Published: 2022-11-09 00:00:00 ET

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Nature of the Business

MiX Telematics Limited (the “Company”) is a global provider of connected fleet and mobile asset solutions delivered as Software-as-a-Service (“SaaS”). The Company’s solutions enable customers to manage, optimize and protect their investments in commercial fleets, mobile assets or personal vehicles. The Company’s solutions enable a wide range of customers, from large enterprise fleets to small fleet operators and consumers, to reduce fuel and other operating costs, improve efficiency, enhance regulatory compliance, promote driver safety, manage risk and mitigate theft.

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

Basis of preparation and consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and reflect, in the opinion of management, all adjustments, consisting of normal recurring adjustments and accruals, which are necessary for a fair statement of the results of the interim periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). The unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated on consolidation.

These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended March 31, 2022 filed with the SEC on June 14, 2022.

Use of estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires the use of estimates and assumptions that affect the amounts reported and disclosed. Significant estimates include, but are not limited to, fair values of assets acquired and liabilities assumed from the business acquired, fair value measurement of contingent consideration, allowances for doubtful accounts, the assessment of expected cash flows used in evaluating goodwill for impairment and income and deferred taxes. Actual results could differ from those estimates, and such differences may be material to the consolidated financial statements.

We have considered the impact of rising inflation, fuel prices, global politics, sanctions and the impact thereof on global trade on the estimates and assumptions used. As of September 30, 2022, we have taken into account the impact of the above on goodwill sensitivities and impairment assessments. However, future changes in economic conditions could have an impact on future estimates and judgements used.

Summary of significant accounting policies

Other than as listed below there have been no other changes to the Company’s significant accounting policies disclosed in the Company’s Annual Report on Form 10-K for the year ended March 31, 2022, filed with the SEC on June 14, 2022, that have had a material impact on the Company’s Condensed Consolidated Financial Statements and related notes.

Contingent consideration

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

Recently Adopted Accounting Pronouncements

There were no new accounting pronouncements adopted during the six months ended September 30, 2022.

Recent Accounting Pronouncements Not Yet Adopted

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

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

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

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

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

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

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

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

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

						September 2, 2022
Fair value of consideration transferred
Cash consideration						$	3,739
Contingent consideration						4,073
						7,812
Fair value of identifiable assets acquired and liabilities assumed
Customer relationships						6,000
Finance lease receivable						412
Indemnification asset1						1,476
Loss contingency1						(1,476)
Product warranties						(41)
						6,371
Goodwill						$	1,441

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

The initial accounting for the business combination is not yet complete given that the acquisition occurred less than a month before the reporting date. The fair values of the identifiable assets acquired and liabilities assumed have only been determined on a provisional basis and therefore, adjustments to them and the resulting goodwill may occur in the future.

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

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

The goodwill is attributable to the workforce of the acquired business and the opportunity for the Company to increase its scale in North America and to further diversify its North America business. The goodwill is assigned to the Americas segment and is deductible for tax purposes. There was no change in the goodwill balance of $1.4 million between the date of acquisition and the end of the reporting period, September 30, 2022.

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

The acquired business contributed revenues of $0.9 million and earnings of $3,400 for the period from September 2, 2022 to September 30, 2022. If the business was acquired on April 1, 2022, the acquired business would have contributed revenues of $5.7 million and earnings of $0.5 million, after amortization of customer relationships, for the 6 months ended September 30, 2022.

Valuation Methodology

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

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

•Historical performance including sales and profitability

•Contributory asset charges

•Business prospects, industry expectations and competitive environment

•Estimated economic life of the asset

•Revenue attributable to existing customers

•Attrition of existing customers

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

The Company provides fleet and mobile asset management solutions. The principal revenue streams are (1) Subscription and (2) Hardware and other. Subscription revenue is recognized over time and hardware and other revenue is recognized at a point-in-time.

