MiX Telematics Ltd - Quarter Report: 2021 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

—————————

FORM 10-Q

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(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

☐ 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 Africa

Not Applicable

(State or other jurisdiction of incorporation or organization)

(IRS Employer Identification No.)

750 Park of Commerce Blvd

Suite 100

Boca Raton

Florida

33487

(Address of principal executive offices)

(Zip Code)

(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 class

Trading Symbol(s)

Name of each exchange on which registered

American Depositary Shares, each representing
25 Ordinary Shares, no par value

MIXT

New York Stock Exchange

Ordinary Shares, no par value

New 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 October 22, 2021, the registrant had 606,434,616 ordinary shares, of no par value, outstanding.

TABLE OF CONTENTS


						Page

Part I - FINANCIAL INFORMATION						3
Item 1. Financial Statements						3
Condensed Consolidated Balance Sheets (unaudited)						3
Condensed Consolidated Statements of Income (unaudited)						4
Condensed Consolidated Statements of Comprehensive Income (unaudited)						5
Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited)						6
Condensed Consolidated Statements of Cash Flows (unaudited)						8
Notes to Condensed Consolidated Financial Statements (unaudited)						9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations						22
Item 3. Quantitative and Qualitative Disclosures About Market Risk						40
Item 4. Controls and Procedures						41
Part II - OTHER INFORMATION
Item 1. Legal Proceedings						42
Item 1A. Risk Factors						43
Item 6. Exhibits						45
Signatures						46

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		September 30, 2021

ASSETS
Current assets:
Cash and cash equivalents	$	45,489	$	39,831
Restricted cash	854		883
Accounts receivables, net of allowances for doubtful accounts of $5.6 million and $6.0 million, respectively	19,265		21,897
Inventory, net	3,109		3,111
Prepaid expenses and other current assets	8,509		8,677
Total current assets	77,226		74,399

Property and equipment, net	23,463		27,769
Goodwill	43,938		43,344
Intangible assets, net	18,303		18,849
Deferred tax assets	3,782		4,506
Other assets	4,434		4,344

Total assets	$	171,146	$	173,211
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term debt	$	1,674	$	2,139
Accounts payables	6,560		6,064
Accrued expenses and other liabilities	17,330		18,957
Deferred revenue	5,788		5,591
Income taxes payable	1,345		1,541
Total current liabilities	32,697		34,292

Deferred tax liabilities	9,187		9,170
Long-term accrued expenses and other liabilities	5,863		5,479



Total liabilities	47,747		48,941

Stockholders’ equity:
MiX Telematics Limited stockholders’ equity
Preference shares: 100 million shares authorized but not issued	—		—
Ordinary shares: 605.6 million and 606.4 million no-par value shares issued and outstanding as of March 31, 2021 and September 30, 2021, respectively	67,401		67,401

Less treasury stock at cost: 53.8 million shares as of March 31, 2021 and September 30, 2021	(17,315)		(17,315)
Retained earnings	76,710		78,468
Accumulated other comprehensive income	1,924		343

Additional paid-in capital	(5,326)		(4,632)
Total MiX Telematics Limited stockholders’ equity	123,394		124,265
Non-controlling interest	5		5
Total stockholders’ equity	123,399		124,270

Total liabilities and stockholders’ equity	$	171,146	$	173,211

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

MIX TELEMATICS LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)


	Three Months Ended September 30,				Six Months Ended September 30,
	2020		2021		2020		2021
Revenue
Subscription	$	27,623	$	30,885	$	53,498	$	61,975
Hardware and other	3,325		5,189		4,947		8,997
Total revenue	30,948		36,074		58,445		70,972
Cost of revenue
Subscription	7,676		9,219		15,025		18,346
Hardware and other	2,621		3,887		3,850		6,803
Total cost of revenue	10,297		13,106		18,875		25,149
Gross profit	20,651		22,968		39,570		45,823

Operating expenses
Sales and marketing	2,447		3,872		5,193		7,384

Administration and other	13,631		15,366		27,122		30,373
Total operating expenses	16,078		19,238		32,315		37,757
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 before income tax expense	4,426		3,788		6,940		7,911
Income tax expense	974		2,489		1,066		3,081
Net income	3,452		1,299		5,874		4,830
Less: Net income attributable to non-controlling interest	—		—		—		—
Net income attributable to MiX Telematics Limited	$	3,452	$	1,299	$	5,874	$	4,830

Net income per ordinary share
Basic	$	0.01	$	0.002	$	0.01	$	0.01
Diluted	$	0.01	$	0.002	$	0.01	$	0.01

Net income per American Depository Share
Basic	$	0.16	$	0.06	$	0.27	$	0.22
Diluted	$	0.15	$	0.06	$	0.26	$	0.21

Ordinary shares
Weighted average	548,008		552,386		547,569		552,124
Diluted weighted average	558,951		565,622		558,829		565,322

American Depository Shares
Weighted average	21,920		22,095		21,903		22,085
Diluted weighted average	22,358		22,625		22,353		22,613

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

MIX TELEMATICS LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)


	Three Months Ended September 30,				Six Months Ended September 30,
	2020		2021		2020		2021
Net income	$	3,452	$	1,299	$	5,874	$	4,830
Other comprehensive income/(loss)
Foreign currency translation adjustments, net of tax	1,561		(4,744)		3,645		(1,581)

