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Fleetmatics Announces Second Quarter 2014 Financial Results

Companies mentioned in this article: Fleetmatics Group PLC

Dublin, Ireland and Boston, Massachusetts -- (BUSINESS WIRE) -- Fleetmatics Group PLC (NYSE: FLTX), a leading global provider of mobile workforce solutions for service-based businesses of all sizes delivered as software-as-a-service (SaaS), today announced financial results for its second quarter ended June 30, 2014.

“We are pleased to report another solid quarter and a great first half of the year, growing our revenues by 30% and our subscriber base by 29% year-over-year, while continuing to be a market leader in the fleet management space,” stated Jim Travers, Chairman and Chief Executive Officer of Fleetmatics. “During the quarter, our ability to meet or exceed our revenue and profitability expectations was driven by solid execution by our team, particularly to SMB customers. The combination of the recent introduction of our new platform, new product offering, and our international expansion positions Fleetmatics to increase market share worldwide.”

Second Quarter 2014 Financial Highlights

  • Revenue: Total revenue for the second quarter was $55.3 million, an increase of 30.0% compared to $42.5 million for the second quarter of 2013.
  • Gross Profit: GAAP gross profit for the second quarter was $40.7 million, compared to $31.7 million for the second quarter of 2013. GAAP gross margin was 73.7% compared to 74.5% for the same period in 2013. Non-GAAP gross profit, which excludes share-based compensation and amortization of intangible assets, was $41.2 million for the quarter compared to $31.8 million in the year ago period. Non-GAAP gross margin was 74.5% for the second quarter of 2014, compared to 74.9% during the same period last year.
  • Operating Income: GAAP operating income for the second quarter was $4.6 million, compared to $8.6 million for the second quarter of 2013. Non-GAAP operating income, which excludes share-based compensation, amortization of intangible assets and other items as defined in “Non-GAAP Financial Measures”, was $8.9 million, compared to $10.9 million for the second quarter of 2013.
  • Net Income: GAAP net income for the second quarter was $3.2 million, compared to $5.7 million for the same period last year. GAAP net income per share for the second quarter was $0.08 based on 38.4 million weighted-average diluted shares outstanding, compared to $0.16 for the same period last year, based on 36.4 million weighted-average diluted shares outstanding, for the same period last year.

    Non-GAAP adjusted earnings, which excludes share-based compensation, amortization of intangible assets and other items as defined below in “Non-GAAP Financial Measures”, was $6.8 million for the second quarter, compared to $8.3 million for the second quarter of 2013. Non-GAAP adjusted earnings per share for the second quarter was $0.18 per share based on 38.4 million weighted-average diluted shares outstanding compared to $0.23 per share, based on 36.4 million weighted-average diluted shares outstanding for the same period last year.
  • Adjusted EBITDA: Adjusted EBITDA for the second quarter was $15.0 million, compared to $14.2 million for the second quarter of 2013. Adjusted EBITDA margin was 27.2% for the second quarter of 2014, compared to a 33.5% margin for the same period last year. Adjusted EBITDA is defined as net income (loss) plus (benefit) provision for income taxes; interest (income) expense, net; foreign currency transaction (gain) loss, net; depreciation and amortization of property and equipment; amortization of capitalized in-vehicle devices owned by customers; amortization of intangible assets; share-based compensation; and other items as defined below in “Non-GAAP Financial Measures.”

A reconciliation of GAAP to non-GAAP financial measures has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below under the heading “Non-GAAP Financial Measures.”

  • Balance Sheet: As of June 30, 2014, Fleetmatics had cash of $155.5 million, an increase of $7.3 million since March 31, 2014.

During the second quarter of 2014, the Company generated $13.6 million in net cash from operations and invested $11.2 million in purchases of property and equipment and capitalization of internally developed software, resulting in free cash flow of positive $2.4 million. During the second quarter of 2013, the Company generated $11.1 million in net cash from operations and invested $9.5 million in capital expenditures and capitalization of software, resulting in free cash flow of positive $1.6 million.

Second Quarter 2014 Operating Highlights

  • Fleetmatics ended the second quarter of 2014 with over 499,000 active vehicles under subscription, up 28.6% compared to over 388,000 during the second quarter of 2013.
  • Quarterly net churn during the second quarter of 2014 was 1.1%, compared to 1.3% during the second quarter of 2013, which excludes the impact of a large enterprise customer. An explanation of this measure is included below under the heading “Non-GAAP Financial Measures.”
  • Fleetmatics acquired Florence, Italy-based KKT Srl, the developer of Routist, a SaaS-based, intelligent vehicle routing solution for businesses looking to optimize the utilization of their fleets and mobile resources.