To provide services to customers, a device which collects and transmits information collected from the vehicle or other asset is required. Fleet customers may also obtain other items of hardware, virtually all of which are functionally-dependent on the device. Some customers obtain control of the device and other hardware (where legal title transfers to the customer), while other customers do not (where legal title remains with the Company). A contract arises on the acceptance of a customer’s purchase order, which is typically executed in writing.

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Contract liabilities

When customers are invoiced in advance for subscription services that will be provided over periods of more than one month, or pay in advance of service periods of more than one month, deferred revenue liabilities are recorded. Deferred revenue as of March 31, 2022 and September 30, 2022 was $6.7 million and $5.9 million, respectively. During the quarter ended September 30, 2021 and September 30, 2022, revenue of $1.2 million and $0.9 million respectively, was recognized which was included in the deferred revenue balances at the beginning of each such quarter. During the six months ended September 30, 2021 and

September 30, 2022, revenue of $2.4 million and $2.2 million, respectively, was recognized which was included in the deferred

revenue balances at the beginning of each such financial year.

Contract acquisition costs

Commissions payable to sales employees and external third parties which are incurred to acquire contracts are capitalized and amortized, unless the amortization period is 12 months or less, in which instance they are expensed immediately. Deferred commissions were $4.1 million and $4.8 million as of March 31, 2022 and September 30, 2022, respectively, and are included in Other assets on the Condensed Consolidated Balance Sheets.

The following is a summary of the amortization expense recognized (in thousands):

			Three Months Ended September 30,												Six Months Ended September 30,
			2021						2022						2021						2022
Amortization recognized during the period:			$	(857)					$	(988)					$	(1,767)					$	(1,929)
–Cost of revenue (external commissions)			(616)						(732)						(1,291)						(1,472)
–Sales and marketing (internal commissions)			(241)						(256)						(476)						(457)

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

						Six Months Ended September 30,
						2021						2022
Balance at April 1						$	5,575					$	5,426
Bad debt provision						1,563						1,643
Write-offs						(1,036)						(2,245)
Foreign currency translation differences						(66)						(831)
Balance at September 30						$	6,036					$	3,993

Overview of the Company’s exposure to credit risk from customers

The maximum exposure to credit risk at the reporting date is the carrying value of each receivable and loan to external parties, net of impairment losses where relevant. As of March 31, 2022 and September 30, 2022, the Company had no significant concentration of credit risk, due to its spread of customers across various operations and geographical locations.

The Company does not hold any collateral as security.

Net accounts receivable as of March 31, 2022 and September 30, 2022 of $4.1 million and $2.6 million, respectively, are pledged as security for the Company’s overdraft facilities.

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Property, plant and equipment comprises owned and right of use assets. The Company leases many assets including property, vehicles, machinery and IT equipment.

The cost and accumulated depreciation of owned assets are as follows (in thousands):

						March 31, 2022						September 30, 2022
Owned assets
Plant and Equipment						$	791					$	715
Motor Vehicles						1,938						1,814
Furniture, fixtures and equipment						1,553						1,357
Computer and radio equipment						4,036						3,745
In-vehicle devices						65,881						67,532
Assets in progress						332						111
Owned assets, gross						74,531						75,274
Less: accumulated depreciation and impairments						(46,597)						(44,905)
Owned assets, net						$	27,934					$	30,369

Depreciation expense related to owned assets during the three months ended September 30, 2021 and 2022 was $2.6 million and $2.2 million, respectively. Depreciation expense related to owned equipment during the six months ended September 30, 2021 and 2022 was $5.3 million and $4.8 million, respectively. Depreciation expense related to in-vehicle devices is included in subscription cost of revenue.

