MiX Telematics Limited
Q3 2015 Earnings Call Transcript

Published: 13 Feb 2015

[Operator:]

Good day, everyone and welcome to the MiX Telematics Third Quarter Fiscal 2015 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.

[Megan Pydigadu:]

Thank you. Good day and welcome to MiX Telematics’ earnings results call for the third quarter which ended on December 31, 2014. Today, we will be discussing the results announced in our press release issued a few hours ago. I am Megan Pydigadu, Chief Financial Officer and joining me on the call today is Stefan Joselowitz, or as many of you know him as Joss. He is President and Chief Executive Officer of MiX Telematics. During the call, we will make statements relating to our business that may be considered forward-looking, pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. These statements are subjects 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 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. 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 and filed with the Securities and Exchange Commission. With that, let me turn the call over to Joss.

[Stefan Joselowitz:]

Thanks, Megan. I would like to thank you all for joining us to review our third quarter 2015 results. I am pleased to report that in the place of continued macroeconomic headwinds, our business continues to grow profitably. We posted top line growth of more than 13% and while we continued to invest in growth initiatives, we have delivered an adjusted EBITDA margin of nearly 20% and expect this to trend further upwards. More than two-thirds of our revenue is from recurring subscription business and this is on the rise. We continue to compete favorably and our state-of-the-art solutions are now being booked on a new software platform released within the past year. We are currently transitioning all of our customers to this platform and anticipate completion within 12 months. The new software platform helps us not only winning business, but also introducing new features and functionality much faster and more cost effectively than ever before. For instance, we extended our safety and compliance product portfolio with the completion of an Hours of Service product for Europe in less than a quarter of the time it took us to develop the similar product previously. The machine-to-machine, or M2M movement, is one that is quickly gaining steam and sustaining our competitive edge is critical. That said, while we do face regional competitors and best-in-class technology is important, penetration of telematics remains approximately 10% of commercial vehicles. It is for this reason we believe our scale is a tremendous asset. MiX Telematics is the only fleet management solution provider to have scaled the business globally. Although a post-reporting period event, in January, we surpassed 500,000 subscribers, a rare achievement in this fragmented industry. We service customers in over 120 countries through our 11 regional offices and 135 channel partners. And while this does expose us to the somewhat more volatile economies, multinational clients increasingly prefer to contract with a single vendor versus a dozen regional players. This is increasingly important as these global enterprises seek to leverage the telematics data that we collect to optimize their operations. We have collected 180 terabytes of cumulative data. To put them into perspective, in every demand, we collect data on about 19 million individual vehicle trips. We now manage the profiles of close to 800,000 commercial drivers and this is growing. We believe this data asset is amongst the largest of any fleet management player and capitalizing on this is a critical component of our long-term growth opportunity. Enterprise is always a challenge to optimize their operations and while falling gas prices do diminish on those tangible ROI story, fuel is any one component of the many savings unlocked by our services and the risk un-impacted at all by the oil price improved safety, timely maintenance, lower insurance costs and improved vehicle’s efficiency all that up to big savings for a customer on top of any fuel cost savings. As an organization we have been successful in many different verticals. Oil and gas is about one, it is roughly 20% of our subscription business. Also bear in mind the converse effect of a lower oil price is that