Quartix Technologies : Interim Report 30 June 2023

Interim Financial Statements Quartix Technologies plc

For the half year ended 30 June 2023

The unaudited interim results to 30 June 2023 for Quartix Technologies plc are set out below:

Statement of Directors' responsibilities

The Directors are responsible for preparing the interim financial report, in accordance with applicable law and regulations.

As permitted, this Interim Report has been prepared in accordance with UK AIM Rules for Companies and not in accordance with IAS 34 "Interim Financial Reporting".

The comparative monetary amounts for June 2022 have been restated in line with a change in policy in the recognition of equipment, installation and carriage costs associated with contracts with customers under IFRS 15: 'Revenue from Contracts with Customers' (See Note 1: Summary of significant accounting policies).

These interim financial statements do not include all the information required in annual financial statements in accordance with IFRS and should be read in conjunction with the consolidated financial statements for the year ended 31 December 2022.

By order of the Board of Directors on 28 July 2023.

Richard Lilwall

Chief Executive Officer

Company No.06395159

Quartix Technologies plc	1
Financial statements for the half year ended 30 June 2023
Contents
	Page
Highlights	2
Chairman's Statement	4
Consolidated statement of Comprehensive Income	7
Consolidated Statement of Financial Position	8
Consolidated Statement of Changes in Equity	9
Consolidated Statement of Cash flows	10
Notes to the Consolidated Financial Statements (unaudited)	11
Company information	17

Quartix Technologies plc	2
Financial statements for the half year ended 30 June 2023

Highlights

Quartix is one of Europe's leading suppliers of vehicle telematics services and driver analytics.

Restatement of comparatives

All comparative monetary amounts for 2022 have been restated in line with a change in policy in the recognition of equipment, installation and carriage costs associated with contracts with customers under IFRS 15: 'Revenue from Contracts with Customers' (See note 2: Summary of significant accounting policies).

Financial highlights

• Group revenue increased by 10% to £14.6m (2022: £13.3m)

1. Fleet revenue increased by 13% to £14.5m (2022: 12.8m)

• 1. Fleet revenue represented 98.9% of total revenue (2022: 95.8%)
• Adjusted EBITDA1 remained constant at £2.7m (2022: £2.7m)
• Operating profit decreased by 7% to £2.4m (2022: £2.6m)
• Profit before tax decreased by 7% to £2.4m (2022: £2.6m)
• Diluted earnings per share of 4.16p (2022: 4.63p)
• Free cash flow2 decreased by 26% to £1.4m (2022: £1.9m)
• Interim dividend of 1.50p per share proposed (2022: 1.50p)

1. Earnings before interest, tax, depreciation, amortization and share based payment expense (see note 4)
2. Cash flow from operations after tax and investing activities

Principal activities and performance measures

The Group's main strategic objective is to profitably grow its subscription base and develop the associated annualised recurring revenue.

Annualised recurring revenue has increased by 8% year on year (see definition in KPI table below). Annualised recurring revenue is a forward-looking key performance measure, and it is pleasing that it grew by £2.1m on a constant exchange rate to £28.0m at 30 June 2023, compared to 30 June 2022.

The Key Performance Indicators used by the Board to assess the performance of the business are listed below and discussed in the Chairman's Statement.

Quartix Technologies plc	3
Financial statements for the half year ended 30 June 2023

Principal activities and performance measures (continued)

Key Performance Indicators ("KPIs")
Period ended 30 June	2023	2022	% change
Fleet subscriptions1 (new units)
33,547	32,085	5
Fleet subscription base2 (units)	251,787	221,800	14
Fleet customer base3	26,337	24,408	8
Fleet gross attrition (annualised)4 (%)	13.5	11.6
Annualised recurring revenue5 (£'000)	27,972	25,833	8
Fleet invoiced recurring revenue6 (£'000)	13,788	12,342	12
Fleet revenue (£'000)	14,456	12,775	13
Price erosion7 (%)	4.6	4.8

