MiX Telematics Limited
Q2 2014 Earnings Call Transcript

Published: 7 Nov 2013

[Operator:]

Good day and welcome to the MiX Telematics F2Q Earnings Conference Call. Today’s conference is being recorded. At this time I would like to turn the conference over to Megan Pydigadu, CFO. Please go ahead, ma’am.

[Megan Pydigadu:]

Good day and welcome to MiX Telematics’ Earnings Results Call for F2Q 2014 which ended on September 30, 2013. Today we will be discussing the results announced in our press release issued a few hours ago. I’m Megan Pydigadu, Chief Financial Officer, and joining me on the call today is Stefan Joselowitz, or as many of you know him, “Joss.” He is President and Chief Executive Officer of MiX Telematics. During the call we will make statements related to our business that may be considered forward-looking and are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995 including statements concerning our financial guidance for F3Q and full F2014, position to execute on our growth strategy, ability to expand our leadership position, and ability to maintain existing and acquire new customers. Forward-looking statements may be identified with words such as “we expect,” “we anticipate,” “upcoming,” or similar indications of future expectations. These statements reflect our views only as of today and should not be reflected upon as representing our views on any subsequent date. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. For a discussion of the material risks and other important factors that could affect our actual results please refer to those contained in our Form F(1). Also during the course of today’s call we will refer 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 at www.mixtelematics.com under the Investor Relations tab and filed with the Securities and Exchange Commission. With that, let me turn over the call to Joss.

[Stefan Joselowitz:]