other verticals like transportation and logistics thrived when fuel prices dropped and we see an increase in their spending. We saw this in the third quarter. The bus and coach segment for example was strong as they enjoyed increased margins when fuel prices dropped. We have entered our first customers in this segment in the Americas. In Brazil we signed deals with two key bus operators one for 450 vehicles and another for 300 vehicles with the collective potential of several thousand. Additionally, our partner in Mexico has concluded an OEM agreement to fit our premium fleet management solution to all of their new luxury buses. In Africa we have successfully rolled out a multi-country solution for DHL which further demonstrates our ability to service and deliver great value to large multi-national accounts. This global logistics leader subscriber have premium fleet manager solution and have added just under 400 vehicles in the first 6 months and we expect a lot more to follow. Further to point in the phase of falling oil prices, we added over 16,000 subscribers in the quarter which is about the same number we netted in Q2. We saw a 5% sequential increase in subscription revenue. Compass acquisition contributed just over 1.5% to the revenue increase and we also saw a slight benefit from the weaker rand. Year-on-year subscription revenue was up 15%. Our global structure continues to provide us with a natural currency hedge. We are primarily exposed to U.S. dollars, euros and British pounds. Contracts originating from the Middle East are generally denominated in U.S. dollars as of those from all South American countries except Brazil where our contracts are in reals. Our costs are primarily in rands, but we do incur costs associated with our regional offices in local currency. At the bottom line, the net effect to asset exchange rate volatility remains negligible, less than $20,000. As we noted in our last call we were making some adjustments to streamline our business which is expected to yield R30 million of savings in fiscal year 2016. While the South African streamlining will have the large impact with the consolidation of the consumer and fleet businesses, we have also streamlined our business in the Middle East and Australasian region. While we continued to see good growth opportunities here, the geopolitical environment in the Middle East remains volatile, so we want to maintain a lean but adequate presence here. Europe remains steady and we feel like operations there are a perfectly scaled to the opportunity. The recently developed EU driving our solution would enable us to more aggressively address the transport and logistics vertical there. We can provide fleet operators with an integrated premium fleet management solution to drive operational efficiencies, whilst also ensuring compliance with [indiscernible] legislations. Our Americas business is increasingly well positioned for growth with our local leader there now able to compete freely, a new sales head in place for both North America and South America, we are building pipeline and extending our reach to new verticals. There is no shortage of large tenders to attack and we are increasingly confident that we can land a meaningful share of the available business. As I noted earlier, we landed a couple of strong enterprise fleets in Brazil, but the [indiscernible] remain stalled. That said I am pleased to report that we have engaged directly with [indiscernible] new owner’s mission and are now having constructive dialogue around getting this project back on track. In conclusion let me reiterate our team is executing well in the phase of macroeconomic challenges. We are focused on the things we can control, streamlining where it makes sense and investing where there is a promise strong returns. We have a long history of profitability and are proud to have sustained adjusted EBITDA margins of close to 20% and see this trending upwards. We remain confident that we have what it takes to capitalize on the growing demand for fleet management solutions globally. We have both the industry’s largest global distribution capability and broadest range of solutions and we intend to maintain our balanced approach to delivering growth as well as solid profitability and cash flows. At this point let me hand it back to Megan to offer a bit more color on the numbers.

