PowerFleet (AIOT) 8 Aug 222022 Q2 Earnings call transcript

Good morning. Welcome to PowerFleet's Second Quarter 2022 Conference Call.

Joining us for today's presentation is the company's CEO, Steve Towe; and Global Controller, Joaquin Fong.

Following the remarks, we will open the call for questions.

Before we begin the call I would like to provide PowerFleet’s Safe Harbor Statement that includes cautions regarding forward-looking statements made during this call.

will future statements financial there events, regarding call, PowerFleet's including performance. the be made forward-looking future During All statements future other offering, other business for include forward-looking financial any growth, than considered anticipated industry strategy, present and regarding position, the expectations statements. company's trends historical competitive the demand position, are plans regarding of for and for results operations, company's future statements anticipated operation, facts, opportunities which product company's for to, statements beyond. XXXX but expectations not company's Such and limited the include, financial are All the such the imply presence of many of risks, contingencies, forward-looking statements uncertainties, which company's and are beyond control. The in may differ any actual materially assumed performance, statement. or projected company's or forward-looking results, from achievements those and to materially the the actual that for amongst competitive business company's cause products Factors and economic position. emergence cash could and conditions, differ technologies could of new services, demand others, results include, factors, company's overall SEC filings, duty to The undertake to any any company circumstances. or update events statements not does future to forward-looking intend reflect

like would in the I replay this website the section of be Relations at for to company's will that Finally, available Investor made remind everyone www.powerfleet.com. call

Now Steve Sir, proceed. I over the turn Towe. please CEO, PowerFleet's would to to like Mr. call

join We earnings say and Day mid-June. you, morning, Thank joined virtual time quarter that to our those you you call. Investor thank in second everyone. good the taking to I'd operator firstly to PowerFleet’s XXXX appreciate like of you

about which and leadership to we PowerFleet’s of positive morning. well, appreciated very enhanced Your The go NII growth to opportunity team a our you'll drivers, hear on software, executing market roadmap, I were to energy and lot as with vision, feedback this the are us. strategy, share all you encouraging

content. to Relations listen the encourage had Investor the the website chance section Investor haven't visit our to I to access our you If to Day, of you

impressive is our in The established XX.X and momentum of PowerFleet journey one during product and third marked which the significant delivered total can our the comparison ago on The QX XX you from the heartbeat see of in latter mix embark sequential we SaaS consensus revenues year on high year-over-year given we includes in we've quarter we recurring growth. quarter as quite estimates. quarter built quality off As second Moreover, revenue revenue and results, the revenue. a company. encouraging million for this is successive where our external also at overachieved quarter the high for solid

headwinds many were our able competitors macro achieve and these globally. affecting the companies we Importantly, chain of milestones industry, to issues despite ongoing our supply and

further line was from [ph]. performance notable by top Ford, Nestle, Volvo, customers QX in commitment driven like impressive NetPac Our and

While that the bottom efficiency rationalization benefits reveals initiatives and improvements profitability. are our enhancing line in of our early the our organization's our

positive realized of second in exceeded and I very improvements we're consensus Taken results delivering, encouraged are by all very the Overall, estimates expectations. profitability expenses external our quarter, in and progress key the the measures seeing. execution both and leadership we're together, making, we we're operating the which and the team

to turn cover outlook, into Joaquin. financial for of XXXX. our Officer, Fong our over to Finance operational dive I Before Principal quarter and I'll results Joaquin second our the highlights it