The cost and accumulated depreciation of right-of-use assets are as follows (in thousands):

						March 31, 2022						September 30, 2022
Right-of-use assets
Property						$	7,019					$	5,113
Equipment, motor vehicles and other						305						225
Less: accumulated depreciation						(2,984)						(2,068)
Right of use assets, net						$	4,340					$	3,270

Intangible assets comprise the following (in thousands):

						As of March 31, 2022																		As of September 30, 2022
			Useful life (in years)			Gross Carrying amount						Accumulated amortization						Net						Gross Carrying amount						Accumulated amortization						Net
Patents and trademarks			3 - 20			$	105					$	(70)					$	35					$	152					$	(122)					$	30
Customer relationships			2 - 15			2,772						(2,528)						244						8,536						(2,543)						5,993
Internal-use software, technology and other			1 - 18			42,335						(22,154)						20,181						36,735						(19,803)						16,932
Total						$	45,212					$	(24,752)					$	20,460					$	45,423					$	(22,468)					$	22,955

For the three months ended September 30, 2021 and 2022, amortization expense of $1.0 million and $1.3 million respectively, has been recognized. For the six months ended September 30, 2021 and 2022, amortization expense of $2.0 million, and $2.4 million, respectively, has been recognized. Non-cash disposals of $0.1 million and $0.6 million were recognized for the six

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

						March 31, 2022						September 30, 2022
Current:
Product warranties						$	630					$	313
Maintenance						506						433
Employee-related accruals						7,621						6,343
Lease liabilities						932						543
Accrued commissions						3,017						2,764
Loss contingency (1)						—						1,476
Other accruals						6,904						7,289
Total current						$	19,610					$	19,161
Non-current:
Lease liabilities						$	3,655					$	2,762
Other liabilities						689						594
Total non-current						$	4,344					$	3,356
(1) Relates to the acquisition of Trimble’s FSM business.

Product warranties

The Company provides warranties on certain products and undertakes to repair or replace items that fail to perform satisfactorily. Management estimates the related provision for future warranty claims based on historical warranty claim information, the product lifetime, as well as recent trends that might suggest that past cost information may differ from future claims. The table below provides details of the movement in the accrual (in thousands):

						As of September 30,
						2021						2022
Product warranties
Opening balance						$	612					$	683
Warranty expense/(credit)						200						(22)
Reclassification (1)						—						(247)
Utilized						(126)						—
Acquisition (2)						—						41
Foreign currency translation difference						(14)						(102)
Balance as of September 30						$	672					$	353
Non-current portion (included in other liabilities)						$	47					$	40
Current portion						$	625					$	313
(1) Relates to a reclassification of certain costs from Product warranties to the Maintenance provision.
(2) Relates to the acquisition of Trimble’s FSM business.

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Development expenditure incurred comprises the following (in thousands):

			Three Months Ended September 30,												Six Months Ended September 30,
			2021						2022						2021						2022
Costs capitalized (1)			$	985					$	988					$	1,956					$	2,029
Costs expensed (2)			1,314						1,449						2,751						3,004
Total costs incurred			$	2,299					$	2,437					$	4,707					$	5,033
(1) Costs capitalized relate only to the development of internal-use software, which are recognized in accordance with the Intangible assets (Internal-use software and technology) accounting policy.
(2) Costs expensed are included in Administration and other expenses in the Condensed Consolidated Statements of Income/(Loss).

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

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

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

			Three Months Ended September 30,												Six Months Ended September 30,
			2021						2022						2021						2022
Operating lease cost			$	373					$	303					$	780					$	635
Short-term lease cost			145						86						234						132
Total lease cost			$	518					$	389					$	1,014					$	767

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

						Six Months Ended September 30,
						2021						2022
Operating cash flow information:
Cash payments included in the measurement of lease liabilities						$	754					$	827
Non-cash activity:
Right-of-use assets obtained in exchange for new operating lease liabilities						$	397					$	231

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

						March 31, 2022						September 30, 2022
Weighted-average remaining lease term - operating leases (months) (1)						25						24
Weighted-average discount rate - operating leases						8.0		%				8.1		%
(1) Including expected renewals where appropriate.

Maturities of operating lease liabilities as of September 30, 2022 were as follows (in thousands):

2023 (remainder)						$	431
2024						701
2025						636
2026						544
2027						552
Thereafter						1,396
Total future minimum lease payments						4,260
Less: Imputed interest						(955)
Present value of future minimum lease payments						3,305
Less: Current portion of lease liabilities						(543)
Non-current portion of lease liabilities						$	2,762

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Basic

Basic earnings/loss per share is calculated by dividing the income/loss attributable to ordinary shareholders of the parent by the weighted average number of ordinary shares in issue during the period.