[Megan Pydigadu:]

Before I begin, I would like to point out that our reporting currency is the South African rand. Though for convenience, we have translated certain of our results into U.S. dollars using the December 31, 2014 spot rate of R11.5719 to the dollar. In addition, our results are presented on an IFRS basis unless otherwise noted. On that basis, total revenue was R351 million or $50.4 million, which is a 13% increase from R310 million for the third quarter of fiscal 2014. The key measures of our success in the market, is subscription revenue. Our subscription revenue of R354 million or $21.9 million was up 15% year-over-year. This was above our guidance range of R246 million to R250 million. The primary driver of our subscription revenue growth was of course the growth of our subscriber base. We added 16,000 subscribers in the quarter ending with the base of 495,367, an increase of 16% year-over-year. Subscription revenue accounted for 72% of total revenue, which is approaching our long-term goal of more than 75%. Hardware and other revenue was R98 million or $8.5 million, up 9% from the prior year quarter. Moving down to P&L, our gross profit in the third quarter was R251 million, representing a gross margin of 65.6% compared to 66.6% in the third quarter of fiscal 2014. We expect gross margins to remain in the mid to high 60% range for the near-term. From a long-term perspective, we are targeting gross margins beyond 70% as subscription revenue continues to increase as a percentage of our total revenues and our fixed costs are amortized over a larger base of subscribers. In terms of our operating expenses, our sales and marketing costs were up 16.9% relative to the third quarter last year. We have been investing in our sales force throughout 2014 and this line item now represents about 12% of revenue, a level we expect to sustain for the foreseeable future. General and administrative expenses were up 19% year-over-year. Included in these expenses are restructuring costs of R10.6 million related to our South African and EMEA businesses. As Joss noted, we have streamlined operations and as a result expect to see cost savings of R50 million in fiscal 2016. Income from operations was R31 million in the third quarter, representing a 8.8% operating margin. This compared to operating income of R58 million in the year ago quarter or 12.4% operating margin. Significant operating margin for the quarter is primarily attributable to the restructuring costs previously discussed, which had a 3% impact on the margins. We have always run our business with a focus on operational excellence in order to deliver a balance of 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 a really good global infrastructure. To providing this with additional information regarding our financial results, we disclosed adjusted EBITDA and adjusted EBITDA margins, which are non-IFRS measures. We have provided a full reconciliation table in our press release. Third quarter adjusted EBITDA was R68.4 million, representing an adjusted EBITDA margin of 19.5% compared to 21.1% last year. Our effective tax rate for the quarter was 57.3% as compared to 29.5% in the year ago quarter, the higher than normal effective rate as a result of the mix in geographic origin of the profit ending the quarter. Profit for the period was R52 million compared to R45 million in the year ago quarter. This was impacted by the tax rate as well as the foreign exchange gains made in the quarter of R17.7 million compared to R24.4 million in the year ago. Profit for the period was R0.04 per fully diluted ordinary share from compared to R0.06 per fully diluted ordinary share posted for the third quarter of fiscal 2014. As previously disclosed, we hold the New York IPO proceeds in U.S. dollars and the rand has been volatile. To facilitate analysis of our results without the effect of foreign exchange gains and losses, we have reported adjusted profit for the period and adjusted EPS. Adjusted profit for the period was R20 million compared to R27 million we posted a year ago. Adjusted earnings per diluted ordinary share were R0.03 compared to $0.03 a year ago. Turning to the balance sheet, we ended the quarter with cash and cash equivalents of R876 million, down from R905 million last quarter. The decline in cash is the result of our acquisition of Compass. We repaid R40 million to the sellers. There is a potential for a further R18 million in us to be paid to Compass, which is currently reflected in restricted cash and is shown as the cash outflow with the [indiscernible]. From a cash flow perspective, in the three months ended December 31, 2014, we generated R61 million in the cash from operating activities and invested R31 million in capital expenditures leading to free cash flow of R29 million or $2.5 million. This compares to a free cash flow of R17 million or $1.5 million in the third quarter of 2014. Finally, I would like to share our financial targets for the full fiscal year 2015. Given our subscription revenue performance in the third quarter and ongoing expectations for the rand to remain weak, we have raised our total in subscription revenue targets. For total revenue, we are now targeting R1.345 billion to R1.355 billion, which would represent year-over-year growth of 67%. We have raised our subscription revenue targets in R985 million to R995 million, which would be year-over-year growth of about 15% to 17%. Due to the increased revenue as well as cost savings we are achieving from our streamlining, we have raised our adjusted EBITDA target about 5% to between R255 million and R260 million. Taking into account the high tax rate associated with our current revenue mix and R10 million of restructuring costs, our adjusted earnings per diluted ordinary share targets is now R0.105 to R0.12 based on 801 million diluted ordinary shares and the tax rate of between 32% and 36% at a ratio of 25 ordinary shares to 1 ADR and using the February tax rate, this would equate to earnings per diluted ADR of $0.23 to $0.26. For the fourth quarter of 2015, we are targeting subscription revenues in the range of R253 to R263 million, which would represent year-over-year growth of 9% to 13%. In summary, we are pleased to have posted solid growth and strong profits. We are winning key contracts, expanding in our newer verticals and very effectively managing our costs. Thank you for the attention. Operator, we are now ready to begin the Q&A session.

[Operator:]

Thank you. [Operator Instructions] And we will take our first question from Terry Tillman with Raymond James.

[Terry Tillman:]

Hey, good morning guys. Hi, Joss.

[Stefan Joselowitz:]

Good morning.

