PowerFleet, Inc.

Greetings. Welcome to PowerFleet's second quarter 2026 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Carolyn Capaccio, of Alliance Advisors. You may begin.

Thanks, Holly. Good morning, everyone. This presentation contains forward-looking statements within the meeting of federal securities laws. Forward-looking statements include statements with respect to Power Fleet's beliefs, plans, goals, objectives, expectations, anticipations, assumptions, estimates, intentions, and future performance, and involve known and unknown risks, uncertainties, and other factors which may be beyond Power Fleet's control and which may cause its actual results, performance, or achievements to be materially different from future results, excuse me, performance or achievements expressed or implied by such forward-looking statements. All statements other than the statements of historical fact are statements that could be forward-looking statements. For example, forward-looking statements include statements regarding prospects for additional customers, potential contract values, market forecasts, projections of earnings, revenues, synergies, accretion or other financial information, emerging new products and plans, strategies and objectives of management for future operations, including growing revenue, controlling operating costs, increasing production volumes, and expanding business with core customers. The risks and uncertainties referred to above are not limited to risks detailed from time to time in PowerFleet's filings with the Securities Exchange Commission, including PowerFleet's annual report on Form 10-K for the year ended December 31, 2021. These risks could cause actual results to differ materially from those expressed in any forward-looking statements made by or on behalf of PowerFleet. Unless otherwise required by applicable law, PowerFleet assumes no obligation to update the information contained in this presentation and expressly disclaims any obligation to do so, whether a result of new information, future events, or otherwise. Now I'll turn the call over to PowerFleet CEO, Steve To. Steve?

Good morning, everyone. It's great to be here this morning with key members of the leadership group to walk you through what's been a statement quarter for PowerFleet. This set of results marks a transition point for the company. It signals the end of an integration period following the two major acquisitions we completed and the start of a new chapter, one focused squarely on accelerating sustainable growth. Just six months into aligning into one global enterprise and operating level, we're clicking into gear. starting to deliver expanding revenue growth and healthy business momentum in our key operating metrics. In Q2, our top growth metric, annual services recurring revenue, reached the double-digit growth milestone originally targeted for year-end ahead of schedule. The true strength of growth is how you get there. For us, that means responsibly and efficiently. The extensive Synergy programs we aggressively executed are already moving the dial meaningfully. And we're delighted to also post meaningful adjusted EBITDA expansion this quarter, both sequentially and year over year. This quarter clearly demonstrates the shape of the future of PowerFleet. Integrated, efficient, and built for profitable growth. Next slide. When you step back and look at the quarter, you can see a clear pattern of balanced execution. Services and ARR are growing strongly. Margins are expanding both at total gross margin level and particularly encouragingly within the services line. This consistent improvement speaks to the strength of our SaaS-led model and our operating discipline. What's also particularly pleasing for this quarter is the return to growth in product revenue inclusive of expanding margins. It underscores the durability of our business and the effectiveness of the actions we took to offset tariff pressures and broader macroeconomic challenges. Together, these results demonstrate a company that's accelerating profitable growth, scaling efficiently, while maintaining quality and control. Next slide, please. We felt it was the right time in our evolution to add a high-quality executive as chief revenue officer, with a proven track record in driving SaaS growth at scale. Someone who's led multiple A-player teams and brings deep SaaS enterprise go-to-market experience. It's a crucial role with the major accelerated growth opportunity directly in front of us. It brings executive bandwidth and further high revenue expansion experience to the global team. I'm delighted to welcome Jeff Lautenbach. Jeff, over to you.