Thank you, Megan, and thanks to all of you for joining us to review our F2Q 2014 results which were highlighted by strong growth in subscribers and better than expected subscription revenue. Megan will review our financial results in detail but let me share a few of the highlights up front. Firstly, our subscription revenue grew over 25.0% versus F2Q last year. This is up nicely from the 16.4% growth posted in the year-ago quarter. Our total debt vehicles under subscription exceeded 400,000, crossing a new milestone, and gained 28% year-over-year. The continued growth in our total vehicles under subscription is the primary driver of our strong subscription revenue growth. We also continued to deliver solid profitability, posting an adjusted EBITDA margin of 21% for both F2Q and the first half of F2014. It was a strong performance from top to bottom, and based on our momentum we remain optimistic about the company’s financial outlook for the remainder of F2014. The global market for fleet management solutions is large and underpenetrated with only 4% of the estimated 330 million commercial vehicles equipped with telematics solutions today. We believe MiX Telematics is well positioned to continue capitalizing on this tremendous market opportunity as a result of our differentiated value proposition and business model. Our solutions deliver a measurable return on investment by enabling our customers to manage, optimize and protect their commercial fleets or personal vehicles. We generate actionable intelligence that enables a wide range of customers to reduce fuel and other operating costs, improve efficiencies, enhance regulatory compliance, promote driver safety, manage risk, and mitigate theft. Our primary focus is on large and enterprise fleets but our broad portfolio of SaaS solutions also allows us to scale down to serve smaller fleets and in certain geographies even passenger vehicles. MiX Telematics is further differentiated by the fact that we have already made the investments necessary to build out what are now truly global operations. We service customers in 112 different countries. In seven of those countries we have a direct presence. We provide support in 24 different languages and we have a distribution network that includes more than 133 partners worldwide. This global distribution platform has taken us many years and significant investment [to build] and we believe it represents a distinct competitive advantage. As we are now at the halfway point of our fiscal year we have provided segment details in our press release. Let me walk you through the contributions from the regional businesses for the first six months. We will provide another detailed update along these lines at the end of our full fiscal year. We added over 44,000 subscribers in the first half of this year and we continue to make progress, adding new logos to our premium customer portfolio. For example, we welcomed a prominent fashion retailer in Africa called Foschini as a new fleet customer. We also continued to expand within existing customers in key verticals across the globe including nice additions from Rio Tinto and from one of the largest bus operators in New Zealand. Our fleet business contributed 73% of our total revenue. The largest segment of our fleet business, the Africa operation, contributed 26% of total revenue. It was up 17% year-on-year and delivered a 30% adjusted EBITDA margin. The Africa fleet business continues to win new customers like Foschini and we believe that we still have a long runway for growth in this region. Our fastest growing segment was the Middle East and Australasia region. It posted 43% year-over-year total revenue growth and represented 25% of total first half revenue. As planned we lowered the adjusted EBITDA margin on this business to 11% as we make increased investments to capitalize on the excellent traction we are seeing from this business region. The European fleet business represented 11% of our total revenue and vehicles under management grew 15%. Our European business turned a small profit at the adjusted EBITDA level for the first half of F2014 as we began to benefit from the restructuring efforts undertaken in F1Q. This effort was primarily focused on the elimination of certain back office functions which can be more efficiently run out of our South African headquarters. Subscribers in the Americas grew by 17% compared to the first half of F2013 and contributed to the strong subscription revenue growth from this business. The Americas represented 10% of our total revenue and its contribution declined versus the first half of last fiscal year due to lower levels of upfront hardware purchases. We believe the premium fleet market is highly underpenetrated in the Americas and that we have the right solution. While we are pleased with the early success – we are landing some very large fleets in North America – we do see the opportunity to further invest in our direct sales organization here, so we can cast our net beyond the oil and gas vertical that we have been initially exclusively focused on. South America is also an extremely attractive region for us as safety and security issues are a pressing challenge. We believe South America not only represents an untapped enterprise market; it also presents a significant opportunity in the passenger vehicle sector. To date our consumer business has been almost exclusively in South Africa. In this area of our business we continue to be very pleased with the market perception for our Beam-e solution that was launched in F2012. Beam-e is a real time, cloud sourced platform to locate mobile assets that enables low-cost entry level vehicle tracking and recovery and it eliminates the expense of traditional cell networks. Our consumer segment contributed 27% of our total revenue in the first half. Subscribers grew 13% and subscription revenue was up approximately 10%. Consistent with our expectations, total revenue for the segment was flat year-over-year driven in part by the renegotiation of our cellular data package. There was an incremental R10.7 million of revenue in the year-ago period related to connection and center bonuses that we opted to forego in favor of lower data costs. This change has been immediately earnings-enhancing as evidenced by our adjusted EBITDA out of this segment which was up 23% year-over-year. We are currently in the process of rolling out our consumer offerings in Brazil, an opportunity four times the size of the South African market. Together the South African and Brazilian passenger vehicle opportunity represents over 30 million vehicles and we believe it is only single-digit penetrated. There are other geographies that have similar demographics with strong demand for safety and security solutions that we expect to address in coming years. We believe we are well positioned to continue driving growth in both our fleet and consumer businesses. From a go to market perspective we address the premium fleet opportunity primarily with a direct sales force. We leveraged regional partners to reach smaller fleet operators and we have a network of over 600 resellers for the passenger vehicle business. In some geographies we employ a flexible go to market approach. For example, in Brazil we are adopting a parallel sales strategy. We address the fleet market directly and opened a Sao Paulo sales office last quarter. For our Beam-e solution we are partnering with a local established player called Sascar. Sascar is a leader in the Brazilian telematics market and under their own brand will be responsible for network rollout, marketing, customer acquisition, and servicing. We will provide the software platform and will be responsible for data gathering, interpretation, and effectively providing our partner with the actionable intelligence required to provide the Beam-e service. We believe that this is a low-risk approach that will enable us to enter the lucrative Brazilian market far more rapidly and cost-effectively than if we attempted to go it alone. In summary we are very pleased with our strong performance in F2Q and first half of F2014. We are at an important point in our business development having built what we believe to be the industry’s largest global distribution capability and broadest line of solutions. We plan to continue increasing our investment in growth initiatives to build on our growing momentum while also remaining focused on continuing to deliver strong profitability and cash flow. With that let me turn it back over to Megan to offer a bit more insight into the September quarter. Thank you.