Financial Outlook

As of August 6, 2014, Fleetmatics is providing guidance for the third quarter of 2014 and full year 2014 as follows:

Third Quarter 2014 Guidance: Total revenue is expected to be in the range of $58.2 million to $59.5 million. Adjusted EBITDA is expected to be in the range of $16.0 million to $17.0 million. Non-GAAP adjusted earnings per share is expected to be in the range of $0.21 to $0.23 based on approximately 38.7 million weighted-average diluted shares outstanding.

Full Year 2014 Guidance: Total revenue is expected to be in the range of $228.0 million to $230.0 million, which represents growth of 29.1% year-over-year at the midpoint. Adjusted EBITDA is expected to be in the range of $62.8 million to $65.3 million. Non-GAAP diluted adjusted earnings per share is expected to be in the range of $0.82 to $0.87 based on approximately 38.7 million weighted-average diluted shares outstanding.

Quarterly Conference Call

Fleetmatics will host a conference call today at 5:00 p.m. EDT to discuss the Company's financial results for the second quarter 2014, its business outlook and other matters. To access this call, dial +1-888-481-2864 (United States), or +1-719-325-2381 (international), with conference ID #8681119. A live webcast of this conference call will also be available on the investor relations portion of the Company’s website at ir.fleetmatics.com, and a replay will be archived on the website as well. A replay of this conference call will also be available through August 20, 2014, by dialing +1-877-870-5176 (United States), or +1-858-384-5517 (international). The recording access code is #8681119.

About Fleetmatics Group PLC

Fleetmatics Group PLC is a leading global provider of mobile workforce solutions for service-based businesses of all sizes delivered as software-as-a-service (SaaS). Our solutions enable businesses to meet the challenges associated with managing local fleets, and improve the productivity of their mobile workforces, by extracting actionable business intelligence from real-time and historical vehicle and driver behavioral data.

Fleetmatics Group’s intuitive, cost-effective Web-based solutions provide fleet operators with visibility into vehicle location, fuel usage, speed and mileage, and other insights into their mobile workforce, enabling them to reduce operating and capital costs, as well as increase revenue. An integrated, full-featured mobile workforce management product provides additional efficiencies related to job management by empowering the field worker and speeding the job completion process – quote through payment. As of June 30, 2014, Fleetmatics served over 23,000 customers, with over 499,000 subscribed vehicles worldwide.

To learn more about Fleetmatics, visit www.fleetmatics.com.

Non-GAAP Financial Measures

In this release, Fleetmatics’ non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating income, non-GAAP adjusted earnings, non-GAAP diluted adjusted earnings per share, adjusted EBITDA and adjusted EBITDA margin are not presented in accordance with generally accepted accounting principles (GAAP) and are not intended to be used in lieu of GAAP presentations of results of operations. Non-GAAP gross profit and non-GAAP gross margin exclude share-based compensation and amortization of intangible assets. Non-GAAP operating income, non-GAAP adjusted earnings and non-GAAP diluted adjusted earnings per share exclude share-based compensation; amortization of intangible assets; foreign currency transaction (gain) loss; certain non-recurring litigation and settlement costs; certain non-recurring secondary public offering costs; acquisition-related transaction costs; the tax effects related to these items, and the tax reserve component of the income tax provision.

Adjusted EBITDA is defined as net income (loss) plus (benefit) provision for income taxes; interest (income) expense, net; foreign currency transaction (gain) loss, net; depreciation and amortization of property and equipment; amortization of capitalized in-vehicle devices owned by customers; amortization of intangible assets; share-based compensation; certain non-recurring litigation and settlement costs; certain non-recurring secondary public offering costs; and acquisition-related transaction costs.

We calculate our net churn for a period by dividing (i) the number of vehicles under subscription added from existing customers less vehicles under subscription lost from existing customers over that period by (ii) the total vehicles under subscription at the beginning of that period. A positive net churn in each period means we added more vehicles from existing customers than we lost from those customers during the particular period.