Thanks, Steve. Great to be here. Having spent time with the teams and customers, I've been able to see for myself momentum building across the business. One key element of our future success is North America, and it's been encouraging to walk into a double-digit year-over-year revenue performance in that region, a clear sign of traction and developing brand strength. One of the proof points of our scale strategy was that as Power Fleet grew, we'd see more invitations to large RFPs and greater visibility in the enterprise market. That's now happening with a 26% increase in new logo wins as more customers recognize us as a top-tier provider. Our core value proposition, safety, compliance, sustainability, and efficiency, continue to resonate strongly. We've seen a sharp rise in demand within our on-site and in-warehouse safety segment where we're delivering real impact. To give you a sense of the traction, one of our largest new deals this quarter came from a major engagement with a global industrial manufacturer, a multibillion-dollar enterprise recognized as one of the world's leading producers of heavy machinery and power systems, serving construction, mining, and energy markets worldwide. They're deploying Unity to modernize asset visibility, optimize equipment utilization, and reinforce compliance standards across their international operations. We also notably secured a major North American logistics and fleet management company, one of the world's largest providers of third-party logistics and supply chain services, operating thousands of vehicles and hundreds of distribution facilities across the region. They've selected Unity to enhance operator safety, strengthen compliance, and deliver deeper operational visibility across their nationwide logistics network. Both are multi-year strategic programs with significant expansion runway, indicators of the scale of opportunity ahead and the value our platform is delivering. Next slide. Looking forward, we're seeing strong progress in our strategic partner channels, another key pillar of our growth plan. Global channel bookings increased meaningfully in Q2 from Q1, particularly with partners like AT&T and Telus. where momentum in the North America channel continues to grow with a 32% sequential increase in quarterly pipeline build. More generally, our global cross-cell pipeline activity grew substantially. Notably, we are seeing solid traction with AI video upselling into our base, and that's showing up with a healthy 23% expansion in the video pipeline this quarter. These are encouraging proof points, evidence that our commercial engine is working as designed and that we're building a flywheel capable of sustaining double-digit growth into FY27. With that, I'll hand it over to David to walk through the financials.

Thanks, Jeff. Before running through our regular financial reviews, I'll begin with the headline. Service revenue, excluding legacy fleet complete book of business, grew 12% organically year over year. even as we've continued deliberately exiting non-core revenue streams in the quarters following our combination with Mix in April 2024. High-margin recurring SaaS revenue is the cornerstone of our future, and that progress is clearly visible in our sales mix, with service revenue now representing 80% of total revenue, up from 74% last year. Next slide. Now on to our regular financial review, starting with a quick recap of the key pro forma adjustments, as well as a change in our prior methodology for calculating adjusted EBITDA. One-time expenses. This quarter, expenses include $2.1 million in one-time charges for restructuring, integrations, and transaction costs, excluded from adjusted EBITDA and EPS for ongoing run rates. Amortization impact. Results include $5.8 million in non-cash amortization related to the mix and complete acquisitions, impacting services gross margins by over 5%. Change the calculation of adjusted EBITDA. Following consultation with the SEC, including a detailed review of question 100.04 of the compliance and disclosure interpretations on non-GAAP financial measures, we concluded our presentation of adjusted EBITDA will no longer include an EBITDA adjustment for recognition of pre-October 1, 2024, contract assets fleet complete. These amounts reflect certain in-vehicle devices delivered by fleet complete prior to the acquisition, but invoiced and collected thereafter. This treatment was applicable for a finite transition period and reflects cash received for hardware that will never be recognized as revenue by PowerFleet. The adjustment was intended to align reporting results more closely with operating cash flows, and the change has no impact on underlying economics or cash generation. Now onto Q2, which was a banner period delivering record top and bottom line performance. Total revenue increased 45% year-over-year to $111.7 million, including strong organic growth of 9% overall and 12% in strategically important services. Turning to adjusted EBITDA, which rose more than 70% to $24.8 million. Alongside this strong performance, we also invoiced $1.3 million in fleet complete IVD recoveries, which historically were included in adjusted EBITDA and will continue to flow through operating cash as collected. These results validate the strategic rationale for our M&A program and highlight the powerful market opportunities emerging through our Unity product strategy. Next slide. Turning to margins, we continue to deliver strong year-over-year improvement. A stronger mix and 77% service gross margins drove a 400 basis point increase in adjusted EBITDA gross margins to 68%. Product margins also improved by 640 basis points sequentially to 31.5%, supported by a rebound in higher margin onsite demand following Q1 tariff headwinds. On operating expenses, We are driving G&A efficiencies, investing go-to-market, and maintaining gross R&D at 8% of revenue. G&A declines to 25% of revenue, three points lower than last year, reflecting synergy capture and operating leverage. We expect G&A as the center of revenue to continue stepping down by roughly one point per quarter in the second half. Sales and marketing represented 18% of revenue, as we continue to invest in enablement and capacity to support momentum. R&D remains steady at 8% of revenue or 4% net of capitalized software as we advance innovation in AI, safety, and compliance. Overall, we're very pleased with our continued P&L progression, expanding margins, disciplined reinvestment, and strong execution across the organization. Next slide, please. Closing on leverage. where previously reported leverage ratios have been amended to exclude the previously discussed fleet-complete EBITDA add-back. We exited Q2 with a net debt-to-EBITDA ratio of 2.9 times, an improvement of half a turn from 3.4 times at the end of FY25. Looking ahead, we now expect to close the year at approximately 2.25 times compared to our prior guidance of below 2.25 times. Net debt at quarter end was $243 million compared to adjusted net debt of $229 million at the end of fiscal 25. This represents a $14 million increase or $6 million better than initial guidance of a $20 million increase in the first half. For the year, we are maintaining expectations to exit the year with net debt of approximately $220 million, representing a reduction of $20 million in the second half. Finally, And as discussed in last week's 8K, we extended the maturity date of our initial term loan A with RMB by one year to March 31, 2028. With that, I'll hand over to Melissa to walk through our adjusted EBITDA optimization progress. Melissa.

