Q1 2020 Earnings Call
Ladies and gentlemen, thank you for your patience. Please standby your.
First quarter 2020 conference call begun momentarily thank for your patience and please standby.
[music].
Good morning, welcome to car fleets first quarter 2020 conference call joining us for today's presentation as a company CEO, Chris Wolf and CFO Ned Mavrommatis. Following their remarks, you open the call for questions before we begin the call I would like to provide our safe Harbor statement that includes cautions regarding forward looking statements made during this call.
In the call there will be forward looking statements made regarding future events, including parsley future financial performance all statements other than president and historical facts, which include any statements regarding the company's plans for future operations anticipated future financial position anticipated results of operation business strategy competitive position companies are expected.
And regarding opportunities for growth demand for the company's product offering and other industry trends are considered forward looking statements.
Statements include.
What are not limited to the Companys financial expectations for 2020 and beyond all such forward looking statements imply the presence of risks uncertainties and contingencies, many of which are beyond the company's control. The company's actual results performance or achievements may differ materially from those projected are assumed in any forward looking statements factors that could cause actual results to differ.
Materially could include amongst others as cc filings overall economic and business conditions demand for the company's products and services competitive factors emergence of new technologies and the company's cash position. The company does not intend to undertake any duty to update any forward looking statements to reflect future events or circumstances.
Finally, I would like to remind everyone that this call will be made available for replay in the Investor Relations section of the company's website at Www Dot power fleet Oh I.
I would now I wouldn't like to turn the call over two car fleet CEO Mr., Chris will Sir Please proceed.
Thank you Josh.
Good morning, and thank you for joining us today, I hope, you're all safe and healthy during this extra ordinary time. The Kobin 19 health crisis requires remarkable efforts from people communities organizations and governments to keep our people healthy and safe.
This crisis is impacting companies and people all over the world in our thoughts go out to all those affected.
Internally, our top priorities remain keeping our employees and community safe, maintaining the health and viability of our business and ensuring our customers keep food.
And goods were you going where they need to get to across our businesses and geographies, we adhere to the CDC guidelines and local health Ministry recommendations well continue to operate central business. That's designated by the U.S. Department of Homeland Security.
Our Israeli operations were also designated as an essential service because our technology supports emergency responders and critical logistics infrastructure.
We spent a considerable amount of time over the last two months accelerating cost saving synergies and Rightsizing, our business units as the Pandemics impact and government responses have varied considerably and doing so while ensuring our companies and employee safety.
Fortunately, our business continuity plans and IP infrastructure were effective and flexible and allowed us to continue helping our customers and partners meet the challenges of today's remote work environment.
I continue to be impressed daily by our teams determination productivity, while navigating these uncharted waters.
Our uninterrupted operational execution in Q1 is a testament to their unwavering commitment to helping our customers and partners in a time, but increased need and our steady financial performance for the first quarter highlighted by 30.8 million in total revenue 17.6 million at high margin recurring and services revenue and 2.8 million of operating cash flow.
We generated demonstrates our business models resiliency.
Powerfully continues to provide the up most customer support during these times to a NIM or customers to react quickly and safely as they were critical cargo around the globe.
Our tracking and monitoring technologies relied upon by global companies in the food and grocery supply chain, including Walmart Nestle, Procter and Gamble General Mills, Publix craft and many more.
Well, we have a broad and diversified customer base comprised the blue chip companies and global enterprises, a small subset of our customers, particularly in the travel industry.
Having impacted by the pandemic, our longstanding partner Avis has not been immune to the current market dynamic and we're working closely with them to support their efforts in rightsizing their fleet.
Recognizing the ongoing uncertainty from this mobile pandemic and its downstream effects on the business and the economy. We believe it was necessary to an act proactive cost saving measures to ensure a business remains secure and our long term growth potential remains intact at the end of March we implemented a plan to reduce our operating cost to further optimize our order.
In the nation. These actions are largely complete strike a balance between temporary and permanent expense reductions on travel marketing, eliminating most contractor expenses differing salary increases shortening work weeks in certain geographies and structural changes such as the reduction in our overall workforce.
