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PowerFleet (PWFL)

Participants
Chris Wolfe CEO
Ned Mavrommatis CFO
Jaeson Schmidt Lake Street Advisors
Gary Prestopino Barrington Research
Mike Walkley Canaccord Genuity
Call transcript
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Operator

Good morning, and welcome to PowerFleet’s Second Quarter 2021 Conference Call.

Joining us for today’s presentation is the Company’s CEO, Chris Wolfe; and CFO, Ned Mavrommatis.

Following their 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.

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

Now the to Chris Mr. CEO, proceed. call Sir, turn please I’d PowerFleet’s Wolfe. over like to

Chris Wolfe

Yes. XX% business a everyone growth pickup and and end joining in driver doing robust I Matt. and acceleration our a The increase you the our sequential generated seeing hope revenue. we was increase across units Thank the of we markets revenue thank new for call, second in Good quarter. are The XX% total morning, drove everyone, year-over-year measurable sales in we you, key experienced well. activity is and a

increase in resulted streams predictable revenue. year-over-year our high-margin XX% In services building addition, focus a revenue on recurring and in

the demonstrates model. our business quarterly performance Our in financial leverage also

that discussed, increase to while in were modest profitability our marketing a able As metrics. we had previously expenses greatly improve we we

of geographic our expanding our to revenue verticals execution and offerings strategy Our increase high-value recurring high-margin services markets. our targeted successful growing businesses our continually in by and our reflect solutions the results also and

operational more initiatives discuss our it discuss in to I Ned I’ll financial Ned? turn detail. over and Before QX traction, our for to results

Ned Mavrommatis

Thank good everyone. you, Chris, morning, and

second our compared Turning of $XX.X to ‘XX. the quarter and sequentially XX% previous million XX% to of million results quarter. for Revenue from in increased QX to the last $XX.X year increased

This high-margin from revenue, revenue million for year-over-year XX% or Gross revenue the service to to or which gross second the last last $XX the year. to mentioned, year. $XX.X million future XX% total and margins increased XX% XX% XX%, of compared Service XX%, at QX $XX.X line prior recurring of $X.X from million for XX% Product Chris QX drives in which ‘XX in As QX last the with year-over-year the was increased gross in quarter of million revenue. margin of services strong quarter. compares million Product year. quarter was an second revenue $XX $XX.X XX% dollars in second total improvement for remained to quarter in year. million to of increased profit QX of year-over-year

$XX.X to were expenses. operating the and XX% from slight compared a of million, in decrease our to million turning expenses previous in million a Now increase Total the QX quarter. $XX.X XXXX $XX.X

of $XXX,XXX and basic QX share common or or improvement basic year. attributable stockholders share non-GAAP for per $X.XX from share. to GAAP $X.X last in in totaled diluted basic $X.XX $X.XX This an net ‘XX $X.XX Turning an net and per per is stockholders $X.X $X.X basic per to income income of and totaled attributable common loss or This quarter $X.XX Non-GAAP share. profitability of the to second diluted million million common or diluted last ‘XX QX was share stockholders net to net of improvement of $X.XX diluted for our to and million a measures. QX loss year. compared per per attributable

Our adjusted in of to an improvement QX XXXX compared a $X.X million, for million non-GAAP $X.X QX metric of EBITDA totaled adjusted EBITDA, last year.

the cash operations. we X months $X.X generated from During million of in XXXX,

positions $XX $XX At million had prepared quarter remain and cash capital working Chris? concludes equivalents we This and cash strong. million. liquidity remarks. in end, of my Our

Chris Wolfe

Thanks, Ned.

and Lines As as PowerFleet’s secured orders signed mirrors my Domestically, a the customers our quarter, across as new secured well & X,XXX intro, in and performance key in demonstrable improving Ross. on pickup Van geographic notably, we major unit Oak fall sales seeing group wins our logistics contract most with and activity Day new Atlas as White several stated financial in the we’re markets. regions expansion vertical