Thanks, David. I want to pause to recognize what we've achieved as a company. After 18 months of complex work, the integration is complete. with more than $30 million in annualized synergies realized, and that's a real milestone worth noting. To have maintained the level of top-line performance we have while executing a multi-business integration is no small task. Now, with integration behind us, we will move decisively into the next phase, optimization and efficiency. We'll evolve our organizational model to ensure we're structured for long-term efficiency with clear accountability across functions and regions, and we'll continue to optimize our resource mix, ensuring the right capabilities are in the right places, balancing internal expertise with flexible external partnerships to stay agile. We're embedding automation and AI more deeply to simplify how we work and enhance our customer experience. Across support, service, and operations, we're advancing further the tools that reduce manual effort improve response time, and free our people to focus on higher value activities. We will refine how we serve subscale segments to improve strategic fit and margin contribution, ensuring every part of the business is aligned to sustainable, profitable growth. In parallel, we'll centralize core operating functions further, strengthening our organizational centers of gravity and embedding best practices globally. Another area of focus is vendor and partner consolidation. We've made real progress here, capturing economies of scale and ensuring we're working with strategic partners who can grow with us. On the technology front, we'll complete our core systems rollout and streamline our technical architecture and hosting to enhance speed, reliability, and cost efficiency. All of these initiatives share one goal, to further expand adjusted EBITDA margins and create capacity for reinvestment in sustainable growth. Next slide, please. Looking ahead, I'm very excited about our upcoming Unity AIoT Innovation Showcase later this week. It's a great opportunity to highlight why PowerFleet is being recognized as a leader in our space. We'll be exploring three lenses. One, the product and solution innovation behind Unity. Two, the customer outcomes we're enabling. the measurable impact on safety, performance, and transformation, and three, the people driving it all, a highly integrated front foot team delivering at scale. It's a chance for investors and partners to see the strength and momentum of the PowerFleet platform up close. Back to you, Steve.

Finally, I'm also pleased to share that PowerFleet has received another covered industry recognition, We've been awarded the Frost & Sullivan's 2025 North America Product Leadership Award. For context, Frost & Sullivan is a highly respected global research and consulting firm, and this award is their highest recognition based on rigorous independent evaluation of innovation, market impact, and customer satisfaction. It's an objective endorsement of the differentiation we've built through Unity and the consistency of our customer experience. We're honored to receive it and proud of the team whose work made it possible. Before we open for questions, I want to close by reflecting a little further on what this set of results signals to investors for the future. It marks a fundamental shift. The moment where the power of the combinations we have undertaken, the dramatic 18-month integration we undertook, and the operational discipline we've bravely driven into the organization is clearly visible in our results. This quarter gives clear evidence that our unique solution strategy and market thesis is resonating strongly, delivering growth that's sustainable, margins that are expanding, and execution that's consistent across the board. My thanks to all our employees, our customers, and our investors for their continued partnership and confidence. Operator, let's open the line for questions.