Actions, we've taken coupled with our solid cash and liquidity position give us confidence that we will not only weathered the storm well come out stronger as the world economies reignite.
Cash liquidity and flexibility are critical during these types of environments, which is why our board believed it was prudent to put kind of aftermarket or ATM is good in place as part of our previously filed form S. Three.
The ATM gives us operational flexibility so that we can do you leverage our balance sheet when it makes sense to do so.
More importantly allows us to execute against some large revenue opportunities in our pipeline, which I'll review in more detail after notes walk through of our first quarter financials Ned.
Thank you, Chris and good morning, everyone.
Our financial results for the first quarter of 2020 include consolidated results for both I'd systems, and pointer Telocation LTB, which were acquired in October Threerd 2019.
Keep in mind, the comparable year ago period, only includes Standalone financial results from I'd systems now would those calls qualifications, let's look at the numbers revenue for the first quarter of 2020 increased to 30.8 million from 13.6 million in the same young adult period.
Hi margin recurring services revenue was 17 point sixmillion or 57% of total revenue compared to 6.4 million or 47% of total revenue in the same yakult failure.
Product revenue, which drives future services revenue was 13.2 million or 43% of total revenue compared to 7.2 million or 53% total revenue in Q1 last year.
Gross profit increased to 14 point ninemillion or 48% of total revenue from 7 million or 52% of total revenue in Q1 of last year.
Now turning to our expenses for the first quarter 2020 total operating expenses were 18.3 billion compared to 9.2 million in Q1 last year looking out the virus components are bought back selling general and administrative expenses were 13.4 million compared to seven point.
2 million in Q1 of last year.
Research and development expenses were 3.2 million compared to 1.7 billion Q on blush year, and depreciation and amortization expenses were 1.7 million compared to 358000 in the same year ago period.
As Chris mentioned in March we proactively implemented several cost saving measures, which we expect to see the financial benefits starting in the second quarter. Some of the cost saving measures already implemented include a reduction in force.
Emanating, mostly all third party contra contractors and imposing a temporary hiring freeze.
So in certain geographies, we reduce to afford they work week and reduce the salary by 20%.
We are monitoring the situation closely and have additional levers to pull through the called it might seem situation worsen.
Turning to.
The profitability measures GAAP net loss for the first quarter 2020 totaled $4.5 million was 16 cents per basic and diluted share. This compares to a GAAP net loss of 2.2 billion or 12 cents per basic and diluted share in Q1 of last year.
Adjusted EBITDA and non-GAAP metric, which we defined on earnings before interest taxes depreciation amortization stock based compensation nonrecurring items for the first quarter 2020 totaled $152000. This compares to adjusted EBITDA of $240000 in Q1 of last year.
Our cash position remains strong with $16.6 million in cash at quarter end working capital of 24.1 billion and we also have available at $10 million.
I'm of credits with back couple him in his role which was on begins at this point.
We're focused on working capital management and as you can see from our Q1 results, we generated $2.8 million and cash flow from operations I'm pleased to report that our cash position remained stable at the end of April we believe that the $8 million.
<unk> costs that we took out recently for lumpy breasts, coupled with the overall cash and available resources, we're well positioned to meet a $4 billion bank. That's that's due over the next 12 months as of today, our pipeline remains strong and our business fully operational however, given the circuit.
We cannot accurately predict the specific event or duration of the impact of corporate covered by team on the financial results. Recognizing this reality, we believe it is prudent to withdraw all financial guidance until our visibility visit beaudry returned to pre Kobin Nike levels in summary, we believe our.
That's it for customer base.
If the board recurring revenue and prudent approach to catch manage Ron will help to ensure that we successfully navigate this uncertain times.
That concludes my prepared remarks, Chris.
Yep.
Actually the financial overview, Ned and the mission to covert induced market disruption. Our team has done a tremendous job executing against our organization organizational and program integration plans and targeted cost savings as I mentioned in my opening remarks as country instinct shutdowns were initiated we took proactive actions to keep our employees safe reduce expenses.
