PowerFleet, Inc.

Good morning and welcome to Power Fleet's third quarter 2021 conference call. Joining us for today's presentation is the company's CEO, Chris Wolf, and CFO, Ned Mavromatis. Following their remarks, we will open the call for questions. Before we begin the call, I would like to provide Power Fleet'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 Power Fleet's future financial performance. All statements other than present and historical facts, which include any statements regarding the company's plans for future operations, anticipated future financial position, anticipated results of operation, business strategy, competitive position, company's expectations regarding opportunities for growth, Demand for the company's product offering and other industry trends are considered forward-looking statements. Such statements include but are not limited to the company's financial expectations for 2021 and beyond. All such forward-looking statements imply the presence of risks, uncertainties, and contingencies, many of which are beyond the company's control. The company's actual results, performance, or achievements may differ materially from those projected or assumed in any forward-looking statements. Factors that could cause actual results to differ materially could include, amongst others, SEC filings, overall economic and business conditions, demands for the company's products and services, competitive factors, emergence of new technologies, and the company's cash position. The company does not intend to undertake any duty to update any forward-looking statements to reflect future events or circumstances. Finally, I would like to remind everyone that this call will be made available for replay in the investor relations section of the company's website at www.powerfleet.com. Now, I would like to turn the call over to Power Fleet's CEO, Mr. Chris Wolfe. Sir, please proceed.

Thank you, Tom. Welcome, everyone, and thanks for joining our call today. As you can see from the press release we issued this morning, that while we successfully grew our recurring services revenues by 10%, we had our product sales in Q3 impacted by the cargo ship backup in Los Angeles, which had the ripple effect of severely impacting new forklift builds starting in mid-August. All forklift manufacturers in the U.S. had their production severely affected, which in turn led to their delaying deliveries of forklifts as they waited for counterbalance weights and other critical parts to be offloaded from ships. It's worth mentioning that about one-third of PowerFleet's industrial sales each quarter are for new forklifts. These higher-priced, higher-margin industrial telemetry orders are typically placed the last month of each quarter for forklifts coming off the line the following quarter. This is where our Q3 shortfall occurred. I'd like to emphasize that these forklift telemetry orders were not canceled, merely delayed, waiting on forklift deliveries, as are our customers. While we face momentary We've seen our investments in our logistics products continue to pay off. During the third quarter, we received several large logistics orders that could have made up for the shortfall in industrial. However, we were not able to procure the necessary electronic parts to surge our logistics deliveries. Despite the challenges we faced in the quarter, we delivered year-over-year revenue growth of 6% in Q3 and 9% for the first nine months of 2021. On top of this, we saw solid growth in our most important KPI, our high margin recurring services revenue, which was up 10% and 7% for the third quarter and for nine months, respectively. I'll turn it over to Ned to discuss our financial results in more detail. Afterwards, I'll cover more about our overall business climate, Q3 successes, our pipeline, and our backlog. Ned?

Thank you, Chris, and good morning, everyone. Turning to our results for the third quarter and nine months ended September 30, 2021. Total revenue for the third quarter increased 6% to $29.2 million compared to $27.6 million in Q3 of last year. For the nine-month period, total revenue increased 9% to $91.8 million from $84.2 million in the same year-ago period. High margin recurring and services revenue for the third quarter of 2021 increased 10% to $18.5 million or 63% of total revenue from $16.7 million or 60% of total revenue in Q3 of last year. For the nine-month period, high margin recurring and services revenue increased 7% to $54.1 million or 63% of total revenue from 50.7 million or 60% of total revenue in the same year ago period. Product revenue, which drives future services revenue for the third quarter of 2021 was $10.8 million or 37% of total revenue compared to 10.9 million or 39% of total revenue in Q3 of last year. For the nine month period, product revenue was 37.7 million or 41% of total revenue and improvement compared to 33.5 million or 40% of total revenue in the same year ago period. Gross profit for the third quarter of 2021 was 14.3 million or 49% of total revenue compared to 14.9 million or 54% of total revenue in Q3 of last year. Service gross profit for the third quarter of 2021 was $11.7 million or 63% of total services revenue compared to $10.7 million or 64% of total service revenue in Q3 of last year. Product gross profit for the third quarter of 2021 was $2.6 million or 24% of total product revenue compared to $4.2 million or 39% of total product revenue in Q3 of last year. The decrease in product gross profit was primarily due to a $400,000 one-time expense related to an incentive program to expand business with an existing customer, one of the largest chassis lessors in North America. In exchange, the customer placed orders for approximately 3,000 units to be delivered in Q4 of 2021 and committed to ordering 10,000 to 15,000 additional units in 2022. was also impacted by product mix, higher costs associated with supply chain issues and electronic component shortages, and inflation. Turning to our expenses, total operating expenses for the third quarter of 2021 were $16.7 million compared to $16.2 million in the prior quarter and $14.2 million in Q3 of last year. Looking at our profitability metrics, Gap net loss attributed to common stockholders totaled $4.5 million, or $0.13 for basic and diluted shares, compared to net loss attributable to common stockholders of $1.7 million, or $0.06 for basic and diluted shares in Q2 of last year. Non-gap net loss for the third quarter of 2021 totaled $364,000 or $0.01 per basic and diluted share. This compares to non-GAAP net income of $2.2 million or $0.07 per basic and $0.06 per diluted share in Q3 of last year. Adjusted EBITDA and non-GAAP metric for the third quarter of 2021 totaled $1 million compared to adjusted EBITDA of $3.6 million in the same year-ago period. Our liquidity position remains strong at quarter end with $33.8 million in cash and cash equivalents and $49.4 million of working capital. That concludes my prepared remarks. Chris?