Certainly. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Your first question for today is from Scott Shirley with Ross Capital.

Hey, good morning. Thanks for taking the questions and congrats on the quarter. Great job in seeing the organic SaaS growth break through that 10% barrier to 12%. Hey, maybe to dive in on that front, Steve and Dave, looking at the guidance for this year, I'm wondering if you could provide a little bit of color about how you're thinking about services and organic SaaS growth into the third and fourth quarter of this year. Also, as part of that, it sounds like Fleet Complete has got some revenue recognition transition issues going on. So how you're thinking about that, particularly as we start to go into 27. And I think Jeff indicated sustainable double digit growth as we get into fiscal 27. I wonder if you give us some early thoughts on that front. And then I had a follow up.

So, Scott, let me just start with the guidance. So we were pretty clear from the get go that we expect to be growing sort of 10 percent organically for Q4. So no change in terms of expectations there. Obviously, we've done a nice job increasing the midpoint of the range over time. So you can see that coming through. But again, things have gone well. Things are going well. We're building up momentum. But this is not a steady state business. So the trajectory is very clear up and to the right. But it's not as if it's just a smooth road all the way. But we feel good about where we are. Obviously, it's very clear in the numbers in terms of what we're posting. And, again, you'll see that 10% organic growth in Q4 as expected.

And, Dave, may I just follow up? Yeah. Oh, sorry. My apologies. Yeah.

No, just going to say on the outlook then in terms of how you're thinking about fleet complete kind of being blended into that organic number and early thoughts on 27, particularly given the build of the opportunity pipeline, it sounds like across the board, you know, both from a carrier partner standpoint, AI video standpoint and warehouse. Seems like everything is on the upswing.

I'll play that one, David. I think we are ahead of schedule, which is great. Momentum is building. If you look at our internal dashboard from our growth perspective, we're ahead of where we wanted to be. And now it's about that consistency, that rhythm, and driving the opportunity that's ahead of us. We've got absolute stellar momentum. We've brought Jeff in and team to help with that execution. And so the flywheel will continue to turn. So we're very optimistic about what we've put out in terms of 2027 previously. You'll hear at the end of the week some more granularity around that. But in general, from a market perspective, from a solution set resonating perspective, from an ARPU expansion perspective, from a wallet share perspective, then, you know, we're in a very, very good spot. I think you can hear the pride that the team has in terms of the numbers. In terms of Fleet Complete, there's no kind of revenue recognition challenges. I'll ask David to kind of walk through his note on Fleet Complete again. But, you know, Fleet Complete has brought those channels with us, you know, the likes of AT&T and Telus. So, you know, we now don't, you know, as of we get into 2027, we now don't think about, you know, fleet complete all of the parts of the business, it's all one and the message remains the same. So strong, durable, profitable, double digit, both SaaS growth and top line growth in general.

Scott, in terms of the fleet complete, that's an EBITDA adjustment. So this is basically invoicing that happens, cash that's collected post the close of the fleet complete transaction. It's not stuff we recognize historically as revenue. We will never recognize it as revenue, but it does generate significant cash. So the thought was to include that as part of the EBITDA adjustments, just to mirror operating cash flow. Obviously, it's a huge economic positive, but that was the EBITDA adjustment for fleet complete, which based on concentration with the SEC, we will no longer be including.

Great. And as a quick follow-up, just I'm wondering if you could provide some more High-level thoughts in terms of North America. Obviously, it's a pretty dynamic environment from a supply chain perspective. I'm wondering how you're seeing sell cycles, the ability to close deals. It certainly seems like the pipeline is building on that front. And, Dave, also just kind of, you know, in this current environment, how you guys are thinking about hedging policy for some of the international markets. Thanks.