Total comprehensive income/(loss)	5,013		(3,445)		9,519		3,249
Less: Total comprehensive income attributable to non-controlling interest	—		—		—		—
Total comprehensive income/(loss) attributable to MiX Telematics Limited	$	5,013	$	(3,445)	$	9,519	$	3,249

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

MIX TELEMATICS LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)


	Three Months Ended September 30, 2020 and 2021
	Common Stock			Treasury Stock		Accumulated Other Comprehensive Income/(Loss)		Additional Paid-In Capital		Retained Earnings		Total MiX Telematics Limited Stockholders’ Equity		Non-Controlling Interest		Total Stockholder’s Equity
	Shares	Amount
Balance as of July 1, 2020	601,019	$	66,522	$	(17,315)	$	(8,986)	$	(6,306)	$	68,687	$	102,602	$	5	$	102,607



Net income	—	—		—		—		—		3,452		3,452		—		3,452
Other comprehensive income	—	—		—		1,561		—		—		1,561		—		1,561


Issuance of common stock in relation to stock options and SARs exercised	3,861	825		—		—		—		—		825		—		825
Stock-based compensation	—	—		—		—		301		—		301		—		301

Dividends of 4 South African cents (0.3 U.S. cents) per ordinary share declared	—	—		—		—		—		(1,293)		(1,293)		—		(1,293)



Balance as of September 30, 2020	604,880	$	67,347	$	(17,315)	$	(7,425)	$	(6,005)	$	70,846	$	107,448	$	5	$	107,453

Balance as of July 1, 2021	606,080	$	67,401	$	(17,315)	$	5,087	$	(4,962)	$	78,679	$	128,890	$	5	$	128,895
Net income	—	—		—		—		—		1,299		1,299		—		1,299
Other comprehensive income	—	—		—		(4,744)		—		—		(4,744)		—		(4,744)
Issuance of common stock in relation to SARs exercised	355	—		—		—		—		—		—		—		—
Stock-based compensation	—	—		—		—		330		—		330		—		330
Dividends of 4 South African cents (0.3 U.S. cents) per ordinary share declared	—	—		—		—		—		(1,510)		(1,510)		—		(1,510)


Balance as of September 30, 2021	606,435	$	67,401	$	(17,315)	$	343	$	(4,632)	$	78,468	$	124,265	$	5	$	124,270

MIX TELEMATICS LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)


	Six Months Ended September 30, 2020 and 2021
	Common Stock			Treasury Stock		Accumulated Other Comprehensive Income/(Loss)		Additional Paid-In Capital		Retained Earnings		Total MiX Telematics Limited Stockholders’ Equity		Non-Controlling Interest		Total Stockholder’s Equity
	Shares	Amount
Balance as of April 1, 2020	600,934	$	66,522	$	(17,315)	$	(11,070)	$	(6,599)	$	67,482	$	99,020	$	5	$	99,025



Net income	—	—		—		—		—		5,874		5,874		—		5,874
Other comprehensive income	—	—		—		3,645		—		—		3,645		—		3,645


Issuance of common stock in relation to stock options and SARs exercised	3,946	825		—		—		—		—		825		—		825
Stock-based compensation	—	—		—		—		594		—		594		—		594

Dividends declared	—	—		—		—		—		(2,510)		(2,510)		—		(2,510)



Balance as of September 30, 2020	604,880	$	67,347	$	(17,315)	$	(7,425)	$	(6,005)	$	70,846	$	107,448	$	5	$	107,453

Balance as of April 1, 2021	605,579	$	67,401	$	(17,315)	$	1,924	$	(5,326)	$	76,710	$	123,394	$	5	$	123,399
Net income	—	—		—		—		—		4,830		4,830		—		4,830
Other comprehensive income	—	—		—		(1,581)		—		—		(1,581)		—		(1,581)
Issuance of common stock in relation to SARs exercised	856	—		—		—		—		—		—		—		—
Stock-based compensation	—	—		—		—		694		—		694		—		694
Dividends declared	—	—		—		—		—		(3,072)		(3,072)		—		(3,072)


Balance as of September 30, 2021	606,435	$	67,401	$	(17,315)	$	343	$	(4,632)	$	78,468	$	124,265	$	5	$	124,270

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

MIX TELEMATICS LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Six Months Ended September 30,
	2020		2021
Cash flows from operating activities
Cash generated from operations	$	22,295	$	14,223
Interest received	206		221
Interest paid	(153)		(197)
Income tax paid	(1,590)		(3,582)
Net cash provided by operating activities	20,758		10,665

Cash flows from investing activities
Acquisition of property and equipment – in-vehicle devices	(2,590)		(9,740)
Acquisition of property and equipment – other	(160)		(851)
Proceeds from the sale of property and equipment	—		54
Acquisition of intangible assets	(1,972)		(2,833)

Net cash used in investing activities	(4,722)		(13,370)

Cash flows from financing activities
Proceeds from issuance of ordinary shares in relation to stock options exercised	825		—

Cash paid on dividends to MiX Telematics Limited stockholders	(2,506)		(3,058)
Movement in short-term debt	740		474
Net cash used in financing activities	(941)		(2,584)

Net increase/(decrease) in cash and cash equivalents, and restricted cash	15,095		(5,289)
Cash and cash equivalents, and restricted cash at beginning of the period	18,652		46,343
Effect of exchange rate changes on cash and cash equivalents, and restricted cash	887		(340)
Cash and cash equivalents, and restricted cash at end of the period	$	34,634	$	40,714

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

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 its 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 September 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.