Thanks, Steve everyone on and good the call. morning to

which Turning XX, was high June X% ended the revenue the a quarter to results was Total XXXX. XX.X XX second of financial our XXXX. of for quarter from million, quarter first up

revenue. revenue. million revenue high XX.X revenue XX% million was that This XXXX. of the recurring in or or reflects or revenue last margins. was to XX% year in the is product improvement to Service well services of ago to we're XXXX compared line, quality million higher XX% of compared products to million same recurring of million last of characterized managing of to, XX.X year. the gross revenue, the total alluded SaaS high X.X quarter, revenue, in our last basis was by profit total service margin quarter dollar or and reengineering of which and or XX.X which year by really future profit the revenue the services same success Product we're year. revenue to XX% of margin compared of of or service in XX.X enhance Steve XX.X total in XX.X QX total an Along XX.X total Product XX% and having total million or XX year. As XX% as QX drives product X.X QX profit QX revenue encouraged in XX% compared was was PPV total total million of the was gross gross composition period. compares revenue revenue, revenue compared ago million in to million The prior the million an improvement of Gross This improvement or revenue revenue the on XX% of of total product in or initial or of as XX% QX period. to sequential challenges certain XX%

through our products supply that solutions they and and commitments and electronic rely on customer navigate chain operations. issues continue their supplying We the to for components global deliver business on

from profit benefits incrementally realize initiatives. reengineering As we through operational balance we we future product the gross improve anticipate of XXXX, progress our and to product as

million XX-month the impact in million expenses Looking rationalization but reducing at the will efforts, quarter, initial expenses of in down be total ongoing operating last were which decrease reflects XX.X of prior sequential our QX approximately The million XX.X annual next period. year. the XX.X from our over operating our X from up expenses, million by

X.X X.X attributable operations portion of at a X.X XX% the on to common and common in an was foreign over totaled to stockholders in Adjusted metrics, Steve. year. impact. year million to diluted basis or compared operating income EBITDA million share, QX basic cash PPV of gain, million the X.X XX loss million, by period. and my and diluted million working of million GAAP or $X.XX X.X of of Based X.X XXXX. or At adjusted million, net share. net basic on end share profitability per X.X attributable and X.X EBITDA to first or visibility million in basic with diluted a and stayed metric first basic diluted from currency at the per last or expect related to $X.XX non-GAAP $X.XX to million profitability net the to stockholders noting our share and $X.XX income Non-GAAP consistent to $X.XX worth of success we in per X and per had period. capital. current per loss This non-GAAP in quarter ago compared cash loss compared year compares of of equivalents same quarter that $X.XX rationalization million half we prepared to totaled of non-GAAP loss a GAAP and million the efforts, improved our quarter in same per concludes to loss remarks. our net ago Looking metric XX.X It's our That significant cross XXXX. in and

experience, with companies XXX,XXX more in PowerFleet standing the tremendous and that you globally. industry recurring proven relationships deploying customer Thank long Today actively of largest technology we're some subscribers, than the has world, Joaquin.

we only opportunity that X years in gain of opportunity With And upsell do play operate portfolio growing we end new logos, us, base, along significant wallet within we substantially a ahead. we role with [ph] market not confident have have are our to the with have is the the capture annually. customers of enterprise at these establish North that operate in XXXX breadth the a subscriber have in can streams, customer and share and our organizations. geographies capabilities increase in, significant the tremendous an we further to recurring and we revenue we our of We grow front to across our XX% base new markets demanded

much growth let that the increasing XX% our operating me first I've broader opportunity, the a demand a delivered today year, improved in from building the PowerFleet and U.S., XX market into years, than regions highlighted the realizing. the Now we're that seeing currently customers. of by we In in for dive our we're traction key industrial is opportunity driven half more the

of manufacturing other facilities workplaces XXXXs workers workplace. in environment. help where links we're of alongside double-digit customers, in segment crucial becoming improved safe validation chain are our that to a working solutions only is to the to business which productivity also also not but enterprise industry and the are is XXs complex a drive represents machines with to and addition mitigate and operations. keep fleet and growth, supply commitment XXXX robust industrial in milestone to our risk people paced surpassed each and safety the innovation, across technology recently testament In increasingly Warehouses seeking that fast the working This

risk has how As We're in customers safety momentum market as by increased you workforce while the material our data can Investor demand have best and science. in balancing our data utilizing our on arena, Day, heard team of and lower handling pedestrian acceptance artificial and intelligence our focused in help solution excited products success class latest the facilities shortages. during improve and the been further driving safety operations provider

