MiX Telematics Limited
Q4 2018 Earnings Call Transcript

Published: 15 May 2018

[Operator:]

Good day and welcome to MiX Telematics Fiscal Fourth Quarter and Full Year 2018 Earnings Results Conference Call. Please note that today's call is being recorder. At this time, I'd like to turn the call over to Paul Dell, Interim Chief Financial Officer, please go-ahead sir.

[Paul Dell:]

Good day and welcome to MiX Telematics Earnings results call for the fourth quarter and fiscal year which ended on March 31, 2018. Today we will be discussing results announced by press release issued a few hours ago. I'm Paul Dell, Interim Chief Financial Officer and joining me on the call today is Stefan Joselowitz, who many of you know him Joss. He is President and Chief Executive Officer of MiX Telematics. During the call, we will also make statements relating to our business that may be considered forward-looking pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. For discussion of the material risks and other important factors that could affect our results, please refer to those contained in our Form 20-F and other filings with the Securities and Exchange Commission available on our website at www.mixtelematics.com under the Investor Relations tab. Furthermore, we will also be referring to certain non-IFRS financial measures. There is a reconciliation schedule detailing these results currently available in our press release, which is located on our website and filed with the Securities and Exchange Commission. With that, let me turn the call over to Joss.

[Stefan Joselowitz:]

Thanks Paul. I would like to thank you all for joining the call this morning. We're in fact reporting live from the Johannesburg stock exchange and we have just celebrated the 10th anniversary of our listing here. We were very pleased with our fourth quarter results which capsule another strong year for MiX. During fiscal 2018 we made significant progress towards achieving our long-term necessity with the end margin target of 30% plus. We expanded our margin by over 600 basis points to 25.8% which was driven by 19% subscription revenue growth on a constant currency basis. This performance was due to ongoing strength across the portfolio globally where we continue to benefit from growth in our premium paid subscriptions. Looking forward we remain well positioned to maintain the momentum and enhance our market position globally which is reflected in our strong initial fiscal 2019 guidance that Paul will walk through shortly. But let me first provide a high-level summary of our fourth quarter performance. Our subscription revenue of 374 million rand was up 19% year over year and 4.1% higher when compared to the third quarter of fiscal '18, both on a constant currency basis. We added over 12,000 net new subscribers increasing our total base to 677,000, our higher ARPU premium fee portfolio was the dominant contributor to this growth. In addition, adjusted EBITDA and margin reached 28.7% in Q4 up by the 600 basis points from 22.3% last year. Our results were supported by good execution from most of our geographies with the highlight being the performance from the United States operation. This broad-based momentum is bolstered by the following customer activity during Q4 which included a contract with [indiscernible] a leading oil services provider in the [Europe safeway-tended] vehicles, the majority of which will receive our ELD solution with the balance going to light-duty vehicles. We expect implementation to start in the coming weeks. In Europe we signed Wincanton, a leading transport and logistics provider and this represents the largest single one in United Kingdom outside of the bus and coach vertical. Wincanton will be installing our premium fleet solution including MiX Vision on close to 1,800 trucks. In Australia we signed a deal with a major multinational transport and logistics company to implement our premium fleet solution on their fleets of over 10,000 vehicles and as such in multiple countries to be done over the next three years. In South Africa we expanded with the current premium customer UnionTrans, to our enhanced truck in the service for over 1,000 elite vehicles. Additionally, Bakers Transport and other long-standing MiX customer will be adopting our expanded MiX Vision technology for several hundred of their vehicles. Our strength in Brazil continues with several new customers tracking over 1,000 subscribers in multiple industries including transportation, fuel services and public transport. Additionally, in Latin America we continue to expand by adding new distribution partners in Argentina, Chile and Peru. Finally, I am delighted to announce that the LafargeHolcim Group, one of the world’s leading suppliers of cement as well as downstream activities such as ready-MiX concrete and asphalt has selected us as their preferred level telematics partner. This is part of their strong focus on road side fleet and vision of zero harm. Together we’ll be working to improve driver safety and operating efficiency across one of the largest fleets in the world with an immediate target of 20,000 vehicles in 25 countries. Implementation has already begun, in more than 2,000 vehicles across eight countries with more to come during the course of the financial year. The fourth quarter marks a strong end to fiscal 2018 and some of the full year highlights included total subscription revenue growth of 19% on a constant currency basis which exceeded expectations as we added approximately 55,000 net new subscribers new during the year as of two thirds of which were added in the second half. In addition, our adjusted EBITDA margin increased to 25.8%, up from 19.6% last year, and was driven by our ability to continued leveraging investments made in the business. In addition, we were pleased to generate positive free cash flow of R15 million up to R230 million was invested in bundled in vehicle devices. From a regional perspective during fiscal 2018 we were pleased with the performance of our team in Africa, evidenced by the subscription revenue growth of 13% and adjusted EBITDA margins of 46% despite the challenging economy. As our largest business unit Africa continued to demonstrate the economies of scale that we believe should be achievable in all of our regional operations [growth] towards critical mass. The continued strong execution by our Americas team is highlighted by about 73% year-over-year growth in subscription revenue as well as adjusted EBITDA margin of 34.8%, significantly higher than the [indiscernible] 16.7% reported last year. In Brazil subscription revenue increased approximately 64% year-over-year as adjusted EBITDA margins grew to 30.8% up from 24.8%. At the top line our European business performed behind plan, with subscription revenues up 6% year-over-year on a reported and constant currency basis. That said achieved it well to adjusted cost base accordingly and adjusted EBITDA margins are up 430 basis points from the prior year. We’re confident in the ability of European operations to perform to plan going forward, based on existing top line including committed deals like Wincanton. In EMEA our business performed according to plan with subscription revenue up 6.9% year-on-year on a constant currency basis. It is worth noting that the rebound in the energy sector in this region has lagged that which we have seen in United States. Prior year restructuring helped achieve deliver healthy adjusted EBITDA margins to 38.3% up from 29.9% in the prior year. After years of investment in fiscal 2018 continues to grow the trend on those investments and posted meaningful acceleration in margins across all geographic regions. To summarize, we are well positioned to maintaining a momentum in fiscal 2019 and beyond as we continue to leverage its global reputation and benefit from strong subscription revenue growth and ongoing margin accretion. With that, let me turn back over to Paul to run through the detail of the portion of the full year.