[Megan Pydigadu:]

Thanks, Joss. We are pleased with the company’s solid F2Q and first half performance across each of our key operating metrics including total vehicles under subscription, subscription revenue and adjusted EBITDA. Before reviewing our financial results in detail let me review some key aspects of our financial model. To start we derive the majority of our revenues from subscriptions to our suite of offerings, and this is also the fastest growing component of our total revenue. As Joss mentioned our subscription revenue accelerated to over 25% year-over-year growth in the quarter. We saw 24% growth versus the first half of F2014 and subscription revenue now accounts for 65% of total revenue. Initial subscription agreements in our fleet business are typically three-year terms. They are billed monthly and revenues are recognized over the course of the contract. We depreciate bundled hardware as per our accounting policy with the majority being three years and we take into account customer contract periods and the historic average customer [loss] as required by IFRS standards. We retain our large fleet operator customers, those with more than 100 vehicles, at a rate in excess of 95%. These large fleets represent 79% of our fleet vehicles under subscription and we have a very diverse customer base. The combination of these factors helps to provide us with a higher degree of visibility into our future subscription revenue. Our passenger vehicle customers are typically billed monthly in advance which yields excellent predictability in our collections. Our entry level solution Beam-e has gained solid traction in South Africa and this has contributed to the acceleration we have seen in the growth of subscribers under management, which were up 28% versus F2Q last year. Our retention and ARPU levels are naturally low for our passenger vehicles solutions as compared to our solutions targeted at large enterprises. We are very excited by our traction in the passenger vehicle market. It is a large and highly complementary global market opportunity for us. With that overview, let me review our F2Q 2014 results starting with the income statement. Before I begin I would like to point out that our reporting currency is the South African Rand, so for convenience we have translated certain of our results into US Dollars using the September 30, 2013 spot rate of 10.1012 Rands to the Dollar. In addition our results are provided on an IFRS basis unless otherwise noted. On net basis total revenue was R 315 million or $32.1 million which is an 11% increase from R284 million booked for F2Q 2013. Most important, our subscription revenue of R207.1 million or $20.5 million was up over 25% year-over-year. This was above our guidance of R198 million to R203 million and represents an acceleration from the subscription revenue growth of 16.4% achieved in the year-ago F2Q. The primary driver of our subscription revenue growth continues to be the growth of our subscriber base. We added 27,097 subscribers in the quarter ending with 404,034 vehicles under subscription, an increase of 28% year-over-year. Hardware and other revenue was R107.9 million, down 9.3% from the prior-year quarter. This was in line with our expectations as a rollout of two major deals in the North American fleet solutions segment were still in process in the prior-year quarter. There is no change to our view that hardware and other revenue will continue to decline as a percentage of our revenue over time and further will vary quarter to quarter. Moving down the P&L our gross profit in F2Q was R204.2 million representing a gross margin of 64.8% compared to a 65.3% gross margin in F2Q 2013. We would anticipate gross margins to remain in the mid-60% range in the near-term and from a long-term perspective we expect gross margins to move beyond 70% as subscription revenues continues to increase as a percentage of our total revenue and our fixed costs are amortized over a larger base of subscribers. In terms of our operating expenses, sales and marketing expenses were in line with the last quarter at R34 million. This represents about 11% of revenue. We believe there is a significant opportunity to build on the growing momentum of our business and we intend to increase our investment in sales and marketing in the coming quarters. General and administrative expenses were R137.0 million compared to R110.8 million last year as we made an increase in headcount from just over 900 employees to over 950 employees year-over-year and invested in our [overall] operations. Furthermore, included in general and administrative costs this year were nonrecurring expenses of R8.5 million relating to the initial public offering of ADRs on the New York Stock Exchange. Income from operations was R44.2 million in F2Q, representing a 14.0% operating margin; this compared to operating