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 September 30, 2021 was $5.8 million and $5.6 million, respectively. During the quarter ended September 30, 2020 and September 30, 2021, revenue of $0.6 million and $1.2 million, respectively, was recognized which was included in the deferred revenue balances at the beginning of each such quarter. During the six months ended September 30, 2020 and September 30, 2021, revenue of $1.7 million and $2.4 million, respectively, was recognized which was included in the deferred revenue balances at the beginning of each such financial year.

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 $3.6 million as of March 31, 2021 and September 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 September 30,				Six Months Ended September 30,
	2020		2021		2020		2021
Amortization recognized during the period:	$	(782)	$	(857)	$	(1,475)	$	(1,767)
–Cost of revenue (external commissions)	(563)		(616)		(1,048)		(1,291)
–Sales and marketing (internal commissions)	(219)		(241)		(427)		(476)

3. Credit risk related to accounts receivable

The movements in the allowance for doubtful accounts are as follows (in thousands):


	Six Months Ended September 30,
	2020		2021
Balance at April 1	$	3,602	$	5,575



Bad debt provision	2,273		1,563
Write-offs, net of recoveries	(1,748)		(1,036)
Foreign currency translation differences	153		(66)
Balance at September 30	$	4,280	$	6,036

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 September 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 September 30, 2021 of $2.3 million and $3.2 million, respectively, are pledged as security for the Company’s overdraft facilities.

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		September 30, 2021
Owned equipment

Equipment, vehicles and other	$	6,877	$	7,614
In-vehicle devices	53,448		59,284
Less: accumulated depreciation and impairments	(42,955)		(44,637)
Owned equipment, net	$	17,370	$	22,261

Total depreciation expense related to owned equipment during the three months ended September 30, 2020 and 2021 was $3.0 million and $2.6 million, respectively. Depreciation expense related to owned equipment during the six months ended September 30, 2020 and 2021 was $5.8 million and $5.3 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		September 30, 2021
Right-of-use assets
Property	$	8,348	$	7,821
Equipment, vehicles and other	226		220


Less: accumulated depreciation	(2,481)		(2,533)
Right of use property and equipment, net	$	6,093	$	5,508

5. Intangible assets

Intangible assets comprise the following (in thousands):


		As of March 31, 2021						As of September 30, 2021
	Useful life (in years)	Gross Carrying amount		Accumulated amortization		Net		Gross Carrying amount		Accumulated amortization		Net
Patents and trademarks	3 - 20	$	115	$	(82)	$	33	$	113	$	(84)	$	29
Customer relationships	2 - 15	2,687		(2,271)		416		2,653		(2,330)		323
Internal-use software, technology and other	1 - 18	35,618		(17,764)		17,854		37,834		(19,337)		18,497
Total		$	38,420	$	(20,117)	$	18,303	$	40,600	$	(21,751)	$	18,849

For the three months ended September 30, 2020 and 2021, amortization expense of $0.9 million, and $1.0 million, respectively, has been recognized. For the six months ended September 30, 2020 and 2021, amortization expense of $1.7 million, and $2.0 million, respectively, has been recognized.

6. Accrued expenses and other liabilities

Accrued expenses and other liabilities comprise the following (in thousands):


	March 31, 2021		September 30, 2021
Current:
Product warranties	$	605	$	625
Maintenance	609		631
Employee-related accruals	6,166		6,081
Lease liabilities	1,395		1,255

Accrued commissions	2,199		2,533
Other accruals	6,356		7,832
Total current	$	17,330	$	18,957

Non-current:
Lease liabilities	$	4,895	$	4,481
Other liabilities	968		998
Total non-current	$	5,863	$	5,479

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 September 30,
	2020		2021
Product warranties
Opening balance	$	616	$	612
Warranty expense	43		200
Utilized	(81)		(126)
Foreign currency translation difference	33		(14)
Balance as of September 30	$	611	$	672
Non-current portion (included in other liabilities)	$	11	$	47
Current portion	$	600	$	625

7. Development expenditure

Development expenditure incurred comprises the following (in thousands):


	Three Months Ended September 30,				Six Months Ended September 30,
	2020		2021		2020		2021
Costs capitalized (1)	647		985		1,383		1,956
Costs expensed (2)	1,046		1,314		2,040		2,751
Total costs incurred	1,693		2,299		3,423		4,707
Percentage capitalized	38.2	%	42.8	%	40.4	%	41.6	%

(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 rate expected to be applicable for the full fiscal year, 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 15.4% for the six months ended September 30, 2020 compared to 38.9% for the six months ended September 30, 2021. Our effective tax rate was 22.0% for the three months ended September 30, 2020 compared to 65.7% for the three months ended September 30, 2021. Ignoring the impact of foreign exchange gains and losses net of tax, the effective tax rate for the six months ended September 30, 2020 and 2021, was 29.0% and 35.0%, respectively, and for the three months ended September 30, 2020 and 2021, was 28.4% and 38.6%, 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 September 30,				Six Months Ended September 30,
	2020		2021		2020		2021
Numerator (basic)
Net income attributable to ordinary shareholders	$	3,452	$	1,299	$	5,874	$	4,830
Denominator (basic)
Weighted-average number of ordinary shares in issue	548,008		552,386		547,569		552,124
Basic earnings per share	$	0.01	$	0.002	$	0.01	$	0.01

American Depository Shares*:
Net income attributable to ordinary shareholders	$	3,452	$	1,299	$	5,874	$	4,830
Weighted-average number of American Depository Shares in issue	21,920		22,095		21,903		22,085
Basic earnings per American Depository share	$	0.16	$	0.06	$	0.27	$	0.22
*One American Depository Share is the equivalent of 25 ordinary shares.

