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. Organization and Summary of Significant Accounting Policies

Nature of the Business

MiX Telematics Limited (the “Company”) is a global provider of connected fleet and mobile asset solutions delivered as Software-as-a-Service (“SaaS”). The Company’s products and services provide enterprise fleets, small fleets and consumers with solutions for efficiency, safety, compliance and security.

The Company is incorporated and domiciled in South Africa, with the principal executive office in Boca Raton, Florida.

Basis of preparation and consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and reflect, in the opinion of management, all adjustments, consisting of normal recurring adjustments and accruals, which are necessary for a fair statement of the results of the interim periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). The unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated on consolidation.

These unaudited condensed consolidated financial statements should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended March 31, 2021 filed with the SEC on June 14, 2021.

Use of estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires the use of estimates and assumptions that affect the amounts reported and disclosed. Significant estimates include, but are not limited to, allowances for doubtful accounts, the assessment of expected cash flows used in evaluating goodwill and long-lived assets for impairment, the amortization period for deferred commissions, the determination of useful lives of the Company’s customer relationships, contingencies, the classification of devices and other hardware as in-vehicle devices (equipment) versus inventory based on the future expectation of the different types of customer contracts, income and deferred taxes, unrecognized tax benefits and valuation allowances on deferred tax assets. Actual results could differ from those estimates, and such differences may be material to the consolidated financial statements.

As of June 30, 2021, the global outbreak of COVID-19 has had and, we believe, will continue to have an adverse impact on global economies and financial markets. We have taken into account the impact of COVID-19 on expected credit losses to the extent possible. Our expected credit losses have increased as a result. 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.

Summary of significant accounting policies

There have been no changes to the Company’s significant accounting policies disclosed in the Company’s Annual Report on Form 10-K for the year ended March 31, 2021, filed with the SEC on June 14, 2021, that have had a material impact on the Company’s Condensed Consolidated Financial Statements and related notes.


2. Revenue from contracts with customers

The Company provides fleet and mobile asset management solutions. The principal revenue streams are (1) Subscription and (2) Hardware and other. Subscription revenue is recognized over time and hardware and other revenue is recognized at a point-in-time.

To provide services to customers, a device which collects and transmits information collected from the vehicle or other asset is required. Fleet customers may also obtain other items of hardware, virtually all of which are functionally-dependent on the device. Some customers obtain control of the device and other hardware (where legal title transfers to the customer); while other customers do not (where legal title remains with the Company). A contract arises on the acceptance of a customer’s purchase order, which is typically executed in writing.

8


Contract liabilities
When customers are invoiced in advance for subscription services that will be provided over periods of more than one month, or pay in advance of service periods of more than one month, deferred revenue liabilities are recorded. Deferred revenue as of March 31, 2021 and June 30, 2021 was $5.8 million and $5.7 million, respectively. During the quarter ended June 30, 2020 and June 30, 2021, revenue of $1.1 million and $1.2 million, respectively, was recognized which was included in the deferred revenue balances at the beginning of each quarter.

Contract acquisition costs
Commissions payable to sales employees and external third parties which are incurred to acquire contracts are capitalized and amortized, unless the amortization period is 12 months or less, in which instance they are expensed immediately. Deferred commissions were $3.7 million and $3.8 million as of March 31, 2021 and June 30, 2021, respectively, and are included in Other assets on the Condensed Consolidated Balance Sheets.

The following is a summary of the amortization expense recognized (in thousands):
Three Months Ended June 30,
20202021
Amortization recognized during the period:$(692)$(910)
Cost of revenue (external commissions)
(484)(675)
Sales and marketing (internal commissions)
(208)(235)

3. Credit risk related to accounts receivable

The movements in the allowance for doubtful accounts are as follows (in thousands):
Three Months Ended June 30,
20202021
Balance at April 1$3,602 $5,575 
Bad debt provision855 571 
Write-offs, net of recoveries
(8)(16)
Foreign currency translation differences132 194 
Balance at June 30$4,581 $6,324 

Overview of the Company’s exposure to credit risk from customers

The maximum exposure to credit risk at the reporting date is the carrying value of each receivable and loan to external parties, net of impairment losses where relevant. As of March 31, 2021 and June 30, 2021, the Company had no significant concentration of credit risk, due to its spread of customers across various operations and geographical locations.