As and maintain uninterrupted operational capabilities. The slowdown also forced us to look at critical priorities and our strategic plan, including temporarily shelving some initiatives that I talked about nearly seven to eight weeks ago, while we pulled other initiatives forward.
Taken together this is accelerated cost savings across the organization as product volumes returned to pre cobot levels. We anticipate we will realize even greater savings from our consolidated supply chain.
In terms of product development engineering, we've been executing on our software as a service platform consolidation efforts and expect to be in beta by the end of Q3, which is on track with our internal schedule.
The consolidation work will allow us to save over a million dollars annually. Once finalized in 2021 simultaneously. This gives our customers full visibility other assets and real time incidence, regardless of asset type and whether the asset isn't a facility in the yard at a job site or over the road.
Our weight on actual R&D initiatives being tested by major customer with encouraging results today, giving us confidence that we can commercialize this product over the next several months. The first generation of this product can tells the containers loaded onto a chassis and as well I can tell if the container is loaded an empty we're striving to get to legal weighed on actual in future generations, which would be a game.
Changer in the logistics market.
The strategic customer has more than 120000 chassis is in which we were targeting for this product.
Cellular version of our industrial truck platforms also slated to launch in Q3. This will allow us to take our proven material handling solutions for access control safety and utilization reporting into the shipment constantly yards ports rail yards and onto construction sites as wells to equipment rental companies have equipment operating outside of a facility.
It's a great synergistic market opportunity for millions of vehicles that leverage our existing sales organization.
Our opportunity pipeline remains not only intact, but also a robust we had a strong start to your in terms of new business development and pipeline creation. However in mid March two early April activity tapered off as covered 19 really took hold and many of our customers and channel partners focused on their own cobot 19 actions such as working from home shutting down facility.
These and stopping visitations to their sites that being said, we have not seen major deals get cancelled or loss that several had been suspended or delayed pending business revival when countries and states go back to work.
We are cautiously optimistic as we've recently seen an uptick in activity both in terms of deals progressing in our pipeline as well as a number of inbound opportunities.
One notable deal includes the world's largest online retailer.
And this is in the U.S., who selected one of our forklift manufacturing partners to deploy our powerfully technology, it's several U.S. sites and that'll happen in Q2.
Additionally, we were selected by one of the world's largest logistic companies to deploy our industrial mobility solutions in nearly all of their use facilities that reps represents over 1000 or high end vehicles.
Mobility solutions. We also recently won a major 3000 unit tender in South Africa, and a similar size deal in Mexico.
As I mentioned on our last call we were pursuing a major opportunity with the U.S. government entity that equates to more than 5000 high end industrial units subscribers.
If successful we expect this contract to be awarded in the third quarter.
Additionally, we are pursuing several large commercial tenders, well, including a 23000 subscriber opportunity the U.S.
30000 subscriber opportunity in Europe, and a 7000 subscriber opportunity in Argentina.
In parallel with these activities, we've been collaborating with a major rental car company on an active pilot. This company's thesis is that our technology is mission critical in this environment because it provides them with real time visibility into their inventory, even if it's not being rented.
This prospect stated that our ease of installation and fuel accuracy or key differentiators of our technology.
Well, we're early in the evaluation process. We were asked to provide pricing quote for 100, 200, and 300000 subscriber units and that's always a good side.
Although we are starting to see that Israel and various U.S. states are starting to reopen known can truly say how long the current situation will persist.
Rest assured that many on the Powerfleet leadership team have navigated through turbulent markets and a recessionary times before and we believe that this experience will enable us to weather. The cobot 19 storm set us up for success as global economies reignite in the months ahead.
The proactive measures we've taken in the near term will allow us to drive our business forward today and the resiliency in our business model and our secular growth drivers in our verticals ensure that our business is positioned well for tomorrow and with that we're ready to open the call for your questions. Operator, please provide the appropriate instructions.
Thank you as a reminder to ask a question Uniques Press Star one on your telephone to withdraw your question Crystacomm Keith. Please standby, we can probably kuni roster.
Our first question comes from Mike Walkley with Canaccord Genuity May proceed with your question.