[Terry Tillman:]

Yes, I guess the first question I had is just in the Americas region, which is strategically important for your future growth, just looking at some of the commentary you had in the prepared remarks and in the press release in terms of strong pipeline. I guess, Joss, first of all, is this driven by improvement in increasing your sales capacity or is it better execution or is it just healthcare spending? Just help us understand a little bit more about the pipeline activity, because it seems like you are really trying to accentuate that or highlight that? And then I had a follow-up question on South America.

[Stefan Joselowitz:]

Sure. So, I guess it’s a combination of all of the above in terms of some of them that you mentioned, certainly, the first two in terms of increased investment in salespeople. So we definitely got more focused activity in certain verticals that we are working on. And I guess the better execution as well. We are finally enjoying unabated period, this last quarter has been – our leaders skipped in the region that there has been basically free to compete. And so we put that litigation issue behind us, which is clearly making a difference in terms of the focus that’s put into the business, and we are putting a lot of efforts into the region. It certainly – if it is weighted into that that region, not to say that we are – we are neglecting any of the other regions, but we are more heavily weighted towards the Americas, there is no doubt.

[Terry Tillman:]

Okay. And I guess, in South America, you highlighted a couple of wins. It sounds like there is some interesting stuff going on, but I would like to ask about in Mexico on the OEM side, but I am curious in terms of in South America, I guess is it getting to a point now where the cadence of business is such that you are starting to see quarter in and quarter out regular flow of business or should we expect they could still be somewhat uneven and patchy or lumpy given that you are still relatively new in South America?

[Stefan Joselowitz:]

South America has been a steadily growing region for us. It’s nowhere near what we believe the potential for that region is, and that’s probably the reason why we just put Head of Sales specifically for Latin America into place, and he set the ground really nicely and they have made some good progress, so I’m excited about that. I personally got a couple of trips scheduled in the near-term to meet with some of our partners or potential partners and customer opportunities in that region. So, it has been a steady, but again it is a region that does play to the full strengths of our organization. There is a second security component that we are very good at that’s not required in North America. Typically, it was not a big a deal in North America. So our product portfolio, we are able to deploy our full product portfolio really in South America, so we are excited about that. And we think there will be an ongoing contributor increasing in tempo for our group as a whole, but of course the big opportunity still remains in North America, USA, and Canada and for us to take the business to a level where we believe it’s possible to get it. It means we have to achieve our objectives in that territory.

[Terry Tillman:]

Okay. And thanks for the responses there. And I guess, in terms of the oil and gas exposure, I mean the headlines for that end market has been rough heavily. Whether it relates to the third quarter or kind a near-term trend, is it actually having a meaningful impact on business or is it really business as usual, I’m just trying to understand should we have an expectations that this is not really a position of strength in the business near-term or more of a bit of softness, just trying to see how this might shake out in your business?

[Stefan Joselowitz:]

Actually, firstly, higher oil prices suites our industry better than a lower oil price. So let’s put that on the table right up front and simply because it makes the return on investment calculation for a customer more attractive. Let’s ignore who that customer is, whether it’s in the oil and gas industry or any other industry for that matter. The return on investment demonstration, the one easy to demonstrate tangible – tangible demonstration that you can demonstrate in the short-term is fuel savings. So, the fuel savings that we deliver doesn’t change. Of course, the dollar value that a customer enjoys of fuel savings is with the lower oil price. So, with higher oil price clearly I will and I guess the same could be said of any leader running a telematics business. Putting that aside, is – it’s no secret that we are successful in a number of verticals and there is no secret that oil and gas is one of our big verticals around 20% of our subscription revenue. But the interesting thing to note there is that the – our customers there aren’t interested in fuel savings that’s not the reason why they are deploying our services. The reason they are deploying our services primarily is to unlock safety improvements and a reduction in accidents, which results in a dramatic reduction in work related accidents and fatalities and injuries, so that’s their big focus. And irrespective of the oil price they are coming forward to stop the safety initiatives. So this is not the first cycle of being through in this business with oil price doing what it is. And I was in the U.S. in 2008 when oil was in the 30s, so I am well aware of this impact of this. So clearly they will continue their spending, but of course exploration slows down. So the fleet expansion may not be as rapid as we would like and that’s just a cycle that we have to deal with. But we’re right in the move of it now and we are still seeing reasonable subscriber growth. It’s no secret that this year hasn’t gone strictly in accordance with our internal plan or my reference to that at previous discussions. But we have bounced back from where we started in Q1 from a subscriber growth perspective. Our January performance which I’m not reporting on right now obviously has been very encouraging. So I didn’t allude to it in the earnings call that we broke through the 0.5 million subscriber barrier in January. So I am not reporting what our full subscriber adds are, but I was pleased with our January subscriber adds which is not traditionally a great month for us with the Christmas and New Year holidays, which seem to take time to build up a bit momentum into the New Year. So we are in the middle of the cycle and thus far it appears to be business as usual.

