MiX Telematics Ltd - Quarter Report: 2022 December (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

—————————

FORM 10-Q

—————————

(Mark One)

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

For the quarterly period ended December 31, 2022

☐ 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 January 27, 2023, the registrant had 553,323,208 ordinary shares, of no par value, outstanding. This number excludes 53,816,750 shares held by the registrant as treasury stock.

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						26
Item 3. Quantitative and Qualitative Disclosures About Market Risk						48
Item 4. Controls and Procedures						49
Part II - OTHER INFORMATION
Item 1. Legal Proceedings						50
Item 1A. Risk Factors						51
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds						52
Item 6. Exhibits						53
Signatures						54

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

MIX TELEMATICS LIMITED

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)


	March 31, 2022		December 31, 2022

ASSETS
Current assets:
Cash and cash equivalents	$	33,738	$	24,968
Restricted cash	981		841
Accounts receivables, net of allowances for doubtful accounts of $5.4 million and $3.3 million as of March 31, 2022 and December 31, 2022, respectively	25,092		27,068
Inventory, net	3,356		4,995
Prepaid expenses and other current assets	11,463		10,065
Total current assets	74,630		67,937

Property, plant and equipment, net	32,274		36,944
Goodwill	44,434		40,552
Intangible assets, net	20,460		23,530
Deferred tax assets	3,768		2,365
Other assets	4,988		6,395

Total assets	$	180,554	$	177,723
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term debt	$	5,597	$	12,633
Accounts payables	8,052		3,609
Accrued expenses and other liabilities	19,610		23,498
Contingent consideration	—		3,792
Deferred revenue	6,692		6,607
Income taxes payable	590		894
Total current liabilities	40,541		51,033

Deferred tax liabilities	8,972		10,846
Contingent consideration	—		281
Long-term accrued expenses and other liabilities	4,344		3,794



Total liabilities	53,857		65,954

Stockholders’ equity:
MiX Telematics Limited stockholders’ equity
Preference shares: 100 million shares authorized but not issued	—		—
Ordinary shares: 605.2 million and 607.1 million no-par value shares issued as of March 31, 2022 and December 31, 2022, respectively	64,390		64,283

Less treasury stock at cost: 53.8 million shares as of March 31, 2022 and December 31, 2022	(17,315)		(17,315)
Retained earnings	79,709		78,007
Accumulated other comprehensive income/(loss)	3,909		(9,534)

Additional paid-in capital	(4,001)		(3,677)
Total MiX Telematics Limited stockholders’ equity	126,692		111,764
Non-controlling interest	5		5
Total stockholders’ equity	126,697		111,769

Total liabilities and stockholders’ equity	$	180,554	$	177,723

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 December 31,				Nine Months Ended December 31,
	2021		2022		2021		2022
Revenue
Subscription	$	30,324	$	32,469	$	92,299	$	94,132
Hardware and other	5,889		5,338		14,886		13,996
Total revenue	36,213		37,807		107,185		108,128
Cost of revenue
Subscription	8,869		9,864		27,215		29,769
Hardware and other	4,893		3,595		11,696		10,176
Total cost of revenue	13,762		13,459		38,911		39,945
Gross profit	22,451		24,348		68,274		68,183

Operating expenses
Sales and marketing	4,027		4,589		11,411		12,974

Administration and other	15,841		15,728		46,214		47,275
Total operating expenses	19,868		20,317		57,625		60,249
Income from operations	2,583		4,031		10,649		7,934
Other income/(expense)	114		(748)		178		859
Net interest expense	75		272		294		8
Income before income tax expense	2,622		3,011		10,533		8,785
Income tax expense	1,992		223		5,073		6,525
Net income	630		2,788		5,460		2,260
Less: Net income attributable to non-controlling interest	—		—		—		—
Net income attributable to MiX Telematics Limited	$	630	$	2,788	$	5,460	$	2,260

Net income per ordinary share
Basic	$	0.001	$	0.005	$	0.010	$	0.004
Diluted	$	0.001	$	0.005	$	0.010	$	0.004

Net income per American Depositary Share
Basic	$	0.03	$	0.13	$	0.25	$	0.10
Diluted	$	0.03	$	0.13	$	0.24	$	0.10

Ordinary shares
Weighted average	552,452		552,865		552,234		552,148
Diluted weighted average	564,580		555,811		565,076		556,047

American Depositary Shares
Weighted average	22,098		22,115		22,089		22,086
Diluted weighted average	22,583		22,232		22,603		22,242

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

MIX TELEMATICS LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)/INCOME

(In thousands)

(Unaudited)


	Three Months Ended December 31,				Nine Months Ended December 31,
	2021		2022		2021		2022
Net income	$	630	$	2,788	$	5,460	$	2,260
Other comprehensive (loss)/income
Foreign currency translation (losses)/gains, net of tax	(3,544)		5,166		(5,125)		(13,443)

Total comprehensive (loss)/income	(2,914)		7,954		335		(11,183)
Less: Total comprehensive income attributable to non-controlling interest	—		—		—		—
Total comprehensive (loss)/income attributable to MiX Telematics Limited	$	(2,914)	$	7,954	$	335	$	(11,183)

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 December 31, 2021 and 2022
	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 October 1, 2021	606,435	$	67,401	$	(17,315)	$	343	$	(4,632)	$	78,468	$	124,265	$	5	$	124,270



Net income	—	—		—		—		—		630		630		—		630
Other comprehensive loss	—	—		—		(3,544)		—		—		(3,544)		—		(3,544)


Issuance of common stock in relation to SARs exercised	1,677	—		—		—		—		—		—		—		—
Stock-based compensation	—	—		—		—		310		—		310		—		310

Dividends of 4 South African cents (0.3 U.S. cents) per ordinary share declared	—	—		—		—		—		(1,429)		(1,429)		—		(1,429)


Purchase of treasury stock	—	—		(801)		—		—		—		(801)		—		(801)
Balance as of December 31, 2021	608,112	$	67,401	$	(18,116)	$	(3,201)	$	(4,322)	$	77,669	$	119,431	$	5	$	119,436

Balance as of October 1, 2022	605,903	$	64,283	$	(17,315)	$	(14,700)	$	(3,950)	$	76,469	$	104,787	$	5	$	104,792
Net income	—	—		—		—		—		2,788		2,788		—		2,788
Other comprehensive income	—	—		—		5,166		—		—		5,166		—		5,166
Issuance of common stock in relation to SARs exercised	1,238	—		—		—		—		—		—		—		—
Stock-based compensation	—	—		—		—		273		—		273		—		273
Dividends of 4 South African cents (0.2 U.S cents) per ordinary share declared	—	—		—		—		—		(1,250)		(1,250)		—		(1,250)


Balance as of December 31, 2022	607,141	$	64,283	$	(17,315)	$	(9,534)	$	(3,677)	$	78,007	$	111,764	$	5	$	111,769

MIX TELEMATICS LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)


	Nine Months Ended December 31, 2021 and 2022
	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, 2021	605,579	$	67,401	$	(17,315)	$	1,924	$	(5,326)	$	76,710	$	123,394	$	5	$	123,399



Net income	—	—		—		—		—		5,460		5,460		—		5,460
Other comprehensive loss	—	—		—		(5,125)		—		—		(5,125)		—		(5,125)


Issuance of common stock in relation to SARs exercised	2,533	—		—		—		—		—		—		—		—
Stock-based compensation	—	—		—		—		1,004		—		1,004		—		1,004

Dividends declared	—	—		—		—		—		(4,501)		(4,501)		—		(4,501)


Purchase of treasury stock	—	—		(801)		—		—		—		(801)		—		(801)
Balance as of December 31, 2021	608,112	$	67,401	$	(18,116)	$	(3,201)	$	(4,322)	$	77,669	$	119,431	$	5	$	119,436

Balance as of April 1, 2022	605,177	$	64,390	$	(17,315)	$	3,909	$	(4,001)	$	79,709	$	126,692	$	5	$	126,697
Net income	—	—		—		—		—		2,260		2,260		—		2,260
Other comprehensive loss	—	—		—		(13,443)		—		—		(13,443)		—		(13,443)
Issuance of common stock in relation to SARs and RSUs exercised	2,292	—		—		—		—		—		—		—		—
Stock-based compensation	—	—		—		—		324		—		324		—		324
Dividends declared	—	—		—		—		—		(3,962)		(3,962)		—		(3,962)
Ordinary shares repurchased and cancelled	(328)	(107)		—		—		—		—		(107)		—		(107)

Balance as of December 31, 2022	607,141	$	64,283	$	(17,315)	$	(9,534)	$	(3,677)	$	78,007	$	111,764	$	5	$	111,769

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)


	Nine Months Ended December 31,
	2021		2022
Cash flows from operating activities
Cash generated from operations	$	18,621	$	13,551
Interest received	300		590
Interest paid	(262)		(601)
Income tax paid	(3,999)		(745)
Net cash provided by operating activities	14,660		12,795

Cash flows from investing activities
Acquisition of property, plant and equipment – in-vehicle devices	(13,413)		(14,521)
Acquisition of property, plant and equipment – other	(1,462)		(788)
Proceeds from the sale of property, plant and equipment	54		71
Acquisition of intangible assets	(4,083)		(4,086)
Cash paid for business combination	—		(3,739)

Net cash used in investing activities	(18,904)		(23,063)

Cash flows from financing activities

Cash paid for ordinary shares repurchased	(801)		(107)
Cash paid on dividends to MiX Telematics Limited stockholders	(4,484)		(3,955)
Movement in short-term debt	666		7,562
Net cash (used in)/from financing activities	(4,619)		3,500

Net decrease in cash and cash equivalents, and restricted cash	(8,863)		(6,768)
Cash and cash equivalents, and restricted cash at beginning of the period	46,343		34,719
Effect of exchange rate changes on cash and cash equivalents, and restricted cash	(782)		(2,142)
Cash and cash equivalents, and restricted cash at end of the period	$	36,698	$	25,809

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 solutions enable customers to manage, optimize and protect their investments in commercial fleets, mobile assets or personal vehicles. The Company’s solutions 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, promote driver safety, manage risk and mitigate theft.

The Company is incorporated and domiciled in South Africa, with its principal executive office in Boca Raton, Florida. The Company’s fiscal year ends on March 31.

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, 2022 filed with the SEC on June 14, 2022.

