All right. Good afternoon, everyone. My name is Alex Sklar. I'm one of the application software analysts here at Raymond James. Very pleased to have PowerFleet with us again this year. We've got David Wilson, Chief Financial Officer. You can do a fireside chat, and if there is time at the end, we'll open with the audience for questions. But David, thanks for joining us. Maybe just as part of an overview, it's been obviously a very busy 18 months for the company. Maybe just start kind of an intro. When you joined PowerFleet, I think it's just been over three years now. And kind of what's been the evolution of the company over the past few years?
Great. It feels like seven is just less than three. We've done more than a typical company would do. So this is definitely a business in transformation as opposed to steady state. And in terms of joining, I need to use my time where there is the largest likelihood, largest amount of positive change that can be driven. I'm really here for the equity. As you guys are in the room for, I'm here more for the equity than the paycheck. So you want to put yourself in a situation where there's going to be a massive amount of positive change. And certainly my three years at PowerFleet, it's been that and then some. So the vision was always to scale rapidly through M&A. So just for people's benefit, we're in the telematics space. It's been traditionally a sort of a business that started in the late 1990s, early 2000s.
Samsara, who many of you will know, is a real example of if you bring a next-generation solution to this market, you can achieve significant growth, so Samsara is one of two public companies to breach $1 billion of ARR, grow north of 30%, be cash flow positive. The other one is CrowdStrike, so to the extent you bring something that the market cares about, there's a real opportunity for growth, so the vision at PowerFleet was to transform what was a pretty much small, unloved public company to something that had size and scale, and to your point, we've done that through M&A. So when I joined, it was $135 million of revenue, $7 million of EBITDA. This year, the guide is $440 million of revenue, $100 million of EBITDA, so a massive amount of transformation happening there. Two significant acquisitions happened.
Merger with MiX Telematics was April 1 of last year. Then within six months, we merged with a company called Fleet Complete. That happened October 1st of last year. I'm here as well because of Steve Towe, CEO. He knows the industry inside out. He comes from a private equity background. I've worked in private equity before. It's not the most comfortable environment, but it is an environment that drives a huge amount of change and a huge amount of urgency. Steve's vision was always to scale up through M&A. He knew the players in the market extremely well. He had a shortlist of three that he wanted to merge with. He only wanted to do two of the three. One of them was MiX. One of them was Fleet Complete. Massive scale, massive change.
There's a wonderful product strategy that I'll talk you through as we work down the questions. But to your point, it's been a busy three years, but we're just beginning. And I think based on the last print that we did, we're demonstrating that bringing these businesses together is more than a theoretical creation of value. We're sort of demonstrating accelerating top-line growth that people are looking for.
Maybe we'll just stick with that. So third quarter results, not that long ago now, but you printed accelerating kind of growth. Some of the KPIs we're watching, kind of that sequential increase in the services revenue. What were the big takeaways from your seat?
Yeah. So I think up until this point, we're being given credit that this is a team that can go realize cost synergies. So if you looked at PowerFleet and MiX on a combined basis, it was $43 million of EBITDA. If you looked at what we're actually going to get flowing through from Fleet Complete, it's another $18 million or so of EBITDA. So that gets you sort of a $60 million EBITDA versus $100 million we're posting this year. In terms of that incremental $40 million, a significant portion of that to date has been driven by cost synergies. So I think the market appreciated that we could take costs out. We could expand EBITDA on that basis.
What people were really looking to see is, as you brought these businesses together, the thesis that we presented that they will complement each other, they will amplify each other, and they'll provide a strong springboard for growth. That was the question the market was desperate to answer. And based on the numbers we shared for the September close, organic services revenue, which is the thing that people care most about for the legacy MiX and PowerFleet businesses, we're up 12% year- over- year. None of the businesses on a standalone basis were growing anywhere close to that. So this ability to really sort of bring scale, but also bring a catalyst for hugely positive change, that was the question that the market was asking. And we think we answered that and then some based on the numbers we just posted.