[Paul Dell:]

Thanks Stefan. Now that you have walked through our fourth quarter and full year fiscal 2019 performance and recall that our reporting currency is the South African Rand for convenience, we have translated our results into US dollars both for the 2018 and 2017 period using the March 2018 spot rate. You can find these conversions in our press release. In addition, please note that our results are presented on an operating basis unless other noted. In the fourth quarter, total revenue came in at ZAR454 million ahead of guidance on an as reported and constant currency basis. Of this total subscription revenue of [ZAR334] million and a high end of our guidance on an as reported basis. Constant currency subscription revenues increased by 19.4% which exceeded our constant currency guidance range. The strong performance was due to the continued growth in our premium precustomer base across our geography and vertical markets as well as expansion in average revenue per EBITDA. Reported subscription revenue was lower than the third quarter of fiscal 2018 due to depreciation of the South African Rand in the fourth quarter of fiscal 2018 versus the third quarter. With the same exchange rate used in the third quarter of fiscal 2018 were used in the fourth quarter subscription revenue would have been ZAR391.6 million representing a constant currency increase of 4.1%. We ended the fourth quarter with 637,000 subscribers, an increase of 9% year-over-year as we added over 12,000 net subscribers in the quarter. Our gross profit margin in the fourth quarter was 65.3% compared to 57.7% from the prior year. The company's gross profit margin in fiscal 2018 includes high depreciation charges related to in-vehicle devices and used in some bundled fee contracts. These contracts generate higher ARPUs and in the long term are expected to result in an increase in gross profit margins as they go through contract renewal cycles. General and administrative expenses was 41.2% of total revenue, a significant decline from last year's $48.2 million and however our ongoing commitment to cost control and scale in the business. Our operating profit margin expanded by 590 basis points year-over-year to 16.3%. Recall that our general and administration costs include research and development costs not capitalized. For those of you interested to see how historical capitalization and development cost expense, we have provided a table in our earnings press release. To provide a business with additional information regarding our financial results, we disclosed adjusted EBITDA and adjusted EBITDA margin as one of adjusted profits for the period which are non-operating measures and we have provided a full reconciliation table in our press release. Fourth quarter adjusted EBITDA increased 49% to ZAR130 million compared to ZAR87 million last year. we'll record 28.7% of revenue. That’s over 600 basis points from 22.3% % of revenue loss occurred. The conference adjusted EBITDA margin of 28.7 expanded by 2.8% from the 25.9 the same reported in third quarter of fiscal 2018. Innovative hardware revenues and related gross profits, inputs contributed 1.2% to the quarter over quarter margin expansion. Operated profit for the period which includes the mid foreign exchange loss of ZAR1.2 million was ZAR64.3 million up from a profit of ZAR31.3 million in the same quarter a year ago. The comparative quarter included mid foreign exchange loss of approximately 1 million. Adjusted earnings for the quarter were approximately ZAR55 million or [Indiscernible] million last year. Earnings per diluted ordinary which is up from the ZAR30 million for [indiscernible] per share we posted a year ago. Turning to the balance sheet we ended the quarter with cash on cash equivalents of ZAR308 million up from 267 million at the end of last year. From a cash flow perspective, we generated a ZAR121 million in mid cash from operating activities and made a ZAR64 million investment to capital expenditures leading to positive free cash flow of ZAR58 million for the fourth quarter compared to positive free cash flow of ZAR51 million during the same period last year. To enter a quick summary of financial results with fiscal year 2018, total revenue was ZAR1,713,000 million subscription revenue was ZAR1,435,000 million and now represents 84% of our total revenue. Subscription revenue growth was 19% on a constant currency basis was driven by the addition of our 54,800 subscribers in the year as well as their expansion at average revenue per reader. Other revenue was ZAR378 million down 7% compared to the previous period primarily due to the ongoing transition to bundled contracts which is a positive for our business long-term. In terms of our sales and marketing cost we continue to aim towards the long-term target range of between 11% and 12% of revenue. During fiscal 2018 our sales and marketing cost represented to 10.8% of revenue compared to 11.8% of revenue in fiscal 2017. Fiscal 2018 administration and other costs were 42.6% of revenue compared to 46.9% in fiscal 2017. During fiscal 2018 adjusted EBITDA was ZAR442 million or 25.8% of total revenue and above our expectations, this is up from ZAR303 million or 19.6% last year. As Jeff mentioned in his remarks, we are very pleased with the steady improvements in our adjusted EBITDA margins during fiscal 2018 and expect the momentum to continue as we focus on scaling the business globally and maintain a focus on cost controls. Profit for the fiscal year with ZAR181 million compared to ZAR121 million last year, earnings per diluted orderly share were 0.32 South African compared to 0.19 South African last year. In the year solid trends profit for the period was $15.3 million or $0.67 unit sales per diluted American depository share compared to $10.3 million or $0.41 per diluted American depository share in fiscal 2017. Adjusted profit for the year was ZAR157 million compared to ZAR105 million. adjusted earnings per diluted orderly share was 0.27 South African and above our expectations compared to 0.17 South African last year. In U.S. dollar term the adjusted profit for the year was ZAR13.3 million or $0.58 per diluted American depository share compared to $8.9 million or $0.35 per diluted American depository share in fiscal 2017. From a brief cash flow expectation, we generated ZAR353 million in net cash from operating activities, and added ZAR238 investment to capital expenditures, which included ZAR230 million of in-vehicle device investments, up ZAR61 million from last year. Free cash flow was ZAR15 million for the full year compared to ZAR28 million in fiscal 2017. We are very pleased with our ability to generate meaningful free cash flow in fiscal 2018 while increasing investments and in in-vehicle devices due to increased demand for our bundled offerings. Now turning to our financial outlook. We entered fiscal 2019 with very good momentum as our pipeline of orders and opportunities continues to grow globally. As Joss mentioned we believe we can maintain the momentum and make further progress towards our longer-term target. In regards to expectations for fiscal 2019 we are targeting total revenue of ZAR1,844,000,000 at the midpoint of the guidance range and subscription revenue of ZAR1,606,000,000 million which is year-on-year growth of 42.25% at the midpoint of the guidance range on a constant currency basis. We believe we can continue our subscription revenue growth driven by the combination of adding new customers, further penetrating existing customers and improving overall ARPU by increasing the percentage of bundled deals as well as add on sales on top of our core solutions. During fiscal 2019 we are targeting adjusted EBITDA of ZAR525 million or a margin of 28.5% at the midpoint of the range on a constant currency basis up approximately 300 basis points compared to last year. This highlights our ability to achieve ongoing margin accretion as we progress towards achieving our long-term adjusted EBITDA target of 30% plus. In regards to adjusted diluted earnings per share for fiscal 2019 we expect to be [indiscernible] at the midpoint of the guidance range based on 592 million diluted ordinary share and an effective tax rate of between 28% to 31%. As we have discussed previously, our intention is to focus on annual target as this is how our management is focused. I do not wish to close deals from suboptimal terms in order to achieve quarterly objectives. This is most relevant as it relates to the hardware and other revenues line items in our profit and loss. The area of revenue where we have highest level of visibility and predictability is our subscription rating which as we have discussed was the largest fastest growing and highest margin component of our business. For the first quarter of 2019 we are targeting subscription revenue in the range of 339 million to 393 million which would represent year-over-year growth of 15.1% to 16.3% on a constant currency basis. We believe this is a strong initial outlook for fiscal year 2019 particularly against the strong performance in fiscal 2018. With that let me hand back to Joss.