rationalization continued of interface, market untapped the positioned live to changes been and of region. lots transformations. business industry deliver ahead. fully in our first in role there's data synergy solutions having are productive We and challenges, alike. new of conversations our and enterprise and The with connected exists some look today market market accelerating leasing, relationships the this reinvigorated that the be and consistency the the working customers the of solutions our that car across renewals of place with U.S. approach software part base the with forward is and and QX to our modular our support early software in single and to plays in penetrate vector a great in From our customer last a the the We in half The car. To program response allocated through the on pane base. in markets, have bring indicative haven't launched end, software savings that attack point innovation to is generated a products of PowerFleet energized and partners growth dedicated the leading team to the enhancing a further by upsell vehicles, of of our initiative cost modernizing customers global U.S. to with the our month we remain which in U.S. meaningfully XXXX. have well years to We're we U.S. expect our is and glass these perspective, the in growth electric digital potential now broader for verticals bought and and our XXXX. SaaS seeing in sales of insurance, highly we're efforts capability traction of in As we We're to customer and North of of the technology yet actively to American the driving team XXXX put point their crucial solutions U.S. profitability in track solutions. with we and the and market advanced global

Israeli [ph] yet thousands is are of tens released and new piece the an go-forward else market not With of XX% important Our world. strategy. that incredibly in market our in solutions we're bringing a history, of the operation to region, subscribers, share anywhere XX-year technology a

and throughout we Despite we the Israeli strengthening Pointer well. Israel drive is dollar, creative the a the week, Center, we expanded life-saving in and public and we gain plans as Last service, for announced be and emergency lives. defibrillators with additional MDA to our XXX solutions and additional continue PowerFleet see effectively. to its successful foreign operational spaces We've innovative in throughout emergencies MDA IoT-enabled solutions all services in to parks initial geographies. opportunity has equipment our by order at ensure IoT of applied received to since train products. only results hit Israel's body with our Our part of that core in manage We the After at more we all pace defibrillators geographies municipalities to national these help the IoT-enabled seen to more countrywide QX blood operation due for exceptionally MDA, deployment particularly than IoT-enabled currency performing solutions IoT Israel. organizations very momentum value save solution the only U.S. Innovation is also more locations, technological time-critical implementing XXXX, key medical reported defibrillators our but commercial pharma use technology, Technology install Israel. available buildings to significant such key most to bring to to and signifies high-rise the This Pointer more will soon. not

have market and arena, is and establish expect driving Emirates, actively seeing our ecosystem. solutions the XXXX. the team the to QX out we're Argentina, the addition in markets, already very we Europe that relatively announce IoT In we're next-generation in markets innovation broadly, More strategic in Mexico have exciting leading parallel, for expressed regions. interest for expanded the other edge growth in a on introduce partnerships plans Dubai some to United untapped brought strategic we're these In working to in to IoT focused of strong footprint even growth Arab the solutions. to IoT more international In and solutions to deep a larger we finalizing

well strategy and regions is As gaining you've underway. execution. PowerFleet's heard, In we're key summary, our transformation in momentum go-to-market

the already is and high we cost at the The program articulated precision. detail levels visible Our in of last are with executed yielding to $X million Investor Day months efficiency annualized returns. over initiatives time six reduction being

Our to we're starting business hit stride. our optimize is and starting to now

solid execute pipeline growth our of Our available strategy. an supported opportunities We resources with plan cash by is and a third the are runway that that position quarter at we sufficient pace. record provide escalating converting to entered a

and also We growing building supported on position more second first higher customer position opportunities, in nicely. several the moving of XXXX second the are growth forward year, of strong year XXXX. the momentum, of the for that half which anticipate the in QX and by pipeline that engagement as in half will We well us as solid very half building strategic inflection a entered bring