-- these X,XXX we group call. these that our unit QX referenced container wins finished In wins, the order our in also logistics addition, to shipping

recently the a and group of significant project. very shipped renewal industrial first Our signed site

you to progresses. of project keeping over opportunity as We They revenues. to forward cannot is While of success a customer partner $XX potential confidentiality, this requested I this in a end has will XX apprised we our momentum equates for which at sites million and to network. say units, name month. channel due potential due it to and units can X,XXX industrial their installing additional that expanding Much look begin of this the our an

trucks the XX,XXX all wins as delivered already Jungheinrich units a units secured PowerFleet’s which for reseller dividends X,XXX total will factory material for Cellocator installed the Mitsubishi record telemetry a quarter telematics a significant their surpassed fleet and have top momentum offer installed highest warehouse This Mitsubishi traction alone, operations several is During largest milestones the our our paying of month on was and with major the over and operations, achieved equally enterprise its which they they online a second agreement and X including in Brazil. we On forklift trucks, monthly quarter. operations customer as automation quarter manufacturer as solution Logisnext Israeli handling was group, QX, QX: we Cat retailer in all the relationship June the in robust. in QX, in leading entered innovative first, option this, Logisnext for solutions. world’s monthly products. sales subscribers; is and lift of into Americas in time. of division our second, Headlining XXX,XXX Internationally,

signed international our In we in QX, an motor countries as hardware the broadly, part in PowerFleet well Toyota which KAVAK, capabilities selected to for pace Romania with Police who’s installations on we such of a expectations, new Agriscience, and solution. in we exceeding tap competencies comprehensive rescue solutions. as software and our is that have highly control industrial as by announced Corteva of And year-end. Additionally, rescue to this subscribers David we Israeli More follow begin vehicles third is customer a These on. are our Carvana rollout and several organizations also wins Mexico and potential Israeli was month. the unique additional of be putting implementing will monthly Mexico, have of us command and manufacturing over The their plant I’m to because reliable nearly service. of secured our to engineering X earlier, Mexico, fire report force the Police Department, other the secured and with X X,XXX where excited following that IoT Adom us Magen services excellent XX,XXX solution

risky natural in driving portfolio image drivers time. proactively solution extension assets protecting the and our to analyze focused premiums. momentum, and and situations intelligence we a record to U.S., best-in-class keeping to launched video leverages track our on of that This reducing Vista, manage build technology addition real innovation. continue we is of on PowerFleet’s sales artificial In a safe, In insurance pipeline technological

pilots We in geographies, momentum, the Vista operations with for electronics the we and we’ve also But the in with COVID numerous working to in in actively are do very finish during around various concerns some year Mexico have also us up, have global U.S. the half component launched Vista We giving currently second Mexico. while And our Delta we growth encouraging our our in situation. prospects. of this entered confidence variant July.

long-term with great major ready that, be the which making massive vision, appropriate your toward is for instructions. open the company we’re provide the industrial in the IoT to of Operator, our goals We’re and our please financial And market. questions. to strides a force call realization

Operator

coming Your Schmidt. [Operator Instructions] first Jaeson from question is

Jaeson Schmidt

on supply want last chain. to Chris, up the your just I comment on follow

have clarify, challenges headwinds out friction either to the in here seen quarter? any the expect from the in or quarter you to September sort sort of June Just there, of any see

Chris Wolfe

now, As slight a the of in now, right no. right is impact answer on the I mean just remember shipments. you we no. But active QX but situation, had delayed it’s an some where

chain go and is growth what has way ourselves large it very to is, right? view pretty field solid. have to supply we up like we’re So forecast a And, require think Our that yes, we’re to looks set potential, trying trials just I it’s our on, going quite have, like us our which going we forecast. normal few surging beyond the for near-term

Jaeson Schmidt

Okay. That ability installed? seen on makes timetables get have of case regards in to not the customers count, on maybe you pull of and to so rising installations the your product back some side, sense. their but And much sort just guys’ with products

Chris Wolfe

today. yet. Not And last that year, but as not seeing we’re of we that again, did see

active. Our the too. employees our in out of say happy all field field the actually are I’m majority are to vaccinated engineers that

requiring customers some are actually So prospects that. and

well So we’re up really there. set

Jaeson Schmidt

queue. and back the for into And one last me, Okay. I’ll jump

as in well that what rental you the other as if trialing on customers curious Avis car market, with. Just could update with seeing you’re both us you’re

Chris Wolfe

or with for our The it’s across I put they a grow -- chosen now, the you’re actually activities But back like program, by getting new really rebounded that. fact, Yes. And think think is car significantly, railcar A exciting market, we’ve are us. just pretty space, cars I having in market issues which board that. we is being them. getting do even have. their the top going right were seeing aware And recovery opportunity Avis below air on well fleets. the of rental X vehicles, everyone a The and matter for have to seen conversations whether Flex on units is into of their the vehicles

Operator

Gary question [Operator is coming Instructions] Your from next Prestopino.