The net income/loss and weighted average number of shares used in the calculation of basic and diluted earnings/loss per share are as follows (in thousands, except per share data):

			Three Months Ended September 30,												Six Months Ended September 30,
			2021						2022						2021						2022
Numerator (basic)
Net income/(loss) attributable to MiX Telematics Limited stockholders			$	1,299					$	(1,206)					$	4,830					$	(528)
Denominator (basic)
Weighted-average number of ordinary shares in issue and outstanding			552,386						552,210						552,124						551,792
Basic earnings/(loss) per share			$	0.002					$	(0.002)					$	0.009					$	(0.001)
American Depository Shares*:
Net income/(loss) attributable to MiX Telematics Limited stockholders			$	1,299					$	(1,206)					$	4,830					$	(528)
Weighted-average number of American Depository Shares in issue and outstanding			22,095						22,088						22,085						22,072
Basic earnings/(loss) per American Depository share			$	0.06					$	(0.05)					$	0.22					$	(0.02)
*One American Depository Share is the equivalent of 25 ordinary shares.

Diluted

Diluted earnings/loss per share is calculated by dividing the diluted income/loss attributable to ordinary shareholders by the diluted weighted average number of ordinary shares in issue during the period. Stock options, retention shares and stock appreciation rights granted to directors and employees are considered to be potential ordinary shares. They have been included in the determination of diluted earnings/loss per share if the required target share price or annual shareholder return hurdles (as applicable) would have been met based on the performance up to the reporting date, and to the extent to which they are dilutive.

Adjustments for stock appreciation rights and restricted share units are excluded from the calculation of diluted loss per share and per American Depository share in the table below for the three and six months ended September 30, 2022 as the effect would have been anti-dilutive.

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The Company has 6 reportable segments, which are based on the geographical location of the 5 Regional Sales Offices (“RSOs”) and also includes the Central Services Organization (“CSO”). The RSOs provide fleet and mobile asset management solutions and predominantly generate external revenues. CSO is the central services organization that wholesales products and services to RSOs who, in turn, interface with our end-customers, distributors and dealers. CSO is also responsible for the development of hardware and software platforms and provides common marketing, product management, technical and distribution support to each of the other reportable segments. CSO is a reportable segment because it produces discrete financial information which is reviewed by the chief operating decision maker (“CODM”) and has the ability to generate external revenues.

The CODM has been identified as the Chief Executive Officer who makes strategic decisions for the Company. The performance of the reportable segments has been measured and evaluated by the CODM using Segment Adjusted EBITDA, which is a measure that uses income before income tax expense excluding acquisition-related costs, net interest expense/income, net foreign exchange gains/losses, net profit on sale of property, plant and equipment, restructuring costs, stock-based compensation costs, impairment of long-lived assets, depreciation, amortization, operating lease costs and corporate and consolidation entries. Product development costs are capitalized and amortized and this amortization is excluded from Segment Adjusted EBITDA.

Segment assets are not disclosed because such information is not reviewed by the CODM.

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

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

1.Subscription revenue is recognized over time.

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

			Three Months Ended September 30, 2022
			Subscription revenue (1)						Hardware and other revenue (2)						Total revenue						Segment Adjusted EBITDA
Regional Sales Offices
Africa			$	18,073					$	1,413					$	19,486					$	7,528
Europe			3,019						510						3,529						1,099
Americas			4,281						473						4,754						945
Middle East and Australasia			3,983						1,889						5,872						2,149
Brazil			1,314						277						1,591						408
Total Regional Sales Offices			30,670						4,562						35,232						12,129
Central Services Organization			30						—						30						(2,692)
Total Segment Results			$	30,700					$	4,562					$	35,262					$	9,437

1.Subscription revenue is recognized over time.

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

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

1.Subscription revenue is recognized over time.

