Quartix interim results: profit growth builds on recurring revenue

Quartix Technologies (AIM: QTX) has delivered a solid set of interim results, combining double-digit revenue growth with improving margins, higher free cash flow and a larger dividend.

The vehicle tracking specialist continues to benefit from its subscription model, with 97% of first-half revenue coming from recurring subscriptions. Growth was supported by more subscribed vehicles, price increases and increased sales of higher-value camera products.

There are some points for investors to watch. Net revenue retention slipped slightly, the US subscription base contracted and statutory earnings per share fell because of a prior-year tax adjustment.

Even so, the broader direction remains positive, and the Board says the second half has started well.

Quartix's key first-half figures

Metric	H1 2026	H1 2025 restated	Change
Revenue	£19.4 million	£17.3 million	12%
EBITDA	£7.2 million	£6.2 million	16%
Adjusted EBIT	£4.9 million	£4.0 million	21%
Profit before tax	£4.8 million	£4.0 million	21%
Free cash flow	£3.0 million	£2.5 million	18%
Diluted earnings per share	5.51p	6.50p	Lower
Interim dividend	2.70p	2.50p	8%

Adjusted EBIT means profit before interest, tax and share-based payment expenses. Free cash flow is defined here as operating cash flow after tax and investing activities.

Gross margin improved to 80.0%, from 78.4% a year earlier. That helped adjusted EBIT grow faster than revenue, with the adjusted EBIT margin rising to approximately 25.4% from 23.3%.

This is encouraging operating leverage. In simple terms, Quartix retained more profit from each pound of revenue despite increasing sales and marketing spending by £1.0 million.

Recurring revenue remains the main attraction

Annualised recurring revenue, or ARR, increased by 11% to £38.9 million at constant exchange rates. ARR represents the annual value of subscriptions in place at the reporting date, making it a useful forward-looking indicator for a subscription business.

Quartix added £3.8 million of ARR over the 12 months to 30 June 2026, including £2.1 million during the first half.

The fleet subscription base rose 7% to 342,679 vehicles, while the customer base increased 6% to 33,550. ARR per vehicle improved by 3% to £114, helped by inflation-linked pricing and camera upsells.

That combination matters. Quartix is not relying solely on signing new customers. It is also generating more revenue from each subscribed vehicle.

ARR per employee increased by 11% to £220,000, suggesting that productivity is improving as the subscription base expands.

Retention has softened slightly

Net revenue retention, or NRR, slipped to 96.9% from 97.3%. This metric measures revenue retained from the existing customer base, including pricing and upsells but excluding newly won customers.

A figure below 100% means that customer losses and reductions were greater than the benefit from price increases and upgrades across the existing base.

The decline was mainly attributed to the UK, where NRR fell to 99.4% from 100% following increased attrition. This is not a dramatic deterioration, but it is worth monitoring because small changes in retention can compound over time in a subscription business.

Management said the measure is being closely monitored across all territories.

European markets are doing more of the heavy lifting

Performance varied considerably by geography.

The UK and Ireland remained Quartix's largest market, with ARR of £20.4 million. ARR grew 7%, but the subscription base increased by only 2% and the customer base by 1%. First-half performance was affected by slower field sales conversion, although momentum improved towards the end of the period.

France delivered ARR growth of 14% to £10.6 million, supported by an 11% increase in subscriptions.

Italy, Spain and Germany were the fastest-growing markets, delivering ARR growth of 39%, 31% and 20% respectively. These businesses remain much smaller than the UK and France, but their progress supports the case for further investment.

The US was the weak spot. ARR edged 1% higher to £3.4 million because pricing improved, but both the subscription and customer bases declined by 3%. Quartix cited higher churn and softer trading.

Investment is rising, but management is adjusting quickly

Quartix increased sales and marketing expenditure by £1.0 million. Of that amount, £0.4 million related to investment in indirect sales channels that failed to generate an adequate return.

The activity has now been scaled back, securing £0.2 million of future savings against the original plan. Half of those savings will be redirected into an artificial intelligence data research project intended to improve customer acquisition efficiency.

It is positive that management has acted rather than continuing to fund an underperforming initiative. However, the episode also shows that not every growth investment will deliver the expected return.

Administrative costs were tightly controlled, rising by just £0.1 million, or 2%.

Why earnings per share fell despite profit growth

Profit before tax increased by 21%, but basic earnings per share declined to 5.52p from 6.50p.

The difference comes from the tax line. Quartix recorded a £2.2 million tax charge, including a £1.1 million prior-year adjustment relating to the 2024 and 2025 financial years. This followed work connected with the Group's updated accounting policy.

Excluding that adjustment, underlying profit after tax was £3.7 million, compared with £3.1 million a year earlier.

The 2025 comparisons have also been restated after tracking systems and dashcams were reclassified as property, plant and equipment under IAS 16. These assets are now depreciated over seven years.

The accounting change increased net assets at 1 January 2025 by £9.2 million and altered the timing and presentation of costs. Importantly, it had no effect on free cash flow.

Cash generation and the dividend

Free cash flow increased by 18% to £3.0 million. Cash generated from operations reached £7.6 million before tax and investment spending.

Quartix ended June with net cash of £4.8 million, compared with £5.6 million at the end of December 2025. The reduction followed £3.6 million of dividends paid during the half.

The Board has proposed an interim dividend of 2.70p per share, costing £1.3 million in total. It will be paid on 24 September 2026 to shareholders on the register on 28 August, with an ex-dividend date of 27 August.

What investors should watch next

Quartix remains confident of meeting 2026 market expectations of £40.3 million in revenue, £10.1 million of adjusted EBIT and £4.9 million of free cash flow.

Based on the first-half figures, that would require approximately £20.9 million of second-half revenue and £5.2 million of adjusted EBIT. The full-year free cash flow expectation requires around £1.9 million in the second half, below the £3.0 million already generated in the first six months.

Operational priorities include completing the French 4G upgrade programme, launching new US tracking products and commercially releasing the new customer interface. Quartix also plans to launch its dashcam offering in Continental Europe during the first half of 2027.

The central investment case remains the quality of recurring revenue and the scope to grow internationally while lifting revenue per vehicle. The main questions are whether Quartix can improve retention, restore US subscription growth and generate attractive returns from increased customer acquisition spending.