MIX Telematics Ltd (MIXT) 2019 Q4 法說會逐字稿

Greetings, and welcome to the MiX Telematics' Fourth Quarter Fiscal 2019 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Interim CEO, Paul Dell. Please go ahead, sir.

Welcome to MiX Telematics' earnings results call for the fourth quarter and fiscal year, which ended on March 31, 2019. Today, we will be discussing the results announced in our press release issued a few hours ago. I'm Paul Dell, Interim Chief Financial Officer, and joining me on the call today is Stefan Joselowitz, 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 relating to our business that may be considered forward-looking pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. These statements are subject to 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 mixtelematics.com under the Investor Relations tab.

We will also be referring to certain non-IFRS financial measures. There is a reconciliation schedule detailing these results currently available in our press release, which is located on our website and filed with the Securities and Exchange Commission.

Finally, when discussing our subscription and total revenue growth, we will be referring to constant currency growth rates. All U.S. dollar amounts referred to on the call have been translated at an average exchange rate of ZAR 14.48 to the U.S. dollar, which was the rand-dollar exchange rate reported by oanda.com as at March 31, 2019.

With that, let me turn the call over to Joss.

Thanks, Paul. I would like to thank you all for joining the call today. Our performance in the fourth quarter was a continuation of the trends we experienced throughout the fiscal year. So let me start by providing a high-level summary of our 2019 results.

We added nearly 74,000 net new subscribers, increasing our total base to over 750,000, a significant milestone for the company. This growth came primarily from fleet customers and was a notable increase from the 55,000 subscribers we added in 2018. Subscription revenue for the year grew 16.3% on a constant-currency basis. We expanded adjusted EBITDA margins in fiscal 2019 to 30.5%, the second straight year we increased margins by more than 450 basis points. We increased our long-term adjusted EBITDA margin target to 35%, up from 30%. We were pleased to generate free cash flow of ZAR 177 million, even after investing ZAR 192 million in-vehicle devices, which drive a higher ROI through our bundled solutions. We expect to generate significant free cash flow as our bundled contracts mature through their renewal cycles, leveraging previous investments in in-vehicle devices.

And we exceeded the rule of 40 (sic) 40% benchmark of combined revenue growth and adjusted EBITDA margin for each quarter and the full fiscal 2019. This is a track record few SaaS companies can match.

Our performance in the fourth quarter drew a number of highlights. We added more than 14,000 subscribers compared to 12,000 in Q4 fiscal 2018. Adjusted EBITDA margin reached a record 33% in Q4, up 400 basis points from this time last year and subscription revenue of ZAR 444 million was up 13% year-over-year on a constant-currency basis.

Our fourth quarter results reflected somewhat softer-than-expected top line performance primarily related to the elections held in South Africa last week. We experienced the impact in March and April, but with the elections now behind us, we're expecting our performance in that geography to return to normal. We remain well positioned to resume the momentum and enhance our market position globally, which is reflected in our strong initial fiscal 2020 guidance that Paul will walk through shortly.

I would like to highlight some Q4 customer wins that demonstrate our success around the world, including in the Americas, one of the world's largest oil field services companies is expanding its adoption of our premium solution to an additional 1,000 vehicles in its U.S. fleet. This global leader has been a customer of MiX Telematics for over 10 years and has more than 5,000 vehicles under subscription worldwide.

Another long-time MiX customer in the U.S. chose to expand their adoption of our solution for an additional 200 vehicles in their Australian operations. A leading earthmoving operator in South Africa selected MiX to monitor over 400 of its specialty vehicles to accurately monitor engine hours and provide additional value by passing data intelligence to their customers.

In Latin America, we will be rolling out our premium fleet management solution to 187 vehicles throughout Colombia for a fast-moving consumer goods company. MiX has a long-standing partnership with this global customer, and we're excited as this contract represents our first expansion with them into South America.

And in Europe, we continue to grow our presence in fleet vertical by providing South Wales Transport with our premium fleet solution to address the safety, efficiency and compliance requirements of their fleet.

From a regional perspective during fiscal 2019, we're extremely pleased that all of our geographies grew subscription revenue strongly, while expanding EBITDA margins. Our Africa, Americas and Brazil operation performed particularly well. The economy in South Africa continues to be challenging, but our African team reported solid results yet again. Subscription revenue grew 11% year-over-year and adjusted EBITDA margins ticked up to 46.4% for the fiscal year 2019.

