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PowerFleet (PWFL)

Participants
Chris Wolfe CEO
Ned Mavrommatis CFO and Treasurer
Scott Searle ROTH Capital
Jaeson Schmidt Lake Street Capital
Gary Prestopino Barrington Research
Call transcript
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Operator

Good morning, and welcome to PowerFleet's Third 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. operation, present company's facts, anticipated for plans position, forward-looking results than statements include future growth, other position, statements. industry anticipated the competitive trends company's regarding for of and demand statements for and regarding product which historical any financial company's the All expectations strategy, offering, opportunities other business future considered operations, are financial include are not expectations company's for but the XXXX statements Such to beyond. and limited uncertainties, statements and beyond forward-looking All imply which of risks, many the are contingencies, such the presence of control. company's performance, company's actual forward-looking achievements The from materially those or results, any or in may differ assumed projected statements. that overall and factors, emergence Factors could filings, economic materially and the differ of new business services, competitive technologies, for results cash cause products could and position. conditions, to company's SEC include amongst company's others demands 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 would I company's to website call www.powerfleet.com. that in this section the relations replay Finally, investor for be of everyone made remind will the

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

Chris Wolfe

Thank call today. joining you, and our Welcome, Tom. for everyone thanks

Los emphasize counterbalance successfully mid-August. All delaying affected, we which they in ripple the weights These worth for about manufacturers of to the higher-margin revenues which product quarter industrial QX As new our from higher-priced, as following like from last see shortfall placed ships. the their merely while of mentioning press Angeles, forklifts. month for waiting This led QX industrial effect are deliveries forklift had telemetry forklift quarter orders were turn forklifts impacted other critical PowerFleet's our not recurring where deliveries be by in canceled, to sales the is for ship to our of in occurred. severely U.S. are that as starting orders telemetry this typically forklifts you productions in in offloaded had new builds waited coming and morning are the cargo of their that severely customers. that release these we off backup I'd delayed XX%, quarter. parts we can sales our each grew for each the one-third services It's forklift issued had up the by line impacting

industrial While investments seen our in we to momentary logistics continue in business, products faced our delays sales our pay off. we've

large During industrial. the the up logistics several for third in quarter, have we shortfall could received made that orders

backlog. parts most surge Ned. However, our top the X% Despite for services recurring I'll we of solid margin months year-over-year were and electronic to not respectively. detail. XX% in QX high over deliveries. in our our business quarter, this, which in pipeline, and KPI, XXXX. the important of was it discuss a our turn nine first QX our overall to third for the financial the of necessary challenges logistics more we more climate, revenue, revenue growth able X% results the for face quarter saw our and and delivered our about in successes, cover to procure I'll growth X% Afterward, Ned up months we On nine we to

Ned Mavrommatis

good morning and Chris you, everyone. Thank

$XX.X of X% year. to our quarter increased September the last million, of in to nine-months revenue quarter $XX.X third third and million for Turning for end to XXXX, results the QX XX, total compared

from QX third for revenue of $XX.X XX% in increased XX% to the period. X% year-ago or total revenue services of of XX% nine-month to same quarter million million margin recurring year. total revenue million from the and increased $XX.X in total $XX.X XXXX of period, $XX.X or For High million last the revenue

million XX% $XX.X of future or million for was of margin revenue third nine-month in high the revenue, which or or last $XX.X increased million revenue, of revenue XXXX revenue period, in XX% recurring X% total $XX.X services from the year. compared quarter Product total to total XX% period. same to of year-ago XX% QX the of or of revenue services and For revenue drives total $XX.X million

last the compared last was million was an product million profit period. same gross $XXX,XXX the XX% expand revenue, compared of decrease For total revenue or in total XX% XX% to million was in $XX.X an third year. one total an XX% third million revenue or XX,XXX profit supply exchange, revenue of $XX.X nine-month customer, customer of to of X,XXX million improvement revenue, quarter in Profit or XX% product existing growth revenue, orders of Service for $X.X gross profit also XXXX electronic primarily XXXX related additional in services was or gross $X.X units period, product impacted XX% and revenue of was the mix, higher profit placed in compared issues for QX the In of for or of of lessors the last and million total within QX XXXX one-time chain XX% component to QX the product units business and chassis for committed with ordering a to expense to third of approximately The $XX.X total product associated $XX.X or revenue program in total of of to to placement. to incentive of delivered XX,XXX margin XX% shortages, quarter in due million costs in America. to $XX.X North year. revenue, be by XXXX to of year-ago or $XX.X of Gross QX million compared or was total year. the quarter service of total Product largest XXXX.