As roadmap scalable, will look highly at own organization. Day global focused Investor profitable That The team driving prepared the repeatable, and remarks. a well introduced our transformation accelerating our our value-creating ahead, we evolution strategic we very remains is vision. executing of and successful concludes on create our and the

for Now I'll Q&A. turn it back to the operator

Instructions]. [Operator you. Thank

of line Our Canaccord come Please questions Genuity. from first proceed questions. with with your the Mike Walkley

Okay, or thanks you gross you're mix later little maybe the margins. margin other assume the results on input the year? that and gross improving some more with would just be in Steve, hardware this QX supply hardware but know congrats factors, on working the solid I the costs in recovery delve into the a reengineering, favorable Could more I

was robust And question. the a we done are than the And to today. get get profitability we've business that thanks making internally also, better we've taken some we of the great. I we of from costs a quicker then around And we've that perspective. price choosing Yes, job for a also, think we've fair Mike. that started Good been reengineering quite sure entertaining expected, which

and back the team that very, that looking we've we're But it from of the quoted to on think key price moved set last components overall, is always get best KPI were up XX% madness pleased So going, price. we XX%. XXx as so possible to continues. for the a out the week, XX%, balance a the component, we Even I very

factor, that into one not add a few So it. quite

that looking that, does Great. how is speaking and on year? maybe of second half is in And any it the supply, impact sales this just the easing how quarter, it

So I think get going to give answer better. soon, solid answer is getting that this question, better and get it can't the asked is, a it's anytime we I

wanted lost haven't we our take think quarter. any that the have taken I perspective not to from revenue revenue any we or in

were will We talked to that perspective. right again, that didn't And some effort deals a all we of we to have about, continue. do from high-quality that at looked deals feel the revenue

improve to But we play. market And think seeing of don't malls and fared particularly I you quarter the from that again the comparison down. look sent we're coming have next in off look think if think competitors I to well industry that challenges. of out, conditions of some have perspective, reengineering at we some those the to notes very back I calm to our seem

we'll the back better to that I'm going continue all levels. we're hopefully trajectory of say, So doing, three doing to what within next But historic not on months’ to period. kind get to six can going and we keep it's

I'll question queue. thanks. me, then and And in one back jump Great, last from the

of the it the pace where how or kind terms and it can savings, on you Thank spread margin Just that that's savings? million more million P&L just of is remind $X and in gross $X hits the OPEX focused OPEX in focused us of you.

freight in of terms of and with It's both of a bit wins can we then of is it quicker to which efficiency some them of why run the savings five-year in terms do being of some it some operational saying and are a what reduction. was that rate business, introduced is into plan full to systems the a bit longer we're term XX-month of get the and

margin kind our we've some and envelope synergies margin, the well kind kind service terms living a development. perspective. we've gross a but suppliers there's way we're in within of from Pointer relationship And had that we OPEX street savings perspective PowerFleet as that folks together bringing the software go-to-market economy So and the reinvested our from scale that, then of as product there's of in on some in some of gross managing putting well people the of of data more and more some some in there's as of you've of in science some the terms -- heard, with of

my some in QX. look new Great. question. those of to out coming Thanks forward taking for And products

Yeah, it's exciting.

you. Thank

Scott with proceed questions line come Capital. ROTH Please next of Our questions. Searle the from your with

questions. taking Thanks job. nice Steve, morning. my good Hey, for

year, seeing you're the into into of this of I'm product margins And half out visibility, to First visibility margin could those how give you they from perspective? gross from would perfect think a on exit also for for were the particularly rate full this of gate front. you year some product idea see if sounds to us year? and like improvements, quarter back gross but year some wondering sequential kind next half of starting looking terms targeting here, it what the the far the of ramping you're Maybe what sales of this in second would be the

at we've if growth. sequential last delivered three So solid think quarters, you I look the

As business XX-Q as to which we've a than high, us done we is a better said, before. is that doing we're important this

We to continue. expect momentum

of terms half. we're back in we've in So and business I but challenging in last we're of that of think a quite CRO was what's And will QX now that the team. brought in a continue in lead new year, in the for revenue terms brought We going generation. on rhythm go-to-market lot Patrick, hopeful our

getting or services pipeline reliant kind quarter, kind this of, of breaks I other deal was makes on dynamic one plus that, stronger. top that is so We're move. on think, interesting customer the So of the the that individual large not one or quarter the within

really So the is revenue subscription strong. coming through

So we expect it to continue.

expect second going I've look to think I half. is XXXX continue momentum As year, super through to a said, this the but we

then get of we experienced the I of product to and to in back in would margin, expect want I'd North plus then past. gross year terms XX% XXXX this margins in In we've get the that XX%

give results? normalized was wondering history? it terms but sequentially. Great, that anything resources, is a wondering quite you're I'm very bit you recent follow R&D the that And a if don't what know there I I allocating number was should OPEX in -- on could at Steve, moved software what know metric, of quick front, second pipeline. there around want seeing, in how I relative strong just getting to you're question to could on terms some up, the capitalization the but down helpful. be, bodies how If in qualify more a unusual of least are or quantitative you I'm quarter was

Yes.

in of but came new I'll one, on some were So give capitalize that to you software terms some products that able we let Joaquin detail, market. to some

where us but gives flat, we keeping to which get want we expanded at relatively OPEX pace, So pretty EBITDA. to, revenue much the growing obviously are

do side? add want to the Joaquin, on development So you anything

software, product develop products you off the the that in think to development, we as see but the start of see continue as of kind the invest we tail future. you'll and I to capitalization in

And then...

cost see, things we right as for much within envelope, around into and but areas working moving that in. the want can to people right the you we're get the to the So future invest

front, throw on could front, then evolution and Steve, could like, into I and you there in to opportunity front, and well, of as terms I opportunities, pane of look, the in terms we've but fourth the on provide sounds out quantify pipeline as it to the know AI that color monetization any the of single start the if XXXX? and some the right, just willing analytics in in don't get Thanks. glass new got if that we of you're quarter, to those late on

early too quantify it's think that. I to

monetization, so categorization. terms -- I bit in, XXXX our be by mean in in time the of we from the we'll through talk modular would think able to I qualified module, kind already more. last carved of we're XX% what North And I this we'll have time, and little quantify our new of the call, that once first plans, launching into a pipeline, of solutions in modular higher out we terms QX pipeline the be year.

Investor can started as with is able you and program a what means concrete think, on we down we already QX we ramp perspective. that out next that renewal and upsell module place, first we've the buy that able give put need think in sit about, that AI-led based talked program then year. that from about be and in through how solutions the start more talked another we I went business And I the work true, to kind views available up of of the will what we So to in people some to quarter to updated volume that were and kind on that Day being

job. Nice much. so Thanks great. Hey,

Thank you.

you. [Operator Instructions]. Thank

questions. with Barrington with questions next your line Our Prestopino Gary proceed the Research. Please from of come

these you you Hey, delve about maybe terms the it, Steve, little could bit talk you in are margin doing the gross of on talk up reengineer trying you can what everyone. a into the that to extent side? morning exactly reengineering to getting good products, about when

Yes.

So years, in those hardware has others. than into and of gone life, engineered our over a that end accelerated, and components some of simple where build up terms, has the life number And astronomically. started components obviously those of have to solutions the become older been some have end of there's very of been the are in of cost those that

we've there's obviously solutions the there looked what more in perspective, So of it and to job cost it's another we're actually new from and to six of in but driving it functionality, components lead terms in effective was out just obviously a the bring to an We've it a ultimately, of do components team and and which helps will bang-up into maybe is terms months our are and And is more change, understand margin to was months cheaper that what gross volume of terms are that back kind price. doing to -- in where take units got more it our those in screen, are change. exceed market, efforts probably where optimization where the six that the go, previously. put advanced

give subscriber the your us could in then And you some growth terms of sequentially? Okay. base, idea of

you about Round Joaquin, available? that XX%. have do

Yes, were it's where about XX% from we sequentially.

Yes.

right? over And you're XXX,XXX Okay. now,

Correct.

Yes.

here. from team of growth idea products, philosophy the but questions some new that cross-sells. that that's sales to revenue total or it's Could it game early more had early in in now be suppose you X% of would now? the I and the couple or right us going upsells realizing of all and new you a with the say is do give too where and just that, quarter then I'm really some the but would And here, you Okay. how

where think about new And growth geographies. new the the the U.S. from hasn't to in excited terms I first introducing solutions very mean that's solutions, that about good I growth in the in come opportunity, the No, of half, new we're it particularly news

we're the So I half that -- we've And XX% traditional launched a loan the of system. pedestrian think industrial the the in of lot growth was the market, segment where segments warning was of We're in getting strong basically the better level our in logistics. also a territories. in and seeing in some U.S. other industrial the execution board, growth subscription sales revenues across across

on is have U.S. on that hardware everything the plus services territory we else the a So only is based. services sell model, we where

So the were the very of nicely, most geographies that the that I on very, all Pointer fleet management are growing solutions based. of house, side is think the subscription and

So the recurring of that you volume, terms it quality the gives in it you doesn't margin give but revenue. high

and two where in -- commercial in as look U.S. car on subscription all the have are where and customers And they to -- of of to they electric all of industrial have lot So customers U.S., opportunities. vehicle hardware connected that we for There is move continue stuff. we're light now have fleets the we opportunities, model, of which the kind that logistics have the conversations buses that over kind demands looking at versus really or a the time. half putting of those at the market evolve and we'll our foot the accelerator

gets as are market. competition those it they've about in very the all out in and good solutions do just energized pumped there's us really us, your the as I we huge is, for some spaces. opportunity against of experience, industry a without we think can incentive kind up And what's they're what come So sales any brought us. and have said, folks in from that And

take you terms need at months. able across be three position bit it's But look market to XXXX, of So in guys a board. early of take six to and will U.S. the a to that. quantification in These we very the dominant should that the get productive,

from $X $XX the down then just almost like maturities coming XX% And looks more from the about product looks and it call then strong questions inventories Are paid maybe would other assume that your couple have million. debt December is million. is, pipeline sheet. talked back a It strong And would there be and the it Looks a the of you of I half you've on any that's are basis? of like should because just year-end, about down million, pretty up? Okay. XX%, the about debt question balance cash like on up let's that some I year $X

second the ask for Joaquin first to I'll answer you. the and I'll answer part, part

rise. So making are still with terms that the prices in some so in the It's to crazy but of we're as yes, inflation strong pipeline, inventory you're invest also, we continuing being right. sure those

margins we through believe that second half, grow as in into which great, to a into pipeline, then we're we conscious the but look Joaquin, was So stock it's enough get prudent on part? as look longer-term we do thing want And first right more door XXXX visibility first that maintain gross of order the and take and you decision. to to we to the do. is half was the felt getting XXXX, which --

have We Sure. do the quarterly on long-term debt. the maturities

maturities those to of in, I are Yes, out? what then, cash trying quarterly cash mean, I'm get idea

around Yes, million. approximately $X.X

Okay.

maturities of So million. quarterly $X.X

you Okay. much. very Alright, thank

comments. at would are call further no There any questions this now Steve the for like time. to over back I you. turn closing Thank to Towe

and questions, again us today. So you the thanks insightful look everybody everybody, thank joining for for

about the excited We are future. very

six but momentum see think we're the We and change metrics the months progress, in good strong year, with are And I very vectors. a in of making first -- all place organization. on this taking the progress six work of our we in that's especially

to and care. forward again Take encouraged, We continue you. very look Thank work we're you soon. we'll Bye-bye. to speaking to hard. So

appreciate you. your does conclude This Thank teleconference. participation. We today's

disconnect this lines may of the You rest your time. day. Enjoy your at