Hey, Chris Thanks, Thanks for taking my questions I hope everybody at powerfully as well.
Good.
As Mike.
So so just on the higher margin recurring revenue services.
To help us just walk through your your customer base, what what areas. The business are holding up better that up that are more sticky given that you are critical and and maybe some other services like in a this that you might have some underutilized assets maybe.
Early shutdown out of service for those markets are we just trying to look at how much of the business is stable and how much might to my come off in the short term. Thank you.
That's very good question, it's really interested that we've not seen <unk> actually hardly any I would say, it's very marginal any reduction in our recurring revenues except for with the this where we gave them a slight.
Discount for a period, it's very limited it's for three months to hopefully get them through what we call the belly of the crisis.
And again, there are a partner with ours split it's more of a discount theres still under contract for the whole hundred and 25000 units and committed to the 60 month term and they've been paying religiously so that they've been a great partner.
Our other businesses, they're all under long term contracts.
We've seen maybe just a couple of people asking for a deferral.
Not asking to be shutdown. So again, a that's very promising and I'd say that's across the board, whether its industrial or logistics or in our fleet management businesses and that's also globally, we're not really seeing.
Much impact at all to our 70 plus million dollars and recurring services.
Recurring services revenue.
Great. Thanks, just building on that given the critical needs, especially in the food and other areas are you seeing any uptick in business or they're just so busy executing right now it's hard to plants offline to add hardware in its just kind of steady and some of those critical businesses that are probably quite busy right now.
Yeah again, some of the customers I mentioned or phenomenally busy right now so the good thing is they're making a lot of money right now and they are actually saving money because of fuel costs at the same time. So I do think a lot of those companies are going to be phenomenally stronger and able to do capital expenditures here once things I'd say normalized if there is going to be a normalized.
But the other side of the logistics puzzle or.
Even in our industrial truck side is you know if you're doing heavy manufacturer automotive you know that those industries basically gone dormant. So I think it's an interesting balance.
Between the two like that large logistics company I mentioned.
Their plan was to aggressively rollout our technology this year, they're rolling out three sites in Q2, but they have hundreds of sites. So again. It just stayed there is slow rolling out a little bit at the front end, just wait and see until the state's open up right because some of the facilities they manage have actually been.
Shutdown.
I understood it I.
I know, it's tough in this environment with the pool guidance, just maybe give us some high level color. How are some visibility in conversations may be here mid may versus April when everything shut down or is there signs of things starting to come back.
You know Israel and different states opening up or is it just too early still as everybody is still kind of just figuring things out.
Yes. This is actually a testament to like our team in Israel actually in our analytics team here in the states are they initially took all of our data from all over the world and because we're on the dock we're actually in the facility.
Whether its warehousing or manufacturing and we're also over the road whether it's in cars are trucks and we did activity indexes on every country and you could actually see the fall off in every country. When it happened by time at the beginning the year and we actually saw what countries that hit the trough.
I'd say is the Canyon and then we've actually seen recoveries, which is great and by the way getting to Israel.
There's.
Probably I'd say, they're like three weeks ahead of us that's kind of the way it's been tracking and we're seeing an uptick in business there already.
Yup car demand is coming back online, which is good to hear.
And also in the states inbound inquiries as I mentioned before are picking up activities on programs I mentioned that logistics company, that's starting to what they are starting to contact us about starting their site deployments. So.
I'd say right now is the United States as kind of variable because every states opening up a different levels.
So it's we have seen it like what I'd say hit the canyon here in the states. It's just a probably going to be a little bit more jerky here than it is in some other countries.
Great. Thanks last question I'll pass the line Ned just just on some of the the cost savings initiatives you lowering consulting some headcount reductions in shorter Workweeks can you help us just quantify how we should think about maybe the spread of those costs, where they hit the PNM and.
What you're thinking about maybe for a run rate of Opex in the maybe this quarter and then where could go exiting the year.
Yeah. So the thanks, Mike the savings amounted to approximately $2 million per quarter.
So we should see the operating expenses.