So I'll tell you the first one. So, look, I mean, as Jeff alluded to, he's walked into a double-digit growth rate for North America recently. We believe everything being equal now that customers are buying again. Where we saw some of that product softness with the tariff decisions, the strong rebound both in the top line growth but also in the margin as well is testament to the work that we've done. What we are seeing is a strong demand and need for efficiency and for safety and compliance. You know, where customers are needing more optimization, they're needing to be more efficient to what they do, and they need stronger visibility because of these changing times, our solutions are really resonating. So, you know, I think that, you know, the couple of large wins that Jeff alluded to, too, are, you know, strategic wins that because of the power of the combination, we are now winning that business at larger enterprise scale. So we feel really good about the future there.

From a hedging strategy, Scott, from an FX standpoint, we do have a portion of our debt in both Shekel, which has been traditionally a powerful cash generator for us. So we have just south of $30 million of Shekel denominated debt. And then for South Africa, we have around about $20 million of Fezzard denominated revolver debt.

So we do have the balance sheet sort of hedging from an FX standpoint.

Your next question for today is from Anthony Stoss with Craig Hallam.

Good morning, Steve and crew, and my congrats on strong execution. A couple of questions. The up 67% in your warehouse solutions, Steve, do you attribute that to, or what do you attribute that to? Is it mainly one big customer? Is it across the board? And also perhaps an update on all your channel partners, AT&T, Telus, and the European giant, where do they stand training and launch-wise? Thanks.

Yeah, so it's across the board. So I think we are doing a better job in terms of sales execution, number one. I think, you know, the combination of solutions now where customers can get true visibility of what's going on on their site or in their warehouse, but also combine that with what's going on over the road, which is our unique proposition. That's a real game changer for our customers. And I think that's kind of resonating through. And then the evolution really of kind of, you know, more advanced video technology to save lives in the warehouse. Again, I would encourage everyone to tune in on Friday where you'll hear from our customers talking about what those solutions are doing for them and how it's changing the world. So, you know, that's a really, I think, positive trend generally. And that's, you know, we've done a lot of that in the U.S., but we're now getting real traction in other markets as well and through those channel partners. So I think we talked about the pipeline growth in terms of the channel partners. We talked about the bookings improvement globally. That's all from those partnerships that we've talked about, whether that's AT&T, Telus, MTN. And we're still gearing up with a couple of other partners that we talked about earlier in the year for 2027. So that just brings real strength and diversity to our opportunity base. And, you know, we've got some exciting future conversations going on with those channel partners about how we get more integrated into their solution set, how they can take the best of Unity and offer broader new solutions and more innovation to their customers as well. And, again, you'll hear some of that if you tune in on Friday.

Very good. Progress again, guys. Thanks.

Your next question for today is from Gary Prestopino with Barrington Research.

Hi, good morning, everyone. Hey, Steve, in terms of great new business awards and all that, but could you maybe tell us how this is starting to shake out in terms of are the majority of the new business awards coming from Unity, or is it products with services attached?

Everything that we sell is within the Unity ecosystem and platform, so there isn't something that's kind of separate. I think the differentiators really are adding in the single pane of glass, so the ability for customers to look at multiple different devices or sensors or data streams coming into the platform, being able to integrate our data into their other third-party systems. Again, we've got some good visibility for investors and partners at the event later this week, and you'll see some demos of that. But it's really, I think, about us expanding from being a point supplier to a mission-critical partner. So, you know, people are looking for connected intelligence. You know, the days of telematics and boxes and hardware, software is really moving now as to you can be a high-grade partner in providing connected intelligence that allows us to make real-time decisioning. You give us visibility with your AI capabilities, you're able to shortcut where we need to go to make the changes that we need to. And that is done in a seamless integrated way. And I think all of that together is what is ultimately, you know, we're now being seen as a different level in terms of the opportunity we can provide to medium-large customers. And I think, you know, that's where we've seen this real shift, I think, in both who we talk to in the organization and what people are willing to pay for our solutions because of the level of benefit that we provide. And ultimately, we're now seen as an integrated partner. And because of the increased scale that we've got, the credibility of our offerings have gone exponentially in terms of where we're now seen with medium to large enterprises. So it's not one single thing, Gary. I think it's a play out of the thesis and the strategy, which is resonating well. And what's really exciting is we're only scratching the surface at the moment. So If you think about the solutions coming together from the three companies, you know, we're only kind of six months into that and you're already seeing the traction and the strength of the results and the durabilities of those results coming through. So again, you know, we've got a lot to do. There's a lot we can do better. We are still a work in progress, but, you know, ultimately we're very, very confident about the future.