Yeah. So you kind of alluded to the sum, but if you talk about what you actually were getting out of the MiX Telematics and the Fleet Complete acquisitions, some of the products from each that have been kind of accretive to the overall products, talk about maybe what attracted you to those two in particular. And now 18 months, 12 months past each of those, what's kind of maybe surprised you to the upside in terms of either the product side or how it's complemented altogether?
Yeah. So these businesses on a standalone basis, just to give you a sense, we were awarded by ABI Research sort of seven, eight months ago. We have the most comprehensive, the most complete, the most differentiated set of solutions in all of telematics. That includes being benchmarked against people like Samsara, Geotab, who are, to be frank, much better known than PowerFleet was. In terms of reaching that point, there's two key things in play. Firstly, AI cameras is a really important piece of the market. That is the greenfield piece of the market that is growing the quickest. PowerFleet by itself did not have a particularly competitive solution in that space.
But by combining what PowerFleet had together with what MiX had and what Fleet Complete brought, we now have a phenomenal set of solutions, both for the last-mile white van through to sort of large trucks in terms of long haul as well. So that's been recognized that we're very well positioned there. So that was an important piece, part of it. The other thing that is compelling for us is the Unity solution. So this is, in essence, solving a lot of the pain points that exist within telematics, not the least of which is if you run a fleet, typically, you'll probably have four or five providers of telematics devices, which means there's four or five portals you have to go into to manage your fleet. That is not scalable. That is an acute pain point.
In essence, through the Unity solution, we're ingesting data no matter who installed the device, harmonizing it and presenting it holistically. So that is another important value block that we bring. So in addition to the capabilities from a product standpoint in terms of something you can physically get your hands on, bringing together MiX and Fleet Complete together with PowerFleet took us from maybe 100 software engineers to 400. So our ability to execute at scale, to accelerate what we can deliver is transformed. And the capabilities that we had, some of which we showed off sort of three weeks ago, that is also a key driver in terms of selling more to existing customers as well as attracting new ones.
So you kind of just hit on the Unity value proposition. How differentiated is that in the market? And then how do you actually monetize that?
Yep. So if you're going to enter this space, the last thing you want to do is be a me too to someone like Samsara. They are so far down the track. Their pockets are so deep that you want to sort of address that in an asymmetric way as opposed to a head-on way. So Samsara has been wildly successful. But to actually get the benefit of Samsara's solution, they typically insist that you rip out all your existing telematics devices and install a Samsara device. So there's an elegance to that. There's a simplicity to that. But in terms of where PowerFleet believes the market is and typically where if you run a large operation, we believe the center of gravity is you have heterogeneous as opposed to homogeneous devices. That's partly because of historical decisions that have been taken. It's partly because companies are acquisitive.
They're always buying new pieces of business. If you're in the sort of the long-haul trucking space, quite often you have a federated set of providers, so owner-operators, who come onto your network to manage those peak demands. We have examples of customers who tried to go all in on Samsara. They could never get this homogeneous level of devices. They had to take a step back, rethink what they did. They were attracted to PowerFleet because, in essence, they tried to solve this acute pain point with Samsara. They weren't successful. The way to successfully address it is through being device agnostic, ingesting, harmonizing, and presenting. This sort of sharded data that you face today if you have five different providers. In essence, with Unity, we solve that problem.
We bring all of that data together in a holistic view, which allows you to be a lot more efficient in terms of how you run your operations. There's a couple of other legs to there, but let me just pause there.
Yeah, and then maybe just quickly then on kind of the monetization aspect. As you do, is it kind of per vehicle charge uplift as you get that holistic view of the kind of customer? What's the right way to think about the pricing mechanism?
Yeah. Yeah. So the joy of addressing acute pain points is you get to get your share of economic rent. So customers today will pay Samsara sort of $15, $16 per month per device. Because they can't get this holistic view, they also pay us $3 to ingest the data for the Samsara device. So they're willing to pay more than they would pay just because this is a massive pain point. The other thing that is interesting is, and I spoke earlier about Samsara being a next-generation telematics company, there's a lot you can do with the telematics data above and beyond what a traditional telematics provider has done. So to the extent, through Unity, we're able to ingest pretty much the entire set from a fleet, for example.