Our Americas team continues to outperform and at 17% of revenues is now our second largest operation. It is our fastest-growing region with subscription revenue growth of 42%. Growth in the Americas has been driven by healthy mix of new subscribers, subscriptions to add-on services and the positive ARPU impact from bundled premium contracts. The high mix of bundled deals is also driving strong adjusted EBITDA margins, which were up more than 1,100 basis points from 34.8% to 46.4%.

Our Americas business continues to benefit from strength in the energy market as well as the early impact from the go-to-market investments we have made in this region to diversify traditional verticals. Brazil continues to outperform in a very challenging socioeconomic environment. Subscription revenues increased 40% year-over-year, as adjusted EBITDA margins grew to 40.3% for the fiscal 2019, up from 30.8% in the comparative period.

Our performance in the U.S. and Brazil are a strong indication of the inherent profitability of our bundled deal strategy, which will have a positive impact on our overall group margins as these regions become a bigger portion of the business.

Another highlight for fiscal 2019 was our Investor Day in December. I just want to take a moment to reiterate the themes we outlined at our event, which remain our key areas of focus in the year ahead. MiX is targeting a multibillion dollar market opportunity, and we have multiple levers to deliver consistent, significant and profitable growth. We're observing a trend whereby more and more multinationals are recognizing the value of Big Data and the Internet of Things. With our rare global distribution footprint and broad product range, we are ideally positioned to take advantage of this [common] phenomena.

We will continue to leverage these trends to add new customers and subscribers around the world. ARPU accretion has been a consistent growth driver for MiX in recent years as we increased the number of solutions to our premium and light fleet customers and continue to drive the uptake of bundled deals. There continues to be a significant opportunity to invest in bundling and various add-on solutions that can drive incremental ARPU expansion overtime. In fiscal 2019, our ARPUs grew by approximately 5%.

We will continue to scale our regional presence and broaden our customer segment focus. We believe that U.S. represents a substantial area for growth in both the premium as well as the light fleet segment. We have driven solid results in the U.S. in recent years and believe we are still in the early stages of benefiting from this opportunity.

To be clear, we believe we have a long runway for growth as we execute on our key initiatives and believe we can grow subscription revenue 15%-plus on a constant-currency basis over time. A key area of focus in the U.S. is the introduction of MiX Now, a simple plug-and-play fleet management offering for smaller fleet operations.

As a reminder, there are 12 million service fleet vehicles in the U.S. alone that are addressable with MiX now, and this vertical represents an incremental annual market opportunity of more than USD 4 billion. Q4 marked our first full quarter with MiX now, and we remain enthusiastic about the opportunity. We signed a number of customers and we're making progress building out the new inside sales force and adapting our go-to-market process to attack this new greenfield vertical. As a reminder, although we are incurring all of the expenses today, we do not expect to begin seeing MiX Now have a meaningful impact on our growth until fiscal 2021.

With that, let me turn it back over to Paul to run through the details on the quarter.

Thanks, Joss. Now let me walk through our fourth quarter and full year fiscal 2019 performance and recall that our reporting currency is the South African Rand. For convenience, we have translated our results in to U.S. dollars both for the 2019 and 2018 periods using the March 31, 2019 spot rate. You can find these conversions in our press release. In addition, please note that our results are presented on an IFRS basis unless otherwise noted.

In the fourth quarter, total revenue came in at ZAR 508 million. Of this total, subscription revenues were ZAR 443.8 million, up over 13% on a constant-currency basis and in line with our guidance range, despite challenging market conditions in South Africa, compounded by the build-up to the elections. Our performance was driven by the ongoing positive traction from our broad subscriber portfolio, including our premium fleet customers across all geographies and vertical markets.

We ended the fiscal year with over 750,000 subscribers, an increase of 10.9% year-over-year, as we added over 14,000 subscribers in the fourth quarter. Subscription revenues represented 87.4% of total revenues compared to 82.4% in the fourth quarter of fiscal 2018. The hardware component of our business is more volatile and depends on whether our customers elect our bundled or cash offerings.

In the fourth quarter, hardware and other revenue was ZAR 64 million, a decline of 19.8% year-over-year. Overtime, we continue to expect the ongoing shift towards bundled deals to increase our subscription revenue as a percentage of total revenue, which will provide us both improved visibility and higher margins. Our gross profit margin in the fourth quarter was 66.9%, up 160 basis points from last year.