[Stefan Joselowitz:]

Thanks Paul. In closing I’d like reiterate some key points from our remarks. Firstly, I’m very pleased with our fourth quarter and fiscal 2018 results and we have entered 2019 with strong momentum. We are well-positioned to maintain our trajectory in subscription revenue growth as well as margin accretion, given the great progress we have made during the year. We have an industry leading integrated telematics platform, our best product portfolio, ongoing traction in key verticals and geographies and are committed to sustained profitable growth. Given the ongoing strong pipeline of opportunities globally and my confidence in the team's ability to optimize the operating leverage from the businesses, I believe we’re well placed to achieve our goals. Our next topic, I’d like to extend my thanks to the global team for delivering a great set of results. With that we’ll turn the call over to the operator to begin the Q&A session.

[Operator:]

Thank you. [Operator Instructions] We’ll go first to Mike Walkley of Canaccord.

[Mike Walkley:]

So, Josh my first question is just kind of high level -- just on a high level, with your strong balance sheet and the improving share price, how are you in the board viewing longer term growth strategies such as maybe M&A, or maybe now that you’re centering cash flow, increasing dividend, or even increasing buyback just wondering what you’re thinking on a high-level strategy basis?

[Stefan Joselowitz:]

We simply continued to look for opportunities -- acquisition opportunities and we’ve been reasonably active in recent quarters, evaluating some things, conversely I maintain and look at any key metric that we remain significantly undervalued, in terms of the quality of the assets that we’ve got and really the board and certainly my decision making process as to what I recommend to the board is guided by over time, on what I continued I am going to get the best intrinsic value per share enhancement and we’re continue to look in -- we’ll continue to look for an acquisition, we would still love to scale up our North American operation for instance through an acquisition but at the same time, we still believe that our share presents company value, so until the right thing comes along, we are constantly evaluating these things, and we’re certainly not excluding a buyback.

[Mike Walkley:]

And just with your strong guidance for the year, ELD mandate in the U.S. certainly has helped us, can you maybe just discuss which areas your pipeline looks strongest for this year and regions and as the ELD mandate now that as lot, is that slowed any momentum or is it just be covering oil markets and other things still driving another strong year in U.S. and then maybe some regional outlook also would be great?