Yeah, I guess what I was just trying to get at, Steve, is, you know, Your Unity is device agnostic, so I guess is the traction pretty good with entities that are not using your products?

It absolutely is. It absolutely is. And as we said before, a lot of customers have multi-source for this stuff. And it's also, it's not just kind of the sensors that we would traditionally think about with PowerFleet. These are other IoT sensors that they have in their estate. There are other data streams that they have in their estate. So people now are saying, look, you know, and when we go and talk to CIOs and CTOs and they say, look, we've just got this data mess. Can you simplify this for me? Can you allow us to see the wood for the trees? And then once you're able to do that, you know, can you make sure that it's usable, it's simple? And we can action it. And that's where I think, you know, the power of Unity's unique capabilities really make swift business change. And, you know, sometimes when we've deployed these solutions and our competitors deploy these solutions, it can take you a decent amount of time to actually start to get the value back. Whereas I think, you know, we are now ahead of break even, you know, within the first 12 months of deployment. We're making meaningful change. We're seeing customers who we expected to kind of, you know, do second phase rollouts over maybe a 12, 18-month period, kind of short-cutting that to a 6- to 12-month period now because they've got the rhythm and because we've been able to simplify the spaghetti mess that they had in their organization.

And then just one last quick question. I mean, in feedback from your customers, I think you had six modules for Unity as you initially rolled out. Are you developing any further? And with any feedback from your clients, what do you feel like you're missing in that Unity platform with the modules, if anything?

Yes. So it's more about enhancing the modules to the next level. So it sounds like I'm plugging Friday. I'm not meaning to. But ultimately, you will see how the strength of our AI capabilities, the data that we can pull, our real-time interventions that we make with our customers. You know, a topic of safety is a very broad topic, and you'll see just how we're really kind of doubling down on the granularity of what we're able to achieve with our customers. So I wouldn't say we're expanding kind of horizontally into more different sets of modularity, but the strength of those modules. And I come back to this, you know, from the question we had earlier. To have true visibility of your safety environment across all your employees, whether that's on a site or whether it's over the road, is transformational for customers in a number of ways. So, you know, really doubling down on that, you know, the advancement of the data analytics we can provide, the speed and accuracy of those is where we're spending the majority of our time at the moment.

Thank you very much.

Your next question is from Dylan Becker with William Blair.

Hey, gentlemen, appreciate it. Really nice job here. Maybe, Steve, starting with you, the 12% organic services, obviously, ahead of plan is quite impressive. I wonder if, given kind of the pipeline strength that you guys are seeing, that's affording you the ability to kind of unlock some of that held back spend around go-to-market, and maybe if that kind of shifts how you think about the model going forward, given the vast opportunity here, kind of reinvesting maybe some of that incremental EBITDA growth or EBITDA upside that you would see traditionally back into go-to-market and product development initiatives? Because it feels like the market's really kind of resonating relative to the solutions you're able to provide at this point.

Yeah, so we talked about, we held back on a $4 million investment as the tariff challenges hit. We have pressed the button on that, and that's in the sales channels and in kind of customer and account engagement, plus some more resources into the channel opportunity. And over time, we will be good stewards in terms of ensuring that we feel confident about the growth and we can stand behind any more investment. But we have the ability to flex the model dependent on that growth rate and on our confidence levels. and we will flex in the model through 27 and 28 appropriately. Because as you say, you know, as this flywheel starts to turn, as we kind of open up more opportunities and, you know, we just get more, I think, exposure into the global markets that we're now, you know, we're now attacking, then, you know, we will maintain flexibility and optionality to double down on go-to-market investment.