As a reminder, gross profit includes depreciation charges related to in-vehicle devices and high-value peripherals used in certain of our bundled fleet contracts. These contracts generate higher ARPUs and as they go through contract renewal cycles, are expected to drive an increase in gross profit margins, which we expect to trend towards 70% in the longer-term.

Operating expenses were 47.7% of total revenue compared to 49.3% of revenue in the fourth quarter last year, which highlights our ongoing commitment to cost controls and scale in the business. Recall that our general and administration costs include research and development costs not capitalized. For those of you interested to see our historical capitalization and development cost expense, we have provided a table in our earnings press release.

To provide investors with additional information regarding our financial results, we disclosed adjusted EBITDA and adjusted EBITDA margin as well as adjusted earnings for the period, which are non-IFRS measures. So we have provided full reconciliation tables in our press release.

Fourth quarter adjusted EBITDA increased 29% to ZAR 168 million or 33% of revenue compared to ZAR 130 million or 28.7% of revenue last year. This represented a 430 basis point year-over-year improvement in adjusted EBITDA margin. The continued improvement in our adjusted EBITDA margins highlights our ability to grow margins year-over-year as we scale the business globally and by successfully leveraging a return on our historical investments, while remaining focused on cost management throughout the business.

Adjusted earnings for the quarter was ZAR 81 million or ZAR 0.14 per diluted ordinary share, which translates to USD 0.24 per diluted American depository share. This was up from the ZAR 55 million or ZAR 0.10 we posted a year ago.

From a cash flow perspective, we generated ZAR 129 million in net cash from operating activities and invested ZAR 50 million in capital expenditures. This led to a positive free cash flow of ZAR 80 million for the fourth quarter compared with free cash flow of ZAR 58 million during the same period last year.

As Joss mentioned, we are very pleased with our ability to generate cash, given the ongoing investments in in-vehicle devices driven by the demand for our bundled offering.

Now turning to our financial outlook. At the midpoint of our total revenue guidance, we expect fiscal 2020 revenue of ZAR 2.197 billion which represents constant currency growth of 9.7%. At the midpoint, we expect subscription revenue to be ZAR 1.945 billion which represents constant currency year-on-year growth of 13.4%.

At the midpoint of our guidance range, we are targeting adjusted EBITDA of ZAR 691 million, which represents an adjusted EBITDA margin of 31.4%. The adjusted EBITDA margin guidance at the midpoint represents an increase of 90 basis points compared to fiscal 2019.

In regards to adjusted diluted earnings per share for fiscal 2020, we're expecting ZAR 0.0477 at the midpoint of the guidance range. Based on an exchange rate of ZAR 14.38 to USD 1, this translates to USD 0.828 per ADS. Our new guidance is based on 585 million diluted ordinary shares and an effective tax rate of 28%.

As we have discussed previously, our intention is to focus on annual targets as this is how our management is focused, and we do not wish to close deals on suboptimal terms in order to achieve quarterly objectives. This is most relevant as it relates to the hardware and other revenue line items in our profit and loss. The area of revenue where we have the highest level of visibility and predictability is our subscription revenue, which as we have discussed is the largest, fastest growing and highest margin component of our business.

For the first quarter of 2020, we're targeting subscription revenues in the range of ZAR 451 million to ZAR 457 million, which would represent year-over-year growth of 10.5% to 12.1% on a constant-currency basis.

We anticipate that our growth will accelerate post the first quarter of fiscal 2020.

Thanks, Paul. In closing, we're well positioned to maintain our momentum in fiscal 2020 and beyond. MiX continues to leverage its global reputation and is executing its strategy of achieving double-digit subscription revenue growth in parallel with strong margin accretion.

With that, we will turn the call over to the operator to begin the Q&A session.

(Operator Instructions) Our first question today is coming from Mike Walkley from Canaccord Genuity.

Congratulations on the strong fiscal 2019 results. So just on the fiscal 2020 subscription growth forecast, can you help us think about the components between, ARPU has been a nice upward trajectory, do we expect ARPU to flatten out and it's more sub growth for that 13% to 14% growth? Or is that a combination of still some premium MiX improving to drive ARPU a little higher and a little slower sub growth, can you help us just think about your planning forecast on the subscription growth?