expenses QX quarter total and $XX.X expenses, $XX.X Turning was to of prior to XXXX compared operating million the last third our for in year. in of $XX.X the quarter million,

This $X.XX to XXX,XXX compares GAAP $X.XX or diluted quarter and $X.X to and QX third QX $X.X to of share net X.X at metrics $X.XX XXXX compared of in $X.XX same or the basic per in loss metrics, year. XXXX totaled last to and share totaled share common the per basic net to third period. Non-GAAP Looking $X.XX attributable of totaling or basic diluted basic per loss for loss diluted income and year. in net net million for non-GAAP million of EBITDA the our profitability stockholders of adjusted quarter or stockholders contributed last Adjusted per non-GAAP diluted common million X.X of share. of EBITDA million $X compared and million year-ago

cash in concludes Our liquidity position remains remarks. and cash equivalents $XX.X million of prepared strong with $XX.X Chris. capital. million That and quarter-end my at working

Chris Wolfe

Ned. you, Thank

opening Los in delivery causing is in delays As my the new remarks, production lead I for backlog container mentioned times forklifts. Angeles lengthening and

expect and QX next We have this see holiday over two to months as three the the the normalize continue to issue through normalization started season. we to in we get

with with which forklift agency, XXXX our well impacted as and by are large aftermarket deployment a deployment Ford, rolls industrial underway, which production out issues. in these not as is large Our federal are both installations

As and also lines. ability impacting I disruptions are chain deliveries supply mentioned, our our product to other surge

our million products, at suppliers our deliveries For which our instance, and QX $X as de-commit two vehicle had we to then ability additional the on minute, last in for an we surge electronic solid impacted shipped logistics and going deliveries components had components with XX% quarter. we have backlog compared them. was backlog to quarterly had could into vehicle up typical entered if that been that build the to orders logistics a any We QX

many it chain these many they and our is like over two issues supply that Our to But we customers dealing customers are worst say next of quarters is daily our from with that note believe starting organization many surprises. start is that lessen will automotive are to to of good over. the hearing the

giving our teams providing to supply us so optionality. have been components for current supplier further over reducing the pricing. cut However, economic additional and us and our into on flexibility critical These and production not initiatives we us with engineering any giving more component on diligently self-correct are next reliance waiting The early one will business components by control supply electronic issues to air working impacted some speak year our our not our recovery need deal clear, competitors. to orders new not that just was our has availability some experienced of to while industrial have products. and be forklift may ability delayed, us may shown loss with and in fuel we to we bubbles business line And any to be

challenges order option This sensor. units QX, had Israel shipping X,XXX marked new won surpassed our devices by customer increase temporary in over which an IoT additional of project units ahead over is successes, chain months a month. of of our with cold which three QX, container order camera X,XXX U.S., we XX,XXX a for of I for MACCABI X,XXX experience units. August, monitored. HMO by X,XXX being units per largest with telemetry KAVAK, did LV-XXX notable which a team monthly team October we patented our our In couple cooling Israel, XX,XXX shipping started freight Mexico units plan installed over Mexico in In in Carvana end which These very follow-on mentioned, and considered While the boxes in included included has this also logistics shipping as the having was forecast. to the the in Also installing a that record.

chassis which empty. fleet to telemetry on over QX. Our operator in and loaded the if a container has U.S. weight a is This know patent-pending and shipped solution team also X,XXX units on the chassis our LV-XXX and sensor, it if signed includes axle allows container