[Terry Tillman:]

Okay. And my last question just financial question, I will turn it over to others. There is obviously different puts and takes here on your subscriber growth and the subscription revenue, but do you guys foresee subscription revenue accelerating in the next fiscal year and then Megan how do we think about the R30 million savings, is that going to be more linear, is that going to be more back end loaded as we move into FY ‘16? Thanks.

[Stefan Joselowitz:]

So, to the first part of that question, we are not ready to forecast the year yet, but what we have repeatedly said is that we have made investments in growth initiatives and we certainly expect some of those initiatives to reap some rewards. Clearly we can’t control some of the factors that are around us, but I am feeling good about the investments that we have made for future growth at this stage.

[Megan Pydigadu:]

Then to answer the last part of your question in terms of the R30 million cost savings that will be coming too on a linear basis. We are expecting the majority of the costs that we have looked at savings to be out of our system by February, early March. So you’ll start seeing this coming seasonally in April.

[Operator:]

And we will move on to our next question. We will take [indiscernible] with William Blair.

[Unidentified Analyst:]

Hi, guys. Thanks for taking my question. First on the South Africa business what did you guys see in that geography this quarter I know that in the prior two quarters I believe it was a bit of challenge in that particular geography, so any change there in the quarter?

[Stefan Joselowitz:]

Well, certainly we did see an improvement from Q2 onwards, in fact you will recall that Q1 really took me by surprise in terms of how rest of your capital, but it’s come back somewhat since then. So the South African economy or the Southern African economy still remains under pressure. Some of the key factors in terms of growth, etcetera are not fantastic from a GDP growth perspective etcetera, but its looking again at the quarter it maintained that steadier momentum that we have seen develop from Q2 onwards. So are we any where near the growth levels that I think we are capable of under a normalized situation in this region, we are not at the moment. But we are growing and growing reasonably and handsomely under the circumstances. So we are just going to focus on executing well under these conditions and it appears to be going in the right direction from our perspective.

[Unidentified Analyst:]

Got it. And then when you look at some of the bus and coach wins that you had in North America during the quarter, can you talk about what were the driving factors there to sign some of these deals? Was it leveraging your prior experience with bus and coach in other geographies that drove some of these deals and is that point an important factor?

[Stefan Joselowitz:]

It certainly is. We booked up a lot credibility in that vertical. It’s still a relatively small vertical for us, like growing extremely well on a global basis. So, we have steady wins just about on a monthly basis with best companies, really all over the world. And one of the key success factors is that we have strong reference accounts, which is enabling us to speed up the momentum, shorten sale cycles in territories where we don’t – we are not particularly well known at the moment. So, that’s really the encouraging point. We can move into a new country just about as an unknown bus fleet and put a pitch on the table that is extremely impressive backed up with very strong customer testimonials. And most importantly, those customers are happy to talk to our prospects, because they typically don’t view them as competitive prospects in different countries. So, they are not likely to be their competitors. So, having said that, [indiscernible] the fact that we do have a global distribution capability, which enables us to take advantage of that credibility and of course, we have a very broad product portfolio, but we have a product feature set that’s been tailored steadily through that vertical, which also increases our attractiveness.