That data can then be sort of passed out of Unity through integrations, pre-built integrations into things like warehouse management systems, planning systems, ERP systems, training and development systems, payroll systems. So not only do we get to sort of monetize the ingestion of data, but as we capture that sort of complete data set, there's also massive value to customers in terms of paying for that data to be pumped into other systems so they can run their operations more effectively. So typically, it's a couple of bucks per device, per integration in terms of monetizing that as well. And this, again, is pure software margin as well. So there's no hardware attached to it. So not only is it a customer pain point, a wallet share expansion pain point, but it's also higher margin.
And then the final point is, as you do this, you're also serving the needs of multiple personas within an organization. And for those of you, and I'm sure everyone in this room understands this, for a subscription business, the more people that you address, the more needs you serve, the stickier that product gets, which means the lifetime value is a multiple of what it would otherwise be.
Maybe just to wrap up on Unity for now at least, it's relatively still new. I mean, three-ish years old, probably since it was kind of put into place. What have kind of been the early results in terms of how are the integration or the implementation efforts going in terms of making that implementation process a little bit more automated and kind of get those better outcomes for customers faster?
Yeah, so you're absolutely right. You want to reduce the barriers and the time to value from a customer standpoint, and you do that through automation. You do that as well. Obviously, the platform scales, you need to harden the scale as well. But we're now in a situation where we have a very clear understanding in terms of what are the capabilities, features that matter most from a customer standpoint, where is the widest desire, widest sort of breadth of demand. You then work on automating that, so in essence, the sort of the speed and the ability to get those capabilities up and running is radically reduced, which means it's easier to do the sales cycle and it's easier to do the cross-sell as well, and what we're really working towards is an ability to actually have this available in the Unity platform itself.
So in essence, you can expand share of wallet without getting a sales guy to work through the sales process. You open it up, people can try those capabilities for a period of time. And we believe they'll see huge value. And as they do, you get to sell within the platform. So that's the pathway we're marching down.
So earlier in the conversation, we hit on this idea that services revenue has kind of accelerated this most recent quarter. I think the other thing that's been accelerating is this large deal activity. So you were able to kind of name on your investor events last month that you'd won Pepsi, obviously a very large fleet size there, and you're starting in the warehouse with them plus Unity. Talk about kind of what's been able to elevate your conversations to the enterprise level.
Yeah. So in terms of PowerFleet, PowerFleet before we bulked up, before we scaled up, there is no way anyone at Pepsi who's responsible for their total U.S. warehouse safety and compliance requirements would go all in on PowerFleet. Now we are a $400 million+ business with $100 million of EBITDA. We now have enough heft that people will put their trust in us. Things like ABI Research recognition, Frost & Sullivan recognition, the fact that we're now mentioned in the same breath as people like Samsara and Geotab, we now have that credibility where people will go all in on us. So Pepsi is a fantastic example as to the whole go-to-market motion that we have. So this is a business where you grow through expansion much more than the initial land.
If you think about profitable growth, it is way, way cheaper, a way, way more predictable, shorter sales cycle if you're selling to an existing customer than to a new customer. So the fact that we can, in essence, get a foothold in many different parts of the supply chain is a boon for our business because it allows us to expand over time. So the Pepsi deal specifically, it is a deal that we closed this time last year. We announced it February of last year. It was a sort of a $5 million TCV opportunity that came through. That was for one of five regions in the U.S. So just within the U.S., for Pepsi, this is a $25 million-$30 million opportunity. They don't roll it out all at once.
So you do a region, you prove out what we do is what we say we can do. We've proven that. Last month, they signed for another two regions. So we have another sort of $9 million coming through. It won't hit the P&L straight away. But in terms of having that commitment, that gets us on the road to sort of 15. But they've been so impressed with what we have done that firstly, obviously, Pepsi is a global business. So the U.S. is by far the largest market, but it's a smaller portion of their total business than a major portion of their total business. So we're now at the table in terms of demonstrating what we can do globally. In addition to that, they're also looking at their third-party logistics providers, and they're pushing our solution in the U.S. there as well.
