MIXT - MiX Telematics Contends With Slow Sales Cycles As Macro Headwinds Remain
2023-09-28 11:25:15 ET
Summary
- MiX Telematics Limited provides vehicle and mobile asset tracking and management software globally.
- Revenue growth is challenged by lengthening sales cycles and a strong U.S. dollar environment.
- The company is correct to focus on premium fleet prospects, but I remain Neutral [Hold] on MiX Telematics for the near term.
A Quick Take On MiX Telematics
MiX Telematics Limited ( MIXT ) provides vehicle and other mobile asset tracking and management software and systems globally.
I previously wrote about MIXT with a Hold outlook.
Revenue growth remains challenged by lengthening sales cycles and a strong U.S. dollar environment.
While the firm appears correctly focused on premium fleet prospects, I remain Neutral [Hold] on MiX Telematics Limited for the near term.
MiX Telematics Overview And Market
South Africa-based MiX began operations in 1996 to provide fleet and mobile asset tracking and management products and services to companies worldwide.
The firm is headed by founder and CEO Stefan Joselowitz.
The company's main offerings include:
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Fleet Manager.
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Asset Manager.
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Matrix.
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Beam-e.
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AI Dashcams.
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Driver Apps.
The firm seeks new customer relationships through direct sales and marketing efforts and through partner referrals.
According to a 2019 market research report by Allied Market Research, the worldwide market for automotive telematics was an estimated $50.4 billion in 2018 and is forecast to reach nearly $321 billion by 2026.
This represents a forecast CAGR of 26.8% from 2019 to 2026, which is an extremely high rate of growth.
The main drivers for this expected growth are continued technology advances in vendor offerings for organizations and a strong demand for increased transportation efficiencies.
Below is a chart showing the forecasted growth pattern by segment within the larger vehicle telematics market:
Allied Market Research
Major competitive or other industry participants include:
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Verizon Connect.
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Karoooo.
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Webfleet.
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Masternaut.
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Fleet Complete.
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Tracker.
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Netstar.
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Ctrack Inseego.
MiX Telematics' Recent Financial Trends
Total revenue by quarter has inched upward at a slow rate; Operating income by quarter has plateaued in recent quarters:
Seeking Alpha
Gross profit margin by quarter has varied within a narrow range; Selling and G&A expenses as a percentage of total revenue by quarter have trended lower more recently:
Seeking Alpha
(All data in the above charts is GAAP).
In the past 12 months, MIXT's stock price has fallen 28.71% vs. that of Karooooo's ((KARO)) drop of 15.45%:
For balance sheet results, the firm ended the quarter with $27.2 million in cash, equivalents and short-term investments and $14.8 million in short-term borrowings.
Over the trailing twelve months, free cash flow was $9.4 million, during which capital expenditures were $18.2 million. The company paid $900,000 in stock-based compensation in the last four quarters.
Valuation And Other Metrics For MiX Telematics
Below is a table of relevant capitalization and valuation figures for the company:
| Measure [TTM] |
| Amount |
| Enterprise Value / Sales |
| 0.9 |
| Enterprise Value / EBITDA |
| 4.3 |
| Price / Sales |
| 0.9 |
| Revenue Growth Rate |
| 2.0% |
| Net Income Margin |
| 3.7% |
| EBITDA % |
| 21.3% |
| Market Capitalization |
| $141,710,000 |
| Enterprise Value |
| $133,240,000 |
| Operating Cash Flow |
| $27,610,000 |
| Earnings Per Share (Fully Diluted) |
| $0.01 |
(Source - Seeking Alpha).
As a reference, a relevant partial public comparable would be Karooooo:
| Metric [TTM] |
| Karooooo |
| MiX Telematics |
| Variance |
| Enterprise Value / Sales |
| 3.1 |
| 0.9 |
| -70.6% |
| Enterprise Value / EBITDA |
| 8.5 |
| 4.3 |
| -49.6% |
| Revenue Growth Rate |
| 26.7% |
| 2.0% |
| -92.6% |
| Net Income Margin |
| 16.2% |
| 3.7% |
| -77.0% |
| Operating Cash Flow |
| $58,200,000 |
| $27,610,000 |
| -52.6% |
(Source - Seeking Alpha).
MIXT's most recent unadjusted Rule of 40 calculation was 23.3% as of FQ1 2024's results, so the firm has improved sequentially, per the table below:
| Rule of 40 Performance (Unadjusted) |
| FQ4 2023 |
| FQ1 2024 |
| Revenue Growth % |
| 1.2% |
| 2.0% |
| EBITDA % |
| 18.7% |
| 21.3% |
| Total |
| 19.9% |
| 23.3% |
(Source - Seeking Alpha).
Sentiment Analysis
The chart below shows the frequency of various keywords in the company's most recent management earnings conference call with analysts:
Seeking Alpha
The firm and its clients are dealing with a macroeconomic slowdown in various major markets, resulting in slower sales cycles and reduced revenue growth, at least in the near term.
Analysts asked about macro conditions, subscriber growth and monetization of its MiX Vision AI technology.
Management said that it has seen improving conditions in Europe and the U.S., although it is seeing a churn headwind in the U.S. from its FSM acquisition from Trimble.
Subscriber growth was from its asset tracking and light fleet in the Africa region, but leadership sees the real growth potential from premium fleet prospects, with significantly higher ARPU opportunities there.
As to monetization of its AI imaging offerings, the company is upselling cameras into its FSM acquisition customer base and management believes there is a "long runway of opportunity" there.
Commentary On MiX Telematics
In its last earnings call (Source - Seeking Alpha ), covering FQ1 2024's results, management's prepared remarks highlighted adding 40,000 net new subscribers during the quarter and increased ARR (Annual Recurring Revenue) by 15% on a constant currency basis.
Subscription revenue now comprises 89% of total revenue.
The team is "seeing growing global demand for our MiX Vision AI camera solutions from both new and existing customers."
However, MIXT continues to experience lengthening sales cycles for premium fleet customers and prospects.
Total revenue for FQ1 2024 increased by only 3.7% year-over-year, while gross profit margin rose by 1.6%.
Selling and G&A expenses as a percentage of revenue decreased by 3.6% YoY, and operating income grew by an impressive 83.3% to $4.4 million for the quarter.
The company's financial position is reasonably strong, with ample liquidity, some debt and positive free cash flow.
MIXT's Rule of 40 performance has been moderate, growing sequentially but in need of further improvement.
Looking ahead, consensus revenue for fiscal 2024 is expected to grow at 2.0%.
If achieved, this would represent an increase in revenue growth rate versus fiscal 2023's growth rate of 1.26% over fiscal 2022.
In the past twelve months, the firm's EV/EBITDA valuation multiple has fallen by 35%, as the chart from Seeking Alpha shows below:
A potential upside catalyst to the stock could include greater success with its focus on premium fleet sales.
However, the company continues to experience slowing sales cycles, delaying revenue growth prospects.
Also, most of its revenue comes from currencies other than the US Dollar. With the dollar exhibiting continued strength, this pressures the firm's earnings potential.
I remain Neutral [Hold] on MiX Telematics Limited for the near term.
For further details see:
MiX Telematics Contends With Slow Sales Cycles As Macro Headwinds Remain