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 September 30,				Six Months Ended September 30,
	2020		2021		2020		2021
Numerator (diluted)
Diluted net income attributable to ordinary shareholders	$	3,452	$	1,299	$	5,874	$	4,830
Denominator (diluted)
Weighted-average number of ordinary shares in issue	548,008		552,386		547,569		552,124
Adjusted for:
– potentially dilutive effect of stock appreciation rights	9,339		11,778		9,517		11,809
– potentially dilutive effect of restricted share units	599		1,458		618		1,389
– potentially dilutive effect of stock options	1,005		—		1,125		—
Diluted-weighted average number of ordinary shares in issue	558,951		565,622		558,829		565,322
Diluted earnings per share	$	0.01	$	0.002	$	0.01	$	0.01

American Depository Shares*:
Diluted net income attributable to ordinary shareholders	$	3,452	$	1,299	$	5,874	$	4,830
Diluted weighted-average number of American Depository Shares in issue	22,358		22,625		22,353		22,613
Diluted earnings per American Depository share	$	0.15	$	0.06	$	0.26	$	0.21
*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 who, 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.

The following tables provide revenue and Segment Adjusted EBITDA (in thousands):


	Three Months Ended September 30, 2020
	Subscription revenue (1)		Hardware and other revenue (2)		Total revenue		Segment Adjusted EBITDA
Regional Sales Offices
Africa	$	14,855	$	1,635	$	16,490	$	7,249
Europe	2,919		474		3,393		1,536
Americas	4,786		240		5,026		2,170
Middle East and Australasia	4,118		948		5,066		2,405
Brazil	928		28		956		363
Total Regional Sales Offices	27,606		3,325		30,931		13,723
Central Services Organization	17		—		17		(1,674)
Total Segment Results	$	27,623	$	3,325	$	30,948	$	12,049

1.Subscription revenue is recognized over time.

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


	Three Months Ended September 30, 2021
	Subscription revenue (1)		Hardware and other revenue (2)		Total revenue		Segment Adjusted EBITDA
Regional Sales Offices
Africa	$	18,686	$	1,596	$	20,282	$	8,874
Europe	3,413		1,337		4,750		1,682
Americas	3,444		468		3,912		33
Middle East and Australasia	4,207		1,750		5,957		2,665
Brazil	1,121		16		1,137		288
Total Regional Sales Offices	30,871		5,167		36,038		13,542
Central Services Organization	14		22		36		(2,457)
Total Segment Results	$	30,885	$	5,189	$	36,074	$	11,085

1.Subscription revenue is recognized over time.

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



	Six Months Ended September 30, 2020
	Subscription revenue (1)		Hardware and other revenue (2)		Total revenue		Segment Adjusted EBITDA
Regional Sales Offices
Africa	$	28,778	$	2,236	$	31,014	$	14,494
Europe	5,769		608		6,377		2,838
Americas	8,961		395		9,356		3,578
Middle East and Australasia	7,999		1,657		9,656		4,323
Brazil	1,959		51		2,010		773
Total Regional Sales Offices	53,466		4,947		58,413		26,006
Central Services Organization	32		—		32		(3,537)
Total Segment Results	$	53,498	$	4,947	$	58,445	$	22,469

1.Subscription revenue is recognized over time.

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



	Six Months Ended September 30, 2021
	Subscription revenue (1)		Hardware and other revenue (2)		Total revenue		Segment Adjusted EBITDA
Regional Sales Offices
Africa	$	37,397	$	2,811	$	40,208	$	17,778
Europe	6,786		2,598		9,384		3,433
Americas	7,067		663		7,730		572
Middle East and Australasia	8,556		2,855		11,411		5,208
Brazil	2,141		48		2,189		605
Total Regional Sales Offices	61,947		8,975		70,922		27,596
Central Services Organization	28		22		50		(5,044)
Total Segment Results	$	61,975	$	8,997	$	70,972	$	22,552

1.Subscription revenue is recognized over time.

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

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


	Three Months Ended September 30,				Six Months Ended September 30,
	2020		2021		2020		2021
Segment Adjusted EBITDA	$	12,049	$	11,085	$	22,469	$	22,552
Corporate and consolidation entries	(2,507)		(2,474)		(4,837)		(4,850)
Operating lease costs (1)	(399)		(373)		(791)		(780)
Product development costs (2)	(271)		(335)		(514)		(698)
Depreciation and amortization	(3,836)		(3,668)		(7,464)		(7,347)
Impairment of long-lived assets	(1)		(28)		(1)		(28)
Stock-based compensation costs	(301)		(330)		(594)		(694)
Increase in restructuring costs (3)	(153)		(51)		(997)		(52)
Net (loss)/profit on sale of property and equipment	(7)		43		(8)		43
Net foreign exchange (losses)/gains	(78)		60		(183)		(16)
Net interest expense	(70)		(141)		(140)		(219)
Income before income tax expense for the period	$	4,426	$	3,788	$	6,940	$	7,911

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 three months ended September 30, 2020, $0.1 million of the restructuring costs related to the North America reporting segment. For the six months ended September 30, 2020, $0.6 million, $0.2 million and $0.1 million of the restructuring costs related to CSO, Africa and North America reporting segments, respectively.