QX. old we an expense to this related lessor’s the us delivered form immediately in major for for credit one-time in this chassis to incentive and gave Ned XG preferred of PowerFleet provider a become systems took remarks, his positioned X,XXX a units and As they optimization in $XXX,XXX be a mentioned order to chassis

of for units importantly, additional unit containers that we logistics product XXXX will letter the XX,XXX I highest a summary, their In along XX,XXX next mix into finalizing the with for plus and other new customer More we're as and company's going an XX,XXX to This delivery intent a year order close order is XXXX. of that this with the delivered combined chassis unit a year backlog be schedules. us history. mentioned we gives backlog over from units XX,XXX out in product orders hand in logistics we close and ordered received currently this previously

our number with launch aftermarket where delivered close supply talked as while products global new million to production now Ford of forklifts, with vehicle forward of been out the about agency to end business XXXX business's with record we've site affected additional OEM delivery as chain Jungheinrich, pipeline. for impacting at we We've critical record was electronics XXXX In situation. and represent at business Our $XX to QX our issues the received logistics QX to sales U.S. in in QX by first supply milestone opportunities, sites new up have previously our is out orders government a vehicles ability We this agency. U.S. strength services extremely levels the moving new the major new a and will group one each to site chain hiccups but of reflected deliver, opportunity The and in implementing closing, to Europe. that look One is was industrial X,XXX our the launched fully XXXX. showed that issue as global production build component on will affect the and of in as and government of and backlog not to based we forklift XX growing implementations our as successfully well our this ability know example opportunity is the global momentum and operational. tight ended units site these procure products, already the that a and deals our manufacturer, our industrial upon forklift recurring revenues be customers' the can which will susceptibility forklift QX these order an that contrary add our X market. QX. that We of well at that We are will to continue the depend several and start as

call turn the I'll to Q&A. for the Now Operator. back over operator

Operator

line Thank first the you. go question your ahead. Scott live. Searle is Scott, [Operator Please Instructions]. coming is from from And Capital. ROTH

Scott Searle

give impact the was was logistics mix could And would were taking the us good costs of you incremental otherwise had and an the due Chris, components. in freight that then, to product couple Thanks number product quarter? unable the morning. and impact expect, wondering Also, could a the ship impacted logistics in in you're Hey, I Hey, margins if you that quantify front. wondering right, of for quarter gross idea follow-ups. on terms I'm maybe questions. industrial what a gave the if to quantify I'm versus the you what forklift given opportunity the mix? you about as

Ned Mavrommatis

Yeah.

that by and QX, products gross the if on those $X,XXX you your industrial dollar price. have margins few because percentage we to typically I'd And points are of range we higher-price, amount, But you the answer increases. say products go -- the XX% are add that's So Scott, ship that in price higher missing mix per to did gross margins that costs are new products. impact The all say a was that industrial what the the more in margin up gross I'd in And shipping of analyst component our -- expectations just ship forklift the here to seen industrial. impacted due of obviously can retail the actually builds. targeted question? we due the margin probably

Scott Searle

answers That Yeah. questions. my

didn't I it up hear resolve. But Chris to Ned. sounds Sorry, then, to the are and issues follow shipping starting port like

into the next kind seasonality looks have go talk you're quarter, I of us happen assume what we revenue Thanks. improving visibility of think of going start year? the like year. as wondering as that you that about product comfort about you're why and you about thinking guess recovery of going next some traditional into like things was first through quarter the pretty maybe how into that we that if first level than kind would and Sounds I I doesn't of feeling better good

Chris Wolfe

it QX installations what's side. Okay, also industrial aftermarket is interesting that about on the depends on

on million could on That’s opportunity. and that or QX. in we're XXX that The seeing by they which refresh example take channel an right we So -- in in a up well them. just government impact over I've into going pull is mentioned would federal it's channel, talking Ford, that we it now as But a to They federal units well. $X QX dealer their have we're implementation have a QX anywhere large there slip can as QX actually are channel. is our if way, orders from pulled agency our the working we our impressive with and you pretty a

the gotten all States feedback OEMs dealers and that's where actually We impact throughout on have United XXX the the the we've and on them.

getting seeing that not to their they're the free. break to So but to they're end sell starting forklifts customers,

So -- by and normalize. that I mean

got with Pedro yeah, So, just San to over in backlogs XXX. those there's XXX there over XX ships were and backlog September now October in

going you're So you normalize a we're the that the the counterbalance what weight off just right or in -- it's times weights, were like holding in ship number and the is now. up forklift what's forklift the if it going counterbalance front. And always the containers wasn't later XXX interesting of getting preponderance delays at forks of sooner production, it's end forklift of to to that's kind to the were and the the parts of needed component really seeing to and at electronic have forklift the which manufacturing. The is have --

that Going into will started of on now actually, of right has QX the start the QX. logistics our shipping. we're But backlog that next customers start way, see preponderance the products just of delivery By XX,XXX of some that in we've schedules. -- working we year, in as shipping all shipping and started with will

