Connexion Telematics generates almost $1m in free cashflow for June quarter

Connexion Telematics ASX CXZ smart car technology revenue
During the June quarter, Connexion Telematics achieved free cashflow of $914,000.

Smart car technology developer Connexion Telematics (ASX: CXZ) has provided an update regarding its operations in the second quarter of this year.

One of the brightest aspects of its company metrics was on the financial side with strengthening performance leading to free cashflow of $914,000 for the June quarter and the company becoming debt-free.

The strong outperformance has been largely attributed to chief operating officer Tasso Koutsovasilis and his commitment to stabilising the company’s operations alongside his management team.

More specifically, Connexion experienced an increase in subscription revenue to $1.6 million for Q2, up from $1.3 million in the previous quarter.

During the June quarter, Connexion’s financial performance continued to strengthen, building on the positive momentum achieved in the previous quarter.

Connexion reported that it generated $1.7 million in revenue for the quarter, which includes $1.6 million in subscription revenue and $100,000 in OnTRAC modification requests.

Looking forward, Connexion expects subscription revenue to grow further with the run-rate estimated to hit $550,000-$600,000 per month with strong operating margins.

Connexion said it continues to expect to receive customisation work requests through a number of ongoing modification and feature enhancement requests for the OnTRAC program which, as well as increasing revenue, also solidifies the relationship with US vehicle giant General Motors (GM).

During the period, the company’s customer cash receipts totalled $1.5 million – a notable increase from $336,000 in Q1 2019. This was a direct result of the receipt of January OnTRAC subscriptions which were delivered in combination with February’s and March’s numbers.

Regarding profit, Connexion recorded an unaudited net profit before tax of $448,000 in the second quarter, which meant the company was able to repay borrowings of $150,000 and has now become debt-free.

Operations are a go

On the operations side, the company finalised the implementation of the Courtesy Transportation Program (CTP) and Cadillac Courtesy Transportation Alternative (CTA) program, first initiated in November 2018.

Connexion said that previous commissioning and dealer orientation issues have “reduced significantly”, allowing the program to operate in a steady-state in Q2 with a significant reduction in support enquiries being achieved.

Furthermore, OnTRAC vehicle subscriptions via General Motors (GM) dealerships peaked at 70,462. This number of revenue-paying subscriptions now represents an average vehicle subscription rate of 71,423 per month over the three months.

Connexion’s OnTRAC fleet management software enables General Motors to manage demonstrator vehicles across 3,666 US-based registered dealers (including Buick, GMC, Chevrolet and Cadillac).

Connexion said that it expects revenue paying subscriptions for OnTRAC to continue to maintain a peak of around 70,000 monthly subscriptions. Also, ongoing optimisation and customisation work currently in the pipeline will continue to drive net revenue per subscription.

The OnTRAC program is also set to undergo customisation in conjunction with GM in a bid to optimise the current features of the software including enhanced dealership analytics, reporting and other various user functions required by the GM dealer network.

Within the Commercial Link subscription base, Connexion said it has maintained steady growth with subscriptions now standing just shy of 5,000.

“The combined revenue-generating subscriptions of CL and OnTRAC was 75,898 for the month of June which is slightly above previous quarter subscriptions,” according to Connexion.

This morning’s news saw Connexion’s share price rally 75% by midday trade to $0.021.

George is an award-winning market analyst who has authored articles and editorial opinion pieces for multiple publications around the world. He has written about a wide variety of topics including financial markets, stocks, trading, politics and economics.