1. New vehicle tracking unit subscriptions added to the subscription base in 6 months to 30 June before any attrition
2. The number of vehicle tracking units subscribed to the Group's fleet tracking services, including units waiting to be installed for which subscription payments have started or are committed
3. The number of customers associated with the fleet subscription base
4. The number of new vehicle tracking unit subscriptions, less the increase in the subscription base, expressed as a percentage of the mean subscription base
5. Annualised data services revenue for the subscription base at 30 June, before deferred revenue, including revenue for units waiting to be installed for which subscription payments have already started or are committed, with comparative June 2022 measured at a constant exchange rate.
6. Invoiced subscription charges before provision for deferred revenue
7. The decrease in average subscription price of the base expressed as a percentage of the average subscription price at 30 June, with comparative June 2022 measured at a constant exchange rate.

As discussed in the 2022 financial statements, the Group implemented a new policy in 2022 which recognised hardware and associated installation and carriage costs over their expected initial contract term (typically 2 years), on a systematic basis that more accurately reflects the revenue stream generated by them. The capitalisation and subsequent amortisation of these incremental costs are more aligned to the core principles in IFRS 15 and make the reported EBITDA more comparable with that reported by companies with a similar business model.

This approach simplifies the presentation of the Group's results. Previously, the Group included an additional voluntary disclosure, separating customer acquisition cost, being the investment for new customer contracts, and Fleet telematics services, for recurring revenue and repeat contracts with existing customers, in order to highlight the different cost structures within the business. Following the change in accounting policy this analysis is no longer considered necessary. However, overheads on the face of the Consolidated Statement of Comprehensive Income have been split between Sales & Marketing expenses and Administration expenses, with Sales & Marketing expenses including the costs of customer acquisition being the investment in marketing expenditure and payroll costs for the sales teams.

Quartix Technologies plc	4
Financial statements for the half year ended 30 June 2023

Chairman's Statement

Introduction

I am pleased to report that growth of the subscription base, both in the UK and overseas, continued to drive an increase in annualised recurring revenues, which increased by £2.1m, at a constant currency rate, to £28.0m at 30 June 2023. Group revenue grew by 10% during the first half of 2023.

This growth was achieved despite adverse economic headwinds impacting the confidence, and additional fleet investment of existing customers, with rolling UK van registrations at the beginning of 2023 matching record lows seen during the COVID-19 pandemic. In addition, attrition has been higher at 13.5% (2022: 11.6%), primarily due to an increase in business closures and customers downsizing their fleet sizes. Price erosion on a constant currency basis continued to improve and was 4.6% (2022: 4.8%).

Despite these market difficulties, each geographical market registered increases in the subscription base for the period (see table below). In the UK, where economic challenges are more significant due to the larger subscription base, growth was supported by a strong performance in new customer acquisition, with 6% year-on-year subscription base growth, and an increase in total revenue of 3% to £9.1m (2022: £8.9m).

We also recorded our highest results in Europe following accelerated investment into the region over the past two years. Year-on-year subscription base growth in France was excellent at 32%, and revenue increased by 25% to €3.7m (2022: €3.0m).

Year-on-year subscription base growth in the other European territories was also very strong at 53% respectively as our operations continue to grow in Spain, Italy and Germany.

As part of a review on ensuring Quartix focuses on profitable growth, the Group has redirected part of the investment and resource from our wider US business in Q1 of 2023 to European territories that present improved returns on investment in the shorter term. The US strategy going forward will therefore have a narrower, field sales approach, focused specifically on Texas. As a result the growth was more modest at 2% year on year.

	Subscription	New	Customers **	New
	Base **	subscriptions		Customers
United Kingdom
2023	140,991	13,223	11,378	718
2022	133,020	14,814	11,520	800
Change	7,971	(1,591)	(142)	(82)
France
2023	61,298	11,733	7,628	1,159
2022	46,387	8,178	6,262	1,157
Change	14,911	3,555	1,366	2
Other European Territories
2023	19,146	4,805	3,359	722
2022	12,505	3,856	2,560	740
Change	6,641	949	799	(18)
USA
2023	30,352	3,786	3,972	496
2022	29,888	5,237	4,066	723
Change	464	(1,451)	(94)	(227)

** Comparatives are June 2022