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, fair values of assets acquired and liabilities assumed from the business acquired, fair value measurement of contingent consideration, allowances for doubtful accounts, the assessment of expected cash flows used in evaluating goodwill for impairment and income and deferred taxes. Actual results could differ from those estimates, and such differences may be material to the consolidated financial statements.

We have considered the impact of rising inflation, fuel prices, global politics, sanctions and the impact thereof on global trade on the estimates and assumptions used. As of December 31, 2022, we have taken into account the impact of the above on goodwill sensitivities and impairment assessments. However, future changes in economic conditions could have an impact on future estimates and judgements used.

Summary of significant accounting policies

Other than as listed below there have been no other 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, 2022, filed with the SEC on June 14, 2022, that have had a material impact on the Company’s Condensed Consolidated Financial Statements and related notes.

Contingent consideration

Contingent consideration is classified as a liability and is remeasured to fair value at each reporting date until the contingency is resolved. Changes in fair value that are not measurement period adjustments are recognized in the Condensed Consolidated Statements of Income.

Recently Adopted Accounting Pronouncements

There were no new accounting pronouncements adopted during the nine months ended December 31, 2022.

Recent Accounting Pronouncements Not Yet Adopted

On October 28, 2021, the FASB issued ASU 2021-08, which amends ASC 805, Business Combinations, to require companies to apply ASC 606, Revenue from Contracts with Customers, to recognize and measure contract assets and contract liabilities from contracts with customers acquired in a business combination. This creates an exception to the general recognition and measurement principle in ASC 805 which requires an acquirer to generally recognize such items at fair value on the acquisition

date. The ASU is effective for fiscal years beginning after December 15, 2022 and interim periods therein for public business entities (PBEs). For all other entities, it is effective for fiscal years beginning after December 15, 2023 and interim periods therein. Early adoption is permitted for all entities, including adoption in an interim period. The effective date for the Company is April 1, 2024. Management is yet to assess the impact of adoption of this ASU.

2. Acquisition

MiX Telematics North America, a 100% owned subsidiary of the Company, acquired Trimble’s Field Service Management business (“FSM”) in North America on September 2, 2022 (the “Transaction”).

FSM’s North American operations include the sale and support of telemetry and video solutions that enable back-office monitoring and visualization for fleet services management in a number of industries. The Transaction presents an opportunity for the Company to increase its scale in North America and to further diversify its North America business by expanding its presence in market verticals such as construction and last mile logistics.

All existing FSM subscription contracts and the related revenue streams were acquired by MiX Telematics North America.

The purchase consideration for the FSM business comprised of the following:

•An upfront cash payment of $3.7 million on September 2, 2022 (“Closing Date”), based on an upfront fee of $300 per subscription contract where the FSM customer has purchased or agreed to purchase 4G hardware as of the day immediately prior to the Closing Date and where the contractual term expires on or after the 18-month anniversary of the Closing Date.

•Additional payments to be made in respect of the renewal of existing subscriptions as well as for new subscriptions entered into by customers (that were customers on the Closing Date) with MiX Telematics North America. Depending on the hardware requirements of these customers and specific contract terms, Trimble will be paid between $200 and $300 per subscription contract. The additional payments will be made approximately every three months, ending on March 2, 2024, and have been treated as contingent consideration. The initial fair value of the contingent consideration of $4.1 million was included in the purchase price for purposes of calculating goodwill and reflects an expectation of approximately a 75% retention rate. Subsequent changes in fair value will be recognized in the Condensed Consolidated Statements of Income. The estimated total consideration for additional payments should not exceed $6.4 million which assumes a 100% conversion rate, which the Company believes is unlikely.

Pro forma results were not presented below because the effect of this acquisition is not material to the Condensed Consolidated Statements of Income.

The acquisition of the FSM business was considered a business combination and was accounted for under the acquisition method of accounting. The following table summarizes the consideration transferred, the assets acquired and liabilities assumed as of the acquisition date (in thousands):


	September 2, 2022
Fair value of consideration transferred
Cash consideration	$	3,739
Contingent consideration	4,073
	7,812

Fair value of identifiable assets acquired and liabilities assumed
Customer relationships	6,000
Finance lease receivable	412
Indemnification asset (1)	1,476
Loss contingency (1)	(1,476)
Product warranties	(41)
	6,371

Goodwill	$	1,441

(1) With the acquisition, the Company assumed a Hardware Purchase Plan (“HPP”) loss contingency of $1.5 million with a corresponding indemnification asset against Trimble. The HPP represents a contractual obligation, requiring the replacement of equipment should this become technically obsolete. The key event triggering the provision is the imminent shut down of the 3G network across different states in America. The Company has entered into an agreement with Trimble whereby Trimble will be responsible for covering these costs. The indemnification outcomes are directly linked to the loss contingency.

The initial accounting for the business combination is not yet complete. The fair values of the identifiable assets acquired and liabilities assumed have only been determined on a provisional basis and therefore, adjustments to them and the resulting goodwill may occur in the future. There were no changes to the initial accounting during the third quarter of fiscal year 2023.

During a transitional period, until all the FSM subscribers have been migrated to the Company’s SaaS platform, Trimble will (i) supply certain hardware comprising telematics kits and other parts as required for the fulfillment of subscription contracts; (ii) grant MiX Telematics North America a non-exclusive, non-transferable license to certain software in respect of hardware used by subscribers; and (iii) provide access to certain applications and network connections to support ongoing operations and customer account management. The Company however remains liable to the customer for the services.

Acquisition-related costs of $0.8 million were incurred, and are included in Administration and other expenses in the Condensed Consolidated Statements of Income. The initial cash payment was funded out of existing cash resources.

The goodwill is attributable to the workforce of the acquired business and the opportunity for the Company to increase its scale in North America and to further diversify its North America business. The goodwill is assigned to the Americas segment and is deductible for tax purposes. There was no change in the goodwill balance of $1.4 million between the date of acquisition and the end of the reporting period, December 31, 2022.

Reconciliation of Total Goodwill

The following table is a reconciliation of the carrying amount of goodwill at the beginning and end of the reporting period:


	As of December 31, 2022
Goodwill
Opening balance at March 31, 2022	$	44,434
Business acquired	1,441
Foreign currency translation difference	(5,323)
Balance as of December 31, 2022	$	40,552

The customer relationships acquired will be amortized over a weighted average amortization period of 10 years.

The acquired business contributed revenues of $3.2 million and earnings of $0.6 million for the period from September 2, 2022 to December 31, 2022. If the business had been acquired on April 1, 2022, the acquired business would have contributed revenues of $8.5 million and earnings of $1.4 million, after amortization of customer relationships, for the nine months ended December 31, 2022.

Valuation Methodology

The customer relationships were valued using the multi-period excess earnings method under the income approach, which estimates associated revenues and costs to determine the projected cash flows derived from this asset. The discount rate used reflects the risk and uncertainty of the cash flows relative to the overall business. The useful lives of customer relationships were established by reference to the payback period of the asset.

Assumptions used in forecasting cash flows included consideration of the following:

•Historical performance including sales and profitability

•Contributory asset charges

•Business prospects, industry expectations and competitive environment

•Estimated economic life of the asset

•Revenue attributable to existing customers

•Attrition of existing customers

The fair value of the contingent consideration was estimated using the income approach, based on applying a discounted cash flow valuation. Key inputs in the valuation include forecasted existing subscriber conversions, subscriber discount rate, and payor counterparty credit risk discount rate.

3. 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, 2022 and December 31, 2022 was $6.7 million and $6.6 million, respectively. During the quarter ended December 31, 2021 and December 31, 2022, revenue of $0.7 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 nine months ended December 31, 2021 and December 31, 2022, revenue of $3.1 million and $3.4 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 $4.1 million and $5.5 million as of March 31, 2022 and December 31, 2022, 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 December 31,				Nine Months Ended December 31,
	2021		2022		2021		2022
Amortization recognized during the period:	$	(878)	$	(1,088)	$	(2,645)	$	(3,017)
–Cost of revenue (external commissions)	(628)		(868)		(1,919)		(2,340)
–Sales and marketing (internal commissions)	(250)		(220)		(726)		(677)

4. Credit risk related to accounts receivable

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


	Nine Months Ended December 31,
	2021		2022
Balance at April 1	$	5,575	$	5,426



Bad debt provision	2,516		2,872
Write-offs	(857)		(4,326)

Foreign currency translation differences	(377)		(636)
Balance at December 31	$	6,857	$	3,336

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, 2022 and December 31, 2022, 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, 2022 and December 31, 2022 of $4.1 million and $3.0 million, respectively, are pledged as security for the Company’s overdraft facilities.

5. Property, plant and equipment

Property, plant 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 assets are as follows (in thousands):


	March 31, 2022		December 31, 2022
Owned assets

Plant and Equipment	$	791	$	798
Motor Vehicles	1,938		2,028
Furniture, fixtures and equipment	1,553		1,420
Computer and radio equipment	4,036		3,971
In-vehicle devices	65,881		72,340
Assets in progress	332		7
Owned assets, gross	74,531		80,564
Less: accumulated depreciation and impairments	(46,597)		(47,477)
Owned assets, net	$	27,934	$	33,087

Depreciation expense related to owned assets during the three months ended December 31, 2021 and 2022 was $2.7 million and $2.4 million, respectively. Depreciation expense related to owned equipment during the nine months ended December 31, 2021 and 2022 was $8.0 million and $7.2 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 assets are as follows (in thousands):


	March 31, 2022		December 31, 2022
Right-of-use assets
Property	$	7,019	$	6,009
Equipment, motor vehicles and other	305		265


Less: accumulated depreciation	(2,984)		(2,417)
Right of use assets, net	$	4,340	$	3,857

6. Intangible assets

Intangible assets comprise the following (in thousands):


		As of March 31, 2022						As of December 31, 2022
	Useful life (in years)	Gross Carrying amount		Accumulated amortization		Net		Gross Carrying amount		Accumulated amortization		Net
Patents and trademarks	3 - 20	$	105	$	(70)	$	35	$	165	$	(135)	$	30
Customer relationships	2 - 15	2,772		(2,528)		244		8,690		(3,100)		5,590
Internal-use software, technology and other	1 - 18	42,335		(22,154)		20,181		39,911		(22,001)		17,910
Total		$	45,212	$	(24,752)	$	20,460	$	48,766	$	(25,236)	$	23,530

For the three months ended December 31, 2021 and 2022, amortization expense of $1.0 million and $1.6 million respectively, has been recognized. For the nine months ended December 30, 2021 and 2022, amortization expense of $3.0 million, and $4.0 million, respectively, has been recognized. Non-cash disposals of $0.1 million and $0.6 million were recognized for the nine months ended December 30, 2021 and 2022, respectively. Foreign exchange related gains of $1.1 million and $2.9 million, on accumulated amortization, were recognized for the nine months ended December 30, 2021 and 2022, respectively.