Gary Prestopino

and on of going could know an helpful, what stuff idea how or I’d what could the But year-over-year data, the have give backlog here. at And don’t maybe also some us changed is of very Chris, is now this your it right you base good and that’s then pipeline. you get of and sequentially? installed a like opportunity I to idea if be lot like then

Chris Wolfe

Okay.

base. our Just real quick installed on

of We numbers XXX,XXX. end at At what yet year, were today. current are announced haven’t the the last

as Cellocator, put of that some not we’ve -- been right? units of range. have from in XX,XXX quarter. those north to yet, in units that installed Just XXX,XXX the we shipped it So those in of Those context, -- we’re

So we’re...

Gary Prestopino

helpful. That’s very

Chris Wolfe

like almost And get Yes. we work a as it’s then we our work schedules and pipeline backlog, our opportunity on as delivery where basis out with far POs we customers. on -- quarter-by-quarter

like opportunity So we planning Day got orders in their just in which a that operations, the on of And with first year. tune The call now lot But shipped up big we’re right we last them that looking in those are with been X,XXX get We units of those goes at year on we what well look like volume. this the we good mix & too, X,XXX the time. making X,XXX, units. I that’s how call also, at first follow-on up as that’s that FlexiVan, with to soon will the high-end less in in the weight We working that September. and that finished axle be I And to QX, preponderance Ross, than I follow-on we way this a in knows, and just progress. other industrial upgrade we that customer, from site mention now -- with significant. we’re them get this them for us. are in I tuning and a units actually can’t as at backlog is container pretty order. the name we order last just just huge with everyone X X I because the like from X,XXX-unit last really did know those other sites expect there’s is mean to XX doing out, are X we the working at of just we actually shipping order or one in And currently so as next least the did to think, And that the with roll follow-on and site. we’re that potential mentioned confidentiality wanting sensor then as that we’ve for months. there’s same

Gary Prestopino

All lot right. you here, number Well, because be opportunity company XG an units, the bites to logistics have sequentially Or us the you QX, a really really upgrade guess other is apple it mean just able and market? et where kept of XX,XXX a of the got going or pipeline I But the XXX,XXX stuff I at see this cetera? are year-over-year. well to side, going seeing a lot guess as gave the on cargo of it is, to helpful question if your units of backlog nice you some would -- I by would in aggregate be is you’ve and driven so be technologies the significant being of on in the for as on it new side I forward.

Chris Wolfe

but camera an award our Lines IoT, is that’s bought is which -- bought bought something LV-XXX us, freight on right? Atlas the that’s brought because us. product, it, Because like anyone received to an my see By go you our that’s Van & why LV-XXX We way, we it’s there Dan the for which innovation. I’m That’s if of up. brought LinkedIn that glad Ross and IoT actually why out organization just wants phenomenal, from market. -- yesterday to that

going them the a now less sign because right? very getting the as than on in to are the XG go people number But So you to little as as from mentioned, the good new we’ve accounts. XX,XXX, up some we to And back that other numbers pipe. other cycle to are it’s become is, the seeing is get XG people, back go your So signed new that we our getting as there own to with well side being they said, and question that down it’s and brand-new prospects back customers upgrade we customers. traction going

or again, the But So a And down reason people just think quarter you come up. the that prospects, units. give that has one, new the have the new never functionality same, are price and of I in, lot points later, a technology. I coming number there’s said have is, numbers roughly customers had around XX,XXX the take, mean, gone

at look uses supercap From doesn’t LV-XXX, rechargeable You use it technology. ownership, cost of total it a our batteries.

going to actually X trailer. last Our get long re-sign It’s Xx It’s anybody product before each. to else can only put on. have replaced. our years will the to them like as to X is recurring last up to as product revenue products going be even needs I for twice, maybe

think us So price in prospects. of new points performance. think for But do a completely different ownership are I puts the I because the coming of it in total people cost and

a more dollar lot You’re for getting your today.

Gary Prestopino

seeing -- now? for out When compete these And are you inquiries, or as go bid win your it’s contracts, really you competition however who what’s to what’s done, been right major out or your rate? there

Chris Wolfe

in X we always about like What I Well, -- tested. tenders larger downselected And X. the and get we that’s being it’s are deliver, And get win. deliver, price price, some different But it’s is number or downselected. the one. being just able vendors it’s to always we’ll whatever, the great like we those. question. of we a always lose But sometimes X Because usually and to then final about if can usually

space we want those everyone and marching marginal you if like going because our is on so that. to where is the system customers be a get a orders in let now that’s the lose them a get with long-term, we right great way, not think expand It it’s our hardware by large these to And Ned’s them. customers. up into to I just right? and We’re and get to side, want are them can just network -- got we’re me And we very on going my -- follow

a chassis. have We solution for

a solution have refrigerated. We trailers, for containers for

last common and year, land they let’s guess which with very their is, a can Tropical, us approach what, our that’s signed these only story, I expand an with and -- large have Well, chassis. signed hey, example, containers. as accounts. us with So for they that’s