Starting in Q2 to be reduced by approximately $2 million are the majority of it is and that's DNA with a few hundred thousand then in R&D.
Right now we are.
Well have additional plans in place. So we definitely have more levers to pull if things take a little bit longer.
The goal is to keep expenses at this level.
We're also managing the company on a cash flow pay says and managing working capital very efficiently. So as you can see from the first quarter we generated.
About $2.7 million in.
In cash flow from operations.
So our cash position also remains very strong.
Great. Thank you very much for taking my questions and.
Best wishes for this year.
Thanks, Mike.
[music].
Thank you. Our next question comes from Scott's here with.
Capital you May proceed either.
Hey, good morning, Thanks for taking my questions I'm glad to hear you guys in your families and teams are safe.
Hey, maybe just to dig in a little bit more on mikes question on Opex, you talked about some some permanently fixed and optimize cost structures as well as some variable comp structures that would come back can you kind of give us an idea about how that breaks down and also Ned.
In terms of depreciation amortization on the quarter could you give us quick breakout of what that the the pointer telocation amortization was related to dealing than I had a couple of follow ups.
Sure.
Thanks, Scott so.
The the cost savings.
Approximately $2 million per quarter.
We're going to start seeing the immediate in Q2.
The majority of that is.
DNA with a few hundred thousand in R&D. When you look at depreciation amortization out of the 1.7 million in depreciation amortization. That's included in Opex 1.1 million relates to the amortization of the of the point direct acquisition related to the intangibles.
No.
Gotcha, and they're just a follow up to one on that 2 million cost reduction will see the full benefit of that in the second quarter or will that be the full benefit of that isn't the third quarter and it sounds like there are some permanent reductions there as well as some variable that would come back compensation or otherwise could you give us an idea of what that looks like provided.
The outlook and we started a little bit or inflection in the second half.
Yes. So the we are going to start seeing immediately in the in the second quarter, we took.
Action there in late March.
So the courseware implement that.
At the beginning of April so we're going to see the full benefit of those savings.
In the second quarter.
And when I look on although you are right some of them a fixed and some of the variable we don't intend to increase any of those expenses.
So to start to see a significant pickup in.
In revenue.
Okay, and Chris maybe just to follow up you highlighted.
A lot of your customers that are in more essential industries, such as grocery is there a number that you could put around that in terms of what they were present across the different product lines, but to give us an idea by end market about what that looks like and if you could as well. If you think certainly started to slow in the March quarter, but could you give us some some linear already in terms of how things progressed on a monthly base.
Basis through the first quarter and into April to give us an idea about where things are kind of troughing to be able to model going forward.
Yes so.
Just off the top my head that we don't usually break it out by food and grocery and distribution.
Put it into an aggregate number like across all geographies, but in the U.S. probably represents about 25% of our business as far as users in service and I would say like in Mexico. It varies it's probably like 30% because they have a huge.
Business going on with Coca Cola, which is not necessarily the central service, but obviously, it's in food and grocery distribution.
So again it varies by geography, but I'd say, it's around the 25% to 30% range of total users in service.
Looking at the geographies, Mexico again, it's really hard to understand where they are in the cobot 19 situation because I don't think they report their numbers quite as accurately as a other countries.
But that being said is a they were seeing a lot of pickup in activity in Mexico, We mentioned that when tender that we won.
Surprisingly enough.
South Africa is I mean, it's it's had a pretty bad basically the economy for awhile.
The winning a 3000 unit tender down there basically almost changes our business in South Africa overnight and we are seeing that basically you've hit the bottom and coming out Argentina has just been steady you know even even with a shutdown.
Yes, there has been pretty good.
Israel's the one where it again, it's a preponderance it's a large part of our it's almost equal to the states in the same size as revenue and a that's done we're seeing a lot of pickup activity starting we're seeing it actually in the data right in the same in the U.S., we've actually started to see.
Pockets like in the certain areas like industrial truck is starting to pick up and then certain parts of logistics kind of flatline, but now they are starting to pick up.
Great.
Okay.
Very helpful and Chris Lastly, if I could just.