7. Accrued expenses and other liabilities

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


	March 31, 2022		December 31, 2022
Current:
Product warranties	$	630	$	287
Maintenance	506		496
Employee-related accruals	7,621		6,971
Lease liabilities	932		731

Accrued commissions	3,017		3,365
Loss contingency (1)	—		1,105
Value added tax payables	48		1,142
Audit fee accrual	1,166		902
Other accruals	5,690		8,499
Total current	$	19,610	$	23,498

Non-current:
Lease liabilities	$	3,655	$	3,231
Other liabilities	689		563
Total non-current	$	4,344	$	3,794

(1) Relates to the acquisition of Trimble’s FSM business.

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 December 31,
	2021		2022
Product warranties
Opening balance	$	612	$	683
Warranty expense/(credit)	256		(44)
Reclassification (1)	—		(265)
Utilized	(172)		—
Acquisition (2)	—		41
Foreign currency translation difference	(38)		(86)
Balance as of December 31	$	658	$	329
Non-current portion (included in other liabilities)	$	52	$	42
Current portion	$	606	$	287

(1) Relates to a reclassification of certain costs from Product warranties to the Maintenance provision.
(2) Relates to the acquisition of Trimble’s FSM business.

8. Development expenditure

Development expenditure incurred comprises the following (in thousands):


	Three Months Ended December 31,				Nine Months Ended December 31,
	2021		2022		2021		2022
Costs capitalized (1)	$	772	$	905	$	2,728	$	2,934
Costs expensed (2)	1,632		1,358		4,383		4,362
Total costs incurred	$	2,404	$	2,263	$	7,111	$	7,296


(1) Costs capitalized relate only to the development of internal-use software, which are recognized in accordance with the Intangible assets (Internal-use software and technology) accounting policy.
(2) Costs expensed are included in Administration and other expenses in the Condensed Consolidated Statements of Income.

9. Leases

The Company leases property, office equipment and vehicles under operating leases. The lease terms vary between 1 month and 120 months, with many leases providing renewal rights and certain leases with annual escalations of up to 8% per annum. To the extent the Company is reasonably certain that it will exercise renewal options, such options have been included in the lease terms used for calculating the right-of-use assets and lease liabilities. Right-of-use assets are included in Property, plant and equipment in the Condensed Consolidated Balance Sheets and lease liabilities related to the Company’s operating leases are included in Accrued expenses and other liabilities and Long-term accrued expenses and other liabilities in the Condensed Consolidated Balance Sheets.

Where lease terms are 12-months or less, and meet the criteria for short-term lease classification, no right-of-use asset and no lease liability are recognized.

The components of lease cost are as follows (in thousands):


	Three Months Ended December 31,				Nine Months Ended December 31,
	2021		2022		2021		2022

Operating lease cost	$	343	$	297	$	1,123	$	932
Short-term lease cost	154		104		388		236
Total lease cost	$	497	$	401	$	1,511	$	1,168

Supplemental cash flow information and non-cash activity related to the Company’s operating leases are as follows (in thousands):


	Nine Months Ended December 31,
	2021		2022

Operating cash flow information:
Cash payments included in the measurement of lease liabilities	$	1,121	$	1,069
Non-cash activity:
Right-of-use assets obtained in exchange for new operating lease liabilities	$	321	$	868

Weighted-average remaining lease term and discount rate for our operating leases are as follows:


	March 31, 2022		December 31, 2022
Weighted-average remaining lease term - operating leases (months) (1)	25		23
Weighted-average discount rate - operating leases	8.0	%	8.2	%

(1) Including expected renewals where appropriate.

Maturities of operating lease liabilities as of December 31, 2022 were as follows (in thousands):


2023 (remainder)	$	271
2024	970
2025	845
2026	750
2027	656
Thereafter	1,490
Total future minimum lease payments	4,982
Less: Imputed interest	(1,020)
Present value of future minimum lease payments	3,962
Less: Current portion of lease liabilities	(731)
Non-current portion of lease liabilities	$	3,231

10. 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 48.2% for the nine months ended December 31, 2021 compared to 74.3% for the nine months ended December 31, 2022. Our effective tax rate was 76.0% for the three months ended December 31, 2021 compared to 7.4% for the three months ended December 31, 2022.

11. 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 December 31,				Nine Months Ended December 31,
	2021		2022		2021		2022
Numerator (basic)
Net income attributable to MiX Telematics Limited stockholders	$	630	$	2,788	$	5,460	$	2,260
Denominator (basic)
Weighted-average number of ordinary shares in issue and outstanding	552,452		552,865		552,234		552,148
Basic earnings per share	$	0.001	$	0.005	$	0.010	$	0.004

American Depositary Shares*:
Net income attributable to MiX Telematics Limited stockholders	$	630	$	2,788	$	5,460	$	2,260
Weighted-average number of American Depositary Shares in issue and outstanding	22,098		22,115		22,089		22,086
Basic earnings per American Depositary share	$	0.03	$	0.13	$	0.25	$	0.10
*One American Depositary 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 December 31,				Nine Months Ended December 31,
	2021		2022		2021		2022
Numerator (diluted)
Diluted net income attributable to MiX Telematics Limited stockholders	$	630	$	2,788	$	5,460	$	2,260
Denominator (diluted)
Weighted-average number of ordinary shares in issue and outstanding	552,452		552,865		552,234		552,148
Adjusted for:
– potentially dilutive effect of stock appreciation rights	10,571		2,249		11,397		2,873
– potentially dilutive effect of restricted share units	1,557		697		1,445		1,026

Diluted-weighted average number of ordinary shares in issue and outstanding	564,580		555,811		565,076		556,047
Diluted earnings per share	$	0.001	$	0.005	$	0.010	$	0.004

American Depositary Shares*:
Diluted net income attributable to MiX Telematics Limited stockholders	$	630	$	2,788	$	5,460	$	2,260
Diluted weighted-average number of American Depositary Shares in issue and outstanding	22,583		22,232		22,603		22,242
Diluted earnings per American Depositary share	$	0.03	$	0.13	$	0.24	$	0.10



*One American Depositary Share is the equivalent of 25 ordinary shares.

12. 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”). The RSOs provide fleet and mobile asset management solutions and predominantly generate external revenues. 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 income before income tax expense excluding acquisition-related costs, non-recurring legal costs, net interest expense, net foreign exchange gains/losses, net loss/profit on sale of property, plant and equipment, restructuring costs, stock-based compensation costs, impairment of long-lived assets, depreciation, amortization, operating lease costs and corporate and consolidation entries. 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 December 31, 2021
	Subscription revenue (1)		Hardware and other revenue (2)		Total revenue		Segment Adjusted EBITDA
Regional Sales Offices
Africa	$	18,242	$	3,196	$	21,438	$	9,047
Europe	3,421		687		4,108		1,452
Americas	3,481		560		4,041		(88)
Middle East and Australasia	4,176		1,325		5,501		2,327
Brazil	993		108		1,101		230
Total Regional Sales Offices	30,313		5,876		36,189		12,968
Central Services Organization	11		13		24		(2,786)
Total Segment Results	$	30,324	$	5,889	$	36,213	$	10,182

1.Subscription revenue is recognized over time.

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


	Three Months Ended December 31, 2022
	Subscription revenue (1)		Hardware and other revenue (2)		Total revenue		Segment Adjusted EBITDA
Regional Sales Offices
Africa	$	18,029	$	1,460	$	19,489	$	8,121
Europe	3,051		748		3,799		1,402
Americas	5,842		308		6,150		1,378
Middle East and Australasia	4,013		2,382		6,395		2,308
Brazil	1,516		440		1,956		614
Total Regional Sales Offices	32,451		5,338		37,789		13,823
Central Services Organization	18		—		18		(2,570)
Total Segment Results	$	32,469	$	5,338	$	37,807	$	11,253

1.Subscription revenue is recognized over time.

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



	Nine Months Ended December 31, 2021
	Subscription revenue (1)		Hardware and other revenue (2)		Total revenue		Segment Adjusted EBITDA
Regional Sales Offices
Africa	$	55,639	$	6,007	$	61,646	$	26,825
Europe	10,207		3,285		13,492		4,885
Americas	10,548		1,223		11,771		484
Middle East and Australasia	12,732		4,180		16,912		7,535
Brazil	3,134		156		3,290		835
Total Regional Sales Offices	92,260		14,851		107,111		40,564
Central Services Organization	39		35		74		(7,830)
Total Segment Results	$	92,299	$	14,886	$	107,185	$	32,734

1.Subscription revenue is recognized over time.

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



	Nine Months Ended December 31, 2022
	Subscription revenue (1)		Hardware and other revenue (2)		Total revenue		Segment Adjusted EBITDA
Regional Sales Offices
Africa	$	55,163	$	4,545	$	59,708	$	23,586
Europe	9,215		1,747		10,962		3,737
Americas	13,535		1,471		15,006		2,496
Middle East and Australasia	12,095		5,156		17,251		6,295
Brazil	4,065		1,077		5,142		1,457
Total Regional Sales Offices	94,073		13,996		108,069		37,571
Central Services Organization	59		—		59		(8,029)
Total Segment Results	$	94,132	$	13,996	$	108,128	$	29,542

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 December 31,				Nine Months Ended December 31,
	2021		2022		2021		2022
Segment Adjusted EBITDA	$	10,182	$	11,253	$	32,734	$	29,542
Corporate and consolidation entries	(2,359)		(2,267)		(7,209)		(7,219)
Operating lease costs (1)	(383)		(298)		(1,163)		(933)
Product development costs (2)	(328)		(280)		(1,026)		(972)
Depreciation and amortization	(3,584)		(4,012)		(10,931)		(11,208)
Impairment of long-lived assets	—		—		(28)		—
Stock-based compensation costs	(310)		(273)		(1,004)		(324)
Restructuring costs	(117)		(84)		(169)		(84)
Net (loss)/profit on sale of property, plant and equipment	—		(1)		43		32
Net foreign exchange gains/(losses)	126		(755)		110		743
Net interest expense	(75)		(272)		(294)		(8)
Non-recurring legal costs (3)	(530)		—		(530)		—
Acquisition-related costs	—		—		—		(784)
Income before income tax expense	$	2,622	$	3,011	$	10,533	$	8,785

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 income before income tax expense, 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 income before income tax expense, product development costs capitalized for segment reporting purposes need to be deducted.
3.Includes legal related costs for a non-recurring patent infringement matter for the three months ended December 31, 2021, that has been resolved.