Yes, certainly, it's -- it's certainly -- we said it was a combination. So we're certainly still expecting some ARPU growth, and that's a key strategic focus for us, of course. And of course, combined with that, we are -- we have a pipeline, a forward pipeline that gives us at least a reasonable indication of some of the forward growth that we can expect both from existing customers and from new customers, and we use a combination of that to come up with our initial guidance.

Okay. And then just on the adjusted EBITDA margin, it's slowing a little bit in terms of the great expansion last year, is this mainly due to MiX Now investments that you'll start to harvest in fiscal '21 and we should start seeing margin expand again? Can you just talk about MiX Now, the investment in 2020 versus what it could drive in terms of margins in '21 and beyond?

Yes. Certainly. So in terms of the EBITDA margin, there is a number of -- certainly a number of factors at play. We certainly have had a great couple of years in terms of the EBITDA margin expansion and of course that same rate is not sustainable indefinitely. Nonetheless, we -- as you remember, we did up guide -- we did update our long-term guidance on -- from 30% to 35%-plus, which is -- so we see a way to go and once we get there it's not the end of the journey, we will update it again. So it is a big focus area for us.

Certainly, investment, in not just MiX Now, and it's certainly part of it, but other strategic initiatives that involve enhanced investment in sales and marketing, while certainly part of the story and we don't believe that our fiscal 2019 saw a fully baked in full investment from that strategic investment point of view. So we're thinking about 2020 certainly as a component of that. Also bear in mind that we have some strategic -- we have a very clear strategic vision for this business that does require us to make additional investments for instance at head office where we're increasing capacity to do various things that we believe are important for meeting our future strategy. So I guess that makes up the other part of it.

Okay. Last question for me, I'll jump back in the queue. Just on the strong growth in Brazil, just concentrating maybe in that large dairy customer you highlighted on previous calls or is it broad based? And how do you see that region continuing for you guys after the strong fiscal '19?

Appreciate it, Mike, and it's certainly, from a Brazil perspective, concentrated on with one customer, which is -- which we view as absolutely great news. We've got a -- and not just one vertical. So Luis and his team are really performing well there in terms of building out a number of verticals and looking at their plans for the year ahead, expecting to see a continued decent performance out of that business as they continue to diversify and build scale.

Our next question is coming from Brian Peterson from Raymond James.

So just wanted to start off on the fiscal year '20 outlook. So it looks like that revenue outlook is above your stretch targets that you provided last year and obviously we've had a lot of upside this year to kind of support that target, but we're seeing guidance imply an acceleration from the first quarter. So just want to really kind of understand your thoughts on what went into kind of setting the guidance outlook?

Thanks. Thanks for the time. As always, guidance is based on best judgment at a point in time. So we put out our view of how we certainly at this stage see the year progressing. And as always, as the year -- as we get more days and particularly when we reach the ARPU we'll have a better feel for where we are in terms of updating that guidance, but the team is focused on delivering our strategic objectives.

It's probably worth mentioning that we have a -- we're reiterating that we have a balanced approach and a balanced focus on our business and top line growth is certainly a very important component of that. We've also adjusted, you mentioned that we were within range of the incentive plan there. It's also worth noting that when it comes to our EBITDA guidance, we're not within range. So the team recognizes that we have to do better than guidance for us to achieve the combination of those 2 objectives. And remember, it has to be both, not one or the other. So there is a significant focus on that. So we're pleased with our initial guidance for the year. As always, we're going to strive to beat it and improve our performance, but I think it's a good starting point.

And maybe just a follow up, I know we've got to hit on the ARPU trends already, but up 5% this year, what is the right way to think about that longer term? And if we could isolate kind of the bundle deal impact, I think, some investors are just trying to understand what does that trajectory look like maybe on a kind of a 5-year outlook?

Not sure. Paul can correct me, if I'm wrong. I don't think we've published any isolated data in terms of splitting out between the affect that bundled yield has on driving ARPU and the other affect that offering enhancing add-ons, additional service add-ons for extra dollars has on that. So we haven't really isolated it. What is still worth noting is that as a percentage of our total base, bundled yields are still only in the 30% kind of exposure. So in the 30s, we have a long way to go in terms of our current base, potentially to -- as they come up for renewal, non-bundled yields to potentially move into a bundled arena, not all of our customers move in that direction, but many of them are. So I think there's a lot of upside there, and we're getting increasingly excited about some of our add-ons, which are particularly for things like MiX Vision, which we're seeing a lot of traction with both existing and new customers. And that's going to continue to drive ARPU. So the way we think about the business is that ARPU should be expanding certainly for the foreseeable future.