income of R41.6 million in the year-ago quarter for a 14.6% operating margin. We have always run our business with a focus on operational excellence in order to deliver (inaudible) growth and profitability. Our success in doing so is evidenced by our long-term growth track record. In addition to the fact that we are delivering strong profit margins while having already built our global infrastructure we remain focused on profitability but we also believe that it makes strategic sense to forego a few points of operating margin in the short term in order to invest for future growth. To provide investors with additional information regarding our financial results we disclose adjusted EBITDA and adjusted EBITDA margins, which are non-IFRS measures. We have provided a full reconciliation table in our press release. F2Q adjusted EBITDA was R66.9 million, representing an adjusted EBITDA margin of 21.2% which is comparable to last quarter’s margin of 21.9%. Our effective tax rate was 32% in the quarter compared to 28% last quarter and 29% in the year-ago period. Our effective tax rate varies according to the mix of profits made in various global jurisdictions. Profits for the period were R30.3 million, up from R28.8 million in the year-ago quarter. Profit for the period was 4 South African cents per fully diluted ordinary share which is consistent with F2Q 2013. For reference, on a US Dollar basis using the September 30, 2013, exchange rate of 10.1012 Rands per US Dollar and at a ratio of 25 ordinary shares per ADR, profit for the period was $3 million or $0.10 per diluted ADR. Turning to the balance sheet, we needed the quarter with cash and cash equivalents of R767.8 million, up significantly from R150.3 million at June 30, 2013, due to the initial public offering in the US which generated net proceeds before expenses of approximately R650 million or $65.5 million. In addition we paid the final dividend of R14 million during the quarter. As previously disclosed, our Board has suspended the dividend in favor of investing in the growth opportunity before us. The Board has also taken the decision to hold the RPO proceeds in US dollars since significant investments are being made in the US and the Rand can be volatile. Foreign currency exposure relating to the RPO proceeds resulted in an unrealized foreign exchange gain of R2.5 million being recorded. From a cash flow perspective, in the three months ended September 30, 2013, we generated R44.3 million in net cash from operating activities and invested R32.8 million in capital expenditures which equates to a free cash flow of R11.5 million or $1.1 million. This compared to free cash flow of R9.1 million or $900,000 in F2Q 2013. Finally, I’d like to update our financial targets for the full year F2014. We are targeting total revenue of R1.27 billion to R1.30 billion which would represent year-over-year growth of 8% to 11%. At the Tuesday, November 5, spot rates of 10.1658 Rands per US Dollar that would be $124.9 million to $127.9 million. We are targeting subscription revenue of R825 million to R833 million which is up from our previous guidance of R814 million to R829 million, and would be growth in the range of 20% to 21% compared to F2013. This converts to $81.2 million to $81.9 million. We are targeting adjusted EBITDA between R270 million and R280 million or $26.6 million to $27.5 million. This would lead to earnings per diluted ordinary share of 15 to 16 South African cents based on 770 million diluted ordinary shares and exchange rates of 10.1658 and a tax rate of between 28% and 31%. At the ratio of 25 ordinary shares to one ADR, and again using the November 5 spot trades, this will equate to earnings per diluted ADR of $0.37 to $0.39. Our intention is to focus primarily on annual targets as this is how our management is focused and we do not wish to close deals with suboptimal terms in order to achieve quarterly objectives. This is most relevant as it relates to the hardware and other revenue line in our P&L. The area of revenue where we have a high level of visibility and predictability is our subscription revenue, which as we discussed is the largest, fastest growing, and highest margin component of our business. For F3Q 2014 we are targeting subscription revenue in the range of R209 million to R214 million which would represent year-over-year growth of 19% to 22%. This would translate to $20.6 million to $21.1 million based on the November 1st spot trade. In summary we are pleased with our operational performance during F2Q 2014. We believe the large and growing global market for fleet and mobile asset management solutions will provide us with significant growth opportunities going forward and MiX is well positioned to capitalize on this potential and the results of our global market leadership position. Operator, we are now ready to begin the Q&A session.