[Unidentified Analyst:]

Got it. And then last one for me, just wondering if we could dive in a little bit more to the DHL deal that was signed in the quarter. Can you provide anymore details there? Was this – is this complementary to something that they already have on some of their vehicles and what’s the total potential opportunity there with them?

[Stefan Joselowitz:]

Yes. So, it was certainly to my knowledge, Greenfield installation, and we have done a combination in fact of our baseline fleet management system combined with some offer enhancing features, which they have taken really around our Intellichain technology, which we have been steadily enhancing. So, it’s a high value-add opportunity and we think one, which if we carry on delivering the way we are, I think it’s going to become a serious global account for us, but I do want to stress it’s early days. And I am always hesitant to talk too broadly about early phase successes until we have entrenched our position. So, as you are aware, DHL is a gigantic organization and installing 400 units, 500 units, is far from an entrenched position. So, we have got some way to go, but I am feeling good about our prospects.

[Unidentified Analyst:]

Got it. Thanks again for taking my questions, guys.

[Stefan Joselowitz:]

Thank you, Matt.

[Megan Pydigadu:]

Thanks.

[Operator:]

Our next question comes from Mike Walkley with Canaccord Genuity.

[Mike Walkley:]

Great. Joss, congratulations on surpassing 0.5 million subscribers to start the calendar year.

[Stefan Joselowitz:]

Thank you. Europe is an exciting millstone for, I was around when we did our first subscriber. So, I am particularly excited about that one and looking forward to our 1 million, so thanks for that.

[Mike Walkley:]

Just on that you have talked in the past and we have seen the industry, there has been a lot of consolidation from some of our competitors whether with each other with private equity firms trying to reach those levels of scale you have with 0.5 million plus subscribers in this fragmented market. So, I just want to gear kind of high level views on acquisitions in the market given its fragmented and how you look at that? And have other approached you for the same reason given your 5,000 base?

[Stefan Joselowitz:]

Yes, so two parts to that question. Of course, there is a lot of activity in our space, which is – which is not surprising, it’s – as you pointed out, it’s a highly fragmented space with – with very few players building out anything of reasonable scale. So, if we talk about 0.5 million plus, you are talking about a globally, particularly players that have booked up global operations, it’s a pretty risk-based scenario. There is maybe a dozen around that, players that can post that kind of scale and so it’s a pretty risk-based and of course the industry has some attractive characteristics. So, you are aware I am sure of all of the moves that have been made from players that have not traditionally been in our space. And many of them are not private equity players they are strategic buyers who are moving a position in a space that they fund extremely attractive. So, that’s been clear. And the second part of your question is have we been approached? Of course, we have booked great assets and it’s an asset that I am pretty proud of and we are getting done interest on an ongoing basis and have already for many years. So, I guess that will continue.

[Mike Walkley:]

Okay, thanks. And then just making with R30 savings on OpEx and given restructuring some regions and investing for growth in others, so we after the R30 savings hit OpEx you have kind of be flat throughout calendar ‘15 or does it start to grow again given some of your investments for growth in other regions?

[Megan Pydigadu:]

It’s a R30 million savings that we will see. So, we will still see an increase in our OpEx cost. And I think as I have previously stated in the results announcement, our sales and marketing are probably running at about 12% of revenue. And we would continue to keep our sales and marketing cost at those levels. So, with increasing revenue, you will see an expense and then cost we are earning. And then our administration costs, they will also be with the growth in the business than if you shift to an increase there as we continue to grow our business. And lastly a big component of our cost base, are people. So, there are inflation adjustments that we could see our employees and also will impact on the cost base. That being said, we should start to see an improvement in our adjusted EBITDA margin and operating margin and we have seen that this last quarter and the previous quarter we are starting to see our adjusted EBITDA reach the 20% level, which is where we are targeting. And we are happy that we could invest at our top of levels again.

[Mike Walkley:]

Okay. Last question for me, also just as you look at your pipeline for next year, could you talk about the mix maybe of hardware versus bundling deals and how we should think about hardware revenue trends over the next 6 to 12 months?