You gave a lot of qualitative.
Examples and data points related to inbounds and customers.
Is there way to quantify the backlog or the pipeline in terms of what you're seeing and it sounds like really the.
The trick here in the near term is the ability to getting an install and close some of these contracts.
What's going to be the real milestone of catalyst it sounds like.
It's going to vary region by region, even state by state, but what should we really be paying attention to when we're starting to get back into full swing your ability to get into a warehouse to get into an enterprise to be able to install against that backlog. Thanks.
Okay. So I.
I would say right now you like had the one logistics company and the you I don't want to keep relied on them because it was a huge deal that we signed in Q1 rolling out in Q2 and throughout 2020.
But we're going to see so that backlog, we've only I think installed at 100 units. So we have 900 units to go there yes Heinrich by the way is well ahead of plan and young Heinrich brought us into their U.S. affiliate and they're the ones that brought us into the world's largest online retailer so implementing those sites and.
Q2, so again, but keep in mind that online retailers those sites are brand new sites. They are brand new warehouses. So it's really easy to get into something like that versus some somewhere where there's lots of people and they're trying to.
Keep external influences out you know they tried it theres no reason to cope with.
Contact tracing and have other vendors walk into your property that we do see lessening up matter of fact, our field installers for the first time.
Really interesting data point are filled installers right now are booked all the way through July they're fully booked now again, we contract out a lot of field, installing but I think thats pretty telling.
So the sales backlog as good a that's deals that are signed in units that we need to ship.
These huge prospects that we're working on again those were that's where the big opportunities for us and again the deals haven't stopped and I mentioned that U.S. government agency, one 5000 units might not sound like a.
Big account, but it's literally almost 19 million dollar opportunity because it includes a lot of software engineering and a lot of software implementation.
Hopefully that helps.
Great. Thank you.
Thank you and as a reminder to ask a question you will need to press Star 100 Telecom. Our next question comes from Jason Smith with Lake Street. You May proceed with your question.
Hey, guys. Thanks for taking my questions just curious if you're seeing any push back on pricing for many of your business lines just given the current environment.
In I'd say in the logistic side more than the like industrial and obviously, one part of their business its a.
About it.
I'd say, it's maybe 10% of our business is hardware only sales.
Because we sell for the rest of world, our product, where we don't actually run operations.
Oh.
That's been impacted but I would say.
You know I don't know Ned what would you add on to that.
Yes, I think.
Just think side.
As for patient I think some of the competition.
Out there.
Everyone is trying to close deals so we are seeing.
Some pricing pressure there.
On the industrial side.
We haven't seen any of that yet.
Okay. That's helpful. And then following up on the online retailer or should we expect the rollout in the U.S. sorry to follow the same trajectory you saw with this customer over in Europe.
There are the dial and retailers actually.
Putting units in when I say units that lets say vehicles. So they are putting vehicles in their warehousing facilities.
And if they pick a vehicle that does not have a telemetry like in other words, the OEM doesn't provide their own telemetry unit.
Then we have a huge opportunity and the partner with young Heinrich here in the states there affiliate here.
They've got ascend they expect to get more warehouses, which would be great for us.
But.
Lets say if they pick a OEM like Raymond are they pick crown for facility, we're probably not going to get that because raymond or crown have their own telemetry device. So it'd be an OEM supply product that they can subsidize when they sell the forklift.
Our claim to fame and where we usually when 100% of the deals is.
In a mixed fleet environment, which that's the preponderance by the way so the but this online retailer.
Likes to did the forklift against each other and then they'll take and go 100% crown or 100% Raymond or 100% Toyota.
So if its Toyota or.
CFA or Heinrich than we will be in that site.
But if it's the other guys than we might not.
Okay and then the final one from me I know, it's hard just given overall visibility, but do you have a sense. If a lot of these delays are being pushed into the second half or more being pushed out to 2021.
I'd say the second half I think right now we're in a critical time, it's like the United States is just now opening.
Israel's opening and by the way up it's great to see the traction that starting there as quickly as it is on the business side, everyone needs to remind you remember that we are a b to b player right. So that kind of you know, it's like the b to C space and some aspects unless you're a.
