Prospectus Summary
Prospectus Summary This summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our ordinary shares. You should read this entire prospectus carefully, especially the “Risk Factors” section of this prospectus and our consolidated financial statements and related notes appearing elsewhere in this prospectus, before making an investment decision.Overview
FleetMatics is a leading global provider of fleet management solutions delivered as software-as-a-service, or SaaS. Our mobile software platform enables businesses to meet the challenges associated with managing their local fleets of commercial vehicles and improve productivity by extracting actionable business intelligence from vehicle and driver behavioral data. We offer intuitive, cost-effective Web-based and mobile application solutions that 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. As of June 30, 2012, we had more than 16,000 customers who collectively deployed our solutions in over 281,000 vehicles worldwide. The substantial majority of our customers are small and medium-sized businesses, or SMBs, each of which deploy our solutions in 1,000 or fewer vehicles. During the six months ended June 30, 2012, we collected an average of approximately 30 million data points per day from subscribers, and we have aggregated over 28 billion data points since our inception, which we believe provides valuable information that we may consider in the development of complementary solutions and additional sources of revenue.
We believe that the addressable market for our fleet management solutions is large, growing and underpenetrated. Frost and Sullivan, an independent research firm, reported that in 2010 there were approximately 18.5 million local commercial fleet vehicles in the U.S. and Canada, 11.3% of which utilized a fleet management solution. We believe that the global market opportunity is much larger and we estimate it to be in excess of 61 million vehicles. Our multi-tenant SaaS solutions are designed to meet the needs of SMBs, overcome existing barriers to adoption, and leverage the volumes of data transmitted to us from in-vehicle devices over cellular networks that we aggregate and analyze from our large and growing subscriber base.
We have grown our customer base, the number of vehicles using our solutions and our revenue in each year since our incorporation in 2004. We have developed a differentiated, cost-effective customer acquisition sales model based on leads sourced through both Web-based digital advertising and targeted outbound sales efforts. The following chart shows the aggregate number of vehicles under subscription for our fleet management solution as of December 31 for each of the years presented and as of June 30, 2012:
The chart above includes the number of vehicles under subscription with our subsidiary SageQuest, Inc., or SageQuest, before and after our acquisition of SageQuest in July 2010.
Our subscription revenue in 2011 grew 42.7% to $92.3 million compared to $64.7 million in 2010 and in the six months ended June 30, 2012 grew 37.1 % to $58.4 million compared to $42.6 million in the six months ended June 30, 2011. We reported net income in 2011 of $2.9 million compared to a net loss in 2010 of $0.7 million, and we reported a net loss of $0.4 million in the six months ended June 30, 2012 compared to net income of $1.6 million in the six months ended June 30, 2011. Our Adjusted EBITDA in 2011 grew 94.7% to $21.7 million compared to $11.2 million in 2010 and in the six months ended June 30, 2012 grew 26.6 % to $12.0 million compared to $9.5 million in the six months ended June 30, 2011. For a definition of Adjusted EBITDA and a reconciliation to net income (loss), see the section entitled “Summary Consolidated Financial Data—Adjusted EBITDA.”
Industry Background
Most small and medium-sized local service and distribution businesses rely on their fleet of commercial vehicles and mobile workforce to deliver products and services. These SMB fleet operators face significant operational challenges. Without knowing the location of each vehicle in a fleet, dispatchers often do not have the information necessary to optimally route their vehicles, resulting in lost time in route to a job location, increased fuel consumption, excessive vehicle mileage, and unnecessary wear and tear. Fleet operators lack oversight of their drivers which makes it more difficult for operators to validate hours worked, discourage unproductive worker behavior and incentivize greater efficiency.