No single customer accounted for 10% or more of the Company’s total revenue for the three or six months ended September 30, 2020 and 2021. No single customer accounted for 10% or more of the Company’s accounts receivable as of March 31, 2021 or September 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 September 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 September 30, 2020 and 2021 was $0.3 million and $0.3 million, respectively. The total stock-based compensation expense recognized during the six months ended September 30, 2020 and 2021 was $0.6 million and $0.7 million, respectively.

Stock appreciation rights granted under the LTIP

The following table summarizes the activities for the outstanding SARs:


	Number of SARs	Weighted- Average Exercise Price in U.S. Cents*	Weighted Average Contractual Remaining Term (years)	Aggregate Intrinsic Values (in thousands)
Outstanding as of April 1, 2021	40,567,917	36

Exercised	(1,392,917)	21

Forfeited	(300,000)	46
Outstanding as of September 30, 2021	38,875,000	37	2.87

Vested and expected to vest as of September 30, 2021	37,762,500	37	2.06	5,857
Vested as of September 30, 2021	16,625,000	28	1.48	3,799

As of September 30, 2021, there was $1.4 million of unrecognized compensation cost related to unvested SARs. This amount is expected to be recognized over a weighted-average period of 3.8 years.

*U.S. currency amounts are based on a ZAR:USD exchange rate of R15.125 as of September 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 September 30, 2021. Management estimates forfeiture to be approximately 5%. The unrecognized compensation cost related to unvested RSUs as of September 30, 2021 was $0.3 million, which will be recognized over a weighted average period of 1.5 years, which is the same period as the weighted average remaining contractual term.

12. Debt

As of March 31, 2021 and September 30, 2021, debt comprised bank overdrafts of $1.7 million and $2.1 million, respectively. Net accounts receivable as of March 31, 2021 and September 30, 2021 of $2.3 million and $3.2 million, respectively, were pledged as security for the Company’s overdraft facilities.

Details of undrawn facilities are shown below:


	Interest rate	March 31, 2021		September 30, 2021
Undrawn borrowing facilities at floating rates include:
– Standard Bank Limited:
Overdraft	SA Prime* less 1.2%	$	2,616	$	2,093
Vehicle and asset finance	SA Prime* less 1.2%	570		562
Working capital facility	SA Prime* less 0.25%	1,676		1,653
– Nedbank Limited overdraft	SA Prime* less 2%	670		661
		$	5,532	$	4,969

*South African prime interest rate

As of March 31, 2021 and September 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.

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 September 30, 2021 was $2.0 million and $1.8 million, respectively. 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 for an administrative penalty in terms of the Competition Act, No. 89 of 1998. The Company 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 September 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 September 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 September 30, 2021, a dividend of 4 South African cents per ordinary share and 1 South African Rand per ADS, which will be paid on December 2, 2021 to shareholders on record as of the close of business on November 19, 2021.

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 our 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.

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 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

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-

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.

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 September 30, 2020 and 2021 our effective tax rates were 22.0% and 65.7%, respectively, and during the six months ended September 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.

Results of Operations

The following table sets forth certain consolidated statement of income data:


	Three Months Ended September 30,						Six Months Ended 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	$	3,452		$	1,299		$	5,874		$	4,830

The following table sets forth, as a percentage of revenue, consolidated statement of income data:

	Three Months Ended September 30,						Six Months Ended 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

Results of Operations for the Three Months Ended September 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. From June 30, 2021 to September 30, 2021, our subscriber base grew by a net 16,700 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 second quarter of fiscal year 2021, the South African Rand strengthened by 14% against the U.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 to U.S. Dollars at the average exchange rates during the second quarter of fiscal year 2022 led to a 8.9% increase in reported U.S. Dollar subscription revenues.

•Hardware and other revenue increased by $1.9 million, or 56.1%, from the second quarter of fiscal year 2021.

The impact of translating foreign currencies to U.S. Dollars at the average exchange rates during the second quarter of fiscal year 2022 led to a 9.0% increase in reported U.S. Dollar revenues.

A breakdown of third-party revenue by segment is shown in the table below:


	Three Months Ended September 30,
	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 the Africa 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% since October 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 the Americas segment, subscription revenue declined by $1.3 million, or 28.0% as a result of a 17.3% decrease in subscribers since October 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 the Europe 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% since October 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 ended September 30, 2020. Total revenue increased by 36.5% on a constant currency basis.

Subscription revenue in the Middle East and Australasia 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% since October 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 the Brazil 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% since October 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

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 a U.S. Dollar intercompany loan between MiX Telematics Limited and MiX 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 a U.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.

Results of Operations for the Six Months Ended September 30, 2020 and 2021

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 $4.1 million, or 81.9%, from 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 2021 led to a 12.9% increase in reported U.S. Dollar revenues.

A breakdown of third-party revenue by segment is shown in the table below:


	Six Months Ended September 30,
	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 the Africa 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 since October 1, 2020. The subscription revenue increase is attributable to growth in the higher ARPU premium subscribers which offset the contraction in the lower

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 the Americas segment, subscription revenue declined by $1.9 million, or 21.1%, as a result of a 17.3% decrease in subscribers since October 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 the Europe 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 since October 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 ended September 30, 2020. Total revenue increased by 40.0% on a constant currency basis.