Telco and you're just providing data that's pretty immune because everyone's on their cell phone and everyone's use and yes go to meeting and all that but in the B to B space you will be the first ones to get the benefit I think because as they start lighting up factories as they start getting trucks back on the road you know that's when they'll start.
Moving faster with us so I think what we've seen so far is very encouraging I think in the states.
I don't.
The deals I'm talking about have not been pushed out.
Into next year matter of fact to you the United States government deal.
Their processes just slow anybody that's ever worked for the government knows that but we think there fast tracking this and we do expect to get.
If we're successful we'll get that deal in Q3 announced in Q3.
Okay. Thanks, a lot guys.
Thank you.
Thank you. Our next question comes from Josh Nichols with B. Riley SPR you May proceed with your question.
Yes. Thanks, I was just curious could you talk a little bit about one where are we on the Avis unit delivery front in regards to 75000 units under contract.
Oh, Yeah. It took their under contract to have they needed to take every unit by October of this year and so they've taken every other 75000, they've taken about 71000.
Roughly so there's literally over little over 4000 units left for us to take.
Right now they are contractually obligated to take those by October. So we're just right now, we're just looking and seeing how their business recovers.
Over the summer.
I think can you talk a little bit I know for pointer like strong U.S. dollar has typically been a little bit of a headwind or you seemed much impact there as a temporary.
Headwind in places like Argentina, Brazil, Mexico, given the strength that dollar.
[noise] digestion SNET, obviously as part of the combined company those geographies.
Are much smaller part of our revenue so the impact that not as significant.
However.
Our expenses also in those currencies the change in the foreign cars that have an impact.
In our bottom line, but it could have an impact in our revenue but.
Approximately 50% of our revenue trades in the U.S.
And a majority of the remaining is in Israel, so when that impact that as much by the changing those currencies.
Thanks, and then just to dive into that a little bit more like.
How much of pointers business or the legacy point of business in Israel is really related to like more basic like standard vehicle recoveries solutions that they used to offer that's kind of tied a little bit March like auto sales in any additional color you could provide on what you're seeing over there would be great.
Yes.
A big percentage of the business in Israel comes from that segment about business.
To date has been very resilient.
Monthly billing.
Remains strong and.
Throughout called the 19.
We are waiting to see how it's going to impact so new units, but so far it's been very resilient piece about business.
Yeah, I know this always hard but any idea for potential timeline with the U.S. government for this 5000 unit opportunity I know that I guess it it's hard but is there any you'd have a formal.
RFP or anything else. The deadline. So you could kind of 0.2 to how goddess when this might be awarded.
Yes, theres a they call it a par net par is already in process and we've supplied them like all the.
Hey, basically we've responded to their RFP already.
The good thing is it's a sole sourced because it's actually a replacement Oh proposal. So initially if you if everyone remembers like three years ago or two years ago. They went out with a par they selected a competitor.
And they're not happy right. So they came to US and asked just this year. They came and said hey, we'd like you to come in and see if you can help us out and so by them, making it a replacement par theres over 80 facilities that need to be installed there moving from decentralized Haiti.
To centralize, which basically we can do very well that's what we do you know we basically a software as a service.
So again, that's where a lot of the money for this program is being generated as well because we'll be but behind the firewall.
Government agency, where they're not going to run in the cloud.
So.
There's some implementation dollars et cetera to go into that there's equipment replacement dollars and then there's recurring for the first time for this customer they've never been on a recurring situation.
So again the timeline they've given us as Q3, so we're all marching to that right now.
Thanks, I'll hop back in the <unk>.
Okay. Thanks, John.
Your next question comes from Gary Prestopino with Barrington Research you May proceed with your question.
Good morning, everyone.
Couple of questions in terms of.
How your margins broke out between product and service.
In the quarter.
Obviously, a big step down because a point or but are those margins, particularly on the product side are they going to vary considerably either way as we go forward here or is that somewhere within that 28, 29% range is that a good number to use.
Hey, Gary that that is a good number to use we.