Operator

next Walkley. from is Your coming question Mike

Mike Walkley

I hope your are well. everybody and is Chris well, families Ned,

industrial Just wanted group. to circle back on the

the million help think about a a into us the big how XX potential you horizon project the $XX for and just revenue, sites like out flow and of that With can of might time framework the model? rolling it

Chris Wolfe

Yes.

question, but like out customer still sign X that weeks will And right? November, September discussed. QX, them that, was before the working we that’s -- the go, after now. that’s next done We It rolling got in We’re there’s know the That the then they’ll then So season, a with done prospect get before them right? roll sites currently to holidays that and holiday because on off get QX, is may the timing. need being But start that we out to project and of prospect ago. customer year.

at We a out long be mean million. customer time very very, could I or it site ago. sites of sites any every And more. quarter, X this And right? rolled these quarter, be $X.X the could that’s a given with size have

will again, September. one And so the first be

X the successful, mean it them have we they that if can be know I end about. like We we schedule we’re before to we year we’ll can as more of feel have which in. how their operations the for get X then year And go very the want next into work roll we on depending -- to to there’s on confident successful.

Mike Walkley

in that part that XX,XXX update on unit base industrial us nonsubscription that’s transition going. if And Great. just not, maybe upgrading? Chris, is this how is of

Chris Wolfe

at They’re are. X,XXX. they -- that way, the By Yes.

They’ve I X XX,XXX X get in mentioned Ford done wanted call. So sites, over process, upgraded, try think, maybe the that in is the if I and you we take to last that speak, now they globally. then X,XXX is do as that’s that this there’s X,XXX. XX be Ford, on moving recurring. to units And to about more I but the And and there sites have will

it’s all large, rest But you after go on about see it. big So $XX aren’t then are It’s XX,XXX well. at not accounts pursuing quite though, as units those are chunk each. like the these as that, a air but of of And can of upgrades actively the month XX,XXX. the a the we will

Mike Walkley

guidance. to I against Great. not giving That’s I Ned, know opportunity. executing see And you’re great that guess,

creates kind framework think of think I which the half first momentum the just off maybe business, there the year, challenging. the of the you’re frame half in of half, still second and in should given back kind of help and there’s But Delta the be can and growth uncertainty versus steady about supply seeing? we or year what you can maybe QX

Ned Mavrommatis

Yes.

mentioned, we to steady keeping Delta -- growth. as business. want the we’re Chris issue. think, chain eye how an impact the variant is And I Mike, and going the supply continue Obviously, to an it’s on the

I behind job that’s a And making getting a think scenes, work see been it, sure there’s any any deliver. are and the significant out amount and worse good meet dealing But getting They’re of getting just there. our so done, we’re actually parts very team doing in didn’t impact not has things QX. being better. with we to able

sit the next manage. back issues the business But trying X we is growth the this -- that to want half year. steady are into of can continue those to the and year as see, So you today, where looking strong, of from we’re we

Mike Walkley

Great.

based Should given be on of in building you just in Ned, me, conservative shipments? kind and QX we it for could maybe the Or backlog? our see, for question constraints expedited steady your modeling what be on gross mix last margin supply product that. Just

Ned Mavrommatis

Yes.

it It from product was the be It saw it quarter, should you slight forward. around XX%. going gross this if margin was XX%. last quarter, level a this improvement So was

Operator

There back floor are queue. no the Chris for now over questions you. in to I Wolfe remarks. Thank will further turn the closing

Chris Wolfe

during Software Conference this X; September Annual Conference, Barrington Capital Street Genuity including: be August financial Investment September morning. Thank XX; Growth XX; on on I Conference September Lake the Canaccord QX, will Gateway on Conference attending upcoming joining XXth Market’s several XX you and us Conference Fall BIGX the the on for virtually and conferences and XX. the the Jefferies September Virtual Research X; Ned

we efforts our employees to Before trust our in execution. their diligent for like valued operational also their our wrap, and I’d I’d products customers and to services. our for putting thank thank like

for and Lastly, to our continued ability their I in to thank we with Operator? our stay support confidence would like your healthy, and vision. to again you our Please realize speaking look investors forward soon.

Operator

today us joining for for you presentation. our Thank

now may disconnect. You