So this ability to really demonstrate value and then have customers really advocate for you is incredibly important. So that's one piece of it. The other piece, and again, this is a really interesting point of differentiation versus other players, is we're the only provider that has capabilities end-to-end across the supply chain. So your Geotab, your Samsara, they're very successful in terms of on the road, long-haul, last mile. They don't have an in-warehouse solution. And it's very typical that somebody is responsible for end-to-end supply chain. So our ability to sort of address those needs holistically end-to-end is, again, another compelling point of differentiation. And for example, Pepsi specifically, obviously, they have a very large on-the-road presence as well.
So this ability through Unity to ingest data from the devices they've already installed for on-the-road so they can get this end-to-end picture across the entire supply chain, you can appreciate that we're banging on that door in terms of proving that out. We can pilot at no cost, for example, just so they can see the benefits and use that to expand that share of wallet over time.
So I'll take maybe kind of hit on from that, but maybe just kind of bigger picture. You talked about you wouldn't have been in that opportunity a few years ago. How do you feel about brand awareness for PowerFleet today? Obviously, the ABI one, you've had some nice wins, but where are we in terms of where you'd like to be in overall brand awareness?
Yeah. So not where we'd want to be. We don't have the ability to sort of invest to that level. But what we are able to do is, obviously, there's earned media we're getting through some of the awards that we've received. But also, to the point earlier about you don't go compete with Samsara head-to-head. You have to have a different way to address the market. And to your earlier question about the M&A activity that we did, not only was it the product side of it, not only was it the additional engineers, it was also the go-to-market capabilities. So what we did pick up both through MiX, but probably more so through Fleet Complete was an indirect channel. So we'll start with Fleet Complete. So they have been very successful in terms of a channel relationship with AT&T and TELUS.
So in essence, while we can't compete head-to-head from a brand recognition necessary with a Samsara, what we can do is we can ride the coattails of AT&T and TELUS. So we have now signed up with AT&T and TELUS that they're going to sell our full suite of products, including our enterprise solutions. So in essence, we get to go shoulder to shoulder, hand in glove with AT&T as they go work their major customers. So this ability to really access it in a way that is success-based, not heavy investment-based, we need to be thoughtful about how we are good stewards of capital. But riding AT&T, riding TELUS is incredibly exciting for us. We also have a presence in Africa. It's not everyone's favorite market, but it is a less sheltered market. It is a very profitable market.
We've just recently signed up with MTN, which is the largest telco in Africa, the most trusted brand across all verticals in Africa. They will white-label our product too. We have good activity in Europe as well. So we are able to, in essence, leverage brands that are better known than any individual telematics provider to go push our solutions. So we do it in a very different way.
Yeah, and maybe just help frame. Today, obviously, they just got access to the full suite. So obviously, a bigger piece of Fleet Complete's business. But what percentage of bookings are made up from those partnerships? Where do you want it to get to?
Yeah. So including both the indirect for Fleet Complete, part of the MiX transaction, we also got access to a reseller network of about 130 providers. That was sort of a legacy Siemens network. MiX was very successful pushing their products with large multinationals, particularly oil and gas. So we have that benefit. And there was some indirect with PowerFleet as well. But today, maybe sort of around about a quarter of our sales are indirect. As we look to the future, we think it'll level out more in the sort of the 60%-40%. So 40% indirect, 60% direct. So we have a nice balance between the two. Clearly, indirect will grow at a faster rate.
Yeah. Key driver to growth in that sense. Okay. So the other thing on go-to-market besides the partnership, you've been kind of aggressively hiring behind some of the savings you've generated from merging the three companies together, a lot of synergies on kind of duplicate systems, things like that. It's how you're sourcing hardware. So you've been investing heavily. You set some nice aggressive targets in terms of sales and support type growth. Where are we in terms of that hiring process? How's productivity looking? And kind of maybe what's the next step for the next 12 months from your seat there?
