nQuartix Technologies(QTX) , a supplier of subscription-based vehicle tracking systems, analytical software and services, updated markets on trading following the return of founder and former CEO Andy Walters, highlighting a renewed focus on customer growth and cash generation that is expected to deliver results through FY24 and beyond.
The company did, however, downgrade its revenue expectations for 2023 and 2024, reducing guidance by approximately £0.9m and £2.6m, respectively.
The company saw annualised recurring revenue of the fleet subscription base rise to £28.7m on 1 October, a £2.1m year-on-year increase, with subscriptions growing to 259k, marking a 13% year-on-year growth.
Progress in France, Spain, Italy and Germany was offset by disappointing progress in the UK and US.
On 15 September, Quartix acquired Konetik, the owner and developer of the software utilised in Quartix's EVolve electric vehicle product. The acquisition is expected to add £0.04m of revenue in FY23, -£0.2m of adjusted EBTIDA, and c.£0.3m of exceptionals. €2.25m was paid in cash upfront for the acquisition, with €0.25m due in 12 months, and €1.4m dependent on the sale of EVolve licences.
Following news that two major network providers in France have brought forward their plans to switch off 2G networks, Quartix expects 2G networks in France will become obsolete by the end of 2026, and that approximately 50,000 Quartix tracking systems will need to be replaced within the company's customer base over the course of the next three years, at an estimated cost of £4.1m.
Quartix added that it will continue to review the best way to achieve the transition whilst reducing potential costs, which it was successful in doing in the US. All new unit installs across the group are now 4G compatible devices or roaming SIM cards that can use a range of 2G networks, and as noted at the interims, the cost of 4G devices is now substantially lower than in H1.
In light of these circumstances, the board expects a deviation from current market expectations for adjusted EBITDA of approximately £1.1m in 2023 and £2.4m in 2024. Free cashflow before Konetik acquisition costs is forecasted to decrease by £1.0m in 2023 and £1.2m in 2024 due to reduced revenue expectations, higher operational costs from Konetik, lower gross margins from new 4G variants, and inflationary pressures on marketing expenses.
View from Vox
Despite the factors mentioned above, underlying cash generation within the company's core business remains strong, and Quartix notes that the renewed board will strive to mitigate the effects of these factors.
Quartix offers tracking and data analytics solutions for commercial vehicle fleets which help boost efficiency and reduce costs by monitoring and reporting vehicle information. Quartix has over 20,000 fleet customers globally.
As tracking technology has advanced, the functionality of vehicle tracking systems has increased making them more attractive and cost effective for end use customers. Consequently, the addressable markets in both the commercial fleet and telematics-based insurance sectors are anticipated to grow substantially over the medium term. The global fleet management software market is projected to grow from $23.67 billion in 2023 to $79.82 billion by 2030, at a CAGR of 19% in forecast period.
Overall, demand for Quartix’s solutions, coupled with its renewed focus on customer growth, should deliver robust, cash-generative growth through FY24 and beyond.
Follow Quartix for more News and Updates: