Q3 2025 PowerFleet Inc Earnings Call

Speaker Change: Greetings and welcome to Power Fleet's third quarter 2025 earnings call.

Speaker Change: At this time, all participants are on a listen-only mode and a question and answer session will follow the formal presentation.

Speaker Change: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.

Speaker Change: Please note, this conference is being recorded. I will now turn the conference over to your host, Mr. David Wilson, Powerfleet's Chief Financial Officer. Sir, you may begin.

Speaker Change: Our remarks today will contain forward-looking statements. Our actual results may differ from those contemplated by these forward-looking statements. Factors that may cause our actual results, performance, or achievements to be materially different from those expressed or implied by such forward-looking statements are described in today's earnings press release.

Speaker Change: With that said, I will hand the call over to Steve Towe, CEO of PowerFleet. Steve.

Steve Towe: Good morning, everyone, and thank you for joining today to discuss our third quarter results, our first since completing the Fleet Complete transaction.

Speaker Change: I'm excited to share the steps we've taken and the progress we've achieved.

Speaker Change: Securing global scale through a creative M&A was a key pillar of our strategic plan, shaping our major initiatives since I joined PowerFleet three years ago.

Speaker Change: The rapid follow-up of the fleet complete acquisition following the mixed combination has fundamentally transformed our business, providing a platform for accelerated growth.

Let's look at the financial headlines.

Speaker Change: Quarterly revenue in Q3 reached $106 million, a $33 million increase representing 45% growth. Importantly, service revenues accounted for 77% of the total revenue in the quarter.

Speaker Change: Adjusted gross margins in the in the quarter exceeded 60% with service margins close to 70%.

Speaker Change: Adjusted EBITDA came in at $22 million, a $10 million increase year over year, reflecting a 77% growth rate and an annual run rate exceeding $85 million, doubling 2024's adjusted EBITDA of $43 million.

Speaker Change: Our Cost Synergy Program continues at pace, with an exceptional $15 million in annualized savings secured exiting the December quarter, and we remain on track to exceed $60 million by year-end.

Speaker Change: Looking ahead, we are focused on realizing an additional $21 million in cost synergies over the next 18 months, reflecting our continued commitment to drive efficiency and maximizing near and long-term value.

Speaker Change: Turning to go-to-market, the FleetComplete transaction has significantly expanded our opportunity set and strategic optionality.

Speaker Change: The addition of scale partner channels with the likes of AT&T and TELUS serves as a force multiplier, providing extensive market reach through a success-based investment model rather than a speculative one.

Speaker Change: In North America, we are actively evolving our approach to fully leverage a hybrid strategy that integrates both direct sales and channel partnerships.

Speaker Change: The importance of our direct sales efforts was exemplified this quarter by securing a major deal in North America for our in-warehouse solutions with one of the largest beverage companies in the world. This agreement includes an initial multi-million dollar order with a long-term potential in the 25 to 30 million dollar total contract value range.

Speaker Change: This landmark deal was the largest of many this quarter for our Unity Safest Decentric solution set, which continues to gain global traction.

Speaker Change: Additional highlights include continued share of wallet expansion with the largest soft drinks bottle in the world with an additional 5,000 subscribers added to the Unity platform.

Speaker Change: An initial $1.2 million order from a leading Australian utility provider for our safety and compliance solutions And finally, a more than $1 million ARR initial order with a top mining operator with a clear path for further expansion

Speaker Change: On the indirect front, FleetComplete's AI camera solution continues to build traction.

Speaker Change: with sales volumes through its largest telco partner up 52% year-over-year while a key partnership in Mexico with a global insurance provider continues to drive multiple new logo wins.

Speaker Change: Looking at product delivery, we've expanded our R&D team from just 85 engineers a year ago to a 400 person strong team with deep domain expertise today.

Speaker Change: This growth enables us to accelerate the execution of the Unity product roadmap guided by a clear understanding of market needs and demand drivers.

Speaker Change: Leading this initiative is Mike Powell, our recently appointed Chief Innovation Officer. With over two decades of experience in digital transformation, AI and automation, Mike is uniquely positioned to advance our Unity AOT ecosystem and accelerate product innovation.

Speaker Change: His leadership will ensure we maximise Unity's potential, while aligning our development efforts with high value opportunities.

Speaker Change: As we sharpen our strategic focus, we're also taking decisive steps to align resources for the most impactful growth areas.

Speaker Change: This means prioritizing high-velocity opportunities while exiting non-core or lower-growth segments. A clear example of this approach is our decision to discontinue support for an end-of-life ELD business that Mixer previously acquired from Trimble.

Speaker Change: While this move has an immaterial impact at less than 1% of our total revenue, it removes a significant source of drag and distraction, allowing us to reallocate resources towards scalable high-value initiatives that drive long-term growth and efficiency.

Speaker Change: With our organizational alignment well underway, cost synergies tracking ahead of plan, and our go-to-market strategy gaining momentum, we're executing on key initiatives to drive long-term growth and profitability.

Speaker Change: Our investments in product innovation, sales channel optimization, and operational efficiency position us to capitalize on emerging opportunities while maintaining financial discipline.

Speaker Change: I'll now hand over the call to David to provide additional detail and insights into our financial results. David?

David Wilson: Thank you, Steve. And great to reconnect with so many of you on today's call. Ahead of reviewing our detailed financial results, a quick reminder of key pro forma adjustments.

David Wilson: Proforma Comparisons. All prior period comparisons are based on Proforma financials for the combined mix and PowerFleet businesses, whereas our 10-Q will reflect only legacy PowerFleet numbers.

David Wilson: One-time expenses. This quarter's expenses include 6.7 million dollars in one-time costs for transactions and restructuring excluded from adjusted EBITDA and EPS on ongoing run rates.

David Wilson: Amortization impact. Results also include 5.4 million dollars in non-cash amortization related to the mix and fleet complete acquisitions impacting service gross margins by 7%.

David Wilson: In addition to these pro forma adjustments, and as disclosed in the 8KA filed with the FCC on December 17th, the conversion from Canadian to U.S. GAAP accounting standards for FleetComplete had an overall positive impact on revenue.

David Wilson: Under US GAAP, there are various adjustments that affect the composition of Fleet Completes Revenue, resulting in both additions and offsets across different revenue categories.

David Wilson: Growth up of sales through the channel. Under US GAAP, fleet complete is recognized as the principle in certain transactions and, as a result, records revenue based on the amounts charged to the end user, with related agency commissions classified as sales and marketing expenses.

David Wilson: This treatment increased both revenue and sales and marketing expenses by approximately $3 million in the quarter.

David Wilson: Unbundling of product sales. Under US GAAP, product sales are treated as a separate performance obligation with revenue recognized upon shipment.

David Wilson: This $2.2 million reduction in service revenue was offset by bundled hardware revenue in Q3 shipments.

David Wilson: While this creates a pickup in revenue, the benefit is expected to be temporary.

David Wilson: The unbundling of product shipments from subscriptions impacts EBITDA, and we are actively revising our service terms to ensure hardware is no longer treated as a separate performance obligation.

David Wilson: Once implemented, this change will reduce product revenue, substantially offsetting the benefit of the channel revenue adjustment.

David Wilson: Now let's dive into the financial performance of the quarter, beginning with revenue, which grew by $32.8 million, or 45% year over year, reaching $106.4 million.

David Wilson: This increase was driven by fleet-complete and underlying organic growth, particularly in warehouse safety solutions, where revenue was up over 40% in the U.S. and 15% in Europe and the Middle East.

David Wilson: Notably, our new sales leadership in Europe has been instrumental in accelerating growth across the region.

David Wilson: Looking at the components of revenue, product revenue grew by $7.3 million, or 42% to $24.7 million, driven by fleet complete and strength in our in-warehouse product line, offsetting ongoing structural headwinds in the U.S. logistics segment.

David Wilson: Product growth margins of 30.6% was substantially higher than the 25.3% recorded in the prior year.

David Wilson: Service revenue grew by $25.5 million, or 45%, to $81.7 million, or $56.7 million, fueled by FleetComplete and our Unity safety-centric offerings.

David Wilson: Service margins adjusted for $5.4 million in non-cash amortization of acquisition-related intangibles expanded by 4.6% to 69.3% from 64.9% in the prior year.

David Wilson: Combined adjusted gross margin exceeded 60% versus 55.5% in the prior year.

David Wilson: Turning to operating expenses, which totaled $60 million for the quarter, including $6.7 million in one-time transaction and restructuring costs versus $5 million in the prior year.

David Wilson: After adjusting for these costs, total OPEX was $53.3 million versus $37.4 million in the prior year, with the increase in spend solely attributable to FleetComplete Transaction.

David Wilson: On an adjusted basis, selling general and admin expenses was $48.7 million, or 45.8% of revenue, down from 46.2% in the prior year.

David Wilson: Within SG&A, general and admin expenses was 27% of revenue, representing a 4% improvement from 31% in the prior year, with the realization of cost synergies a key driver.

David Wilson: Sales and marketing expense rose to 15.9% of revenue, up from 12.2% in the prior year, driven by our previously communicated investments in go-to-market and approximately 3 million in sales agent expenses related to the U.S. gap adjustment for FleetComplete's channel sales.

David Wilson: This level of investment remains efficient and reflects the cost-effectiveness of high-quality engineering talent in South Africa through the mixed merger and in Estonia through the fleet complete acquisition.

David Wilson: Turning to adjusted EBITDA, which increased by 77% to $22.5 million, up from $12.7 million in the prior year.

David Wilson: This increase is driven by the Fleet Complete transaction, inclusive of an EBITDA add-back to service revenue never recognized for products shipped by Fleet Complete prior to October 1st, organic growth, and the success of our cost synergy program.

David Wilson: Net loss attributed to common stockholders was $14.3 million or $0.11 per basic and diluted share compared to $0.05 in the prior year.

David Wilson: After adjusting for one-time expenses and the amortization of acquisition-related intangibles, net profit attributable to common stockholders was one penny per basic share compared to three pennies in the prior year.

David Wilson: Higher interest expense and taxes in the current period of seven cents more than offset the two cents difference.

David Wilson: Net debt is currently tracking below our $235 million year-end guidance, supported by $5 million in proceeds from the Fleet Complete capital raise, which were earmarked for transaction fees and remain unsettled.

David Wilson: Finally, we are raising our fiscal 2025 guidance to reflect the strength of our year-to-date financial performance, with organic revenue growth now projected at 7%, up from our previous guidance of 5%, and the impact of the transition to U.S. GAAP bleak and bleak.

David Wilson: In summary, annual revenue is expected to exceed $362.5M, a $10M increase from our prior guidance of approximately $352.5M.

David Wilson: Annual EBITDA, including $5 million in annualized run rate synergies, is expected to exceed $75 million, compared to our prior guidance of $72.5 million.

That concludes my remarks. Steve?

Thanks, David.

David Wilson: The first couple of quarters following the fleet complete transaction are naturally transitional, as we align the business across multiple dimensions to establish a strong foundation for long-term success.

David Wilson: A transformational program is underway to actively align our organizational structure to drive sustainable growth and operational excellence.

David Wilson: We are building an integrated structure for centralised functions, including technology, customer experience and operations, marketing, finance, corporate development and HR.

David Wilson: Each of these functions is designed to support the entire organisation, ensuring consistency, efficiency and scalability, while enabling us to deliver value across all of our business units.

David Wilson: This unified approach allows us to maintain a cohesive strategy while empowering regional go-to-market and customer success teams to execute effectively in their respective markets.

David Wilson: Harnessing our expanded go-to-market capabilities is of critical focus as we head towards fiscal year 2026.

David Wilson: particularly enabling channel sales for Unity in warehouse solutions and AI cameras.

David Wilson: At the same time, we are sharpening our commercial execution, applying a data-driven sales approach to maximize upsell and cross-sell opportunities across our 8,000 enterprise and 40,000 mid-market customers.

David Wilson: Our largest telco channel partners are fully engaged in the qualification process required before they can begin reselling our enterprise solution portfolio. As part of this process, we are working through key milestones, including solution validation, sales enablement, and integration into their partner ecosystems.

David Wilson: This is a critical initiative and we anticipate commercial activity to ramp early in Q2 FY2026.

David Wilson: In parallel, we are rapidly building additional pipelines centered on our device agnostic and unified operations capabilities enabled through Unity.

David Wilson: Additionally, we now offer the broadest AI camera portfolio in the industry, delivering comprehensive visibility both in the warehouse and over the road.

David Wilson: With both direct and indirect sales channels advancing at pace, we are well positioned to accelerate market penetration and capture share in this rapidly evolving space.

David Wilson: To conclude, I'm more than delighted with the progress we are making and the strong financial performance we've delivered coming out of the gate.

David Wilson: Standout metrics for the quarter including gross margins exceeding 60%, service gross margins tracking towards 70% and EBITDA margins exceeding 20% underscore the strength of our model and the disciplined execution of our strategy as we head towards the new financial year.

David Wilson: We're mobilizing the organization to achieve our stated financial goals with the primary focus on driving top-layering growth acceleration starting in fiscal year 26, as we unlock the full potential of our platform and the extended market reach we have created.

David Wilson: I'll turn it back over now to the operator for Q&A. Operator?

Thank you.

Speaker Change: At this time, we'll be conducting our question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad.

David Wilson: A confirmation tone will indicate your line is in the question queue.

David Wilson: You may press star 2 if you would like to remove your question from the queue.

David Wilson: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

One moment please, while we poll for questions.

Thank you.

Speaker Change: Our first question is coming from Scott Searle with Roth Capital. Your line is live.

Scott Searle: Hey, good morning. Thanks for taking the questions. Congratulations. Great job on the quarter

Scott Searle: Hey Steve, maybe to start, in terms of organic growth, 7% is a great number out of the gates here. I'm wondering if you could calibrate us in terms of

Scott Searle: to complete a contribution in the December quarter. And then given that building in the current fiscal year, how are you starting to think about fiscal 26? I know it's a little bit early, but you're talking about inflection on the organic growth rate. I'm wondering if you could expand on that a little bit.

Yeah.

Scott, let me start in terms of...

Scott Searle: The Fleet Complete piece, so in terms of Fleet Complete revenues for the quarter.

Scott Searle: It would be close to $30 million in terms of what it contributed. And so that'll give you that view. Obviously, if you're back into the Power Fleet piece, we're at 76 and change, which was in line with the prior quarter. Albeit there was probably about an FX hit of about $1 million across those numbers.

Scott Searle: So that just gives you a sense in terms of how we did. Obviously, 7% is strong given all the activity that's happened bringing these businesses together. You can appreciate we are spinning many, many plates and we're keeping them all spinning. So we feel good about that.

Scott Searle: And then in terms of next year, obviously, we're actively working that now. What I would say is we are beyond excited in terms of what we can do through the telco channel.

Scott Searle: That's not going to be instantaneous. We're hard at work getting the pump primed for that. And as we noted, as Steve noted on the call, getting things lined up so we can really see that contribute to the top line from sort of the beginning of fiscal 20.

Scott Searle: beginning of second quarter fiscal 26 onwards so again we feel good about what we have we're actively working it but you know there's a lot of moving parts we just have to be very thoughtful about what we prioritize and how we synchronize things

And just to layer in, Scott,

Scott Searle: I mean, we were three to four million bucks up, I think, on our guidance.

Scott Searle: for the quarter. So, whenever you bring a new business in, it's important to realize we're not yet a year into it.

Scott Searle: the mix merger and we're 90 days plus now into fleet complete. So the majority of the growth came from the power fleet mix side which obviously we've been able to get our sales motion towards.

but as David says, as we pivot towards FY26.

Scott Searle: And we very much double down our focus on AI video in Warehouse and over the road as unique capabilities, the strength of the Unity platform, and to be able to put those enterprise solutions into the channel partners of FleetComplete.

Scott Searle: We expect that, you know, a good chunk of our growth will come.

Scott Searle: via FleetComplete in 2026. So, you know, it's great for us. We now have enterprise and mid-market. We have direct and indirect. We've got a very nice balance in terms of territories on a global scale. So we think we've done a pretty elegant job to give us all the tools to accelerate that growth.

Scott Searle: But, you know, with all of the change that's been going on and bringing in the new businesses, you know, we're very proud of the performance that we've been able to come out of the gate with.

Speaker Change: Steve, maybe a follow-up on the global channels and the global reach now. Certainly a big win with the world's largest...

Scott Searle: global beverage provider. Are you getting to the table now more for some of these larger opportunities as a global scale starting to play in to that and maybe just a quick update in terms of how you're doing in head-to-heads on the competitive landscape. Thanks.

Scott Searle: Yeah, so I mean we're really excited about this deal one obviously because it's a substantial

Scott Searle: But it's to your point the ability for us now to be seen as a global provider. This is one of the world's largest

Scott Searle: beverage companies who have a lot of operations across the six continents within which we work.

Scott Searle: And we very much see now we're getting to the table at a larger kind of, I would say, transformational TCV value opportunity, so the bigger opportunities.

and I think now, you know, we're starting to see...

ourselves addressed in the same conversation, invited to more RFPs.

Scott Searle: have a downside, more credibility in terms of us being able to provide solutions at scale against those kind of top two providers that we always talk about.

Scott Searle: A great win, one of many more to come, and what was one of the unique drivers of winning that, interestingly, is one of our largest competitors has their over-the-road fleet.

Scott Searle: But by taking us across with our safety solutions into the warehouse, one of the other key drivers for the decision was to actually get that single pane of glass from Unity. So when we talk about being able to displace

Scott Searle: our competitors when we talk about going up the value chain and we'll all remember the IMC video from Investor Day where you know the IT director talks about we won the hearts and minds because that's where people view the data and make We make those data usable. This is a great example of that strategy. So couldn't be more excited by the win

Speaker Change: Thanks so much. I'll get back in the queue, but congrats. Great job out of the gate with TweetComplete. Thanks.

Gary Prestapino: Thank you. Our next question is coming from Gary Prestapino with Barrington Research. Your line is live.

Gary Prestapino: Hey, good morning, Steve and David. You know, my question I think revolves around the last question that was raised in terms of the New Deal.

Gary Prestapino: Steve, do you feel that as a standalone entity, PowerFleet, prior to these acquisitions, would have been able to play at that table? I think you may have answered it, but I just wanted to...

and we'll get some clarification there.

Gary Prestapino: When we looked about how could we come and take a seat at the top table and how could we get the credibility? You need scale and part of our thesis all along was to get it to a point where we have those core ingredients

Gary Prestapino: And that's, you know, for multiple reasons. That's depth and breadth of product solution. That's scale of the organization to support large enterprises. And it's financial stability as well. So I think we've...

Gary Prestapino: given ourselves very nice foundations to go and build on this win. And we're definitely, definitely seeing a difference that as a standalone power fleet, you know, we would have been in a different position fighting at a different level of the market.

Gary Prestapino: So, in that regard, I mean, Unity's been out, you know, as a full platform maybe for a year, a year and a half.

Speaker Change: When you're generating new business, what's the key selling points that the direct sales force is going into with Unity that really capture the attention of a potential account?

Speaker Change: Yeah, so I think it's device agnosticism, so the single pane of glass

Speaker Change: is definitely a driver. Our willingness to, you know, to allow the customer to consume the data in multiple formats through what we call unified operations, you know, the third-party integrations.

Speaker Change: And then I think finally, it's then the usability and being able to toggle between your warehouse and your over-the-road solutions. So whether that's for safety drivers, compliance drivers, maintenance drivers, sustainability drivers.

Speaker Change: We're able to give you unique views and and as we're kind of heading up the value chain We're becoming more mission-critical both from an IT perspective where you know, we're solving the data problem Which is a big data problem for organizations today

Speaker Change: but also we're creating value propositions across the leadership group. Those two things in tandem, backed up by, I think, the data highway is where people are seeing us now as a different level to what they've seen out there in the marketplace.

Speaker Change: And then just lastly, could you make a couple of comments on what some of the headwinds you're seeing in the logistics?

Speaker Change: field is. I assume these are our worldwide headwinds or is it just United States centric?

Speaker Change: Yeah, so it's a bit of both, but I would call it more in the way that we sell solutions into those marketplaces. So, you know, we did a lot in the commoditized space.

you know, the company's strategy was, you know...

Speaker Change: in that kind of small to mid-end in terms of chassis and trailers and obviously there's been quite a retraction and quite a...

Hi Mark in business

Speaker Change: But it was, you know, decent in terms of our revenue profile. So we moved away from that. We pivoted for that. You know, that at the moment seems to be a race to the bottom in terms of price as well.

Speaker Change: where competitors are doing business there. But it was a conscious strategy in the light of the fact that, you know, people probably oversubscribed inventory through COVID. And, you know, there's a lot of change going on in that industry, predominantly US first, but we have seen it around the world as well.

Okay, thank you.

Thank you.

Thank you.

Speaker Change: Our next question is coming from Anthony Stoss with Craig Hallam. Your line is live.

Anthony Stoss: Hi, guys. I congrats as well on the strong execution. Steve, I wanted to focus in on the AI video safety solutions segment.

Anthony Stoss: Really strong growth, 52%. I know that was constrained from the prior private equity owner not wanting to spend or hire. What are the things that you're doing differently, and when do you think those will have a big impact on the fast-growing market?

Speaker Change: Yes, I think you know we've publicly stated for a long time in terms of our our mix and power fleet, one of a better phrase, investment in go-to-market and customer success.

Speaker Change: We're now doubling down on that in terms of expanding our investment for Fleet Complete, as you quite rightly said. You know, things were scaled back pretty dramatically, so I think more people talking to more customers. It doesn't sound rocket science, but it makes a big difference for us.

Speaker Change: And then secondly, what we're able to do now is actually combine the portfolios.

Speaker Change: whether that is, you know, the Mix camera, sorry, the FleetComplete cameras, which is the fast install cameras, whether it's 360-degree cameras, more high-end stuff that we've got as part of the broader portfolio, whether it's cargo carriers, whether it's pedestrian safety cameras in the warehouse.

Speaker Change: We have, as we come out and said, you know, the broadest portfolio of camera opportunity.

Speaker Change: We've done a lot of review on to our customer base in terms of greenfield opportunity there. It is significant.

Speaker Change: but we have that full range. So we can go to the mid-market, we can go to the enterprise, we can go direct, we can go indirect, but it's a very much one of our three key strategic pillars.

Speaker Change: is to use that competitive advantage as we have, as hard and fast as we can in the market, on a global stage as well, so.

Speaker Change: This isn't just about the channel partners in the U.S. We're seeing strong demand around the globe for those solutions.

Speaker Change: And then just as a follow-up, the large beverage company, when has that started to generate revenue in the December quarter or what quarter do you think it will start to impact?

Speaker Change: It will continue to impact for a significant period of time, so it's a layer into, you know, to get these things deployed at scale, it takes you up to 12 months to do that.

Speaker Change: So there was a little bit into this current quarter, a very initial deployment, but that will continue to scale.

Speaker Change: But the drive-out plan to the highest CCB value is a three-year strategic plan that we have with the customer. Obviously, we need to perform, but we're very confident of doing that. But this is a long-term relationship.

Speaker Change: And as I said, this is one which is, I think, a key statement in terms of the new power fleet and the size and scale of our capabilities.

Great results, guys. Best of luck.

Thank you.

Speaker Change: Thank you. Our next question is coming from Dylan Becker with William Blair. Your line is live.

Speaker Change: Hey, gentlemen. Nice job here. I got to congrats. Maybe, Steve, for you, we talked about how the channel is going to start contributing kind of second quarter or so, give or take, next year. There's the education and the ramp of that. But can you give us a sense of kind of their interest right now, kind of the feedback you're hearing that you have all these assets? They have more tools to go sell.

Speaker Change: they see the market demand, but give us a sense of kind of how active and hungry they are now to be able to go out there and sell more powerfully and how that obviously kind of aids in the confidence of the double-digit moments of next year. Thanks.

Yeah, so...

Speaker Change: I would say their appetite has exceeded our expectations. We thought it would be strong.

Speaker Change: But I think, you know, in terms of the fact that they are looking for higher RPU solutions, higher RPU solutions, they're looking for data consumption. You'll remember the SVP from AT&T who described the fact that this year was video, video, video for the organization. Well, you know, comments on this call kind of play into that.

Speaker Change: and I think as well, you know, that there's been limited...

Speaker Change: partner opportunities for those guys in the marketplace. And I think that, you know, some of the relationships they've had, you know, outside of free competed being established.

Speaker Change: But I think there's more than enough room to take our end-to-end solutions to market very quickly and very substantially.

Speaker Change: and the winning player is Unity. So if you think about...

Speaker Change: you know, the telcos in terms of wanting kind of being an end-to-end solution provider, you know, they want to be the manager and the custodian of data.

Speaker Change: and they want to be right in the heartbeat of the customer's operation, Unity really takes you there. And their view is there's a lot more expanded market verticals that we could play in with Unity over time. We're being cautious because we want to obviously...

Speaker Change: you know maximize where we are today but you know in the broader AOT space they this is a solution that they've been crying out for and to be honest some of them have tried to build themselves.

Speaker Change: But they haven't had kind of you know the ability to focus on it So I think if you take unity if I think you take

the video solutions. There's a huge appetite for.

Speaker Change: in Warehouse. I think that's a new and unique solution in Greenfield for them.

Speaker Change: as well, with a lot of the safety and compliance drivers.

Speaker Change: and the other one, interestingly, is Cold Chain. So they've really jumped on.

Speaker Change: the cold chain solutions. We were voted obviously by ABI researchers having the best solution.

Speaker Change: end-to-end in smart cold chains so that's another one which is

Speaker Change: They're very excited to get moving, so we couldn't be more delighted with their engagement. We obviously have to do things really, really well.

Speaker Change: from experience, you know, the time spent to get these things off to a great start is really the key to long-term success. We're in the middle of that but truly it's exceeded our expectations, just the interest and appetite from those large channels.

David Wilson: Okay, great. Yeah, that's great to hear. Maybe, Dave, switching over to you as well, too, on the gross margin front.

David Wilson: Encouraging to see kind of the tracking to nearly 70% on the services piece, I guess. How should we think about from a long term model perspective? How much room is there as we think about kind of the 70% threshold? And how maybe that gives you confidence that this mix continues to shift and some of the longer term kind of profitability targets or goals as well. Thanks, guys.

Yeah.

David Wilson: Unity is a driver of many things, not the least of which is it is a transition over time to fuel software margins and so it has the benefit of solving acute pain points for customers. It's a great way to land and expand so it makes you go-to-market super efficient.

David Wilson: But most importantly, when you think about ingesting data from third-party devices, when you think about aggregating all of the data and solving larger problems through unified operations, this is all pure software.

David Wilson: So over time, we do see as the business scales, you get the scale benefit, but also the mix continues to sweeten in terms of increasingly its margins are sort of 85 to 90% versus the sort of the high 60s we're seeing today.

Perfect. Thanks, guys. Congrats.

Thank you.

Speaker Change: Once again, ladies and gentlemen, if you have any questions or comments, please indicate so now by pressing star 1 on your telephone keypad.

Speaker Change: Our next question is coming from Alexander Sklar with Raymond James. Your line is live.

Alexander Sklar: Great, thank you. Steve, on the go-to-market side, just wanted to see how you're tracking on hiring plans to date relative to that 55% growth outlook that you laid out at Investor Day over the next kind of 12 to 18 months.

Yeah, so we're on track.

We're exploring opportunities to go further.

through self-funding as you're aware.

Alexander Sklar: So, yes, that's all I can say. We're on track. We're delighted with some of the talent that we've been able to bring in. And we feel good about 2026 and 2027.

Speaker Change: Okay, great. And then maybe a follow-up, Steve, just to Tony's question earlier on Unity Safety.

Speaker Change: But what have you learned about the appetite from some of the legacy power fleet and mixed base for these kind of broadened solutions on the safety side that you have available? And then, David, just where Unity Safety stands as a percentage of revenue or ARR, the growth right there, any color on kind of Unity Safety as a percentage of total now? Thanks.

Speaker Change: Yeah, so very good traction, very good opportunity to add cameras from a safety perspective. Secondly then, the safety-centric ability to have visibility on the road and...

in the warehouse combined.

Speaker Change: The MIX customers and the PowerFleet customers now are really engaging on that solution. And this is where we're pivoting towards our value propositions around being that true safety partner. So I think we must have mentioned safety-centric solutions four or five times.

Speaker Change: in our prepared remarks. And that's really where the growth is coming from. That's a lot of opportunity for us.

Speaker Change: It takes a while just to navigate with the customer their priorities because we are taking a lot of different optionality to them in terms of the different capabilities that we bring. It's about taking them on a structured journey, but what's really, really refreshing is

seeing the South teams now build two- to three-year roadmaps.

with the customers. So, you know, that true SaaS selling.

Speaker Change: that true kind of, you know, let's prove ROI in one place, let's move on to your other key priorities. That's a big, big shift in solution selling. And that's probably what I'm most excited about. And obviously what's some of the market drivers for that safety, compliance, insurance and sustainability as well.

Yeah, and in terms of the revenue piece of it.

Speaker Change: You have to think about Unity as an ecosystem. So we're basically driving everything. So Unity is the portal into all of our solutions. So we do it in that way, Alex. So it's not as if we sort of break it out in terms of its own separate component, because it's so interrelated. It doesn't make sense to sort of untangle that.

Speaker Change: in terms of where we're seeing the most amount of success.

clearly it's in warehouse.

Speaker Change: there's huge safety concerns there just with the transition in terms of the employee base coming out of COVID.

Speaker Change: transition to electric forklifts versus ones that are noisier. So all of those things sort of drive incremental demand there.

Speaker Change: We certainly talked in terms of just the strength this quarter in terms of, you know, a nice 40% pickup in terms of in warehouse safety.

Speaker Change: So that's the major area of traction, the other one obviously being AI cameras, which is a big growth area. We talked about the 52% increase in terms of fleet complete.

Speaker Change: Now, while that's not traditionally Unity, it will be transitioning over to the Unity platform and it's something we'll be cross-selling into the sort of the legacy enterprise customers of both.

Speaker Change: both a mix and power fleet, so we'll be driving that as well. So we don't have a separate breakout, but if you look at the underlying drivers of growth, it is unity and clearly the thing that is resonating most strongly with the market is our in-warehouse safety solutions.

Speaker Change: and just that I just refer to a slide in the Investor Data Act where we we identified 10x opportunity in our base

Speaker Change: You know, just in terms of multiple product adoption, you know, the key value drivers like safety.

Speaker Change: We've kind of put some stats in there in terms of the penetration today versus the expected.

Speaker Change: and hopeful penetration tomorrow. So, you know, we have a wealth of opportunity. For us now, it's about executing this route, having the right engagement strategies with our customers and obviously harmonizing our solution sets, which we're making great strides towards as well.

Okay, great. Thank you both.

Thank you.

Speaker Change: Our next question is coming from Greg Gibbeth with Northland Security. Your line is live.

Speaker Change: Thank you. Good morning, Steve and David. Thanks for taking the questions. Congrats on the strong results.

Speaker Change: Um, you know, given the large beverage company in North America, when you mentioned Australian utility provider, you know, in order from a top mining operator, I just wanted to, you know, I know you covered a little bit, get a little more color on whether maybe they're deciding factors in their selection of PowerFleet.

Speaker Change: Could you repeat that? You broke up a little bit at the end. You said Movet Factors are powerful.

Speaker Change: Sorry, yeah, just wanted to get some more color on maybe their deciding factors in their selection of power fleets.

Speaker Change: So I think unity number one. I think breadth and depth of solutions in terms of in warehouse and over the road would be number two. And I think also the way that we're rocking up in terms of customer success and long-term relationship.

Speaker Change: and then finally I would say the improved balance sheet. So those four factors are very key in terms of you know seeing this as a truly international truly global player at scale that can go on long-term mission-critical journeys with our customers.

Speaker Change: and we're holding price very nicely in the marketplace as well.

Speaker Change: So it's not becoming a price cell, it's very much a value cell, unlocking that value for our customers. And, you know, we're really strong in terms of being able to interpret ROI for customers which they can build from.

Got it, that's helpful.