Subscription revenue in the Middle East and Australasia 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% since October 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 the Brazil 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% since October 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		%

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 a U.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 a U.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.

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.


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.


Reconciliation of net income to non-GAAP net income
	Three Months Ended September 30,				Six Months Ended 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 September 30,						Six Months Ended 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	%

Hardware and Other Revenue


	Three Months Ended September 30,						Six Months Ended 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 September 30,						Six Months Ended 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 ended March 31, 2021, which we filed with the Securities and Exchange Commission on June 14, 2021.

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.

The following tables provide a summary of our cash flows for each of the six months ended September 30, 2020 and 2021:


	Six Months Ended September 30,
	2020		2021
	(In thousands)
Net cash provided by operating activities	$	20,758	$	10,665
Net cash used in investing activities	(4,722)		(13,370)
Net cash used in financing activities	(941)		(2,584)
Net increase/(decrease) in cash and cash equivalents, and restricted cash	15,095		(5,289)
Cash and cash equivalents, and restricted cash at beginning of the period	18,652		46,343
Effect of exchange rate changes on cash and cash equivalents, and restricted cash	887		(340)
Cash and cash equivalents, and restricted cash at the end of the period	$	34,634	$	40,714

We fund our operations, capital expenditure and acquisitions through cash generated from operating activities, cash on hand and our undrawn borrowing facilities.

It is currently our policy to pay regular dividends, and we consider such dividend payments on a quarter-by-quarter basis.

On May 23, 2017, our Board approved a share repurchase program of up to R270 million (the equivalent of $17.9 million as of September 30, 2021) under which we may repurchase our ordinary shares, including ADSs. We expect any repurchases under this share repurchase program to be funded out of existing cash resources. During the six months ended September 30, 2021, there were no additional share repurchases. Refer to “Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” 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, for information regarding our share repurchase program.

Operating Activities

Net cash provided by operating activities during the six months ended September 30, 2020 consisted of our cash generated from operations of $22.3 million, net interest received of $0.1 million and taxes paid of $1.6 million.

Net cash provided by operating activities decreased from $20.8 million in the six months ended September 30, 2020 to $10.7 million during the six months ended September 30, 2021. This is primarily attributable to lower cash generated from operations of $8.1 million and increased taxation paid of $2.0 million. The lower cash generated from operations is primarily as a result of a deterioration in working capital management of $8.1 million (specifically an increase in accounts receivables of $7.2 million, an increase in prepaid expenses and other current assets of $0.3 million, an increase in capitalized commissions of $0.4 million, and an adverse change in foreign currency translation adjustments of $2.2 million, partially offset by a decrease in inventories of $0.3 million, an increase in accounts payables of $1.4 million, and an increase in accrued expenses of $0.3 million).

Net cash provided by operating activities during the six months ended September 30, 2021 primarily consisted of our cash generated from operations of $14.2 million, net interest received of $0.02 million and taxes paid of $3.6 million.

Investing Activities

Net cash used in investing activities in the six months ended September 30, 2020 was $4.7 million. Net cash used in investing activities during the six months ended September 30, 2020 primarily consisted of capital expenditures of $4.8 million. Capital expenditures during the six months ended September 30, 2020 included purchases of intangible assets of $2.0 million and cash paid to purchase property and equipment of $2.8 million, which included in-vehicle devices of $2.6 million.

Net cash used in investing activities in the six months ended September 30, 2021 increased to $13.4 million from $4.7 million in the six months ended September 30, 2020. Net cash used in investing activities during the six months ended September 30, 2021 primarily consisted of capital expenditures of $13.4 million. Capital expenditures during the six months ended September 30, 2021 included purchases of intangible assets of $2.8 million and cash paid to purchase property and equipment of $10.6 million, which included in-vehicle devices of $9.7 million.

Financing Activities

In the six months ended September 30, 2020, the cash used in financing activities of $1.0 million includes dividends paid of $2.5 million offset by proceeds of $0.8 million from the issue of ordinary shares in relation to the exercise of stock options and $0.7 million from facilities utilized.

In the six months ended September 30, 2021, the cash used in financing activities of $2.6 million includes dividends paid of $3.1 million, offset by $0.5 million from facilities utilized.

Credit Facilities

As of September 30, 2021, our principal sources of liquidity were net cash balances of $37.7 million (consisting of cash and cash equivalents of $39.8 million less short-term debt (bank overdraft) of $2.1 million) and an unutilized borrowing capacity of $5.0 million available through our credit facilities. Our principal sources of credit are our facilities with Standard Bank Limited and Nedbank Limited.

We have an overdraft facility of R64.0 million (the equivalent of $4.2 million as of September 30, 2021), an unutilized working capital facility of R25.0 million (the equivalent of $1.7 million as of September 30, 2021) and an unutilized vehicle and asset finance facility of R8.5 million (the equivalent of $0.6 million as of September 30, 2021) with Standard Bank Limited that bear interest at South African Prime less 1.2% except for the working capital facility that bears interest at South African Prime less 0.25%.