No single customer accounted for 10% or more of the Company’s total revenue for the three months ended December 31, 2021 and 2022. No single customer accounted for 10% or more of the Company’s accounts receivable as of March 31, 2022 or December 31, 2022.

13. 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 December 31, 2022, there were 23,390,000 shares reserved for future issuance under the LTIP.

The total stock-based compensation expense recognized during the three months ended December 31, 2021 and 2022 was $0.3 million and $0.3 million, respectively. The total stock-based compensation expense recognized during the nine months ended December 31, 2021 and 2022 was $1.0 million and $0.3 million, respectively. The noted decrease during the nine months ended December 31, 2022 is mainly as a result of the resignation of the Group Chief Financial Officer during the first quarter of fiscal year 2023.

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, 2022	40,971,875	45
Granted	11,575,000	30
Exercised	(2,778,125)	19

Forfeited	(6,625,000)	43
Outstanding as of December 31, 2022	43,143,750	37	3.84

Vested and expected to vest as of December 31, 2022	41,531,250	37	3.82	431
Vested as of December 31, 2022	5,668,750	20	0.41	431

As of December 31, 2022, there was $2.7 million of unrecognized compensation cost related to unvested SARs. This amount is expected to be recognized over a weighted-average period of 4.06 years.

*U.S. currency amounts are based on a ZAR:USD exchange rate of R16.984 as of December 31, 2022.

Restricted share units granted under the LTIP

2 million RSUs were outstanding and unvested as of April 1, 2022. 1 million RSUs vested and were exercised during the first quarter of fiscal year 2023. 0.2 million RSUs were forfeited during the first quarter of fiscal year 2023, resulting in 0.8 million RSUs outstanding as of December 31, 2022. Management estimates forfeiture to be approximately 5%. The unrecognized compensation cost related to unvested RSUs as of December 31, 2022 was $0.03 million, which will be recognized over a weighted average period of 0.3 years, which is the same period as the weighted average remaining contractual term.

14. Debt

As of March 31, 2022 and December 31, 2022, debt comprised bank overdrafts of $5.6 million and $12.6 million, respectively.

Details of undrawn facilities are shown below:


	Interest rate	March 31, 2022		December 31, 2022
Undrawn borrowing facilities at floating rates include:
– Standard Bank Limited:
CFC Overdraft	SA Prime* less 1.2%	$	—	$	1,403
Overdraft	SA Prime* less 1.2%	—		—
Vehicle and asset finance	SA Prime* less 1.2%	587		—
Working capital facility	SA Prime* less 0.25%	544		—
– Nedbank Limited overdraft	SA Prime* less 2%	690		589
– Investec Bank Limited Facility:
General committed banking facility	SA Prime* less 1.5%	—		10,694
General uncommitted banking facility	Negotiable (overnight or daily rates)	—		10,000

		$	1,821	$	22,686

*South African prime interest rate

As of March 31, 2022 and December 31, 2022, the South African prime interest rate was 7.75% and 10.50% respectively. On January 26, 2023, the South African prime interest rate was increased to 10.75%. 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.

On June 29, 2022, the Company entered into a new credit facility agreement with Investec Bank Limited (“Investec”) for a 364-day renewable committed general credit facility of R350 million ($22 million at a USD/ZAR exchange rate of $1:ZAR 16.1546), (the “Committed Facility”) and an uncommitted general credit facility of $10 million (the “Uncommitted Facility”). As of December 31, 2022, $9.9 million of the facility was utilized.

Under the Committed Facility, the Company will pay a commitment fee charged at 30bps on any undrawn portion of the Committed Facility (plus VAT on such amount), calculated monthly and payable, free of deduction, monthly in arrears on the first business day of each month. The Uncommitted Facility is repayable on demand by Investec and a fee of 10bps per annum shall be charged on any undrawn portion of the Uncommitted Facility (plus VAT on such amount), calculated monthly and payable, free of deduction, monthly in arrears on the seventh business day of each month.

The loans under the Committed Facility bear interest at South African prime interest rate less 1.5% per annum and the loans under the Uncommitted Facility bear interest at overnight or daily negotiable rates, in each case which such interest shall accrue on all amounts outstanding under the Committed Facility or the Uncommitted Facility, as the case may be, payable monthly in arrears on the first business day of each month, or as otherwise specified in the Credit Agreement. Investec shall advise the Company of any changes to the applicable interest rate.

In November 2022, the Company concluded a second amendment to the credit agreement with Standard Bank of South Africa Limited, which entitles the Company to utilize a maximum amount of R70.0 million (the equivalent of $4.1 million as of December 31, 2022), in the form of a customer foreign currency account overdraft facility (the “CFC Overdraft Facility”). All other facilities under the facility letter with Standard Bank of South Africa Limited were replaced by the CFC Overdraft Facility. The CFC Overdraft Facility has no fixed renewal date and is repayable on demand. The CFC Overdraft Facility bears interest at the South African Prime interest rate less 1.2% per annum. As of December 31, 2022, $2.7 million of the facility was utilized.

The Company also terminated the suretyship securing the Customer’s indebtedness (among other parties) to Standard Bank of South Africa and signed by the Company and its subsidiaries; MiX Telematics Africa and MiX Telematics International Proprietary Limited. A new suretyship agreement was entered into providing that the Company and only one subsidiary being Mix Telematics International Proprietary Limited, binds themselves as surety(ies) and co-principal debtor(s) for the payment

when due of all the present and future debts of any kind of the Company and Mix Telematics International Proprietary Limited to the Standard Bank of South Africa. The security release letter also provides that Standard Bank’s claims to any security furnished by the the Company and its subsidiaries under the original suretyship agreement would be released upon signature of the new suretyship agreement.

15. 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, 2022 and December 31, 2022 was $1.7 million and $1.3 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.

The Commission’s lawyer recently approached the Tribunal to secure a pre-hearing date. The pre-hearing will be used to set a timetable for the further process towards a hearing in due course. The parties expect the pre-hearing (once held) to result in dates for a hearing being established (along with a timeline for the production of documents such as the Commission’s investigative record, discovery, exchange of factual witness statements, etc.). The Tribunal has not yet reverted on the pre-hearing date.

We cannot predict the timing of a resolution or the ultimate outcome of the matter; however, management, with the input of its external legal advisers, continues 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 December 31, 2022, we have not made any provisions for this matter as an estimate of the possible loss or range of loss could not be made, and we do not believe that an outflow of economic resources is probable.

16. Subsequent events

Other than the item below, the directors are not aware of any matter material or otherwise arising since December 31, 2022 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 December 31, 2022, a dividend of 4 South African cents per ordinary share and 1 South African Rand per ADS, which will be paid on March 2, 2023 to ADS holders on record as of the close of business on February 17, 2023.

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.

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 valued-added resellers 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 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.

Recent Developments

MiX Telematics North America, one of our wholly-owned subsidiaries, acquired Trimble’s Field Service Management business (“FSM”) in North America on September 2, 2022 (the “FSM Acquisition”).

FSM’s North American operations include the sale and support of telemetry and video solutions that enable back-office monitoring and visualization for fleet services management in a number of industries. The FSM Acquisition presents us with an opportunity to increase our scale in North America and to further diversify our North America business by expanding our presence in market verticals such as construction and last mile logistics.

All existing FSM subscription contracts and the related revenue streams were acquired by MiX Telematics North America.

The purchase consideration for the FSM comprised of the following:

•An upfront cash payment of $3.7 million on the Closing Date, based on an upfront fee of $300 per subscription contract where the FSM customer has purchased or agreed to purchase 4G hardware as of the day immediately prior to the Closing Date and where the contractual term expires on or after the 18-month anniversary of the Closing Date.

•Additional payments to be made in respect of the renewal of existing subscriptions as well as for new subscriptions entered into by customers (that were customers on the Closing Date) with MiX Telematics North America. Depending on the hardware requirements of these customers and specific contract terms, Trimble will be paid between $200 and $300 per subscription contract. The additional payments will be made approximately every three months, ending on March 2, 2024, and have been treated as contingent consideration. The initial fair value of the contingent consideration of $4.1 million was included in the purchase price for purposes of calculating goodwill and reflects an expectation of approximately a 75% retention rate. The estimated total consideration for additional payments should not exceed $6.4 million which assumes a 100% conversion rate, which we believe is unlikely.

The acquired business contributed revenues of $3.2 million and earnings of $0.6 million for the period from September 2, 2022 to December 31, 2022.

Inflation Risk

We believe that inflation may have a material effect on our business, financial condition or results of operations in the current fiscal year. Current economic projections remain uncertain as a result of the sudden and sharp surge in global inflation mainly as a result of global supply chain constraints, rising fuel prices, global politics, sanctions and the impact thereof on global trade. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset these higher costs through price increases. Our inability to do so could harm our business, financial condition and results of operations. Refer to Part II Item 1A. “Risk Factors” for further information regarding inflation risk.

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 increased as a percentage of total revenue due to a decrease in hardware and other revenue. In the three months ended December 31, 2021 and 2022, subscription revenue represented 83.7% and 85.9%, respectively, of our total revenue. In the nine months ended December 31, 2021 and 2022, subscription revenue represented 86.1% and 87.1%, respectively, of our total revenue.

Subscribers

Subscribers represent the total number of discrete services we provide to customers at the end of the period.


	As of December 31,
	2021	2022
Subscribers	790,483	959,212

Net 35,800 subscribers were added by MiX Telematics North America, from the acquired FSM business.