[Stefan Joselowitz:]

We have not and we’re never going to either -- let’s call it the major recipient of ELD, we certainly enjoyed I guess some momentum out of it and from existing and new customers. But we really don’t play in the small pre-space in the United States, certainly currently and the larger fleets many of them were early adopters of this kind of technology, that said it is my view that ELD will continue to be a tailwind for some years to come still, certainly for the next I would guess 18 to 24 months, so -- and we’re happy to take any tailwinds that would be there, but we’re also pleased that there’s generally our top line in our business across multiple geographies is looking healthy and it’s really the basis and the foundation for the guidance that we put out.

[Mike Walkley:]

And last question for me and I'll pass the line. In your implied annual guidance. Can you help us to think about the pus and takes for ARPU trends and then hardware off of the runway you just have this quarters to continue to decline quarter- over-quarter or just stable at these lower levels but I guess to think about hardware revenue decline year-over-year versus the ARPU trends embedded in your annual guidance. Thank you.

[Stefan Joselowitz:]

Sure. Certainly, with hardware we don't expect to be a growth driver in our business going forward. So, I would expect over the coming years that the hardware as a percentage of our revenue will on an average on a trend line continue to decline. We did have as you pointed out correctly, we did have a nice [indiscernible] in Q4 with unexpectedly higher hardware sales and the good news is that that we will convert to subscribers in the future quarter. So that's the good news out of that particular component. What it did do, however, it did pressure our adjusted EBITDA margin by about 1.3% and I don’t plan or expect that we can have the same trajectory every quarter, so even without our adjusted EBITDA margin continued its upward trend and while I believe we can still see some up and down movement quarter to quarter. It's certainly our plan and our intention to continue driving that accretion to get through our initial milestone 30% and beyond, so as a key or really driven towards achieving that objective.

[Operator:]

And we will now move to Bhavan Suri of William Blair.

[Bhavan Suri:]

Joss, let me talk about Americas first, if you look at the subscription growth there it was really strong. I'm not just so stained it will actually be oil rebound in the oil segment that drove it, obviously the majority of the business in U.S. like was there anything else that is driving that really strong growth in the Americas?

[Stefan Joselowitz:]

Alright certainly oil was a component of it so let's not forget that we had a 20% of our global revenues are out of that sector. So, we are delighted, we saw the same store happening probably 6 quarters ago as you know. And where we see our global customers and certainly in the United States we have mentioned that rebound has lagged in Middle East, but certainly in the United States we have seen a rebounding in customer spending both with existing and new customers. And the good news is that our total supported oil and gas energy sector subscriber base now is larger than it was by individual subscriber numbers and before the crises a couple of years ago when the oil price tanked. The other piece of good news is that by individual customers the feedstock of the stock is significantly smaller. So, although that be growing, they are nowhere near their peak that before the cost so we see that as a great next shore opportunity within existing customers to continue to see expansion but having that we also have had wins in other verticals. I have express that we are near a stage where we target supply in the United States away from our exposure to the energy sector and it still working progress but we have made progress.

[Bhavan Suri:]

I just wanted to touch on EMEA a little bit and the Middle-East and Europe. So, the Middle-East and Europe lagging obviously the U.S. nice there on margins so when you think about investments there has a percentage of bounce back do you think do you need to sort of add sales or restructure sales or changes organization sort of tap some of the growth that you are seeing in the U.S. or do you think that you are set up in investment properly should that market bounce back.

[Stefan Joselowitz:]

Two different answers, the simple same answer for that and the Middle-East now we think we've rejected our structure accordingly and we do have an overweight exposure to energy particularly in that sector and we think we will see it bounce back and we think it will happen as a natural course of events but we think our structure is appropriate. In Europe it's a different story and but by the way Middle-East grew according to plan so we weren’t expecting much different. Europe I think I alluded to the fact that I was disappointed with our top line performance in Europe and let additive debt that cost of little bit early on in the year to adapt the bottom line was pleasing and top line we were disappointed within and we had a nice sales and in that region any we continue to do so, so we are quite pleased with the top line that we are looking at in that region we think that they are well positioned to do going forward and we shouldn’t be at a sales and marketing level recognize that we reach the maximum investment.