Our next question is coming from Matt Pfau with William Blair.

Joss, wanted to hit on the strong performance in the Americas region. Can you give us any more details on what drove that? You mentioned it was a combination of energy and some of the other verticals that you've been investing in, but is it primarily energy driving that growth? And are some of these other investments potentially growth drivers down the road? And within energy, is it still some customers bringing more vehicles online after they had brought some off-line previously? Or are there other expansions or customer wins going on?

Certainly. So there is a number of questions there. It's certainly -- a large part of it is coming from energy. So remember, a few years ago, it was all energy. So we're certainly seeing new customers coming in that are outside of energy sector. And so it's -- we view it as early stages, but nonetheless it's a trend that we view as encouraging. So that's important for us. As far as the growth drive from our -- from the energy sector, it again is a combination of fleet expansion from existing customers and equally exciting we've been adding new customers, and we'll say, if I look at our pipeline going forward, we've got a number of new exciting deals that are looking positive in that pipeline as well. So it is a combination.

Got it. And as I look at the segment margins for both Africa and the Americas, they're both at about the same level. Is there more room for those EBITDA margins to expand for those segments? Or does your future margin expansion come from the Americas segment growing faster and perhaps some of these other regions improving their EBITDA margins to the level of that of Americas and Africa?

Yes. We believe there is room for -- absolutely room for future improvement because the 2 examples you have given have that margin, I guess, for different reasons. The Africa business, which is running at its mid-40s margin is primarily driven as a result of impressive scale in the business. When we look at the U.S. business, we don't view our U.S. business as anywhere near scale yet, however, it's delivering impressive margins because of a very high component of bundled deals. So when we compare one to the other, the [DAR] component in our U.S. business is much higher than our African business. And that component will come down with the efflux of time as these deals -- bundled deals come through renewal, and we've amortized these devices.

So at the same time, we're seeing a parallel affect that the margin should come up in that region on renewal and we're seeing a parallel affect that we continuing to scale the business, so its inherent scale margins should improve. So the combination of, I guess, those 2 factors in all of our businesses should help us achieve -- one of our strategic objectives is to see our business drive, our margin drive continue which, as you know, we just updated our longer-term view on that and we're now focused on achieving that 35%-plus journey at which point we'll update it again.

Our next question is coming from David Gearhart from First Analysis.

My first question I wanted to ask a little bit about the subscriber additions, 14,000 in the quarter, lowest number for the year. Just wondering is it in regards to the weakness in the South African economy in terms of lower net additions for the quarter relative to the rest of sort of prior 3 quarters of the year? And then also can you talk a little bit about the mix of premium fleet in fiscal Q4 versus asset tracking, is it up, flat relative to prior quarters as well as the mix of bundled deals versus upfront in the quarter?

Thanks, David. We certainly viewed our performance in Q4 as a little bit softer than we're anticipating and the reasons are very specific around a slowdown that we observed really in the last month of the quarter and leading into the first month of our new Q1 related to the South African general election. Of course, that's now behind us, it was last week. The outcome is broadly viewed as positive, and we're certainly expecting business momentum to return to normal. So definitely the fact that we never grew as fast, let me stretch even our African business did grow through both of those months, added net subscribers. So we certainly saw growth. It wasn't at the pace we were planning for. So that's certainly one of the reasons. Having said that, we certainly grew subscribers. We added more subscribers in this Q4 than we did in the prior comparative period, if that's any consolation. And we certainly expecting our momentum to improve as we've guided to for the balance of the year. So that's our current expectation.

And in regards to the mix between premium fleet versus asset tracking and bundled versus upfront in the quarter versus the prior quarters, where does that stand at least directionally?

Yes. So directionally, in the quarter that we've just reported, our combined fleet products were an important contributor for us. So in fact, more than 50% of the net additions were fleet customers rather than asset tracking customers.

And is that up or down versus the prior quarters or in line?

It's certainly in line with, I guess, where we would like it to be ultimately for the year. I don't think we've disclosed the breakdown quarter-by-quarter and off the top of my head this year we have had -- where asset tracking has been more than 50%. So it's not something that necessarily remains. It's not a steady percentage, it depends how the deal flows during the quarter, but it's certainly that ratio is a ratio that I'm very happy with.