The Company does not hold any collateral as security.

Net accounts receivable as of March 31, 2021 and June 30, 2021 of $2.3 million and $3.2 million, respectively, are pledged as security for the Company’s overdraft facilities.













9


4. Property and equipment

Property and equipment comprises owned and right of use assets. The Company leases many assets including property, vehicles, machinery and IT equipment.

The cost and accumulated depreciation of owned equipment are as follows (in thousands):

March 31,
2021
June 30,
2021
Owned equipment
Equipment, vehicles and other$6,877 $7,200 
In-vehicle devices53,448 56,239 
Less: accumulated depreciation and impairments(42,955)(44,888)
Owned equipment, net$17,370 $18,551 

Total depreciation expense related to owned equipment during the three months ended June 30, 2020 and 2021 was $2.8 million and $2.7 million, respectively. Depreciation expense related to in-vehicle devices is included in subscription cost of revenue.

The cost and accumulated depreciation of right-of-use property and equipment are as follows (in thousands):

March 31,
2021
June 30,
2021
Right-of-use assets
Property$8,348 $8,200 
Equipment, vehicles and other226 227 
Less: accumulated depreciation(2,481)(2,447)
Right of use property and equipment, net$6,093 $5,980 


5. Intangible assets

Intangible assets comprise the following (in thousands):

As of March 31, 2021As of June 30, 2021
Useful life (in years)Gross Carrying amountAccumulated amortizationNetGross Carrying amountAccumulated amortizationNet
Patents and trademarks
3 - 20
$115 $(82)$33 $90 $(58)$32 
Customer relationships
2 - 15
2,687 (2,271)416 2,667 (2,280)387 
Internal-use software, technology and other
1 - 18
35,618 (17,764)17,854 38,330 (19,327)19,003 
Total$38,420 $(20,117)$18,303 $41,087 $(21,665)$19,422 


For the three months ended June 30, 2020 and 2021, amortization expense of $0.8 million, and $1.0 million, respectively, has been recognized.









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6. Accrued expenses and other liabilities

Accrued expenses and other liabilities comprise the following (in thousands):
March 31,
2021
June 30,
2021
Current:
Product warranties $605 $607 
Maintenance609 621 
Employee-related accruals6,166 6,512 
Lease liabilities1,395 1,353 
Accrued commissions2,199 2,650 
Other accruals6,356 7,426 
Total current$17,330 $19,169 
Non-current:
Lease liabilities$4,895 $4,848 
Other liabilities968 1,009 
Total non-current$5,863 $5,857 

Product warranties
The Company provides warranties on certain products and undertakes to repair or replace items that fail to perform satisfactorily. Management estimates the related provision for future warranty claims based on historical warranty claim information, the product lifetime, as well as recent trends that might suggest that past cost information may differ from future claims. The table below provides details of the movement in the accrual (in thousands):

As of June 30,
20202021
Product warranties
Opening balance$616 $612 
Warranty expense26 56 
Utilized(31)(61)
Foreign currency translation difference22 18 
Balance as of June 30$633 $625 
Non-current portion (included in other liabilities)$11 $18 
Current portion$622 $607 















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7. Development expenditure

Development expenditure comprises the following (in thousands):
Three Months Ended June,
20202021
Costs capitalized (1)
$736 $971 
Costs expensed (2)
994 1,437 
Total costs incurred$1,730 $2,408 
Percentage capitalized42.5 %40.3 %
(1) Costs capitalized relate only to the development of internal-use software. Product development costs are expensed when incurred.
(2) Costs expensed are included in Administration and other expenses in the Condensed Consolidated Statement of Income.