[Bhavan Suri:]

One last one for me you did call out a couple of specific cases of MiX Von the call sort of more products we've got, any trends you are starting to see the different and obviously the paths from a product adoption perspective meeting the add-on so any uptick in MiX Vision on MiX taps and sort of how they are going to performing versus expectations?

[Stefan Joselowitz:]

The MiX Vision continues to get nice traction and I don’t think we've see any changes it's a nice add-on to our product and we've seen healthy adoption by some existing customers and from new customers for instance the 19 we mentioned a very big win for us in United Kingdom when intention there from the asset typing MiX Vision of the net add-on side and that's one example and so we are pleased with that. So, tabs a conversion is what have come that are ongoing and are still remain very confident in its ability in the future to be a nice driver with some existing customers but nothing of meaningful traction yet.

[Operator:]

We will now move to Brian Peterson with Raymond James.

[Brian Peterson:]

So, Joss just one for you, it sounds like your large fleet momentum was really pretty progressive and you had that large win I think it was global with 20000 vehicles overall, I’m curious are your customer conversations moving to more of a global dynamic there where you have these 10000-20000 fleet opportunities or are they still mostly regional today?

[Stefan Joselowitz:]

No, there is certainly a -- there is no doubt that there's a trend in the conversations, so even some of the ones that we'd mentioned, I mean, LafargeHolcim is a gigantic fleet initial target is 20000 but the fleet does into 100s of 1000, so top of edge it is a massive fleet and the conversation the drivers I think at corporate level and that’s not the anyone I’m just mentioning, one that. I mentioned one that I couldn't name, the Australian one, which is a multicounty rollout. And there's been a recognition in multinationals as there is a big advantage they have centralized global data and we are definitely seeing that trend. It is also top of my head is there has been a handful over the last year I guess of meaningful multinationals that we have one that has been driven not from a regional perspective that’s been driven from a headquarters.

[Brian Peterson:]

And just as we think about the fiscal year '19 outlook that was evolved our expectation, so I understand there is some uncertainty as it relates to the bundled deals and in the customers will kind of dictate there. But can you just remind us what kind of revenue visibility do you typically have entering the year? And how should we think about that into fiscal year '19 versus prior year?

[Stefan Joselowitz:]

Yes, this is -- I’d make this point before I’m happy to make it again, Brian. It's certainly not a slam dunk so we had -- we have decent visibility, we now at this stage we have got '19 behind us we have got visibility into one of Q1 so we put a bit more than just '19 visibility we see our pipeline. We take a feel but we have never guided in the bag guidance for the year going forward. It's based on our -- I hope one day we get into the luxury of being in that position but we are not. We take out this judgment, we have signed some nice big deals, we know some of them are quick soon rollouts and that one that large one that mentioned we have already rolling out 2000 of them in the and especially already a couple of months. There was another one we announced last year we are not up to that number yet nine months later I guess. So that’s holding up but it's taking much more time. So, we don’t know it's in the customers control how the rollout actually happens fundamentally. We are trying to influence it but for the slam dunk it's -- we have used our best judgment and we know we're coming off a strong year which -- we have got a driver for really strong growth and we understand that. But we are feeling good about that.

[Brian Peterson:]

And maybe one for you Paul just on the margin drivers, thinking about fiscal year '19. We are thinking about what are the biggest there one or two largest area -- drivers qualitatively any help there.

[Paul Dell:]

So, Brian are you talking about adjusted EBITDA or...?

[Brian Peterson:]

Yes, just the adjusted EBITDA ramp, it’s looking higher next year, just trying to think through what the primary one or two drivers of that are?

[Paul Dell:]

I think Brian that it’s obviously the benefit of scale and the mid teen subscription revenue growth is which is at a high margin and keeping costs under control, I think it's very important [indiscernible] successful for us in fiscal 2018.

[Operator:]

And we’ll now move to David Gerhardt of First Analysis.

[David Gerhardt:]

My first question you mentioned that in terms of the net subscriber addition there’s a strong mix of premium fleet and on prior calls you had mentioned that the MiX was starting to shift more towards a balance of premium fleet and lower ARPU consumer FBR offering, just wondering where do we stand on that balance of 50-50, do we over shoot it in fiscal Q4 and if so is there potential for us to stay above a 50-50 MiX?