Scott Searle

to just Hyundai opportunities, went of color Great. could, be big terms around like had color they're car wondering Thanks. that could starting away was you And but the pandemic, and native Translead. any going was on XXXX get Kind I lastly, frame now wanted of to back. that what's I if in those during certainly of opportunities I [ph] if come rental Chris seem in the in how front? some

Chris Wolfe

Yeah.

just car far opportunities. the as So as interesting rental

flex provider a car have the great for for You technology-selected is huge customer their Avis. growth a Avis, is of been ours. We've opportunity program, which which

processing I getting to issues we having for products provide The services saw our car EVs order obviously are from cars. with is which still put new includes rental continue Hertz The companies So for come patented are an -- and Avis, combustion you and mean accuracy. cars XXX,XXX about bad those good telemetry. actually product either that we that electric. already Tesla. internal But thing the or for that works good is our fuel on

telemetry odometer, so, automatic even of And like the So first sure not check-in, need part data, might accuracy though which you I question all the if still other check-out, I it. your answer could you need fuel etc. Scott, can is the make you repeat

Scott Searle

sorry. Oh,

on color any front? Translead, Hyundai that Just Thanks.

Chris Wolfe

Yeah. Yeah.

Hyundai Translead our And is they at U.S. build. out the about of they XX% and and XX,XXX So to now. -- XX,XXX it's that's right working But trailer Mexico. what is about of so we're total there get them in of there build -- goal for bought typical -- their that kind actually least their

Scott Searle

Great. you. Thank

Chris Wolfe

Thanks, Yup. Scott.

Operator

you. Thank

is your of next live. Jaeson, line from coming Street. question go Schmidt is Jaeson ahead. Lake Your Please

Jaeson Schmidt

for guys. taking Thanks Hey, my questions.

following on question. Just up Scott's

you you if the expected expect in here quantify supply curious impact from chain Just QX? could the

Chris Wolfe

Yeah, new clear our I forklift products. make on want delivery, the to sure is the that chain side primarily not supply impacting forklift too it's

the one Right an and hit have build to in hiccup. vehicles our our finish getting and increased logistics actually accelerate look almost parts all able to tune vehicle we last-minute some to forecast to see our QX. new that's all or their is units here forklifts But now, On to can address we're so susceptible that the we the have on in the at But not $X and that's that working to that are numbers you'll for that and see and looks products weren't actually to we backlog we logistics waiting ship, of has had there. manufacturing. we that that expand components get still that's our on capitalize What saying plus side, We you parts of forecast. QX in XX,XXX million opportunity just those logistics inventory and what when we not to to inventory backlog. normal our normal I'm doable. have you component to

have if QX the by right of build it components. like can't won't impacted be shortage. looks product XXX% any kind hard don't you you now But electronics a So of

Jaeson Schmidt

mentioned industrial to you a trying just the just I And of up in all but cancellations how following some get then concerned at are orders Okay. about decommits, firm know that, on are? no sense actually you these segment,

Chris Wolfe

Yeah.

-- is actually actually any haven't normal We the our forklift in kind an of company's forklift flow XX% in there market the manufacturer the of like exacerbates channel an North IC forklifts is and truck, we've number combustion is Toyota, availability seen which that's number the level also its issue kind of in one never in business. world. One because issue any is the off of the a impacting of history April decommits EPA because market pulled was which issue. American the which is Their truck, internal of

internal but every that, forklift XX% basically that's addressing they're that's combustion Now vanished. market of in the is

other the our seeing kind off get hiccups. But Again, up those there ships, because actually channel. void We're kind production come steam, that kind like as just not the and of that starting the fill through worse. situation. mean exacerbated So see we to it be all get to lines scrambling improve it that the parts all the of of as won't we're OEMs are doesn't that's back but see normalizing

Jaeson Schmidt

the the pulled remaining know be should queue, agency, we for the me if XX in some back to jump for I And could be but in mentioned those we looking QX, of just about forward look completed? I'll sort how think that at last timeline then, sites, government you Okay. that at and one potentially

Chris Wolfe

get It's bowling the they first probably they take the a approach. the two-year works project and do tender kind they in -- site is way way total. Once by of that the

the they their past. train with how customer site cookie-cutter, is were we've in they to processes and the the this -- have So we get the first operators all down worked

site in steam that they sites six, to quarter. this three seven can they'll they'll know or But be once will QX they that get up and we But -- up of two very next well. or start then six to sites doing up run rate So get seven after QX year. probably this probably a do

Jaeson Schmidt

Okay. Thanks a lot, guys.