[Operator:]

Thank you. (Operator instructions.) We’ll take our first question from Terry Tillman with Raymond James.

[Terry Tillman:]

Hey Joss and Megan, how are you all doing? Nice job on the quarter first of all. My first question, Joss, just relates to you’re talking about stepping up investments. In the US market specifically where are you in the spending curve if you will in terms of adding more feet on the street and just the sales and marketing investments? Where are we on that spending curve? And then secondly what about pipeline activity or anything that speaks to you’re starting to see some footholds beyond oil and gas in the US?

[Stefan Joselowitz:]

Thanks, Terry. So the first part of the question, we’re well into the process of increasing our investment in sales and marketing in the US. It’s not an overnight process so there’s a, well we’re looking for obviously a number of experienced, high-quality systems salespeople and we’re steadily making progress in finding those people and developing a bigger pipeline of people coming onboard. But in terms of where we ultimately want to get to I guess it’s probably still relatively early days. As I mentioned it’s not an overnight process. I have learned over the years that it’s relatively easy to waste money on marketing and really we’re taking a pragmatic approach to making sure. We’re intending to increase our investment but we’re intending to do it wisely, and we’re just taking it a step at a time and making steady progress. As to the second part of the question we don’t give visibility into our pipeline but I can give you a bit of flavor in that we’ve certainly started the process of expanding beyond our traditional exclusive focus of oil and gas in the North American region and in the Americas generally, so we certainly have what we think is a pipeline that will enable us to meet our plan and our objectives for this year going forward. And we’re happy with the progress so far.

[Terry Tillman:]

Okay, thanks Joss on that. And I guess on the Middle East and Asia-PAC front, I mean the growth is very strong there. Can you maybe delve a little deeper into that in terms of what’s been driving the strength year-to-date? Is it more the new wins, new logos? Or is it expansion of already-won business? Just some more color would be interesting because of how much growth there is there, thanks.

[Stefan Joselowitz:]

Certainly. The majority of our growth in that region is new wins which is clearly a healthy picture from our perspective. But we are at the same time very pleased to be seeing ongoing strong additions from existing customers in multiple verticals in the regions in which we operate. Clearly the Middle East is heavily weighted towards our oil and gas efforts and that’s still the biggest vertical for us in that region; but in Australasia we’re already developing many more parallel verticals. We’ve seen good wins in the bus and coach sector, in the resource mining sector and others. So overall a good, healthy balance of new and existing customer support.

[Terry Tillman:]

Okay, and I guess my final question and then I’ll jump back in the queue

[Stefan Joselowitz:]

Thank you, Terry. Again, we’re pleased that it is a balanced contribution. So we’ve seen strong growth from both of the core sectors in our business. Clearly from a volume generation perspective with the efforts that we’re making in Brazil there’s no doubt that the consumer sector has at least the capability or the capacity to drive more volumes going forward than its current ratio. And we haven’t launched there yet and it’ll still be awhile until we see how that effect actually plays out. But nonetheless a good balance from both of our sectors. Certainly over 70% of our subscription revenues are coming out of our fleet sector. Our consumer business has shown strong subscriber growth. And remember, the “consumer” name itself is a bit of a misnomer because a good part of that growth is coming from large enterprise fleets, and I think I’ve mentioned this before; and we continue to see that effect. What’s also interesting is that we’re seeing we’re gaining fleet customers through introduction to the fleet via Beam-e. So we’re ending up with a healthy number of high-end fleet customers using our MiX-FM, our high-end sophisticated fleet solutions that started with us because their burning need was for a low-cost asset tracking device to enhance their security in a trailer or whatever it may be. And we’ve now ended up with a dual subscriber and that’s an interesting phenomenon which we’re excited about. Clearly we’re not able to capitalize on that phenomenon in all geographies; at the moment it’s only South Africa but we expect a similar effect in our Brazilian business going forward.