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

			Six Months Ended September 30, 2022
			Subscription revenue (1)						Hardware and other revenue (2)						Total revenue						Segment Adjusted EBITDA
Regional Sales Offices
Africa			$	37,134					$	3,085					$	40,219					$	15,465
Europe			6,164						999						7,163						2,335
Americas			7,693						1,163						8,856						1,118
Middle East and Australasia			8,082						2,774						10,856						3,987
Brazil			2,549						637						3,186						843
Total Regional Sales Offices			61,622						8,658						70,280						23,748
Central Services Organization			41						—						41						(5,459)
Total Segment Results			$	61,663					$	8,658					$	70,321					$	18,289

1.Subscription revenue is recognized over time.

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

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

			Three Months Ended September 30,												Six Months Ended September 30,
			2021						2022						2021						2022
Segment Adjusted EBITDA			$	11,085					$	9,437					$	22,552					$	18,289
Corporate and consolidation entries			(2,474)						(2,778)						(4,850)						(4,952)
Operating lease costs (1)			(373)						(301)						(780)						(635)
Product development costs (2)			(335)						(349)						(698)						(692)
Depreciation and amortization			(3,668)						(3,450)						(7,347)						(7,196)
Impairment of long-lived assets			(28)						—						(28)						—
Stock-based compensation costs			(330)						(243)						(694)						(51)
Restructuring costs			(51)						—						(52)						—
Net profit on sale of property, plant and equipment			43						—						43						33
Net foreign exchange gains/(losses)			60						653						(16)						1,498
Net interest (expense)/income			(141)						(223)						(219)						264
Acquisition-related costs			—						(784)						—						(784)
Income before income tax expense			$	3,788					$	1,962					$	7,911					$	5,774
1.For the purposes of calculating Segment Adjusted EBITDA, operating lease expenses are excluded from the Segment Adjusted EBITDA. Therefore, in order to reconcile Segment Adjusted EBITDA to income before income tax expense, the total lease expense in respect of operating leases needs to be deducted.
2.For segment reporting purposes, product development costs, which do not meet the capitalization requirements under ASC 730 Research and Development or under ASC 985 Software, are capitalized and amortized. The amortization is excluded from Segment Adjusted EBITDA. In order to reconcile Segment Adjusted EBITDA to income before income tax expense, product development costs capitalized for segment reporting purposes need to be deducted.

No single customer accounted for 10% or more of the Company’s total revenue for the three months ended September 30, 2021 and 2022. No single customer accounted for 10% or more of the Company’s accounts receivable as of March 31, 2022 or September 30, 2022.

The Company has issued equity-classified share incentives under the MiX Telematics Long-Term Incentive Plan (“LTIP”) to directors and certain key employees within the Company.

The LTIP provides for three types of grants to be issued, namely performance shares, restricted share units (“RSUs”) and stock appreciation rights (“SARs”).

As of September 30, 2022, there were 34,965,000 shares reserved for future issuance under the LTIP.

The total stock-based compensation expense recognized during the three months ended September 30, 2021 and 2022 was $0.3 million and $0.2 million, respectively. The total stock-based compensation expense recognized during the six months ended September 30, 2021 and 2022 was $0.7 million and $0.1 million, respectively. The noted decrease during the six months ended September 30, 2022 is mainly as a result of the resignation of the Group Chief Financial Officer during the first quarter of fiscal year 2023.

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Stock appreciation rights granted under the LTIP

The following table summarizes the activities for the outstanding SARs:

			Number of SARs						Weighted- Average Exercise Price in U.S. Cents*						Weighted Average Contractual Remaining Term (years)						Aggregate Intrinsic Values (in thousands)
Outstanding as of April 1, 2022			40,971,875						45
Granted			—						—
Exercised			(121,875)						19
Forfeited			(5,650,000)						42
Outstanding as of September 30, 2022			35,200,000						36						3.16
Vested and expected to vest as of September 30, 2022			34,118,750						36						3.13						895
Vested as of September 30, 2022			8,350,000						19						0.50						895

As of September 30, 2022, there was $1.5 million of unrecognized compensation cost related to unvested SARs. This amount is expected to be recognized over a weighted-average period of 3.7 years.