8. Income taxes

Our income tax provision reflects our estimate of the effective tax rates expected to be applicable for the full fiscal years, adjusted for any discrete events which are recorded in the period they occur. The estimates are re-evaluated each quarter based on our estimated tax expense for the full fiscal year.

Our effective tax rate was 3.7% for the three months ended June 30, 2020 compared to 14.4% for the three months ended June 30, 2021. Ignoring the impact of foreign exchange gains and losses net of tax, the effective tax rate for the three months ended June 30, 2020 and 2021, was 30.2% and 31.8%, respectively.


9. Earnings per share

Basic
Basic earnings per share is calculated by dividing the income attributable to ordinary shareholders of the parent by the weighted average number of ordinary shares in issue during the period.

The net income and weighted average number of shares used in the calculation of basic and diluted earnings per share are as follows (in thousands, except per share data):
Three Months Ended June 30,
20202021
Numerator (basic)
Net income attributable to ordinary shareholders$2,422 $3,531 
Denominator (basic)
Weighted-average number of ordinary shares in issue547,124 551,860 
Basic earnings per share $0.004 $0.01 
American Depository Shares*:
Net income attributable to ordinary shareholders$2,422 $3,531 
Weighted-average number of American Depository Shares in issue21,885 22,074 
Basic earnings per American Depository share$0.11 $0.16 
*One American Depository Share is the equivalent of 25 ordinary shares.






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Diluted
Diluted earnings per share is calculated by dividing the diluted income attributable to ordinary shareholders by the diluted weighted average number of ordinary shares in issue during the period. Stock options, retention shares and stock appreciation rights granted to directors and employees are considered to be potential ordinary shares. They have been included in the determination of diluted earnings per share if the required target share price or annual shareholder return hurdles (as applicable) would have been met based on the performance up to the reporting date, and to the extent to which they are dilutive.
Three Months Ended June 30,
20202021
Numerator (diluted)
Diluted net income attributable to ordinary shareholders$2,422 $3,531 
Denominator (diluted)
Weighted-average number of ordinary shares in issue547,124 551,860 
Adjusted for:
– potentially dilutive effect of stock appreciation rights9,696 11,840 
– potentially dilutive effect of restricted share units637 1,320 
– potentially dilutive effect of stock options1,245  
Diluted-weighted average number of ordinary shares in issue558,702 565,020 
Diluted earnings per share$0.004 $0.01 
American Depository Shares*:
Diluted net income attributable to ordinary shareholders$2,422 $3,531 
Diluted weighted-average number of American Depository Shares in issue22,348 22,601 
Diluted earnings per American Depository share$0.11 $0.16 
*One American Depository Share is the equivalent of 25 ordinary shares.


10. Segment information

The Company has 6 reportable segments, which are based on the geographical location of the 5 Regional Sales Offices (“RSOs”) and also includes the 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 for the Company. 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-lived assets and subsidiaries. Product development costs are capitalized and amortized and this amortization is excluded from Segment Adjusted EBITDA.

Segment assets are not disclosed because such information is not reviewed by the CODM.










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The following table provides revenue and Segment Adjusted EBITDA (in thousands):

Three Months Ended June 30, 2020
Subscription
revenue (1)
Hardware
and other
revenue (2)
Total revenueSegment Adjusted EBITDA
Regional Sales Offices
Africa$13,923 $601 $14,524 $7,245 
Europe2,850 134 2,984 1,302 
Americas4,175 155 4,330 1,408 
Middle East and Australasia3,881 709 4,590 1,918 
Brazil1,031 23 1,054 410 
Total Regional Sales Offices25,860 1,622 27,482 12,283 
Central Services Organization15  15 (1,863)
Total Segment Results$25,875 $1,622 $27,497 $10,420 

1.Subscription revenue is recognized over time.
2.Hardware and other revenue is recognized at a point in time.