Speaker Change: And if I wanted to follow up a little more, maybe color of the drivers of the increased revenue and EBITDA guidance ranges, and kind of what gives you confidence in the outlook. You know, could you remind us, I guess, of the drivers of the seasonality expectations in Q4, you know, with the implied sequential decline, and should we anticipate maybe any accounting-related impacts that are anticipated in that Q4 guide?

Speaker Change: Yeah, so in terms of the guidance, obviously revenue is up.

$10 million in terms of the components of that.

Speaker Change: $4 million really speaks to the fact that the performance that we just did in Q3 was probably about $4 million higher than the prior guidance. So that's a driver. The other driver is the change in the accounting treatment that you alluded to in terms of there's about $3 million a quarter or so coming through in terms of the net benefit from the change from Canadian GAAP to U.S. GAAP.

Speaker Change: So, in terms of the revenue piece, 4 million is just good, strong growth, good, strong execution. 6 million is from the accounting change at FleetComplete. So, that would cover the revenue piece. Greg, anything that I'm missing on that side?

Speaker Change: No, that's kind of what I was indicating. Thanks for breaking that down.

Yeah

Speaker Change: And then if you think about the EBITDA guidance, you know, it's 2.5 on a sort of a $4 million pickup in terms of the organic revenue growth, and the 6 million from Fleet Complete, that's, in essence, it's not EBITDA generating, because there's an offset in terms of offset.

I see. All right. Thanks.

Thank you.

Speaker Change: Our next question is from Scott Searle with Roth Capital. Your line is live.

Scott Searle: Hey, thanks for taking the follow-up. Hey, Dave, maybe just to quickly follow up on the accounting issue, could you just clarify again how long

Speaker Change: That impact is expected to go what we should be thinking about in fiscal 27 and then Steve in terms of new logos I think at the analyst a you guys talked about growth About 30% coming from new logos and 70% coming from mining the existing base

Speaker Change: Given what's happened in the 90 days since the Analyst Day, have you seen any change in your thought process on that front and new logos versus upsell, cross-sell of the existing base? And lastly, maybe if you guys have given any thought in terms of operating metrics going forward that you are going to be sharing with the street. Thanks.

So, let me start with the first and the last.

Scott. So in terms of the pickup, in

Speaker Change: One thing we are solving for is rebundling the hardware piece of it so it's not treated as a separate deliverable. So that is active work that's underway. We expect that will hit, you know, within the next sort of five months or so, targeting maybe closer sort of beginning of fiscal 2026.

Speaker Change: that will reduce the revenue pickup from something that's sort of three a day to something closer to $1 million per quarter. So it becomes pretty de minimis pretty quickly in terms of what's driving that piece of it. And in terms of operating metrics.

Speaker Change: So much of what we want to do and want to share is predicated upon getting a modern

Speaker Change: back office system in place in terms of ERP, in terms of billing, just so we can actually drive metrics globally consistently, so we don't have to hand crank the metrics.

Speaker Change: The overriding one that we're solving for is net dollar retention. So that is something that we're very keen to drive the business against.

Speaker Change: We think we're very well positioned as we bring everything together to have a business that can be a really strong engine to get to best-in-class performance there. But that is the one that we're focused on, but it is...

Speaker Change: predicated upon getting the new systems up and running so we can do it consistently and we can do it accurately on a global business in many different countries with obviously lots of different starting points. So that's what we're driving towards.

Speaker Change: We have a lot of opportunity for cross-sell upsell in our base.

Speaker Change: and that obviously is a lower cost of acquisition and also speed to revenue is going to be important there.

Speaker Change: But what I would say is, you know, to a lot of the theme that we've talked about.

Speaker Change: We're being seen now as a top tier player, which allows us to fight the battles in the new logo market extensively. And we think with our channel partners, they will drive new logo business for us hard. So, no change.

Speaker Change: But, you know, we think there is, you know, what I would say, both areas are solidifying nicely for us to give us confidence for future growth.

Great, thanks so much and congrats again.

Speaker Change: Thank you. As we have no further questions on the line, I'd like to hand the call back over to Mr Steve Towe for any closing remarks.

Speaker Change: Thank you everybody for your continued support. Very exciting times for us.

Speaker Change: It's been, you know, a lot of transformation, a lot of transition to get to this point.

Speaker Change: But I would refer back to our comments from yesterday. This was the start line and we're very encouraged by where we're at today in terms of being able to deliver the performance that we've set forward for FY26 and into FY27.

Speaker Change: Just to let everyone know, we will be at the Roth Conference in a three to four week time at Dana Point. So look forward to hopefully seeing many of you then. Take care, and we'll be back in touch soon.

Goodbye.

Speaker Change: Thank you. Ladies and gentlemen, this does conclude today's conference and you may disconnect your lines at this time. And we thank you for your participation.

Thanks, John.