Perfect. Okay. Thank you. Very helpful. And maybe, following up again with you here, Steve, or maybe this is for Jeff as well too, encouraging to see some of the new logo momentum in the business. But if I look at it too, low single digit millions for a Fortune 500 entity, feels like you're kind of just scratching the surface relative to that opportunity. So maybe if you can kind of help reconcile, obviously getting more shots on goal, getting a foot in the door, but maybe also how that kind of breeds conviction and and the opportunity to significantly expand within several of those accounts, maybe better line of sight now that you have built and established that relationship, kind of the opportunity from a cross-selling perspective as well, too. Thank you.

Jeff, why don't you take that one and I'll follow up?

Yeah. There is great opportunity with new logo moving forward. As we talked about, we made a pivot, right, from a selling perspective to onsite and vision. And the sales organization, that's resonating really well with the opportunity. You heard about the pipeline increases. We can do so much better moving forward. And there's so much opportunity out there in these markets that are untapped for us. i feel like we're just getting our sea legs underneath us relative to the opportunity statement and enabling the field on the new value propositions as we move into these these different market segments but leveraging the the install base that we already have so the customers are there for us to expand and then from a new logo perspective uh it's attacking the verticals too and that opportunity is there as well so I'm really optimistic about the opportunity around new logo, especially as we continue to gain skills and progress skills in those areas.

Thanks, Jeff. And just to respond around, you know, we're scratching the surface on those accounts. You're absolutely right. There's a 5, 10x opportunity in those accounts, both nationally and internationally as well. So we're strengthening our global accounts model. And you will hear again here from some of the customers that we alluded to earlier in the year about, you know, some large scale deployments and how they're feeling about expansion opportunities with us as well. So, you know, what's exciting is it's multidimensional. And it's, you know, if you look around the modularity of the solution to Gary's point, people can grow in the solution, whether that's, you know, in terms of do more of the same with us on a global basis, expanding sites, expanding, you know, the volume of vehicles that they have with us or growing different divisions or territories. So, you know, we're really, I think, infused by the space we're creating for ourselves, particularly in that kind of large enterprise market.

Very helpful. Thank you, guys.

Your next question for today is from Alex Sklar with Raymond James.

Great. Thank you. Steve or David, I just wanted to follow up on Dylan's question there on the enterprise momentum and just ask it a little bit differently. But if you go back one to two years in time, can you just help put some context behind how incremental these enterprise opportunities have become for PowerFleet in terms of pipeline mix today? And then with that and kind of overall brand awareness, how much more room do you have to go on the brand awareness marketing side? Thanks.

Yeah, so I think it's night and day. Our exposure, our win rates, our abilities to be successful in those large enterprise arenas. Heritage Power Fleet of 18, 24 months ago is unrecognizable from the opportunity and the credibility and the trust, frankly, in terms of being a mission-critical provider and partner to those enterprise markets. I think You know, we're building brand momentum. So, you know, the innovation awards that we get, you know, we're getting, I think, recognized now as a very much a top tier provider. You know, one of the top three in the world that's really leading in terms of, you know, its innovation and profitable growth. So ensuring that we are, you know, being good stewards of the company's capital and making sure that we, you know, are doing things responsibly. I think he's a very good sign in these times is having a partner that does that. And I think, you know, that's always been our mantra and we continue to excel there. So there's always more work to do. And, you know, there are markets that we are attacking where, you know, we have less brand presence than others in the marketplace. But that offers great opportunity for us. But overall, I think, you know, we are we're in a different paradigm and in a different sphere to where we were two years ago. And I think, you know, the upside opportunity there remains fairly immense.