Basis of Presentation and Key Components of Our Results of Operations

We manage 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 income before income tax expense excluding non-recurring legal costs, net interest expense, net foreign exchange gains/losses, net loss/profit on sale of property, plant and equipment, restructuring costs, stock-based compensation costs, impairment of long-lived assets, depreciation, amortization, operating lease costs, acquisition-related costs and corporate and consolidation entries. 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 and Gross Margin

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, on a straight-line basis, 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. Subscription revenue generates a higher gross profit margin than hardware and other revenue. 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 over the expected life of the contract taking account of expected extensions/renewals (unless the amortization period is 12 months or less). Commission capitalized that is attributable to hardware or installation is amortized in full at the time the related hardware, or installation, revenue is recognized. Advertising costs consist primarily of costs for print, radio, television and digital advertising, search engine optimization, promotions, public relations, customer events, tradeshows and sponsorships. We expense advertising costs as incurred. We plan to continue to invest in sales and marketing in order 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, 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, 2022, which we filed with the U.S. Securities and Exchange Commission (“SEC”) on June 14, 2022.

Taxes

During the three months ended December 31, 2021 and 2022, our effective tax rates were 76.0% and 7.4%, respectively, and during the nine months ended December 31, 2021 and 2022, our effective tax rates were 48.2% and 74.3%, 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 10. 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 statements of income data:


	Three Months Ended December 31,						Nine Months Ended December 31,
	2021			2022			2021			2022

	(In thousands)



Total revenue	$	36,213		$	37,807		$	107,185		$	108,128
Total cost of revenue	13,762			13,459			38,911			39,945
Gross profit	22,451			24,348			68,274			68,183
Sales and marketing	4,027			4,589			11,411			12,974
Administration and other	15,841			15,728			46,214			47,275
Income from operations	2,583			4,031			10,649			7,934
Other income/(expense)	114			(748)			178			859
Net interest expense	75			272			294			8
Income tax expense	1,992			223			5,073			6,525
Net income	$	630		$	2,788		$	5,460		$	2,260

Less: Net income attributable to non-controlling interest	—			—			—			—
Net income attributable to MiX Telematics Limited	$	630		$	2,788		$	5,460		$	2,260

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

	Three Months Ended December 31,						Nine Months Ended December 31,
	2021			2022			2021			2022
	(Percentage)
Total revenue	100.0		%	100.0		%	100.0		%	100.0		%
Total cost of revenue	38.0			35.6			36.3			36.9
Gross profit	62.0			64.4			63.7			63.1
Sales and marketing	11.1			12.1			10.6			12.0
Administration and other	43.7			41.6			43.1			43.7
Income from operations	7.1			10.7			9.9			7.3
Other income/(expense)	0.3			(2.0)			0.2			0.8
Net interest expense	0.2			0.7			0.3			—
Income tax expense	5.5			0.6			4.7			6.0
Net income	1.7			7.4			5.1			2.1

Less: Net income attributable to non-controlling interest	—			—			—			—
Net income attributable to MiX Telematics Limited	1.7			7.4			5.1			2.1

Results of Operations for the Three Months Ended December 31, 2021 and 2022

Revenue


	Three Months Ended December 31,
	2021		2022		% Change		% Change at constant currency
	(In thousands, except for percentages)
Subscription revenue	$	30,324	$	32,469	7.1	%	16.7	%
Hardware and other revenue	5,889		5,338		(9.4)	%	(1.1)	%
	$	36,213	$	37,807	4.4	%	13.8	%

Our total revenue increased by $1.6 million, or 4.4%, from the third quarter of fiscal year 2022. The principal factors affecting our revenue growth included:

•Subscription revenues increased by 7.1% to $32.5 million, compared to $30.3 million for the third quarter of fiscal year 2022. The FSM business acquired on September 2, 2022 contributed $2.3 million to the subscription revenue for the third quarter of fiscal year 2023. Subscription revenues represented 85.9% of total revenues during the third quarter of fiscal year 2023. Subscription revenues increased by 16.7% on a constant currency basis, year over year, of which 8.5% is attributable to the FSM business acquisition. During the third quarter of fiscal year 2023, our subscriber base grew by a net 44,600 subscribers, or 4.9%, mainly due to the Africa segment, with contributions across all solution categories, to over 959,000 subscribers at December 31, 2022, compared to the net growth of 20,300 subscribers during the third quarter of fiscal year 2022.

The majority of our revenues and subscription revenues are derived from currencies other than the U.S. Dollar. Accordingly, the strengthening of the U.S. Dollar against these currencies (in particular against the South African Rand) following continued currency volatility, has negatively impacted our revenue and subscription revenues reported in U.S. Dollars. Compared to the third quarter of fiscal year 2022, the South African Rand weakened by 14% against the U.S. Dollar. The Rand/U.S. Dollar exchange rate averaged R17.64 in the third quarter of fiscal year 2023 compared to an average of R15.42 during the third quarter of fiscal year 2022. The impact of translating foreign currencies to U.S. Dollars at the average exchange rates during the third quarter of fiscal year 2023 led to a 9.6% decrease in reported U.S. Dollar subscription revenues.

•Hardware and other revenue decreased by $0.6 million, or 9.4%, from the third quarter of fiscal year 2022. Hardware and other revenues decreased by 1.1% on a constant currency basis, year over year.

The impact of translating foreign currencies to U.S. Dollars at the average exchange rates during the third quarter of fiscal year 2023 led to a 9.4% decrease in reported U.S. Dollar revenues.

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


	Three Months Ended December 31,
	2021		2022		2021		2022		2021		2022
	(In thousands)
	Total Revenue				Subscription Revenue				Hardware and Other Revenue
Africa	$	21,438	$	19,489	$	18,242	$	18,029	$	3,196	$	1,460
Americas	4,041		6,150		3,481		5,842		560		308
Europe	4,108		3,799		3,421		3,051		687		748
Middle East and Australasia	5,501		6,395		4,176		4,013		1,325		2,382
Brazil	1,101		1,956		993		1,516		108		440
CSO	24		18		11		18		13		—
Total	$	36,213	$	37,807	$	30,324	$	32,469	$	5,889	$	5,338

In the Africa segment, subscription revenue decreased by $0.2 million, or 1.2%. On a constant currency basis, the increase in subscription revenue was 12.3%, as a result of a 21.7% increase in subscribers since January 1, 2022. Hardware and other revenue decreased by 54.3%. Total revenue decreased by $1.9 million, or 9.1%. Total revenue increased by 3.5% on a constant currency basis.

In the Americas segment, subscription revenue increased by $2.4 million, or 67.8%. The FSM business acquired on September 2, 2022 reported subscription revenue of $2.3 million during the quarter which contributed to the subscription revenue increase. Hardware and other revenue decreased by 45.0%. Total revenue increased by $2.1 million, or 52.2%.

In the Europe segment, subscription revenue declined by $0.4 million, or 10.8%. On a constant currency basis, subscription revenue decreased by 2.1%. Subscribers decreased by 1.0% since January 1, 2022. Total revenue decreased by $0.3 million, or 7.5%, due to a decrease in subscription revenues of $0.4 million compared to the third quarter of fiscal year 2022. Total revenue increased by 1.6% on a constant currency basis.

In the Middle East and Australasia segment, subscription revenue decreased by $0.2 million, or 3.9%. On a constant currency basis, subscription revenue increased by 2.2%, as a result of a 3.4% increase in subscribers since January 1, 2022. Hardware and other revenue increased by $1.1 million, or 79.8%. Total revenue increased by $0.9 million, or 16.3%. Total revenue in constant currency increased by 23.5%.

In the Brazil segment, subscription revenue increased by $0.5 million, or 52.7%. On a constant currency basis, subscription revenue increased by 43.1%. Subscribers increased by 17.1% since January 1, 2022. Hardware and other revenue increased by $0.3 million. Total revenue increased by $0.9 million, or 77.7%. On a constant currency basis, total revenue increased by 66.8%.

Cost of Revenue and Gross Margin


	Three Months Ended December 31,
	2021		2022
	(In thousands, except for percentages)




Cost of revenue - subscription	$	8,869	$	9,864
Cost of revenue - hardware and other	4,893		3,595

Gross profit	$	22,451	$	24,348
Gross profit margin	62.0%		64.4%
Gross profit margin - subscription	70.8%		69.6%
Gross profit margin - hardware and other	16.9%		32.7%

Compared to an increase in total revenue of $1.6 million, or 4.4%, cost of revenues decreased by $0.3 million, or 2.2%, from the third quarter of fiscal year 2022. This resulted in a higher gross profit margin of 64.4% in the third quarter of fiscal year 2023 compared to 62.0% in the third quarter of fiscal year 2022.

Subscription revenue, which generates a higher gross profit margin than hardware and other revenue, contributed 85.9% of total revenue in the third quarter of fiscal year 2023 compared to 83.7% in the third quarter of fiscal year 2022. The subscription revenue margin during the third quarter of fiscal year 2023 was 69.6%, compared to 70.8% for the third quarter of fiscal year 2022.

During the third quarter of fiscal year 2023, hardware and other margins were higher than in the third quarter of fiscal year 2022, mainly due to the geographical sales mix and the distribution channels.

Sales and Marketing


	Three Months Ended December 31,
	2021			2022
	(In thousands, except for percentages)



Sales and marketing	$	4,027		$	4,589
As a percentage of revenue	11.1		%	12.1		%

Sales and marketing costs increased by $0.6 million, or 14.0%, from the third quarter of fiscal year 2022 to the third quarter of fiscal year 2023 against a 4.4% increase in total revenue. The increase in the third quarter of fiscal year 2023 was primarily as a result of increases of $0.4 million in employee costs and $0.1 million in travel costs and an increase of $0.1 million in advertising costs. It should be noted that the FSM business contributed $0.1 million of the total sales and marketing costs for the third quarter of fiscal year 2023.

In the third quarter of fiscal year 2023, sales and marketing costs represented 12.1% of revenue compared to 11.1% of revenue in the third quarter of fiscal year 2022.

Administration and Other Expenses


	Three Months Ended December 31,
	2021			2022
	(In thousands, except for percentages)



Administration and other	$	15,841		$	15,728
As a percentage of revenue	43.7		%	41.6		%

Administration and other expenses decreased by $0.1 million, or 0.7%, from the third quarter of fiscal year 2022 to the third quarter of fiscal year 2023.