Management presents these non-GAAP financial measures because it considers them to be important supplemental measures of performance. Management uses the non-GAAP financial measures for planning purposes, including analysis of the company's performance against prior periods, the preparation of operating budgets and to determine appropriate levels of operating and capital investments. Management also believes that the non-GAAP financial measures provide additional insight for analysts and investors in evaluating the company's financial and operational performance. However, these non-GAAP financial measures have limitations as an analytical tool and are not intended to be an alternative to financial measures prepared in accordance with GAAP. We intend to provide these non-GAAP financial measures as part of our future earnings discussions and, therefore, the inclusion of these non-GAAP financial measures will provide consistency in our financial reporting. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures. A reconciliation of our non-GAAP financial measures to their most directly comparable GAAP measures has been provided in the financial statement tables included below in this press release.

The Company’s earnings press releases containing such non-GAAP reconciliations can be found on the Investors section of the Company’s web site at ir.fleetmatics.com.

Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about our future market share and our expected financial results for the third quarter of 2014 and the full year of 2014. These forward-looking statements include, but are not limited to: plans, objectives, expectations and intentions and other statements contained in this press release that are not historical facts and statements identified by words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” or words of similar meaning. These forward-looking statements reflect our current views about our plans, intentions, expectations, strategies and prospects, which are based on the information currently available to us and on assumptions we have made. Although we believe that our plans, intentions, expectations, strategies and prospects as reflected in or suggested by those forward-looking statements are reasonable, we can give no assurance that the plans, intentions, expectations or strategies will be attained or achieved. Furthermore, actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors that are beyond our control including, without limitation, risks associated with our ability to effectively and efficiently attract, sell to and retain SMB customers; our ability to attract customers on a cost-effective basis; our dependence on various lead generation programs; our ability to retain and increase sales to our existing customers; our ability to successfully complete and integrate acquisitions; expectations regarding the widespread adoption of fleet management solutions; our ability to expand the sales of our products to customers located outside the U.S.; our ability to continue to compete in a highly fragmented market and the risk of future competitors by way of recent and future acquisitions or otherwise; keeping up with the rapid technological change required to remain competitive in our industry; our ability to migrate customers to newer technologies; and the impact of adverse economic conditions on information technology spending by SMB business, collection of our accounts receivable and other risks set forth under the caption “Risk Factors” in the Company’s annual report on Form 10-K filed with the Securities and Exchange Commission on March 17, 2014, as updated by our subsequently filed quarterly reports on Form 10-Q, annual reports on Form 10-K and other filings that we make with the Securities and Exchange Commission. We assume no obligation to update any forward-looking statements contained in this document as a result of new information, future events or otherwise.

               

FLEETMATICS GROUP PLC

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

(Unaudited)

 
 
Three Months Ended
June 30,
Six Months Ended
June 30,
2014 2013 2014 2013
Subscription revenue $ 55,268 $ 42,529 $ 107,165 $ 80,948
Cost of subscription revenue   14,534     10,834     27,280     20,831  
Gross profit   40,734     31,695     79,885     60,117  
 
Operating expenses:
Sales and marketing 22,049 13,600 40,411 26,201
Research and development 4,613 2,461 8,790 4,555
General and administrative   9,486     7,080     20,758     15,020  
Total operating expenses   36,148     23,141     69,959     45,776  
Income from operations 4,586 8,554 9,926 14,341
Interest income (expense), net (210 ) (372 ) (373 ) (738 )
Foreign currency transaction gain (loss), net 402 (300 ) 354 (656 )
Other income (expense), net           41      
Income before income taxes 4,778 7,882 9,948 12,947
Provision for income taxes   1,545     2,200     3,087     4,305  
Net income $ 3,233   $ 5,682   $ 6,861   $ 8,642  
 
Net income per share:
Basic $ 0.09   $ 0.16   $ 0.18   $ 0.25  
Diluted $ 0.08   $ 0.16   $ 0.18   $ 0.24  
 
Weighted average ordinary shares outstanding:
Basic   37,411,223     34,990,936     37,271,047     34,802,543  
Diluted   38,360,498     36,441,602     38,376,232     36,353,988  
           

FLEETMATICS GROUP PLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

 
June 30,
2014
December 31,
2013
 
(Unaudited)
Assets
Current assets:
Cash $ 155,473 $ 137,171
Restricted cash 64
Accounts receivable, net of allowances of $1,827 and $1,395 at June 30, 2014 and December 31, 2013, respectively 14,717 20,240
Deferred tax assets 6,746 6,505
Prepaid expenses and other current assets   20,752   13,675
Total current assets 197,688 177,655
Property and equipment, net 72,744 61,732
Goodwill 30,161 28,706
Intangible assets, net 7,714 7,765
Deferred tax assets, net 1,009 1,282
Other assets   10,561   9,399
Total assets $ 319,877 $ 286,539
 