[Stefan Joselowitz:]

Yes. There is definitely acceleration towards bundled deals if we analyze our pipeline. So, that the good characteristics of that is that naturally the offers are higher, margins will trend up with as we recognize it as recurring revenue particularly once you have got through the phase of the basically amortization of the hardware specifically around that process. The negative of course is you get the initial cash flow impact. So, that’s the nature of the bundled deals. So, there is no doubt that going forward we are going to see a higher level of bundled versus the unbundled model where we sell hardware and subscription revenues separately. We don’t expect to see our hardware components disappear at any time in the near-term or medium-term for that matter, but you will definitely see the ratios change.

[Mike Walkley:]

Thank you.

[Operator:]

[Operator Instructions] And we will take our next question from Brian Schwartz with Oppenheimer.

[Brian Schwartz:]

Yes, hi Joss and Megan and I actually want to pass along my congratulations on reaching the 0.5 million subscriber scale. That’s a rare air in your industry. So, congratulations.

[Stefan Joselowitz:]

It is. Thanks for those conduits. Thank you.

[Brian Schwartz:]

You are welcome. I just had one follow-up question kind of building on Mike’s question about kind of the – what are you seeing in markets like? My question Joss was around pricing, because there has been quite a bit of a consolidation activity, strategic acquisitions from bigger companies, but yet the market is at least from my assessment still relatively fragmented out there. So, I wonder if you can just update us or talk about what are you seeing in terms pricing and if you think you have the ability to maintain your price here on the products as we move forward over the next several quarters and years? Thanks.

[Stefan Joselowitz:]

Sure. Thank you. So, yes, lot of M&A activity as you pointed out and so from – some of them relatively or incredibly large players, making investments in the space. And had we seen directly any change in behavior post these acquisitions? We actually haven’t. So, no significant change in the market dynamics. Am I expecting the market to evolve over time with the entry of these increasingly larger players coming to our space? Of course, I am. So, what does excite me, however, is that even without mentioning names of the state, but you are aware of all of them, but the kind of the players that are coming into the space are likely to be pretty rationale competitors, which is very different from the stiff competition we faced for many years, from small regional players who are undercapitalized and are struggling to pay the salary bill at the end of month. So, you see a very different kind of behavior at a regional level from those kind of players. So, I think the kind of the consolidation that’s taking place is a good thing, which will become a great thing with the efflux of time. I have always maintained that the industry is right for this and it can be no secret that part of the some of the moves we have made was to position ourselves to steadily build our scale, not only organically, but through acquisition. I am now focused at the moment on organic and we are looking at opportunities as and when they present themselves, but building an asset of true global scale, I mean, we have booked out a great asset, we put a 0.5 million subscribers, but we are a long away from the vision that I have got for this business. And now the vision I have got is a much less weighting out of Africa or obviously with Africa still growing very strongly, but I would like to see our international businesses surpassing that growth rate, where it becomes a less significant component to our business. So, we are adjusting our risk profile from that perspective. I would – I have got a vision to see the center of gravity steadily moving towards North America. And as we unlock the opportunities that, that region presents to us and I think we are making good progress towards getting there, but genuinely, I think 0.5 million is a great millstone for us, but it’s taken us this part of 18 years to get there, but things have changed and my plan is to get into the millions or much more record than it’s taken us to get this far. So, it’s going to require a step change and we need a couple of those investments that we have been working off to start paying off and then we will steadily get there.

[Brian Schwartz:]

Thank you.

[Stefan Joselowitz:]

Thank you. I appreciate it.

[Operator:]

And there are no further questions I would like to turn the conference back over to our speakers for any additional or closing remarks.

[Stefan Joselowitz:]

Well, briefly thank you ladies and gentlemen, I’d like to thank you for joining us here today. We look forward to speaking with and seeing some of you at the Raymond James Institutional Investors Conference on March 3 in Orlando. I am excited about that. For now, thanks for your time.

[Operator:]

And that concludes today’s teleconference. Thank you for your participation.