Three Months Ended June 30, 2021
Subscription
revenue (1)
Hardware
and other
revenue (2)
Total revenueSegment Adjusted EBITDA
Regional Sales Offices
Africa$18,711 $1,215 $19,926 $8,904 
Europe3,373 1,261 4,634 1,751 
Americas3,623 195 3,818 539 
Middle East and Australasia4,349 1,105 5,454 2,543 
Brazil1,020 32 1,052 317 
Total Regional Sales Offices31,076 3,808 34,884 14,054 
Central Services Organization14  14 (2,587)
Total Segment Results$31,090 $3,808 $34,898 $11,467 

1.Subscription revenue is recognized over time.
2.Hardware and other revenue is recognized at a point in time.














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A reconciliation of the segment results to income before income tax expense is disclosed below (in thousands):

Three Months Ended June 30,
20202021
Segment Adjusted EBITDA$10,420 $11,467 
Corporate and consolidation entries(2,330)(2,376)
Operating lease costs (1)
(392)(407)
Product development costs (2)
(243)(363)
Depreciation and amortization(3,628)(3,679)
Stock-based compensation costs(293)(364)
Increase in restructuring costs (3)
(844)(1)
Net loss on sale of property and equipment(1) 
Net foreign exchange losses(105)(76)
Net interest expense(70)(78)
Income before income tax expense for the period$2,514 $4,123 
1.For the purposes of calculating Segment Adjusted EBITDA, operating lease expenses are excluded from the Segment Adjusted EBITDA. Therefore, in order to reconcile Segment Adjusted EBITDA to net income before taxes, the total lease expense in respect of operating leases needs to be deducted.
2.For segment reporting purposes, product development costs, which do not meet the capitalization requirements under ASC 730 Research and Development or under ASC 985 Software, are capitalized and amortized. The amortization is excluded from Segment Adjusted EBITDA. In order to reconcile Segment Adjusted EBITDA to net income before taxes, product development costs capitalized for segment reporting purposes need to be deducted.
3.For the first quarter of fiscal 2021, $0.6 million and $0.2 million of the restructuring costs related to the CSO and Africa reporting segments, respectively.

No single customer accounted for 10% or more of the Company’s total revenue for the three months ended June 30, 2020 and 2021. No single customer accounted for 10% or more of the Company’s accounts receivable as of March 31, 2021 or June 30, 2021.


11. Stock-based compensation plan

The Company has issued equity-classified share incentives under the MiX Telematics Long-Term Incentive Plan (“LTIP”) to directors and certain key employees within the Company.

The LTIP provides for three types of grants to be issued, namely performance shares, restricted share units (“RSUs”) and stock appreciation rights (“SARs”).

As of June 30, 2021, there were 47,090,000 shares reserved for future issuance under the LTIP.

The total stock-based compensation expense recognized during the three months ended June 30, 2020 and 2021 was $0.3 million and $0.4 million, respectively.











15


Stock appreciation rights granted under the LTIP

The following table summarizes the activities for the outstanding SARs:
Number of SARsWeighted-
Average
Exercise Price in U.S. Cents*
Weighted Average Contractual Remaining Term (years)Aggregate Intrinsic Values (in thousands)
Outstanding as of April 1, 202140,567,917 38
Exercised(818,750)22
Forfeited(50,000)41
Outstanding as of June 30, 202139,699,167 393.08
Vested and expected to vest as of June 30, 202138,436,355 382.277,377
Vested as of June 30, 202114,442,917231.224,866

As of June 30, 2021, there was $1.8 million of unrecognized compensation cost related to unvested SARs. This amount is expected to be recognized over a weighted-average period of 3.5 years.

*U.S. currency amounts are based on a ZAR:USD exchange rate of R14.318 as of June 30, 2021.

Restricted share units granted under the LTIP

2 million RSUs were outstanding and unvested as of April 1, 2021, and remain as such as of June 30, 2021. Management estimates forfeiture to be approximately 5%. The unrecognized compensation cost related to unvested RSUs as of June 30, 2021 was $0.4 million, which will be recognized over a weighted average period of 1.75 years, which is the same period as the weighted average remaining contractual term.