The FSM business contributed a $1.0 million increase in costs (mainly employee costs). The costs from the business acquired were offset by a decrease of $0.3 million in other employee costs, a decrease of $0.2 million in bonuses, $0.4 million saving in professional fees due to non-recurring legal related costs incurred during the third quarter of fiscal year 2022 and other decreases of $0.2 million, none of which were individually significant.

Taxation


	Three Months Ended December 31,
	2021			2022
	(In thousands, except for percentages)


Income tax expense	$	1,992		$	223
Effective tax rate	76.0		%	7.4		%

Taxation expense decreased by $1.8 million. During the third quarter of fiscal year 2023, net income included a net foreign exchange loss of $0.8 million before tax and a $1.3 million credit from the income tax effect of net foreign exchange losses (which includes a $1.1 million deferred tax credit on a U.S. Dollar intercompany loan between MiX Telematics and MiX Telematics Investments Proprietary Limited (“MiX Investments”), one of our wholly-owned subsidiaries, as well as a

$0.2 million deferred tax credit on other foreign exchange losses). During the third quarter of fiscal year 2022, net income included a net foreign exchange gain of $0.1 million before tax and a $1.1 million charge from the income tax effect of net foreign exchange gains, which relates to the deferred tax charge on a U.S. Dollar intercompany loan between MiX Telematics and MiX Investments.

Adjusted effective tax rate, a non-GAAP measure which excludes the impact of net foreign exchange losses and gains net of tax and acquisition-related costs, is the tax rate used in determining adjusted net income below. Adjusted effective tax rate was 39.6% in the third quarter of fiscal year 2023 as compared to 35.5% in the third quarter of fiscal year 2022. Refer to the non-GAAP section below for the reconciliation of adjusted effective tax rate.

Results of Operations for the Nine Months Ended December 31, 2021 and 2022

Revenue


	Nine Months Ended December 31,
	2021		2022		% Change		% Change at constant currency
	(In thousands, except for percentages)
Subscription revenue	$	92,299	$	94,132	2.0	%	11.2	%
Hardware and other revenue	14,886		13,996		(6.0)	%	1.1	%
	$	107,185	$	108,128	0.9	%	9.8	%

Our total revenue increased by $0.9 million, or 0.9%, from the first nine months of fiscal year 2022. The principal factors affecting our revenue increase included:

•Subscription revenues increased by 2.0% to $94.1 million, compared to $92.3 million for the first nine months of fiscal year 2022. The FSM business acquired on September 2, 2022 contributed $3.2 million to the subscription revenue for the first nine months of fiscal year 2023. Subscription revenues represented 87.1% of total revenues during the first nine months of fiscal year 2023. Subscription revenues increased by 11.2% on a constant currency basis, year over year. From March 31, 2022 to December 31, 2022, our subscriber base grew by a net 144,000 subscribers to over 959,000 subscribers at December 31, 2022, compared to the net growth of 45,800 subscribers during the first nine months of fiscal year 2022. The group reported net organic subscriber growth of 108,200 subscribers with contributions across all solution categories. Net 35,800 subscribers were added by MiX Telematics North America, from the acquired FSM business.

The majority of our revenues and subscription revenues are derived from currencies other than the U.S. Dollar. Accordingly, the strengthening of the U.S. Dollar against these currencies (in particular against the South African Rand) following continued currency volatility, has negatively impacted our revenue and subscription revenues reported in U.S. Dollars. Compared to the first nine months of fiscal year 2022, the South African Rand weakened by 13.6% against the U.S. Dollar. The Rand/U.S. Dollar exchange rate averaged R16.73 in the current nine-month period compared to an average of R14.73 during the first nine months of fiscal year 2022. The impact of translating foreign currencies to U.S. Dollars at the average exchange rates during the first nine months of fiscal year 2023 led to a 9.2% decrease in reported U.S. Dollar subscription revenues.

•Hardware and other revenue decreased by $0.9 million, or 6.0%, from the first nine months of fiscal year 2022. Hardware and other revenues increased by 1.1% on a constant currency basis, year over year.

The impact of translating foreign currencies to U.S. Dollars at the average exchange rates during the first nine months of fiscal year 2023 led to an 8.9% decrease in reported U.S. Dollar revenues.

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


	Nine Months Ended December 31,
	2021		2022		2021		2022		2021		2022
	(In thousands)
	Total Revenue				Subscription Revenue				Hardware and Other Revenue
Africa	$	61,646	$	59,708	$	55,639	$	55,163	$	6,007	$	4,545
Americas	11,771		15,006		10,548		13,535		1,223		1,471
Europe	13,492		10,962		10,207		9,215		3,285		1,747
Middle East and Australasia	16,912		17,251		12,732		12,095		4,180		5,156
Brazil	3,290		5,142		3,134		4,065		156		1,077
CSO	74		59		39		59		35		—
Total	$	107,185	$	108,128	$	92,299	$	94,132	$	14,886	$	13,996

In the Africa segment, subscription revenue decreased by $0.5 million, or 0.9%. On a constant currency basis, the increase in subscription revenue was 11.9%, as a result of a 21.7% increase in subscribers since January 1, 2022. Hardware and other revenue decreased by $1.5 million, or 24.3%. Total revenue decreased by 3.1%. On a constant currency basis, the total revenue increase was 9.3%.

In the Americas segment, subscription revenue increased by $3.0 million, or 28.3%. The FSM business acquired on September 2, 2022 reported subscription revenue of $3.2 million during the nine months period, which was the primary reason for the subscription revenue increase. The FSM business acquired increased the segments subscriber base by 98.8%. Hardware and other revenue increased by $0.2 million, or 20.3%. Total revenue increased by $3.2 million, or 27.5%.

In the Europe segment, subscription revenue decreased by $1.0 million, or 9.7%. On a constant currency basis, the decrease in subscription revenue was 0.2% as a result of a 1.0% decrease in subscribers since January 1, 2022. Total revenue decreased by $2.5 million, or 18.8%, following a decrease in hardware and other revenues of $1.5 million or 46.8% compared to the first nine months of fiscal year 2022. Total revenue decreased by 10.0% on a constant currency basis.

Subscription revenue in the Middle East and Australasia segment decreased by $0.6 million or 5.0%. On a constant currency basis, subscription revenue was consistent with the prior period, despite a 3.4% increase in subscribers since January 1, 2022. Hardware and other revenue increased by $1.0 million, or 23.3%. Total revenue increased by $0.3 million, or 2.0%. Total revenue in constant currency increased by 7.6%.

In the Brazil segment, subscription revenue increased by $0.9 million, or 29.7%. On a constant currency basis, subscription revenue increased by 24.1%. The increase was mainly due to an increase in subscribers of 17.1% since January 1, 2022. Total revenue increased by $1.9 million, or 56.3%. On a constant currency basis, total revenue increased by 49.5%.

Cost of Revenue


	Nine Months Ended December 31,
	2021			2022
	(In thousands, except for percentages)




Cost of revenue - subscription	$	27,215		$	29,769
Cost of revenue - hardware and other	11,696			10,176

Gross profit	$	68,274		$	68,183
Gross profit margin	63.7		%	63.1		%
Gross profit margin - subscription	70.5		%	68.4		%
Gross profit margin - hardware and other	21.4		%	27.3		%

Compared to an increase in total revenue of $0.9 million, or 0.9%, cost of revenues increased by $1.0 million, or 2.7%, from the first nine months of fiscal year 2022. This together with lower subscription revenue margins resulted in a lower gross

profit margin of 63.1% in the first nine months of fiscal year 2023 compared to 63.7% in the first nine months of fiscal year 2022.

Subscription revenue, which generates a higher gross profit margin than hardware and other revenue, contributed 87.1% of total revenue in the first nine months of fiscal year 2023 compared to 86.1% in the first nine months of fiscal year 2022. The subscription revenue margin during the first nine months of fiscal year 2023 was 68.4%, compared to 70.5% for the first nine months of fiscal year 2022.

During the first nine months of fiscal year 2023, hardware and other margins were 27.3% compared to 21.4% in the first nine months of fiscal year 2022.

Sales and Marketing


	Nine Months Ended December 31,
	2021			2022
	(In thousands, except for percentages)



Sales and marketing	$	11,411		$	12,974
As a percentage of revenue	10.6		%	12.0		%

Sales and marketing costs increased by $1.6 million, or 13.7%, from the first nine months of fiscal year 2022 to the first nine months of fiscal year 2023 against a $0.9 million, or 0.9%, increase in total revenue. The increase in the first nine months of fiscal year 2023 was primarily as a result of increases of $0.8 million in employee costs, $0.5 million in travel costs and $0.1 million in advertising costs. It should be noted that the FSM business contributed $0.1 million of the total sales and marketing costs the first nine months of fiscal year 2023.

In the first nine months of fiscal year 2023, sales and marketing costs represented 12.0% of revenue compared to 10.6% of revenue in the first nine of fiscal year 2022.

Administration and Other Expenses


	Nine Months Ended December 31,
	2021			2022
	(In thousands, except for percentages)



Administration and other	$	46,214		$	47,275
As a percentage of revenue	43.1		%	43.7		%

Administration and other expenses increased by $1.1 million, or 2.3%, from the first nine months of fiscal year 2022 to the first nine months of fiscal year 2023.

The increase mainly relates to $1.6 million contributed by the FSM business (mainly employee costs), and increases of $0.4 million in professional fees and $0.3 million in travel costs, partially offset by a decrease of $1.2 million in other employee costs.

Taxation


	Nine Months Ended December 31,
	2021			2022
	(In thousands, except for percentages)


Income tax expense	$	5,073		$	6,525
Effective tax rate	48.2		%	74.3		%

Taxation expense increased by $1.5 million. In the first nine months of fiscal year 2023, the income tax expense included a foreign exchange gain of $0.7 million before tax and a $2.8 million charge from the income tax effect of net foreign exchange gains (which includes a $2.6 million deferred tax charge on a U.S. Dollar intercompany loan between MiX Telematics and MiX Investments, as well as a $0.2 million deferred tax charge on other foreign exchange gains). During the first nine months of fiscal year 2022, net income included a net foreign exchange gain of $0.1 million before tax and a $1.3 million deferred tax charge on a U.S. Dollar intercompany loan between MiX Telematics and MiX Investments.