I expect that because of the effect now that were vertically integrated that we would see slight improvement those margins to get into the low thirtys.
However, as I mentioned before we are seeing some pricing.
Pressure, especially in the logistics business as well as due to the fact that the product revenue.
As a lower amount to the cobot 19 situation so right using that number for the next few quarters is the good way to look at it.
And then any any slippage in revenue that we're going to see relative to our.
Patients would be on the product side right. The services side, you're basically contracted out too so unless that as far out right. Yes. Okay. Okay. Good that's great and then as Christmas sorry.
Chris mentioned.
To date, our service revenue has been.
There is resilient we continue to.
Two invoice and collect on a monthly basis, we are going to see a slight decline due to some deferrals, but on a.
Overall basis, we feel comfortable with the service right.
Okay, and then can you kind of possibly if at all just frame this out for us.
If this.
How much did this cobot impact.
Hit you for in the latter half a March have you guys gone through that exercise in terms of revenues.
Yeah. This is Chris and a I'd, probably say there was probably about a $2 million worth of revenue that we would have had because again everyone should all it. This is the way. It works you product revenue was always.
It's usually at the ended the year because people have to or the end of that or fiscal year, because they want to spend their budgets money and right number two it's usually at the end of a quarter.
But our deals usually come in so it was kind of.
I'd say it was probably into 2 million range that we would have had that just got pushed out in its you know again some of the deals or do you have there all the deals are still in play it's as customers, just said hey, who knows.
'cause it got to remember this first the last two weeks of March literally everybody just shut down and it was almost overnight and they started pricing on the on their own stuff right. You know they had the focus on their own covert 19 actions. So.
That's a good number to use or think about.
Okay and then.
You know I would assume that you're saying your pipeline still pretty strong and all that that your salesforce. You know is actively out doing outbound calls here talking to your counterparts in the industry me, obviously, nobody is doing face to face meetings, but I mean, just to get an idea of just how well you are operating.
People able to get.
Potentials on on the line on the other end.
Yes, that's a very good question and for a while the answer was no because basically everyone at our customers and prospects. We're all trying to work from home et cetera.
That's he's done and our by the way our dealer network or go to market strategy.
They always did it over the phone so which is great. So it's like you know they rarely went to dealers into the end customer because it was a through a channel. That's the same with Heinrich right. So that those are not impacted.
On the logistics side, where it's more direct.
Our inside sales team has always been working over the phone. So that's actually not matter of fact, we've gotten some really good leaves just recently because I think people had more time to pick up the phone too which is interesting.
But on the closing the deals.
We're closing deals and in the logistic side as well, which has moved right.
But it's a little different it's a little bit more difficult as lot of sometimes you just got to look at somebody in the face and you can do it on zoom too, but it's a but we're doing it and it's a I think everyone's kind of getting the custom to it.
Okay, and then lastly, Chris.
This government contracts that you're bidding on did I hear you right that this is a 19 million dollar contract and on an annual basis or is there just some upfront.
You know consulting Thats done there and then an annualized is on a certain number.
Yeah, it annualized at a certain number.
I can use know what that was like but I don't have the the latest numbers in front of them because they asked for two different models by the way right. Okay. So that being said is there's a hardware part of that is 5000 units and.
Roughly think about that's our high end product, but everyone is remember an industrial truck product sells for over $1000.
Not like selling a trailer device, which is like a couple of hundred dollars.
Okay, but there was a recurring on that which will kick in once the units go online.
Okay. Thanks.
Thank you.
Thank you and I'm not showing any further questions. At this time I would now like to turn the call back over to Mr. Walker for any further remarks.
Yes. Thank you for joining US today, then I have presenting at the 15th annual Needham Virtual technology immediate conference next Tuesday may 19th Eleventhirty am Eastern time, the presentation will be webcast available in the Investor Relations section of our website.
Thanks, again for everyone's attendance and participation today, please stay safe and we look forward to hopefully talking to you and keeping you updated in the months ahead. Thank you.
Operator.
Thank you. Thank you for joining us today.
Isn't station you may now disconnect.
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