As of September 30, 2021, $2.1 million was utilized under the overdraft facility. We use this facility as part of our foreign currency hedging strategy. We draw down on this facility in the applicable foreign currency in order to fix the exchange rate on the existing balance sheet foreign currency exposure that we anticipate settling in that foreign currency. Our obligations under the overdraft facility with Standard Bank Limited are guaranteed by MiX Telematics Limited and our wholly-owned subsidiaries, MiX Telematics Africa Proprietary Limited and MiX Telematics International Proprietary Limited, and secured by a pledge of accounts receivable by MiX Telematics Limited and MiX Telematics International Proprietary Limited.

During fiscal year 2020, we entered into a R25.0 million (the equivalent of $1.7 million as of September 30, 2021) working capital facility from Standard Bank Limited that bears interest at South African Prime less 0.25%. As of September 30, 2021, the facility was undrawn. We use this facility for working capital purposes in our Africa operations.

During fiscal year 2014, we entered into a R10.0 million (the equivalent of $0.7 million as of September 30, 2021) facility from Nedbank Limited that bears interest at South African Prime less 2%. As of September 30, 2021, the facility was undrawn. We use this facility for working capital purposes in our Africa operations.

Our credit facilities with Standard Bank Limited and Nedbank Limited contain certain restrictive clauses, including without limitation, those limiting our and our guarantor subsidiaries’, as applicable, ability to, among other things, incur indebtedness, incur liens, or sell or acquire assets or businesses. These facilities are not subject to any financial covenants such as interest coverage or gearing ratios.

Off-balance sheet arrangements

We do not engage in any off-balance sheet financing activities. We do not have any interest in entities referred to as variable interest entities, which include special purpose entities and other structured finance entities which are not consolidated.

Contractual and other obligations

As of September 30, 2021, there have been no material changes in contractual and other obligations as disclosed under the caption “Contractual and other obligations” in Item 7 of our Annual Report on Form 10-K for the fiscal year ended March 31, 2021.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As a “smaller reporting company”, we are not required to provide the information required by this Item 3.

Item 4. Controls and Procedures

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

The Company maintains disclosure controls and procedures, as defined in Rules 13a – 15(e) and 15d – 15(e) under the Exchange Act, that are designed to ensure information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the periods specified by the SEC, and that such information is accumulated and communicated to management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2021. Based on that evaluation, we concluded that our disclosure controls and procedures were effective as of September 30, 2021.

CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING

We implemented the new ERP system in our Middle East operations in September 2021 and plan continue the roll out of the ERP system to our other operations according to a phased roll out plan. As part of the new ERP system, certain internal controls over financial reporting has been automated or modified and the source of information used to perform the control activities has changed to the new ERP system. While we believe the controls in the new ERP system will enhance the internal control environment, there are inherent risks associated to the implementation of a new ERP system. We will continue to evaluate the processes and controls related to the system transition and the assessment of design adequacy and operating effectiveness of internal controls over financial reporting throughout fiscal year 2022.

Other than the implementation of the ERP system in the Middle East, there were no changes in the Company’s internal control over financial reporting, as defined in Rule 13a - 15(f) and 15d - 15(f) promulgated under the Exchange Act, during the three months ended September 30, 2021, that have materially affected, or are reasonably likely to materially affect the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

There have been no material developments in our legal proceedings since we filed our Annual Report on Form 10-K for the fiscal year ended March 31, 2021. Refer to “Part I. Item 3. Legal Proceedings” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2021 for additional information regarding legal proceedings.

Item 1A. Risk Factors

As of September 30, 2021, there have been no material changes to the risk factors previously disclosed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended March 31, 2021 and the Company’s Quarterly reports on Form 10-Q for the three months ended June 30, 2021 except for the following risk factor under the heading “Risks related to Our Business”, which is replaced in its entirety with the following:

The extent to which the COVID-19 pandemic and measures taken in response thereto impact our business, results of operations and financial condition will depend on future developments, which are highly uncertain and are difficult to predict.

The global impact of the COVID-19 pandemic and measures taken to reduce the spread of the virus have had an adverse effect on the global macroeconomic environment and have significantly increased economic uncertainty and reduced economic activity. Governments globally, including the foreign jurisdictions in which we have offices, have declared a state of emergency related to the spread of COVID-19. The pandemic has resulted in authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-place or total lock-down orders, and business limitations and shutdowns. Although governments around the globe have taken steps to mitigate some of the more severe economic effects of the virus and the impact of the pandemic on the economic activity globally is unfolding, there can be no assurance that such steps will be effective or achieve their desired results in a timely and sustainable manner or at all.

Initially. nearly 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. Many of our employees have subsequently returned to our offices; however, some employees continue to work from home. In addition, we have modified certain business and workforce practices (including suspension of the majority of business travel and cancellation of physical participation in certain meetings, events and conferences) and implemented 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. There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus, in which case our employees or other individuals may become sick, our ability to perform critical functions could be harmed, and we may be unable to respond to some of the needs of our global business. Further, our increased reliance on remote access to our information systems increases our exposure to potential cybersecurity breaches. We continue to monitor the design and effectiveness of internal controls, taking into account that employees may be working remotely. We continue to monitor the situation and will take further actions as government authorities require or recommend or as we determine to be in the best interests of our employees, customers, suppliers and other business counterparties.

The extent to which the COVID-19 pandemic impacts our business, results of operations and financial condition in the longer term will depend on future developments, which are highly uncertain and are difficult to predict, including, but not limited to, the duration, spread and severity of the outbreak, the actions taken to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions broadly resume.