12. Debt

As of March 31, 2021 and June 30, 2021, debt comprised bank overdrafts of $1.7 million and $3.0 million, respectively. Net accounts receivable as of March 31, 2021 and June 30, 2021 of $2.3 million and $3.2 million, respectively, are pledged as security for the Company’s overdraft facilities.

Details of undrawn facilities are shown below:
Interest rateMarch 31,
2021
June 30,
2021
Undrawn borrowing facilities at floating rates include:
– Standard Bank Limited:
Overdraft
SA Prime* less 1.2%
$2,616 $1,472 
Vehicle and asset finance
SA Prime* less 1.2%
570 594 
Working capital facility
SA Prime* less 0.25%
1,676 1,746 
– Nedbank Limited overdraft
SA Prime* less 2%
670 698 
$5,532 $4,510 
*South African prime interest rate

As of March 31, 2021 and June 30, 2021, the South African prime interest rate was 7.0%. The Standard Bank Limited and Nedbank Limited facilities have no fixed renewal date and are repayable on demand. The facility from Nedbank Limited is unsecured.


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13. Contingencies

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, a subsidiary of the Company, 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 as of March 31, 2021 and June 30, 2021 was $2.0 million. No loss is considered probable under this arrangement.

Competition Commission of South Africa matter

On April 15, 2019 the Competition Commission of South Africa (“Commission”) referred a matter to the Competition Tribunal of South Africa (“Tribunal”). The Commission contends that the Company and a number of its channel partners have engaged in market division. Should the Tribunal rule against MiX Telematics, the Company may be liable to an administrative penalty in terms of the Competition Act, No. 89 of 1998. The Company had cooperated fully with the Commission during its preliminary investigation. We cannot predict the timing of a resolution or the ultimate outcome of the matter, however, the Company and its external legal advisers continue to believe that we have consistently adhered to all applicable laws and regulations and that the referral from the Commission is without merit. As of June 30, 2021, we have not made any provisions for this matter as we do not believe that an outflow of economic resources is probable.


14. Subsequent events

Other than the item below, the directors are not aware of any matter material or otherwise arising since June 30, 2021 and up to the date of this report, not otherwise dealt with herein.

Dividend declared
The Board of Directors declared, in respect of the three months ended June 30, 2021, a dividend of 4 South African cents per ordinary share and 1 South African Rand per ADS, which will be paid on September 2, 2021 to shareholders on record as of the close of business on August 20, 2021.
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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including without limitation, statements regarding our position to execute on our growth strategy, and our ability to expand our leadership position. These forward-looking statements include, but are not limited to, Company’s beliefs, plans, goals, objectives, expectations, assumptions, estimates, intentions, future performance, other statements that are not historical facts and statements identified by words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “seeks”, “estimates” or words of similar meaning. 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. Although we believe that our plans, intentions, expectations, strategies and prospects as reflected in, or suggested by, these forward-looking statements are reasonable, we can give no assurance that the plans, intentions, expectations or strategies will be attained or achieved.

Furthermore, actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of known and unknown risks and uncertainties, some of which are beyond our control.

We believe that these risks and uncertainties include, but are not limited to, those described in Part II, Item 1A. “Risk Factors”. These risk factors should not be considered as an exhaustive list and should be read in conjunction with the other cautionary statements and information in this report. These risk factors may also be intensified as a result of circumstances outside of control such as the events related to the COVID-19 pandemic.

We assume no obligation to update any forward-looking statements contained in this Quarterly Report on Form 10-Q and expressly disclaim any obligation to do so, whether as a result of new information, future events or otherwise, except as required by law.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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, 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).