[Stefan Joselowitz:]

It does vary, going forward and obviously from quarter-to-month-to month and going forward our preference obviously is to get a rating on the higher ARPU side, but the high ARPU side is generally along slower sales cycle. This quarter Q4, was definitely over weight on premium fleet, and the ex-fleet subscriber number I guess I would have been happier with a large number than 12,000, we did -- we still continue to see some contraction from some of the larger South African fleet, we retained the customer but particularly car rental fleets, where in a challenging economy that cut backs -- continues to cut backs the fleets a little bit, so the financial subscription revenue impact on us is not huge, but in absolute subscriber count it does have an impact, but we’ve definitely seen in the last I guess in this year, a certainly better than 50% performance, from out premium fleets business and it’s a ratio I am very happy with and I’d love to sustain that and in fact even grow it going forward.

[David Gerhardt:]

And then just following up on the rental fleet contraction, was there contraction in Q4 and if so can you give us some sense of the magnitude of that contraction of subs for rental fleet?

[Stefan Joselowitz:]

Yes there was contraction in Q4, there was very big contraction in Q1 if you recall, and I think we disclosed the number in the call, I think we mentioned the number of 0.5 thousand to -- so I believe we report net numbers, so the numbers we reported in Q1, and the numbers we reported in Q4 net of any churn or contraction, we did have contraction again in Q4, we had no contraction in Q3, but marginal growth in Q3, contraction in Q4, and it was nowhere near the Q1 number but it was a couple of 1,000.

[David Gerhardt:]

And then you talked a little bit about the add on capability in terms of MiX Vision, MiX Tabs, just wondering if you can give us an update if there’s meaningful growth in any of the other add on products that MiX Go, My MiX, Journey Management, Insight Agility and anything going on with those add-ons any color would be helpful?

[Stefan Joselowitz:]

Yeah thank you. I'm not sure there is much more I can give you. I mean I certainly the most established one now is MiX Vision and other service, which can be in other space is best -- and those are two most stablished ones. And we seen progress of others. And it's not enough to move the needle yet and some of them we really think. Enhancing our efforts including in terms of driving. And we'll see how it will pan out, I think we've got a nice broad product portfolio and the team still feel confident that all of the add-ons -- have decent home someway. So, as I start gaining traction I'll try to give you bit more color.

[David Gerhardt:]

Okay. And then last question for me. You had mentioned in terms of the oil and gas vertical the fleet sizes are not up to what they could be on an individual basis. And I think in past conversations we had mentioned that new wins and deployments are what's driving the growth in oil and gas. So just wondering if you could give us a sense of reactivation activity for ideal fleets. It's a trend that is starting to pick up are year seeing a start to reactivations and if not any color on conversations that you're having with these oil and gas in terms of reactivating some of the ideal basis.

[Stefan Joselowitz:]

Sure. That we separately seeing yes try to be pretty existing testing and a little bit sort of pre-cross discussion as we seeing reactivation. Reactivation I guess in your mind to occurring a flick of a switch. And apart vehicle is reactivating. And I think there is some of that, but a lot them I disposed off their asset at a time so we're also seeing reactivation in that day acquiring new vehicle and installing solutions into those vehicles. So, there is no doubt that we have seeing expansion from existing customers that they have grown over the last 18 months but a way of previous levels and it will be interesting to see how it plays out. It can be reminding all I would say we'd expect $50 a barrel I think the oil is currently trending and I think the interesting to see how this bringing change at the United States at these fronts of --.

[Operator:]

And with that that does conclude todays' question-and-answer session. I would now like to turn the call back to Charles for any closing comments.

[Stefan Joselowitz:]

Also thank you guys. And I appreciate the time and attention and making the time to listen for us. I look forward to any of you that are attending conference in Chicago in mid-June. Look forward to guys see you there. And I guess for anybody who wants to call out with us in coming wish. We'll happy to make a however -- arrival. So that's again. Over the best.

[Operator:]

And with that Ladies and gentlemen, this does conclude today's call, we thank you again for your participation. You may now disconnect.