In particular, we may experience reduced revenues and/or financial losses as a result of a number of operational factors, including:

•Customer pricing pressure, payment term extensions, contract amendments and insolvency risk – As our customers face reduced demand for their products and services, reductions in their business activity and face increased financial pressure on their businesses, we have faced downward pressure on our pricing and gross margins as a result of making pricing concessions to customers. In addition, in response to the requests of some of our customers, we have granted extended payment terms. We expect that some of our customers will continue to make such requests, which may have an adverse effect on our cash flows from operations. We may also face a significantly elevated risk of customer insolvency, bankruptcy or liquidity challenges, which may result in a failure to be paid for services we have performed and expenses we have incurred, which could, in turn, result in us having to take a charge in the period in which the related receivable was written down or written off.

•Reduced customer demand for services – As a result of the pandemic’s impact on our customers, we have experienced reduced demand for our services. Among other things, a number of our customers have postponed, cancelled or scaled back existing and potential projects with us.

•Increased costs – We face increased costs from the pandemic, including as a result of mitigation efforts such as enabling increased work-from-home capabilities and additional health and safety measures.

•Reduced/delayed supply of components - We rely on contract manufacturers and other companies to provide electronic components and products that we use. The ongoing impact of COVID-19 on the global economy could impact the operations at our third-party manufacturers, which could result in delays or disruptions in the supply of our products and could impact our ability to meet customer demand. If we are unable to implement alternatives or other mitigations with respect to suppliers that may have potential delivery impacts due to COVID-19, our sales and financial results could be negatively impacted.

•Diversion of and strain on management and other corporate resources – Addressing the significant personnel and business challenges presented by the pandemic, including various business continuity measures and the need to enable work-from-home arrangements for our employees, has demanded significant management time and attention and strained other corporate resources, and is expected to continue to do so. Among other things, this may adversely impact our recruitment and retention, our customers and employee development and our ability to execute our strategy and various transformation initiatives and may increase our exposure to security breaches or cyberattacks.

In addition, COVID-19 has resulted in, and may continue to result in, significant economic volatility and uncertainty in U.S. and international financial markets, which could adversely affect our access to capital markets and investment activity, negatively impacting the availability of capital, the terms and conditions of financing arrangements and the related costs of such financing. This could result in situations where financing may not be available to us at all, or at terms formerly available to us.

There are no comparable recent events that provide guidance as to the effect the spread of COVID-19 and the measures taken in response thereto may have on our business, and, as a result, the ultimate impact of the pandemic is highly uncertain and subject to change. The nature and extent of the crisis, multiple variants and waves of the virus, the public health measures to contain it, the progress and effectiveness of vaccination programs, different levels of restrictions and the resultant economic impact may differ between regions and remain uncertain. We continue to monitor the effects of the pandemic on our business, results of operations, financial condition and liquidity as well as on our risk factors and the effectiveness of the control environment.

We depend on certain key suppliers and vendors to manufacture our hardware, and an interruption in the supply of components or of our hardware could impair our production capacity, which would impact our ability to supply hardware to customers.

We currently purchase key GSM (Global System for Mobile communications) module components of our hardware from two key suppliers. These modules and other electronic components used in the manufacture of our products, have extended lead times on orders. An interruption in the supply of components from these suppliers or a failure to identify the need to re-order components in a timely manner would significantly impact our operations and require us to identify and integrate our manufacturing and supply logistics with an alternate supplier, or use a substitute component, which could materially and adversely affect our business, results of operations and financial condition.

The components we use to manufacture hardware are predominately supplied by manufacturers and suppliers in China. The COVID-19 pandemic, amongst other contributing factors, has adversely affected manufacturing capacity of electronic components. The component supply shortage and extended lead times may impact our business in terms of increased pricing and additional engineering projects to implement alternative components, however, we have so far been able to supply our customer demand and maintain commitments to customers. Where possible, we have also taken steps to mitigate our risk to some extent by buying additional safety stock of scarce items or items with extended lead times and continue to carefully monitor the situation.

We contract two vendors in South Africa to manufacture and assemble hardware, one of which changed during fiscal year 2020. Each of these contracts is terminable on 12 months’ written notice. We have no financial control over, and limited operational influence on these vendors and the conduct of their businesses. These vendors could negatively impact our business by, among other things, extending delivery times, raising prices and limiting supply due to their own shortages and business requirements. Our two contract manufacturers produce different products for us and if the facilities at one of these contract manufacturers suffer a mass casualty event, it could take as much as three to five months, or longer, to replace production capacity. An extended interruption in the supply of hardware from our contract manufacturers could materially and adversely affect our production capacity and hence our ability to fulfil sales orders which could have a material adverse effect on our operations.

Item 6. Exhibits


Exhibit No.			Description

31.1			Certificate of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a--14(a) and 15d--14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2			Certificate of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a--14(a) and 15d--14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32*			Certificate of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS			XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH			XBRL Taxonomy Extension Schema Document.
101.CAL			XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF			XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB			XBRL Taxonomy Extension Label Linkbase Document.
101.PRE			XBRL Taxonomy Extension Presentation Linkbase Document.
104			Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

* The certification attached as Exhibit 32 that accompanies this Quarterly Report on Form 10-Q is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


			MIX TELEMATICS LIMITED

			By: /s/ Stefan Joselowitz
			Stefan Joselowitz
			Chief Executive Officer

			By: /s/ John Granara
			John Granara
			Chief Financial Officer

Date: November 5, 2021