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
In December 2019, a novel strain of coronavirus was reported in China (“COVID-19”). In January 2020, the World Health Organization (“WHO”) declared this outbreak a Public Health Emergency of international concern and, subsequently, it was declared a pandemic in March 2020. The outbreak continued to spread globally, affecting global economic activity and financial markets. 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, except for our staff working in our monitoring centers, which were classified as an essential service. We have implemented appropriate safeguards for these centers. In addition, we have 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.
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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 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. During the first three months of fiscal year 2022, we experienced a growth of 8,800 subscribers as a result of the easing of COVID-19 pandemic restrictions in certain jurisdictions in which we operate. The net growth in subscribers increased our reported subscription revenues.
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 June 30, 2020 and 2021, subscription revenue represented 94.1% and 89.1% 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 June 30,
 20202021
Subscribers787,750 753,474 

Basis of Presentation and Key Components of Our Results of Operations
In the first 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
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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-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.
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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 ended June 30, 2020 and 2021 our effective tax rates were 3.7% and 14.4% 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.



















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Results of Operations
The following table sets forth certain consolidated statement of income data:
Three Months Ended
June 30,
20202021
(In thousands)
Total revenue$27,497 $34,898 
Total cost of revenue8,578 12,043 
Gross profit18,919 22,855 
Sales and marketing2,746 3,512 
Administration and other13,491 15,007 
Income from operations2,682 4,336 
Other expense98 135 
Net interest expense70 78 
Income tax expense92 592 
Net income for the period2,422 3,531 
Net income attributable to MiX Telematics Limited stockholders2,422 3,531 
Net income attributable to non-controlling interest—  
Net income for the period$2,422 $3,531 
The following table sets forth, as a percentage of revenue, consolidated statement of income data:
Three Months Ended
June 30,
20202021
(Percentage)
Total revenue100.0 %100.0 %
Total cost of revenue31.2 34.5 
Gross profit68.8 65.5 
Sales and marketing10.0 10.1 
Administration and other49.1 43.0 
Income from operations9.8 12.4 
Other expense0.4 0.4 
Net interest expense0.3 0.2 
Income tax expense0.3 1.7 
Net income for the period8.8 10.1 
Net income attributable to MiX Telematics Limited stockholders8.8 10.1 
Net income attributable to non-controlling interest—  
Net income for the period8.8 10.1 




23


Results of Operations for the Three Months Ended June 30, 2020 and 2021

Revenue
Three Months Ended June 30,
20202021% Change% Change at constant currency
(In thousands, except for percentages)
Subscription revenue$25,875 $31,090 20.2 %3.5 %
Hardware and other revenue1,622 3,808 134.8 %106.9 %
$27,497 $34,898 26.9 %9.6 %

Our total revenue increased by $7.4 million or 26.9%, from the first quarter of fiscal year 2021. The principal factors affecting our revenue growth included:
Subscription revenues increased by 20.2% to $31.1 million, compared to $25.9 million for the first quarter of fiscal year 2021. Subscription revenues represented 89.1% of total revenues during the first quarter of fiscal year 2022. Subscription revenues increased by 3.5% on a constant currency basis, year over year. From March 31, 2021 to June 30, 2021, our subscriber base grew by a net 8,800 subscribers to 753,400 subscribers at June 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 quarter of fiscal year 2021, the South African Rand strengthened by 21% against the U.S. Dollar. The Rand/U.S. Dollar exchange rate averaged R14.14 in the current quarter compared to an average of R17.97 during the first quarter of fiscal year 2021. The impact of translating foreign currencies to U.S. Dollars at the average exchange rates during the first quarter of fiscal year 2022 led to a 16.7% increase in reported U.S. Dollar subscription revenues.

Hardware and other revenue increased by $2.2 million, or 134.8%, from the first quarter of fiscal year 2021.

The impact of translating foreign currencies to U.S. Dollars at the average exchange rates during the first quarter of fiscal year 2022 led to a 17.3% increase in reported U.S. Dollar revenues.















24


A breakdown of third-party revenue by segment is shown in the table below:
 Three Months Ended June 30,
 202020212020202120202021
 (In thousands)
Total RevenueSubscription RevenueHardware and Other Revenue
Africa$14,524 $19,926 $13,923 $18,711 $601 $1,215 
Americas4,330 3,818 4,175 3,623 155 195 
Europe2,984 4,634 2,850 3,373