Chris Wolfe

Jaeson. Okay. Thanks,

Operator

Research. ahead. your Barrington next is And Prestopino from go your question is line from live. Instructions]. coming [Operator Gary Gary, Please

Gary Prestopino

Chris, you. will quantify Thank Hey gotten off be for XXk of on what basis fully derive recurring logistics you new this both that revenue of kind the and that the revenue implemented? you've a that and can product you when order LV-XXX,

Chris Wolfe

LV-XXX that actually on units of we shipping to and up ship and those consist Yeah. the started every November then by of the around those price units. month. freight is price probably And $X. the We've the retail the in steam hardware We'll typically $X.XX that camera try around $X.XX is recurring unit does and and on be full to typical out XXth revenue

Gary Prestopino

right, per month. unit, Per

Chris Wolfe

Correct. per unit month. Per

Gary Prestopino

Okay, impacted great. segment, was had Thank correct? you. couldn't you the logistics said you just obviously is not be or but industrial accelerated, forklifts. that In orders could component you million OEM X in part, could get the you And have that the you a then that by clear, to

Chris Wolfe

logistics two It's vehicles. areas, and

of well. I actually units thousands backlog of in Mexico. units, do a tens lot in as there we keep We like of you mean sell have mind If a KAVAK to

logistics between the that if our could and have vehicles segment, $X million shipped products. combined built have we it's So could we

Gary Prestopino

things been they've these canceled right? alright. been have of And again, out, Okay, none pushed just

Chris Wolfe

Oh, absolutely nothing's been canceled.

is stronger. of fact, anything matter even As on-demand

Gary Prestopino

up And or backlog was you was overall also said XX% logistics? your in that just backlog

Chris Wolfe

count logistics to in that's built. orders vehicles. a We That's backlog and when don't -- waiting firm I be say backlog

PO. by PO industrial the So side is

kind we the others orders. PO of get when we fulfill in the we So

the classify from from customer we the from it or really order or backlog. don't end we as So the until purchase OEM dealer get the

Gary Prestopino

Okay, and then, last --

Chris Wolfe

vehicles. and Logistics

Gary Prestopino

-- know Okay, if sorry. don't lost on, I him, And we lastly, I'm Ned's but may have

Ned Mavrommatis

here. in I'm No.

Gary Prestopino

which like over Okay on your -- there? gross on it product looks numbers your almost looks XXX the points. on Ned, down I my down, correct going But margin was like if was XXX service what you understandable. have explain Could basis margin it is is gross

Ned Mavrommatis

XX% Yeah, the XX% it this product was year, quarter. margin on last service was consistent,

it consistent. margin mark, The was product definitely So was very the lower. product on the

during time are that to replace an If one in you incentive get next was QX to we old with $XXX,XXXX to their remarks this the recall which lead going to did units, customer significant there expense program customer. prepared year our orders and

If that by margins $XXX,XXX that it XX% chain product in a was issues, approximately related expense, well. you electronic about exclude one-time gross freight the percentage product was points and supply few impacted we to issues XX%, mix components, talked to costs, higher related all and the as

Gary Prestopino

Okay, thank you.

Ned Mavrommatis

You welcome. are

Operator

floor And to in now I there this Wolfe time, queue remarks. for are to no the further would closing Chris at turn like Mr. questions back

Chris Wolfe

diligent operational again services, our thank to to investors to on Thank stay virtually morning. I during employees closing, global Ladenburg XXXX QX November I'd and Operator. continued Technology we like Roth efforts upcoming their Capital Please in support in including attending with our for you be thank and putting and products Technology forward you and our look for joining confidence financial realize will the and Expo to the and our our XXth. and ability Ned Virtual PowerFleet's soon. for In us vision. valued on trust healthy their you customers XXth Annual for execution, your speaking this Thalmann November several thank conferences Conference XXth, extend the

Operator

us presentation. our for you joining for Thank today

may You disconnect. now