*U.S. currency amounts are based on a ZAR:USD exchange rate of R17.980 as of September 30, 2022.

Restricted share units granted under the LTIP

2 million RSUs were outstanding and unvested as of April 1, 2022. 1 million RSUs vested and were exercised during the first quarter of fiscal year 2023. 0.2 million RSUs were forfeited during the first quarter of fiscal year 2023, resulting in 0.8 million RSUs outstanding as of September 30, 2022. Management estimates forfeiture to be approximately 5%. The unrecognized compensation cost related to unvested RSUs as of September 30, 2022 was $0.1 million, which will be recognized over a weighted average period of 0.8 years, which is the same period as the weighted average remaining contractual term.

As of March 31, 2022 and September 30, 2022, debt comprised bank overdrafts of $5.6 million and $12.0 million, respectively.

Details of undrawn facilities are shown below:

						Interest rate						March 31, 2022						September 30, 2022
Undrawn borrowing facilities at floating rates include:
– Standard Bank Limited:
Overdraft						SA Prime* less 1.2%						$	—					$	224
Vehicle and asset finance						SA Prime* less 1.2%						587						473
Working capital facility						SA Prime* less 0.25%						544						1,390
– Nedbank Limited overdraft						SA Prime* less 2%						690						556
– Investec Bank Limited Facility:
General committed banking facility						SA Prime* less 1.5%						—						10,812
General uncommitted banking facility						Negotiable (overnight or daily rates)						—						10,000
												$	1,821					$	23,455

*South African prime interest rate

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As of March 31, 2022 and September 30, 2022, the South African prime interest rate was 7.75% and 9.75% respectively. The Standard Bank Limited and Nedbank Limited facilities have no fixed renewal date and are repayable on demand. The facility from Nedbank Limited is unsecured.

On June 29, 2022, the Company entered into a new credit facility agreement with Investec Bank Limited (“Investec”) for a 364-day renewable committed general credit facility of R350 million ($22 million at a USD/ZAR exchange rate of $1:ZAR 16.1546), (the “Committed Facility”) and an uncommitted general credit facility of $10 million (the “Uncommitted Facility”). As of September 30, 2022, $8.7 million of the facility was utilized.

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

Service agreement

In terms of an amended network services agreement with Mobile Telephone Networks Proprietary Limited (“MTN”), MTN is entitled to claw back payments from MiX Telematics Africa Proprietary Limited, a subsidiary of the Company, in the event of early cancellation of the agreement or certain base connections not being maintained over the term of the agreement. No connection incentives will be received in terms of the amended network services agreement. The maximum potential liability under the arrangement as of March 31, 2022 and September 30, 2022 was $1.7 million and $1.3 million, respectively. No loss is considered probable under this arrangement.

Competition Commission of South Africa matter

On April 15, 2019 the Competition Commission of South Africa (“Commission”) referred a matter to the Competition Tribunal of South Africa (“Tribunal”). The Commission contends that the Company and a number of its channel partners have engaged in market division. Should the Tribunal rule against MiX Telematics, the Company may be liable for an administrative penalty in terms of the Competition Act, No. 89 of 1998. The Company cooperated fully with the Commission during its preliminary investigation.

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

We cannot predict the timing of a resolution or the ultimate outcome of the matter; however, management, with the input of its external legal advisers, continues to believe that we have consistently adhered to all applicable laws and regulations and that the referral from the Commission is without merit. As of September 30, 2022, we have not made any provisions for this matter as an estimate of the possible loss or range of loss could not be made, and we do not believe that an outflow of economic resources is probable.

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Other than the item below, the directors are not aware of any matter material or otherwise arising since September 30, 2022 and up to the date of this report, not otherwise dealt with herein.

Dividend declared

The Board of Directors declared, in respect of the three months ended September 30, 2022, a dividend of 4 South African cents per ordinary share and 1 South African Rand per ADS, which will be paid on December 1, 2022 to ADS holders on record as of the close of business on November 18, 2022.

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