Adjusted effective tax rate, a non-GAAP measure which excludes the impact of net foreign exchange losses and gains net of tax and acquisition-related costs, is the tax rate used in determining adjusted net income below. Adjusted effective tax rate was 44.4% in the first nine months of fiscal year 2023 as compared to 35.1% in the first nine months of fiscal year 2022. Refer to the non-GAAP section below for the reconciliation of adjusted effective tax rate.

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, adjusted net income, adjusted net income per share, adjusted effective tax rate, free cash flow 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 net income before income taxes, net interest expense, net foreign exchange gains/losses, depreciation of property, plant 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, net loss/profit on sale of property, plant and equipment, stock-based compensation costs, impairment of long-lived assets, restructuring costs, non-recurring legal costs and acquisition-related costs. 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 our 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 December 31,						Nine Months Ended December 31,
	2021			2022			2021			2022
	(In thousands)

Net income	$	630		$	2,788		$	5,460		$	2,260
Plus: Income tax expense	1,992			223			5,073			6,525
Plus: Net interest expense	75			272			294			8
(Less)/plus: Foreign exchange (gains)/losses	(126)			755			(110)			(743)
Plus: Depreciation (1)	2,621			2,419			7,965			7,216
Plus: Amortization (2)	963			1,593			2,966			3,992
Plus: Impairment of long-lived assets	—			—			28			—
Plus: Stock-based compensation costs	310			273			1,004			324


Plus/(less): Net loss/(profit) on sale of property, plant and equipment	—			1			(43)			(32)

Plus: Restructuring costs	117			84			169			84
Plus: Non-recurring legal costs (3)	530			—			530			—

Plus: Acquisition-related costs	—			—			—			784
Adjusted EBITDA	$	7,112		$	8,408		$	23,336		$	20,418
Adjusted EBITDA margin	19.6		%	22.2		%	21.8		%	18.9		%

(1) Includes depreciation of owned assets (including in-vehicle devices).

(2) Includes amortization of intangible assets (including intangible assets identified as part of a business combination).

(3) Includes legal related costs for a non-recurring patent infringement matter for the three months ended December 31, 2021, that has been resolved.

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.

Adjusted Net Income

Adjusted net income is defined as net income excluding net foreign exchange gains/losses and acquisition-related costs, net of tax.

We have included adjusted net income 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 and acquisition-related costs, net of tax and associated tax consequences, from earnings. Accordingly, we believe that adjusted net income provides useful information to investors and others in understanding and evaluating our operating results.


Reconciliation of net income to adjusted net income
	Three Months Ended December 31,				Nine Months Ended December 31,
	2021		2022		2021		2022
	(In thousands)

Net income	$	630	$	2,788	$	5,460	$	2,260
Net foreign exchange (gains)/losses	(126)		755		(110)		(743)

Income tax effect of net foreign exchange gains/(losses)	1,107		(1,267)		1,417		2,792


Acquisition-related costs	—		—		—		784
Income tax effect on acquisition-related costs	—		—		—		(182)
Adjusted net income	$	1,611	$	2,276	$	6,767	$	4,911

Basic and Diluted Adjusted Net Income Per Share

Basic and diluted adjusted net income per share is defined as adjusted net income divided by the weighted average number of ordinary shares in issue during the period.

We have included adjusted 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 and acquisition-related costs, net of tax and associated tax consequences, from earnings. Accordingly, we believe that adjusted net income per share provides useful information to investors and others in understanding and evaluating our operating results.


Reconciliation of net income to basic and diluted adjusted net income per ordinary share
	Three Months Ended December 31,				Nine Months Ended December 31,
	2021		2022		2021		2022
	(In thousands)

Net income	$	630	$	2,788	$	5,460	$	2,260
Net foreign exchange (gains)/losses	(126)		755		(110)		(743)

Income tax effect of net foreign exchange gains/(losses)	1,107		(1,267)		1,417		2,792


Acquisition-related costs	—		—		—		784
Income tax effect of acquisition-related costs	—		—		—		(182)
Adjusted net income	$	1,611	$	2,276	$	6,767	$	4,911

Weighted average number of ordinary shares in issue
Basic (’000)	552,452		552,865		552,234		552,148
Adjusted for:
– potentially dilutive effect of stock appreciation rights	10,571		2,249		11,397		2,873
– potentially dilutive effect of restricted share units	1,557		697		1,445		1,026
Diluted (’000)	564,580		555,811		565,076		556,047

Net income per ordinary share – basic	$	0.001	$	0.005	$	0.010	$	0.004
Effect of net foreign exchange (gains)/losses	#		0.001		#		(0.001)
Income tax effect of net foreign exchange gains/(losses)	0.002		(0.002)		0.003		0.005


Acquisition-related costs	—		—		—		0.001
Income tax effect of acquisition-related costs	—		—		—		#
Adjusted net income per ordinary share – basic	$	0.003	$	0.004	$	0.012	$	0.009

Net income per ordinary share – diluted	$	0.001	$	0.005	$	0.010	$	0.004
Effect of net foreign exchange (gains)/losses	#		0.001		#		(0.001)
Income tax effect of net foreign exchange gains/(losses)	0.002		(0.002)		0.003		0.005


Acquisition-related costs	—		—		—		0.001
Income tax effect of acquisition-related costs	—		—		—		#
Adjusted net income per ordinary share – diluted	$	0.003	$	0.004	$	0.012	$	0.009

# Amount less than $0.001

Adjusted Effective Tax Rate

The adjusted effective tax rate is defined as income tax expense excluding the income tax effect of net foreign exchange gains/losses and acquisition-related costs divided by income before income tax expense excluding net foreign exchange gains/losses and acquisition-related costs.

We have included adjusted effective tax rate 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 and acquisition-related costs, and associated tax consequences, from our effective tax rate.


Reconciliation of effective tax rate to adjusted effective tax rate
	Three Months Ended December 31,						Nine Months Ended December 31,
	2021			2022			2021			2022
	(In thousands)

Income before income tax expense	$	2,622		$	3,011		$	10,533		$	8,785
Net foreign exchange (gains)/losses	(126)			755			(110)			(743)

Acquisition-related costs	—			—			—			784
Income before income tax expense excluding net foreign exchange (gains)/losses and acquisition-related costs	$	2,496		$	3,766		$	10,423		$	8,826

Income tax expense	$	(1,992)		$	(223)		$	(5,073)		$	(6,525)
Income tax effect of net foreign exchange gains/(losses)	1,107			(1,267)			1,417			2,792

Income tax effect of acquisition-related costs	—			—			—			(182)
Income tax expense excluding income tax effect of net foreign exchange gains/(losses) and acquisition-related costs	$	(885)		$	(1,490)		$	(3,656)		$	(3,915)

Effective tax rate	76.0		%	7.4		%	48.2		%	74.3		%

Adjusted effective tax rate	35.5		%	39.6		%	35.1		%	44.4		%

Free Cash Flow

Free cash flow is determined as net cash provided by operating activities less capital expenditure for investing activities. We believe that free cash flow provides useful information to investors and others in understanding and evaluating our cash flows as it provides detail of the amount of cash we generate or utilize after accounting for all capital expenditures including investments in in-vehicle devices.

The following table (in thousands) reconciles net cash provided by operating activities to free cash flow for the periods shown:


	Three Months Ended December 31,			Nine Months Ended December 31,
		2021		2022		2021		2022
		(In thousands)

Net cash provided by operating activities		$	3,995	$	11,213	$	14,660	$	12,795
Less: Capital expenditure payments		(5,534)		(5,335)		(18,958)		(19,395)
Free cash flow		$	(1,539)	$	5,878	$	(4,298)	$	(6,600)

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 December 31,						Nine Months Ended December 31,
	2021		2022		% Change			2021		2022		% Change
	(In thousands, except for percentages)
Subscription revenue as reported	$	30,324	$	32,469	7.1	%		$	92,299	$	94,132	2.0	%
Conversion impact of U.S. Dollar/other currencies	—		2,918		9.6	%		—		8,504		9.2	%
Subscription revenue on a constant currency basis	$	30,324	$	35,387	16.7	%		$	92,299	$	102,636	11.2	%

Hardware and Other Revenue


	Three Months Ended December 31,						Nine Months Ended December 31,
	2021		2022		% Change			2021		2022		% Change
	(In thousands, except for percentages)
Hardware and other revenue as reported	$	5,889	$	5,338	(9.4)	%		$	14,886	$	13,996	(6.0)	%
Conversion impact of U.S. Dollar/other currencies	—		485		8.3	%		—		1,057		7.1	%
Hardware and other revenue on a constant currency basis	$	5,889	$	5,823	(1.1)	%		$	14,886	$	15,053	1.1	%

Total Revenue


	Three Months Ended December 31,						Nine Months Ended December 31,
	2021		2022		% Change			2021		2022		% Change
	(In thousands, except for percentages)
Total revenue as reported	$	36,213	$	37,807	4.4	%		$	107,185	$	108,128	0.9	%
Conversion impact of U.S. Dollar/other currencies	—		3,403		9.4	%		—		9,561		8.9	%
Total revenue on a constant currency basis	$	36,213	$	41,210	13.8	%		$	107,185	$	117,689	9.8	%

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with GAAP. Other than the estimates related to fair values of assets acquired and liabilities assumed from the business acquired and the fair value measurement of contingent consideration, management believes that there have not been any other significant changes in our critical accounting policies and estimates during the third quarter of fiscal year 2023 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, 2022, which we filed with the SEC on June 14, 2022.

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 nine months ended December 31, 2021 and 2022:


	Nine Months Ended December 31,
	2021		2022
	(In thousands)
Net cash provided by operating activities	$	14,660	$	12,795
Net cash used in investing activities	(18,904)		(23,063)
Net cash (used in)/from financing activities	(4,619)		3,500
Net decrease in cash and cash equivalents, and restricted cash	(8,863)		(6,768)
Cash and cash equivalents, and restricted cash at beginning of the period	46,343		34,719
Effect of exchange rate changes on cash and cash equivalents, and restricted cash	(782)		(2,142)
Cash and cash equivalents, and restricted cash at the end of the period	$	36,698	$	25,809

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, the MiX Telematics Limited Board approved a share repurchase program of up to R270 million (equivalent of $15.9 million as of December 31, 2022) under which we may repurchase our ordinary shares, including ADSs. On December 3, 2021, the Board approved an increase to the share repurchase program under which the Company may repurchase ordinary shares, including ADSs. Post this increase, and after giving effect to shares already purchased under the program as at December 2, 2021, the Company could repurchase additional shares with a cumulative value of R160 million ($10.0 million). The total value of the whole share repurchase program post the December 3, 2021 increase is R396.5 million ($24.9 million). During fiscal year 2022, shares with a value of R44.7 million (equivalent of $2.6 million as of December 31, 2022) were repurchased under the share repurchase program.