Okay, great. And then, David, maybe one for you on the back-to-base motion. I know we're working through some final system integration to get precise NRR, but can you help frame directionally what you're seeing from the installed base through maybe end of second quarter of October? Where across kind of retention, upsell, cross-sell, have you seen the biggest level of improvement? Where are you still kind of pushing hardest to get to kind of some of the aspirational goals? Thanks.

So clearly, if you look at just the acceleration in growth, you know, a huge part of that is NRR in terms of selling more to our existing customers. And to everyone's point, we're early there in terms of the potential, both in terms of the customer demand as well as solutions we're bringing to market. So it is moving positively. If you look back in the last couple of quarters, obviously, we were clear in terms of our prepared remarks that for mix, for example, this time last year, we were still actively shedding revenue in terms of getting the right base and getting rid of distractions from a product delivery standpoint and a market focus standpoint. So that's working well. As you look at the sort of second half of this year, from a fleet complete standpoint, there was a similar exercise in terms of shedding some revenue as well. So what I would say is when you look at just the traditional power fleet business, excluding fleet complete, which is the 12% organic growth from an ARR standpoint, you know, a major part of that is positive net revenue retention. So everything you'd expect to see happening in terms of firstly, cleaning the book of business. Secondly, the complimentary nature of our products. Thirdly, the sort of dependent demand within customers is clearly coming through in terms of the growth that we're posting. What I would say is for the second half of this fiscal year, you're going to have a bit of a headwind in terms of the fleet complete because we did the same thing with fleet complete that happened with MIX in terms of getting the right revenue base in place that's aligned with our future as opposed to holding onto things as sort of a distraction and create friction in terms of where we need to go.

So very, very positive, and things are playing out as expected. Okay, great. Thank you both. Thanks.

Your next question for today is from Greg Gibbous with Norlin Securities.

Great. Good morning, guys. Thanks for taking the questions and congrats on the results. You know, really nice to see that 23% increase in the cross-sell pipeline. Wondering if you could maybe provide some color on where you're seeing success or solid traction with your cross-sell efforts.

Yeah, so it's in-warehouse. to over the road and vice versa. So there is a lot of traction in video, and that is multiple different video solutions that are based around safety and compliance, but really kind of expanding our reach in terms of the breadth of the organizations, whether that's from insurance perspective, whether that's, as I said, compliance, whether it's getting true safety visibility or just operational efficiency for the end-to-end supply chain. So it's really that kind of, you know, where we've had strength in one, either the over-the-road or the in-warehouse section, it's really kind of transferring those either way. And because we have that uniqueness, because we're talking to the right people in the organization who care about the objectives of both of those, you know, different parts of the business, that's resonating super strongly.

Great to hear.

And if I could, you know, can you maybe characterize the greater demand environment and I guess demand trends as it relates to what you're hearing on pauses on purchasing? Like, would you say that that headwind has fully subsided at this point?

I think, you know, people are still cautious, right? I mean, there's still, you know, dynamics in the macroeconomic conditions that cause people to be very, I think... thinking through just how much capital they're going to spend and when they're going to spend it. But obviously, if you look at the rebound we've had from a product perspective, then we are seeing people making those decisions. And so that's really positive. And on top of that, we've been able to improve price and improve margin as we go. So I think there's always a watchtower on these things. And we continue to be cautious in our approach towards things. But we've seen, you know, I think there's a real shift and a need for change in organizations, transformation, efficiency, optimization, and visibility. And, you know, it's kind of where do we sit in the food chain of decisions in terms of being kind of mission critical to businesses? I think that's only improving.

Great. And I guess one last one, if I could, you know, as it relates to the accounting adjustment, you know, you mentioned the $4 million change. impact on 25. How much are you guys taking out of 26 that was baked in?

Yeah, the number for this quarter was about $1.3 million. So it's probably a percentage point just over of EBITDA margin would be the way to think about it, Greg.

Okay, got it. Thanks very much.

We have reached the end of the question and answer session, and I will now turn Nicole over to Steve To for closing remarks.

Thanks, everyone, for joining us today, and your continued support. We look forward to updating you on our progress next quarter. Have a great day, and we look forward to our innovation event on Friday. Thank you. Bye-bye.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.