Many fleet management alternatives do not adequately address the challenges faced by operators or are poorly suited for SMB adoption given their high up-front costs, technical complexity and difficulty of implementation and use. Fleet operators often use discrete point-to-point solutions, such as cellular phones, to monitor their fleet and mobile workers. These solutions do not enable continuous monitoring, making it difficult to validate hours worked and manage other day-to-day fleet activities. Additionally, paper-based techniques, spreadsheets and other manual processes used to manage fleet data tend to be inefficient and generate minimal business intelligence. Fleet management solutions targeting long-haul fleet carriers are not well-suited to SMB customers as these offerings typically feature complex functionality built into proprietary hardware devices and require high up-front costs associated with implementation.
Our Solutions
Our SaaS solutions enable businesses to meet the challenges associated with managing their local fleets by extracting actionable business intelligence from vehicle and driver behavioral data. We believe that our solutions benefit customers in the following ways:
Reduced operating costs. Businesses that use our solutions can monitor and manage route efficiency and reduce idle time, resulting in lower fuel costs and labor expenses, such as overtime pay. In addition, our software helps companies to monitor vehicle speeds, identify unauthorized usage, minimize fleet wear and tear as well as the likelihood of fines, and increase the prospects of recovering stolen vehicles.
Increased worker productivity and revenues. Our solutions enable our customers to enhance worker productivity by minimizing wasted time on and traveling to job sites, detecting extended breaks and unauthorized detours, and provide our customers with the ability to better align compensation with productivity.
Designed for SMBs. Our FleetMatics branded product is a competitively-priced solution that is easily accessed and used via a Web browser or mobile application and that can be quickly implemented with the assistance of our large network of third-party installers.
A robust platform for data aggregation. We aggregate data that is generated from the use of our solutions with data provided through partnerships, integration with third-party products, commercial or publicly available sources, and from our customers. This capability provides us with an opportunity to recognize trends and provide insights that complement our core product reports to help our customers optimize the performance of their fleet.
Highly scalable, reliable and cost-effective SaaS platform. We utilize a SaaS delivery model, which lowers operators’ costs by eliminating their need to own and support software or associated technology infrastructure. We have built our solutions to scale and support geographically-distributed fleets of any size as they grow.
Ability to integrate third-party products and services. Our software architecture facilitates integration with third-party applications and services, such as fuel cards, mapping and work order integration solutions, and other value-added software and services.
Device and network agnostic. Our fleet management solutions can be accessed over personal computers, tablets or smart phones, providing our customers with significant flexibility in how they access the business insights we provide.
Our Key Competitive Strengths
We believe that the following competitive strengths differentiate us from our competitors and are key to our success:
Efficient and scalable customer acquisition model. We have developed a scalable sales and marketing model that is focused on the efficient generation of a large number of customer leads, primarily through digital advertising, such as search engine marketing and optimization and email marketing as well as targeted outbound sales efforts. These techniques provide us with a flow of low-cost, qualified leads, both in the U.S. and internationally. We believe our marketing approach provides us with a cost-efficient and highly effective means of targeting and accessing the vast and geographically diverse SMB market and converting leads into paying subscribers.
Business intelligence approach to fleet management. Our approach to fleet management is based on our proprietary business intelligence software that enables our customers to analyze large volumes of complex vehicle and driver behavioral data by accessing over 40 pre-built reports online through an intuitive dashboard. Our technology platform enables users to consolidate large, disparate data sets and identify relationships and long-term historical trends within data through proactive prompts or when requested by the user. We believe that our solutions provide our customers with insights that help them make more informed and timely business decisions.
Software-as-a-Service model. Our SaaS-based solutions are offered through a subscription over the Internet and use a multi-tenant architecture, which enables us to run a single instance of our software code, add subscribers with minimal incremental expense and deploy new applications and upgrades quickly and efficiently.
Deep domain expertise. From inception, we have focused on small and medium-sized fleet markets. This focus enables us to understand the specific needs of SMB fleet operators as they evolve. We possess significant experience and expertise in fleet management solutions, which enable us to develop, implement and sell SaaS solutions purpose-built for our existing and prospective customers.