Yep. Yep. So, Q2 last year, the EDR for sales and marketing was about 12%. It was most recently 18%. So, significant investment there. We're doing it in tranches. So, we talk about sort of blocks of $4 million, which is about 1% of revenue there or thereabouts. So, we did some at the end of last fiscal year. We pulled the trigger on another $4 million investment sort of August, September as we saw some of the impacts of Liberation Day dissipating. As we look to next year, obviously, we're forecasting additional revenue growth, so north of 10%. But, we're also talking about the EDR expanding probably from 18%- 19%. So, what we are doing, though, is we're investing behind success. So, you experiment, you push things out. Obviously, a lot of focus on the channel, for example.
The more success we get there, the more we prove our thesis, the more we would invest. So it's not going to be put all your chips in and gamble. It's going to be very thoughtful. And we will follow the signals in terms of things that work well. We'll put more dollars behind that.
Yeah. So I think you've kind of already laid out a big part of the growth algorithm to get to the 12% this most recent quarter, but 10%, I think, is what you're targeting right now. How do you get from the 10% as you think about the different growth factors to kind of the 15% medium-term target that's kind of out there?
Yeah. So the hardest thing was getting to the 10. So demonstrating that we can bring these things together. So obviously, that was faster than we expected. So to your point earlier, I never asked the question in terms of what went well. I think that the organic growth we were able to drive is a huge positive. It really is doing and continuing to play the path we're already marching down. So again, it's the telco channels. It's MTN getting turned up. It's AT&T getting more comfortable selling our enterprise solutions. It's the additional investment we went into go-to-market. It's building out and automating and lowering the barriers to value, the speed to value for all the differentiation we get through Unity. So we have everything that we need within our control to be wildly successful.
There's every reason to believe we can grow at a faster rate than the guide that we've given. This is really an execution story, and it's heads-down execution. And again, this is a team that have transformed what PowerFleet was to what it now is. And we're early in terms of what we can do. But I think if you look at what we've been able to achieve over the last sort of few quarters, this is a business that has been radically transformed.
And from a solution standpoint in terms of the growth algorithm, we kind of talked about the go-to-market structure standpoint. But from a solution standpoint, in-warehouse, safety, are those kind of the two main growth drivers? Anything else you'd call out from a product standpoint? I guess maybe Unity as well, but.
Yep. Yeah. There's three. So there's the in-warehouse. There's the safety. Obviously, you'd expand safety to include AI cameras. That is definitely a mega trend within our sector. So we'll ride that more. We're building up a great head of steam there as well. This complementary nature in terms of in-warehouse and on the road is very interesting. I would say the global appreciation as to what we can do in-warehouse is just beginning now. So it's not as if this is a mega trend that's happening. So there's a wave you can catch, and then there's latent demand opportunity. Latent demand opportunity requires a degree of education. So we're busy sort of priming the pump in terms of other regions so people appreciate just what the compelling ROI there is in terms of in-warehouse. You can save millions of dollars from insurance premiums by putting this in.
The payback time, the recurring nature is very compelling. So we need to sort of work on that education and push that through some of the channels that exist today, both the telco as well as channels that have traditionally been used for on the road for MiX. So that is in play as well. So in essence, we have everything that we need. It's just a question of heads down. So AI cameras is one in-warehouse and over the road in terms of how complementary is the other. And then to your point, the final one is just continue to build out these Unity capabilities, educating the market, educating our existing customers, and driving greater penetration, greater adoption.
Why do you think the in-warehouse has kind of had this resurgence growth outlook? I guess it's been something that was at Heritage PowerFleet for a while, but it feels like the momentum there has really picked back up. Is there anything that's been catalyzing that or regulatory drivers? You talked about insurance. Anything out there that's kind of a catalyst for more adoption to come?