[Terry Tillman:]

Thanks, guys.

[Stefan Joselowitz:]

Thank you, Terry.

[Operator:]

We’ll take our next question from Bhavan Suri.

[Bhavan Suri:]

Hey Joss, hey Megan. So just following up on Terry’s question on the Brazil market, so it’s great that the potential for Beam-e alongside sort of the fleets is there, but as you look at the market you have a fleet business there today. Sort of help me understand the scale and the growth and the size of that large fleet potential opportunity in Brazil.

[Stefan Joselowitz:]

Certainly the scale and size of it is large. It’s a complicated opportunity but it’s an opportunity that we have a lot of experience in, because it’s an opportunity that is driven by a combination of factors but primarily from security or risk management concerns. So it’s not the feature set that’s driving that market is very different to what it could be in North America for argument’s sake or many of the other developed territories in which we operate. So it is a complex market and just to give you an example, the average truck operator there is not only in cab telematics that they’re looking for but it’s systems and features that enable them to lock access to the trailer outside of very specific geographic points for argument’s sake – and so basically giving a central control room, exclusive control over access control to that vehicle which does complicate the opportunity a little bit because there’s an added element of quite a lot of mechanical interaction that you need to combine the high-tech element of that device into unlocking those features. But once you’ve done it you’ve got a pretty sticky customer and the ARPUs are extremely attractive. So it’s certainly a market that we’re excited about pursuing aggressively and that’s why we’ve made an investment there.

[Bhavan Suri:]

Great, and then Megan, you had touched on this a little bit last quarter about sort of bundling some of the hardware as part of subscription especially with some of the larger customers. Just an update on how those conversations are going and sort of how you see that progressing in the back half of this year.

[Megan Pydigadu:]

In terms of how it’s progressing, if we just look from a capitalization point of view this year on last year, this year in vehicle devices that we’ve capitalized is R27 million for the half year compared to R19 million in the prior year. So you can see there is an uptake in terms of going for bundled services, and as an example we’re starting to see some of our large enterprise customers looking at bundled deals as opposed to buying the hardware upfront. Last quarter we announced a big deal with a security company and previously they probably would have bought their hardware upfront, and this time they’ve entered into a contract with us as a bundled arrangement. So we are seeing an uptake but we’re not seeing to have a dramatic change in terms of our business model. I think it’ll be an iteration of the [task].

[Bhavan Suri:]

Great, great, that’s helpful. And then as you look at, and we’ve touched a little bit on the sales investments that you’re going to sort of prudently make in the United States, and you’ve also talked about making sales investments in the Middle East, in Europe. Just an update overall globally, sort of how is that tracking according to the plan that you laid out and how should we think about that probably as you think about ramping that through the next year?

[Stefan Joselowitz:]

Bhavan, thank you. We certainly expect to see the actual spend accelerate so we’ve taken a decision as a group to make a healthy increase in our sales and marketing expenditure. There’s no doubt that spend is going to be weighted towards the Americas but we are increasing investments effectively in all of our regions. And as I mentioned before it takes time to find the right people but we certainly started that process a while back. So we’re certainly hopeful that there will be a steady acceleration in the spend rate as we get closer to bringing more and more people onboard towards meeting those plans. So where are we in terms of our plan? I think as is evidenced in our number we’re certainly trekking our plans in terms of our closed sales. Our top line is certainly looking like it’s supporting our plan for the year going ahead. And sure, I would love to accelerate that acquisition of feet on the ground and it’s just a matter of going through the process and hopefully we’ll end up at the right place on time. So that’s where we’ve been.

[Bhavan Suri:]

Joss, a couple of the guys in the fleet space have been acquired. Are you cherry picking some, are you poaching out there? Where are you getting the sales guys from?