Large and growing ecosystem of fleets and vehicles. As of June 30, 2012, we had more than 16,000 customers who deployed our solutions in over 281,000 vehicles worldwide. In addition, our customers ran 1.6 million reports and generated over one billion data points in June 2012. This vast amount of data not only provides valuable information for our business intelligence offerings, but also provides us with opportunities for increased revenue. Our large deployment footprint also provides us with an audience to whom we can market and sell incremental solutions, such as integration with fuel cards and global positioning system, or GPS, navigation devices, or third-party complementary products and services.
Our Growth Strategy
Our objective is to be the world’s leading provider of SaaS-based fleet management solutions. To accomplish this, we intend to:
Acquire new customers. We intend to acquire new customers by continuing to execute on our efficient sales model, leveraging our marketing efforts, capitalizing on word-of-mouth referrals and expanding our direct sales force.
Increase sales to existing customers. We believe that there are numerous opportunities to increase the penetration of our existing client base by selling our customers additional fleet management solutions, such as work order management, fuel card capabilities and GPS navigation device integration. We also expect our customers will acquire additional subscriptions as they add vehicles.
Continue to innovate and partner. We collaborate with our customers to build functionality that addresses their needs and requirements. We plan to continue to use our expertise in fleet management and strong relationships with our customers to invest in our software solutions and develop new applications, features and functionality which will enhance our solution and expand our addressable market. We also intend to pursue industry partnerships that can leverage our mobile platform to deliver increased value to our customers.
Capitalize on big data opportunity. During the six months ended June 30, 2012, we collected an average of approximately 30 million data points per day from customers’ vehicles and have aggregated over 28 billion data points since our inception. We believe this represents a significant asset from which we are developing complementary solutions and deriving incremental revenue opportunities.
Continue to expand internationally. In 2011 and in the first six months of 2012, 13.7% and 10.6%, respectively, of our revenue was generated outside of North America. We believe that a significant opportunity exists to increase our sales internationally.
Pursue strategic acquisitions. We may pursue acquisitions that complement our existing business, represent a strong strategic fit and are consistent with our overall growth strategy.
Risks That We Face
You should carefully consider the risks described under the “Risk Factors” section beginning on page 11, and elsewhere in this prospectus. Some of these risks are:
These risks could materially and adversely impact our business, financial condition, operating results and cash flow, which could cause the trading price of our ordinary shares to decline and could result in a loss of your investment.
Our Status as a Controlled Company
After this offering our largest shareholder will continue to control a majority of the voting power of our outstanding ordinary shares. As a result, we are a “controlled company” within the meaning of the corporate governance rules of the New York Stock Exchange. Under these rules, a company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including the requirement that we have a compensation committee that is composed entirely of independent directors; the requirement that we have a nominating/corporate governance committee that is composed entirely of independent directors; and the requirement for an annual performance evaluation of the nominating/corporate governance and compensation committees. Accordingly, in the future you may not have the same protections afforded to shareholders of companies that are subject to all of the New York Stock Exchange corporate governance requirements.
Our Corporate Information
The legal and commercial name of our company is Fleetmatics Group Limited. We were incorporated in Ireland on October 28, 2004, as a private limited company. Before completion of this offering, we will change our corporate structure from a private limited company to a public limited company. A public limited company known as FleetMatics Group plc will become the holding company of the Fleetmatics group by way of a share-for-share exchange in which the shareholders of Fleetmatics Group Limited exchange their shares in Fleetmatics Group Limited for identical shares in FleetMatics Group plc. Upon the exchange, the historical consolidated financial statements of FleetMatics Group Limited included in this prospectus will become the historical consolidated financial statements of FleetMatics Group plc. Our legal and commercial name will be FleetMatics Group plc. Our registered and principal office is located at Penthouse Suite, Block C, Cookstown Court, Belgard Road, Tallaght, Dublin 24, Ireland. Our U.S. headquarters office is located at 70 Walnut Street, Wellesley Hills, Massachusetts and our telephone number is (866) 844-2235.
Our website address is www.fleetmatics.com. Information contained on, or accessible through, our website is not a part of this prospectus and the inclusion of our website address in this prospectus is an inactive textual reference.