 
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable $ 10,586 $ 9,952
Accrued expenses and other current liabilities 20,882 14,855
Deferred revenue   24,099   21,163
Total current liabilities   55,567   45,970
Deferred revenue 10,931 9,029
Accrued income taxes 3,245 2,094
Long-term debt 23,750 23,750
Other liabilities   4,758   3,888
Total liabilities   98,251   84,731
Total shareholders’ equity   221,626   201,808
Total liabilities and shareholders’ equity $ 319,877 $ 286,539
 
           

FLEETMATICS GROUP PLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 
 
Six Months Ended
June 30,
2014 2013
Cash flows from operating activities:
Net income $ 6,861 $ 8,642
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property and equipment 10,116 6,065
Amortization of capitalized in-vehicle devices owned by customers 658 446
Amortization of intangible assets 1,221 934
Amortization of deferred commissions, other deferred costs and debt discount 3,791 2,989
Provision for (benefit from) deferred tax assets (284 ) (73 )
Provision for accounts receivable allowances 985 697
Unrealized foreign currency transaction (gain) loss (388 ) 640
Loss on disposal of property and equipment and other assets 778 1,499
Share-based compensation 6,427 2,205
Excess tax benefits on share-based awards (8,752 )
Changes in operating assets and liabilities:
Accounts receivable 4,677 (3,094 )
Prepaid expenses and other current and long-term assets (3,219 ) (4,288 )
Accounts payable, accrued expenses and other current liabilities 5,008 2,252
Accrued income taxes 1,149 668
Deferred revenue   4,822     3,614  
Net cash provided by operating activities   33,850     23,196  
 
Cash flows from investing activities:
Purchases of property and equipment (18,390 ) (17,542 )
Capitalization of internal-use software costs (1,342 ) (904 )
Proceeds from sale of property and equipment 41
Payment for business acquired, net of cash acquired (2,228 )
Net decrease in restricted cash   64      
Net cash used in investing activities   (21,855 )   (18,446 )
 
Cash flows from financing activities:
Payments of Term Loan (625 )
Proceeds from exercise of stock options 1,391 2,625
Taxes paid related to net share settlement of equity awards (3,150 )
Excess tax benefits from share-based awards 8,752
Payments of previously accrued initial public offering costs (1,329 )
Payments of capital lease obligations (365 ) (180 )
Payments of notes payable   (179 )    
Net cash provided by financing activities   6,449     491  
Effect of exchange rate changes on cash   (142 )   (119 )
Net increase in cash 18,302 5,122
Cash, beginning of period   137,171     100,087  
Cash, end of period $ 155,473   $ 105,209  
 
Supplemental disclosure of cash flow information:
Cash paid for interest $ 348 $ 658
Cash paid (refunds received), net for income taxes $ 742 $ 1,205
Supplemental disclosure of non-cash financing and investing activities:
Acquisition of property and equipment and software through capital leases and note payable $ 1,940 $
Additions to property and equipment included in accounts payable or accrued expenses at the balance sheet dates $ 2,433 $ 1,300
Issuance of ordinary shares under employee share purchase plan $ 441 $
               

RECONCILIATION OF GAAP TO NON-GAAP GROSS PROFIT AND OPERATING INCOME

(In thousands)

(Unaudited)

 
 
Three Months Ended
June 30,
Six Months Ended
June 30,
2014 2013 2014 2013
 
Gross Profit GAAP $ 40,734 $ 31,695 $ 79,885 $ 60,117
Share-based compensation 172 101 319 143
Amortization of intangible assets   291     52     549     104  
Gross Profit Non-GAAP $ 41,197   $ 31,848   $ 80,753   $ 60,364  
 
Subscription revenue $ 55,268 $ 42,529 $ 107,165 $ 80,948
 
Gross Margin Percentages:
GAAP 73.7 % 74.5 % 74.5 % 74.3 %
Non-GAAP 74.5 % 74.9 % 75.4 % 74.6 %
 