[Stefan Joselowitz:]

Yeah, so it’s really a multi-pronged process in terms of it is good to get experienced guys. I’ve always found the problem with getting from a competitor is it’s often difficult to get a performance reference on the guy so that does complicate the process somewhat. You know, you don’t want to end up with a bunch of salespeople that had a poor performance track record historically anyway. Nonetheless, I think it’s the same challenge that everybody faces. But it is a multi-pronged approach. We have appointed search consultants to help us with these individuals. It’s via our own network, word of mouth. We do feel that MiX is a desirable place to work and I certainly think that our recent RPO has raised our profile from that point of view as well, so we are getting approached by various parties or people that are involved in our industry. And it’s steadily coming together, Bhavan.

[Bhavan Suri:]

Great, thanks for taking my questions, guys. Good job.

[Operator:]

We’ll take our next question from Mike Walkley with Canaccord Genuity.

[Mike Walkley:]

Thank you, congratulations on the strong results. Megan, just a question just on the ARPU – it was up sequentially. Can you walk us through the drivers there? I just had expected it to continue to slightly fall given the Beam-e mix over time. Are you getting any traction with some of your new high-end enterprise solutions such as MiX Vision or can you just kind of walk through the ARPU trends?

[Megan Pydigadu:]

In terms of the ARPU trends we don’t specifically look at it in our business; we look at our overall growth from a consumer and a fleet perspective. And we’re comfortable that the growth that we’re getting is leading us to be able to put out our guidance in terms of our subscription growth for the next quarter and for the full year. In terms of MiX Vision that is still in its early phases of sales and it is a systems and complex sales, so for this quarter we haven’t seen significant traction but we are working on that.

[Stefan Joselowitz:]

Just to add to that, Mike, I think you also hit the nail on the head and Megan did mention it earlier – we did a couple of larger enterprise deals on a bundled service basis or on a fully bundled basis which clearly drives ARPUs up as well. So I think with the influx of time we’ve stated that strategically we are happy to invest some cash in more aggressively driving bundled services and that will certainly be an ARPU driver, as well as hopefully some of these other initiatives like MiX Vision and other attachment initiatives as they start to take hold.

[Mike Walkley:]

Great, that’s helpful. Just on that with the September quarter on the sub basis better than my expectations it looks like a little bit of a slowdown in December. Is it just lumpiness in some of these bigger deals or do you lose some sales days in the December quarter because of the holidays and days off in the enterprises around Christmas, Thanksgiving, etc.?

[Stefan Joselowitz:]

Yeah, the December period is typically summer holidays in the Southern Hemisphere so it is, sort of mid-December to mid-January is generally a quieter period for us cyclically than most other periods. But other than that we plan for it and we think we’ll deliver against the plan is our view.

[Mike Walkley:]

Okay, thanks. And then Joss, just back to the Brazil market. Some of your competitors for the personal market are pretty excited about the Contran 245 and they’re already seeing some ramping trends. Can you maybe address what you’re seeing down there, and with your Beam-e getting ready to launch are you seeing any additional excitement with some of the legislation down there?

[Stefan Joselowitz:]

Sure, Mike. Of course we’re not in the market yet so we don’t have hands-on access to those trends. I’m not a personal fan of initiatives like Contran but there is a sector of the market that thinks it’s going to be a good growth driver, and it will be a growth driver. So it’s not all bad; I just think overregulation of anything has its own sets of headaches. But nonetheless the feedback that I am getting from our partner there is that there’s definitely an increase in uptake probably driven from Contran.

[Mike Walkley:]

Okay thanks, and one last question from me on just kind of the competitive dynamics and then I’ll pass it on. There’s been a lot of M&A activity recently among your competitors and even in the North American market – Qualcomm’s divesting Omnitracs and a lot of other type deals. As you’re seeing M&A and some competitors trying to scale up and one of your advantages is your larger scale and global footprint, are you seeing any changes in the competitive patterns in the markets when you’re competing for deals?