And lastly, from ELD in the United States, second deadline coming up in December, just wondering what you're expecting on the ELD front? Is it baked into the guidance in terms of some momentum building due to ELD as the year progresses? Or is that something that's being treated as a wildcard?

Thank you, and I appreciate that. It's certainly -- what we've baked into it is what we know in terms of our current pipeline. And as much of that pipeline that currently relates to ELD in terms of based on the fact that we might have a reasonable level of certainty on some of those deals, we would have baked it in. We certainly haven't baked in a significant last-minute rush. And if that happens, it will be a tailwind from our perspective, but we're certainly not banking on it. So to use your terminology, we're treating it as a wildcard.

Our next question is coming from Brian Schwartz from Oppenheimer.

Joss, I had a couple of questions on the U.S. business. Just wondering at all if you can either size or shape the contribution that the U.S. business is having today? Maybe to either your subscription bookings or subscription revenue, just kind of getting the sense on where that stands today.

Thanks, Brian. It's certainly a vital component of our business, and I think I've indicated that we view the U.S. as a -- albeit, the fact that we've done well over the last couple of years, in terms of early stages of building out that geography, we view it as a still a significant untapped opportunity for us. So the U.S. currently now is our second largest region, still a long way from our African business, and part of our strategic vision is that ultimately we want to get the U.S. to this same kind of scale or pretty close to the same size of the African business in terms of how we want to build this group going forward, so currently at 17%. It's the second largest geography for us, but 17% is a long way from where we're targeting to get to.

To get to the kind of level that's going to need to be over the next couple of years, 2 to 3 years we would like to see that business as a sort of 1/3 of our group. And we believe we're continuing to enjoy strong organic growth in that region. We also recognize we won't achieve that vision on organic growth alone. So we're going to have to at some point then we'll -- that day will come where we find a suitable add-on for that business. And -- but I hope that gives you the color that you're looking for. So currently about 17% of our group revenues.

It does. Maybe if I just ask you about the follow-up here just thinking about the investment profile here, this year in that region, especially with your sales capacity. Again just from a quantitative perspective, is there any way that you can share with us maybe how much the sales rep capacity increased last fiscal year in either the U.S.? And then how we should think about -- how we should expect the investment profile or the sales rep capacity to grow this fiscal year for that region?

Yes. So certainly, the U.S. is receiving an overweight investment from us from a sales capacity perspective. So over the last 12 months, I guess, we've tripled our sales force there in terms of -- clearly some of that sales force is a new kind of sales force for us. So it's a dialing for dollars' kind of team. So it's more of an internally focused dialing out kind of team, but we have also increased our investment in feet on the street and having systems -- high level systems sales people out on the roads. So remember our premium fleet business remains -- while we're excited about MiX Now and the potential that that derives, we'll never lose focus on our premium fleet portfolio, which remains what we believe is the most critical component of our business. Paul and I've been discussing this over the last couple of days, we're certainly expecting sales overheads as a percentage of revenue to be higher than it was in this year that we just reported. So we would expect, maybe Paul, what's your view on what level you think it would get to?

We came in at 10% this year, and I think we'll get definitely to 11% next year as a percentage of sales.

It does. And then just last question from me just a reminder again, I think the business -- the business doesn't have any direct exposure to China, that is correct? I just want to double check on that.

Thank you. I appreciate the question. We have no direct exposure to China. We don't -- on either side of our business, we don't directly import any components from China. As you know, we do subcontract. We're not a manufacturer. We subcontract the production of our core platform -- that core platforms are -- and we have been looking over the years, been looking at other geographies, but as things currently stand, we've took a view to carry on producing in primarily in South Africa and in hindsight, I think also we don't have any direct exposure there.

We've reached the end of our question-and-answer session. I would like to turn the floor back over to management for any further or closing comments.

I'd like to take this opportunity to thank you all for joining the call today. I'll just remind you that we will be presenting at the William Blair Conference in Chicago in mid-June. So any of you that happen to be in town, we would love to get together, have a cup of coffee, and spend more time discussing our great business, and we really appreciate your attention and your questions, and look forward to chatting soon. Thanks, again.

Thank you. That does conclude today's teleconference. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.