During the three months ended September 30, 2022, shares with a value of R1.7 million (equivalent of $0.1 million as of December 31, 2022) were repurchased under the share repurchase program. No shares were repurchased during the three months ended December 31, 2022. Additional shares to the value of R113.5 million (equivalent of $6.7 million as of December 31, 2022) may still be repurchased.

We expect any repurchases under this share repurchase program to be funded out of existing cash resources or borrowing facilities.

Operating Activities

Net cash provided by operating activities during the nine months ended December 31, 2021 primarily consisted of our cash generated from operations of $18.6 million, net interest received of $0.04 million, offset by taxes paid of $4.0 million.

Net cash provided by operating activities during the nine months ended December 31, 2022 primarily consisted of our cash generated from operations of $13.6 million, offset by net interest paid of $0.01 million and taxes paid of $0.7 million.

Net cash provided by operating activities decreased from $14.7 million during the nine months ended December 31, 2021 to $12.8 million during the nine months ended December 31, 2022. This is primarily attributable to a decrease in cash generated from operations of $5.1 million, decreased net interest received of $0.05 million offset by the

decreased taxation paid of $3.3 million. The cash generated by operations decrease is primarily as a result of a decrease in net income of $3.2 million, non-cash foreign exchange gains of $0.6 million, an increase in capitalized commissions of $2.7 million due to higher revenues, partially offset by an improvement in working capital management of $0.4 million (specifically a decrease in accounts receivables of $3.3 million, an increase in accrued expenses of $0.9 million, positive change in foreign currency translation adjustments of $0.2 million and a decrease in prepaid expenses and other current assets of $0.7 million, partially offset by a decrease in accounts payables of $3.6 million and an increase in inventories of $1.1 million).

Investing Activities

Net cash used in investing activities in the nine months ended December 31, 2021 was $18.9 million. Net cash used in investing activities during the nine months ended December 31, 2021 primarily consisted of capital expenditures of $19.0 million, offset by proceeds from the sale of property, plant and equipment of $0.1 million. Capital expenditures during the nine months ended December 31, 2021 included purchases of intangible assets of $4.1 million and cash paid to purchase property and equipment of $14.9 million, which included in-vehicle devices of $13.4 million.

Net cash used in investing activities in the nine months ended December 31, 2022 increased to $23.1 million from $18.9 million in the nine months ended December 31, 2021. Net cash used in investing activities during the nine months ended December 31, 2022 primarily consisted of capital expenditures of $19.4 million, cash paid for business combination of $3.7 million, offset by proceeds from the sale of property, plant and equipment of $0.1 million. Capital expenditures during the nine months ended December 31, 2022 included purchases of intangible assets of $4.1 million and cash paid to purchase property and equipment of $15.3 million, which included in-vehicle devices of $14.5 million.

Financing Activities

In the nine months ended December 31, 2021, the cash used in financing activities of $4.6 million includes dividends paid of $4.5 million and ordinary shares repurchased of $0.8 million, offset by $0.7 million from facilities utilized.

In the nine months ended December 31, 2022, the cash from financing activities of $3.5 million includes $7.6 million from facilities utilized for working capital purposes in the Africa segment, offset by dividends paid of $4.0 million and shares repurchased of $0.1 million.

Credit Facilities

As of December 31, 2022, our principal sources of liquidity were net cash balances of $12.4 million (consisting of cash and cash equivalents of $25.0 million less short-term debt (bank overdraft) of $12.6 million) and an unutilized borrowing capacity of $22.7 million available through our credit facilities. As of December 31, 2022, our principal sources of credit are our facilities with Standard Bank Limited, Nedbank Limited and Investec Bank Limited.

Up until November 14, 2022, we had the following facilities under the facility letter with Standard Bank of South Africa Limited, an overdraft facility of R64.0 million (the equivalent of $3.8 million as of December 31, 2022), a working capital facility of R25.0 million (the equivalent of $1.5 million as of December 31, 2022) and a vehicle and asset finance facility of R8.5 million (the equivalent of $0.5 million as of December 31, 2022) that bore interest at South African Prime less 1.2% except for the working capital facility that bore interest at South African Prime less 0.25%.

On November 15, 2022, the Company concluded a second amendment to the credit agreement with Standard Bank of South Africa Limited, which entitles the Company to utilize a maximum amount of R70.0 million (the equivalent of $4.1 million as of December 31, 2022), in the form of a customer foreign currency account overdraft facility (the “CFC Overdraft Facility”). All other facilities under the facility letter with Standard Bank of South Africa Limited were replaced by the CFC Overdraft Facility. The CFC Overdraft Facility has no fixed renewal date and is repayable on demand. The CFC Overdraft Facility bears interest at the South African Prime interest rate less 1.2% per annum.

provides that Standard Bank’s claims to any security furnished by the the Company and its subsidiaries under the original suretyship agreement would be released upon signature of the new suretyship agreement.

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. As of December 31, 2022, $2.7 million of the facility was utilized.

As of December 31, 2022, our obligations under the CFC 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.

Our Investec credit facilities 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.

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

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 defined in Rules 13a - 15(e) and 15(d) - 15(e) under the Exchange Act) as of December 31, 2022. Based on that evaluation, we concluded that, as of such date, our disclosure controls and procedures were not effective as a result of a material weakness in our internal control over financial reporting that was disclosed in our Annual Report on Form 10-K for fiscal year ended March 31, 2022. The material weakness related to several deficiencies in the design and operating effectiveness of business process level controls in the areas of management review of income tax, consignment stock and capitalization of internally generated software costs at the Company’s Africa segment as a result of the lack of senior financial resources to appropriately supervise and execute control activities.

Remediation

As described in “Item 9A. Controls and Procedures” in Part II of our Annual Report for the fiscal year ended March 31, 2022, we started the implementation of the remediation plan to address the material weakness mentioned above. This plan includes:

•Investigating and understanding the root causes of the control weaknesses that resulted in the material weakness;

•Evaluating and redesigning, where applicable, management’s control descriptions to address the design and effectiveness of controls over income tax, consignment stock and capitalization of software costs;

•Reviewing, identifying and implementing process and system functionality and automation enhancements;

•Adopting formal onboarding and off boarding for staff in the finance functions;

•Training and cross-training staff in executing finance functional tasks and executing controls;

•Reviewing the accountability assigned for fulfilling finance tasks, remediation efforts and for executing controls; and

•Reviewing current retention and succession policies of key senior resources.

We have completed the restructuring of the finance function, have appointed personnel and have reinforced the procedures and controls of management review. Controls have been redesigned where required and the focus remains on improving the operational effectiveness of these controls. The material weakness will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are designed and operating effectively.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

We implemented a new ERP system in our Middle East operations in September 2021, in North America in April 2022 and in Australia and Europe in July 2022. In addition, we have acquired the FSM business in North America of Trimble Inc. and continued with the integration of the acquisition into the Americas segment.

We completed the roll out of the ERP system in our Brazil operations in January 2023. As part of the new ERP system implementations, certain internal controls over financial reporting have 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 with 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 control over financial reporting throughout fiscal year 2023.

Other than the implementation of the ERP system in North America, Australia and Europe, there were no material 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 December 31, 2022, 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 Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2022. Refer to “Part II. Item 1. Legal Proceedings” in our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2022 and “Part I. Item 3. Legal Proceedings” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2022 for additional information regarding legal proceedings.

Item 1A. Risk Factors

As of December 31, 2022, there have been no material changes in the risk factors previously disclosed. Our business is subject to numerous risks, a number of which are described under Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended March 31, 2022 and Part II, Item 1A. “Risk Factors” of our Q1 and Q2 2023 Form 10-Qs.

These risks should be carefully considered together with the other information set forth in this report, which could materially affect our business, financial condition and future results. The risks described under Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended March 31, 2022 and Part II, Item 1A. “Risk Factors” of our Q1 and Q2 2023 Form 10-Qs are not the only risks we face. Risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Purchases of equity securities by the issuer and affiliated purchasers

Fiscal 2023 purchases

During the first quarter of fiscal year 2023, there were no share repurchases. During the second quarter of fiscal year 2023, the following purchases were made under the share repurchase program:


Period	Total number of shares repurchased	Average price paid per share (1) R	Shares canceled under the share repurchase program	Total value of shares purchased as part of publicly announced program R’000	Maximum value of shares that may yet be purchased under the program R’000
Month
August 2022	328,228	5.33	—	1,749	113,534
	328,228	5.33	—	1,749	113,534

(1) Including transaction costs.

Table below shows the equivalent U.S Dollar amounts, converted at the average monthly exchange rate for the month of the purchase.


Period	Total number of shares repurchased	Average price paid per share (1) $	Shares canceled under the share repurchase program	Total value of shares purchased as part of publicly announced program $’000	Maximum value of shares that may yet be purchased under the program $’000
Month
August 2022	328,228	0.32	—	105	6,803
	328,228	0.32	—	105	6,803

(1) Including transaction costs.

Shares repurchased during the second quarter of fiscal year 2023 were delisted and form part of the authorized unissued share capital of the Company.

During the third quarter of fiscal year 2023, there were no share repurchases.

Item 6. Exhibits


Exhibit No.			Description



10.1			Second Amendment to the Facility Letter between the Company and the Bank, as lender, filed as Exhibit 10.1 with the Company’s Current Report on Form 8-K, filed on November 21, 2022, is incorporated by reference herein.
10.2			Security Release Letter relating to the Facility Letter by and between the Company, MiX Telematics Africa, MiX Telematics International, and the Bank filed as Exhibit 10.2 with the Company’s Current Report on Form 8-K, filed on November 21, 2022, is incorporated by reference herein.
10.3			Suretyship Agreement relating to the Facility Letter by and among the MiX Telematics Parties and the Bank filed as Exhibit 10.3 with the Company’s Current Report on Form 8-K, filed on November 21, 2022, is incorporated by reference herein.
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 SEC 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/ Paul Dell
			Paul Dell
			Chief Financial Officer

Date: February 9, 2023