               
Three Months Ended
June 30,
Six Months Ended
June 30,
2014 2013 2014 2013
 
Operating income GAAP $ 4,586 $ 8,554 $ 9,926 $ 14,341
Share-based compensation 3,423 1,601 6,427 2,205
Amortization of intangible assets 627 467 1,221 934
Secondary public offering costs 256 893
Litigation and settlements 97 (72 ) 217 288
Acquisition-related transaction costs   129   114     218   114
Operating income Non-GAAP $ 8,862 $

10,920

  $ 18,009 $ 18,775
 
               

RECONCILIATION OF GAAP NET INCOME TO ADJUSTED EBITDA

(In thousands)

(Unaudited)

 
Three Months Ended
June 30,
Six Months Ended
June 30,
2014 2013 2014 2013
Reconciliation of Net Income to Adjusted EBITDA:
Net income $ 3,233 $ 5,682 $ 6,861 $ 8,642
Provision for income taxes 1,545 2,200 3,087 4,305
Interest (income) expense, net 210 372 373 738
Foreign currency transaction (gain) loss, net (402 ) 300 (354 ) 656
Depreciation and amortization of property and equipment 5,813 3,073 10,116 6,065
Amortization of capitalized in-vehicle devices owned by customers 372 233 658 446
Amortization of intangible assets 627 467 1,221 934
Share-based compensation 3,423 1,601 6,427 2,205
Secondary public offering costs 256 893
Litigation and settlements 97 (72 ) 217 288
Acquisition-related transaction costs   129     114     218     114  
Adjusted EBITDA $ 15,047   $ 14,226   $ 28,824   $ 25,286  
 
Subscription revenue $ 55,268 $ 42,529 $ 107,165 $ 80,948
 
Adjusted EBITDA margin 27.2 % 33.5 % 26.9 % 31.2 %
 
               

RECONCILIATION OF GAAP NET INCOME TO NON-GAAP ADJUSTED EARNINGS AND EPS

(In thousands, except share and per share data)

(Unaudited)

 
Three Months Ended
June 30,
Six Months Ended
June 30,
2014 2013 2014 2013
 
Net income $ 3,233 $ 5,682 $ 6,861 $ 8,642
Amortization of intangible assets 627 467 1,221 934
Share-based compensation 3,423 1,601 6,427 2,205
Foreign currency transaction (gain) loss, net (402 ) 300 (354 ) 656
Secondary public offering costs 256 893
Litigation and settlements 97 (72 ) 217 288
Acquisition-related transaction costs 129 114 218 114
Tax effect of non-GAAP adjustments above at 15% (581 ) (400 ) (1,159 ) (764 )
Tax reserve component of income tax provision   262     391     525     821  
Adjusted earnings $ 6,788   $ 8,339   $ 13,956   $ 13,789  
 
Weighted average ordinary shares outstanding — diluted 38,360,498 36,441,602 38,376,232 36,353,988
Non-GAAP adjusted EPS $ 0.18   $ 0.23   $ 0.36   $ 0.38  
 
           

FLEETMATICS GROUP PLC

RECONCILIATION TO NON-GAAP INCOME

(In thousands)

(Unaudited)

 
Three Months Ended June 30, Six Months Ended June 30,

2014

  2013 2014     2013
Cost of subscription revenue
Share-based compensation $ 172 $ 101 $ 319 $ 143
Amortization of intangible assets   291     52     549     104
Subtotal cost of subscription revenue 463 153 868 247

Sales and marketing

Share-based compensation 1,329 560 2,502 803
Amortization of intangible assets   336     415     672     830
Subtotal sales and marketing 1,665 975 3,174 1,633

Research and development

Share-based compensation   468     256     865     308
Subtotal research and development 468 256 865 308

General and administrative

Share-based compensation 1,454 684 2,741 951
Secondary public offering costs 256 893
Litigation and settlements 97 (72 ) 217 288
Acquisition-related transaction costs   129     114     218     114
Subtotal general and administrative 1,680 982 3,176 2,246
 
Foreign currency transaction (gain) loss, net (402 ) 300 (354 ) 656
Tax effect of non-GAAP adjustments, net of tax reserve component of income tax provision   (319 )   (9 )   (634 )   57
Total expense add-backs $ 3,555   $ 2,657   $ 7,095   $ 5,147
 


Copyright © Business Wire 2014
Contact:

Investor Contact:
ICR Inc. on behalf of Fleetmatics
Seth Potter, 646-277-1230
fleetmatics@icrinc.com