Yeah. I think certainly regulatory safety is a trend, and we get to ride that trend. And the joy about that is it's generally not discretionary spend, right? So you continue to double down. The other one is we brought these businesses together. We now have them together. We burn a lot of calories, both identifying, closing, integrating. We now can take a step back and say, right, let's really now start optimizing what we have. So some of it is just we have now more mind share to focus on top-line growth. So if you think about that 12% growth, we spent a lot of time that could have been spent driving more growth on identifying, closing, integrating. We're now in a situation where we can repivot, re-emphasize what matters most, which is let's show that we can be a really big player, a very successful player in our market.
Yeah. Let's see if there's any questions in the audience. All right. So you're going to be now post synergies, putting off a lot more cash flow. Any thoughts on uses of cash, interest in future M&A from here now that we're in a different cash position?
Yeah. So in terms of leverage, most recent quarter, sort of 2.9 x. We're guiding to about 2.25x at the end of this year. I think when we get down below 2x leverage on our way to 1.5x , we think the stock is a steal. So we think at this price, given the numbers we're posting, it makes no sense that we are trading where we're trading. To be frank, given the numbers that we posted, we thought it would be 25%, 30% higher. And that would still be, we think, at a discount in terms of the real intrinsic value of the stock. I would say that I'm the CFO, but I think you take a step back and look at what we've done. And there's a huge disconnect between answering that key question about accelerating top-line growth and how the stock reacted.
So that's definitely an area of focus. Again, the other thing would be go-to-market. So to the extent we see success, investing a little bit more behind that in go-to-market would be interesting. So we have that. One of the options that we have in terms of M&A, obviously, we have a pedigree. We have a track record in terms of doing this and doing it well, clearly capable, taking costs out.
A key value block that exists within Unity is not only can we solve our customers' issues in terms of bringing all that fragmented data together, it also means from an M&A standpoint, if we buy relatively high-quality books of business for a legacy telematics provider, because we can ingest all of that data from the existing telematics devices into Unity and sell more things, it basically means from a customer standpoint, there's little risk in terms of revenue dyssynergies. It's not like we have to rip things out. This ability to move over a book of business, open up the aperture in terms of selling more things, cross-selling more things, taking out incremental costs because we're good at that, you can appreciate, given it's such a fragmented business, given many of the players are owner-founder-led. These are businesses that started early 2000s, late 1990s.
People are coming to the end of their lifetime as a worker. And those books of business are only going to go backwards, not forwards. It's a biased market for consolidating up. So it is, I would say, a compelling strategic option for us. We're not saying we're going to do it. But if we had nothing better to do, that's a pretty good thing too.
Are you seeing those opportunities come through already?
Yeah. The amount of inbounds we get is massive, and again, for now, we have heads down. We've done two large deals. We need to demonstrate that we can really realize the value given everything that we have in front of us and under our control, but we are a restless bunch, so when things become easier, we'll want to make them harder again.
Yeah, well, they'll have the cash flow to support any of a bunch of those options, well, maybe just because we're at time here, just to kind of wrap up, you hit on some things that maybe you'll call back on here. But from your seat, all the investor conversations you've been having post the quarter or this year, what do you still feel is most underappreciated from the investment community? And what might be out there that from your all's end, execution-wise, that could change that in kind of calendar 2026?
Yeah. Yeah. It's what I said previously. The reason we were trading where we're trading, the clear feedback was, okay, you put three businesses together. Show me you just don't have three subpar businesses. That's now a single large subpar business. The way to answer that question is to demonstrate accelerating top-line growth on services. We just posted 12%. The idea the stock is trading pretty much at the same level it was before we posted the 12% and after makes absolutely no sense to us. And as we speak to investors who have followed the story, some of which are in this room, they too are scratching their heads and wondering why we aren't getting rewarded for what we've done because it's massively de-risked. Anyone can say we're going to grow, but we've actually the prints there, we are growing.
So I would say that is the single largest source of dislocation. The good news for investors is dislocation is an opportunity in terms of getting alpha returns. So we firmly believe we are an alpha return investment at this point.
Hopefully. And it sounds like more growth to come. This isn't a one-and-done quarter, so.
Yep. No, we're very early in what we can.
All right, well, David, thanks for the time today. Thanks, everyone in the audience.
Appreciate the interest. Thank you all. Cheers, Alex.