[Stefan Joselowitz:]

Certainly nothing that we’re seeing on the ground yet but one thing is clear – it is a changing landscape. And this is not a new revelation for us; it’s certainly one of the reasons that we undertook the moves that we made in the quarter. And in fact in the quarter that we’re reporting on when we did our RPOs is to position ourselves to firstly take advantage of consolidation opportunities. And we’ve been around for longer than most; we’ve certainly scaled ourselves out of the competitive, the noisy competitive landscape and we’re certainly positioned to… As I said, we’re in a much stronger position than we were a few months ago s an organization to capitalize on the changing landscape, vis-à-vis the consolidation opportunities that will present themselves and what we perceive to be the factors that are driving the growth acceleration in the industry.

[Mike Walkley:]

Thank you very much.

[Stefan Joselowitz:]

Thanks, Mike.

[Operator:]

We’ll take our final question from Brian Schwartz with Oppenheimer.

[[Koji Teda]:]

Hi Joss and Megan, this is [Koji Teda] for Brian Schwartz, thanks for taking my question. I wanted to dig deeper with the Beam-e product. Are you guys targeting any other geographic regions that could see Beam-e being launched in the next 12 to 24 months?

[Stefan Joselowitz:]

Yes.

[[Koji Teda]:]

Okay, fair enough. And talking a little bit more about geographic regions, were there any specific regions that performed better than your expectations? And on the flipside are there any regions that didn’t meet your expectations?

[Stefan Joselowitz:]

Yeah, I think overall as an organization we’re certainly happy with our performance. In terms of how those components performed in terms of internal plans, we’re not going to share our views because our internal plans are our internal plans. But by and large no significant disappointments and certainly some pleasant surprises. So the overall picture we’re happy with.

[[Koji Teda]:]

Okay, great. And then with the hardware and other revenue being down can you quantify for us how much if any of that was a result of the decline in price for the hardware?

[Stefan Joselowitz:]

It’s certainly a factor but it’s not by any means the only factor. We’ve just gone through a new cycle of costs down within our organization and our engineers have had a lot of success in terms of coming up with our latest versions that cost us less than the previous version and we’ll start passing that on to the market. But in terms of the overall impact I’ll hand it over to Megan; I’m sure she’s got further thoughts on it. Remember, of course we are seeing a couple of larger enterprise pieces moving towards taking the bundled service which has been part of our strategy. We’ve been driving that so Megan mentioned I think G4S as one example where they might have been a hardware sell before it was a bundled service sale now. And that’s certainly had an impact – those kinds of deals have an impact on the lower hardware line. But it’s a part of our strategy and we’re happy with that. Anything else you want to add to that, Megan?

[Megan Pydigadu:]

Yeah, probably just two other things I’d like to add to that. If you look at our other revenues in the prior-year half year, if you’re looking on a half-year basis, we did have revenues from our connection and center bonuses of R10.7 million which we don’t have in this half year and that’s in our consumer business, so that’s also affected how our hardware and other revenue has done. And then also it can be a bit lumpy in terms of when we’re rolling out large fleet contracts and the customers bought the hardware up front, and last year we had the benefit in North America of rolling out two large contracts. And those are probably the main reasons for the decline.

[[Koji Teda]:]

Okay, great. That was helpful. Thanks for taking my questions.

[Operator:]

At this time I’ll turn the conference back to the speakers for any additional or closing remarks.

[Stefan Joselowitz:]

Well thank you everybody, and really thank you again for your time this morning, ladies and gentlemen. We are really pleased with our F2Q and of course our first half of F2014. Additionally our listing on the US Capital Market in this quarter was a major milestone that of course provided us with additional capital to execute our growth strategy. And another thing that was surprising and I did expect an increase and uplift in our profile, but we experienced a dramatic increase in RFPs and increased traffic to our website following the RPO and this certainly exceeded my expectation. We look forward to speaking with you in the coming days and watch our story as the MiX story plays out over the coming quarters and coming years. Thank you.