PowerFleet, Inc.

Greetings. Welcome to Power Fleet's first 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, David Wilson, PowerFleet's Chief Financial Officer. You may begin.

Thank you, operator, and I'm delighted to welcome everyone to PowerFleet's first quarter FY26 earnings call. Let me start by reading out the safe harbor statement. Our amounts today will contain forward-looking statements. Our actual results may differ from those contemplated by these forward-looking statements. Factors that may cause our actual results, performance, and achievements to be materially different from those expressed implied by such forward-looking statements are described in today's earnings press release. Any forward-looking statements that we make on this call are made only as of today, and we assume no obligation nor do we intend to publicly update or revise any forward-looking statements to reflect subsequent events or circumstances. During this call, we will present both GAAP and certain non-GAAP financial measures. A reconciliation to GAAP to non-GAAP financial measures is included in today's press release. The press release is available on the investor section of our website at ir.powerfleet.com, and we invite you to follow along with the slides that accompany this call, also located on our IR website. Now, I'll turn the call over to our CEO, Steve Towe. Steve?

Thanks, David. Good morning, everyone. It's a pleasure to be here with some of our leadership team as we reflect on a high-impact Q1, one marked by SaaS revenue momentum, profitable growth, and deeper customer traction through our platform strategy. As we entered Q1, we did so with the need to navigate real external complexity, from customer caution tied to macro uncertainty to the intense need to manage swiftly tariff frameworks and exposures. We proactively shifted our go-to-market to emphasize bundle software-led solutions in our highest value verticals. We exercise product pricing and commercial discipline that's improved our attach rates and expanded service revenues. At the same time, we accelerated our supply chain evolution playbook, mitigating tariff headwinds by rebalancing supplier exposure, negotiating improved cost rates, and managing impacts on the business and our customers. We remain firmly on the front foot. Our units of solutions are gaining strong market recognition, and our performance this quarter shows we're building momentum in the right places. Whether it's new customer acquisition, SaaS revenue mix, or the operating leverage we're unlocking, we're delivering against the roadmap we laid out. Next slide, please. The standout metric this quarter is our achievement of a 6% sequential increase in service revenue. Underscoring our recurring SaaS growth momentum. This took our services to a record 83% of total revenue, our highest mix yet. The shift towards SaaS is central to our strategy, improving predictability, scaling margins, and compounding value over time. Accelerating this move allowed us to mitigate pressure on CapEx-laden product deals where sales cycles have been elongated due to the macro uncertainty. Another key standout metric for the quarter was our service adjusted EBITDA gross margins hitting 76%, validating the improved efficiency of our model. Furthermore, we actioned $11 million of annualized savings in Q1 FY26 of the annualized $18 million committed for the full year of FY26, which has helped us to deliver adjusted EBITDA above expectations for the quarter. Let's turn now to our commercial progress. Next slide, please. Encouragingly, in Q1, we added high-value deals of over 100K ARR across 11 diverse sectors, evidence of the wide-ranging appeal for Unity solutions. We also grew our new customer logo wins by 14% sequentially, a healthy expansion driven by enterprise and mid-market traction. AI video bookings grew 52%, quarter over quarter, As well as a sequential 28% improvement in overall pipeline with our major channel partners in North America highlights the robustness of our unity go-to-market strategy. The metrics on this slide are solid proof points that we're driving a strong growth flywheel across our most premium high ARPU solutions and both our direct and indirect sales motions are both contributing well to our growth. Let's take a look now at some of the key deals in Q1 and why we won them. Next slide, please. This slide illustrates some of our most strategic enterprise wins this quarter, from Fortune 500 food and beverage leaders to global rental and logistics Tier 1 providers. Across the board, we're seeing increased penetration of our safety and compliance modules. Major national and international enterprises are placing mission-critical reliance There's a fundamental shift with customers targeting to consolidate their technology portfolios with unity across the full operational spectrum. This translates into improved wallet share and stickiness with our major clients. Having looked at some key direct wins, now I have some exciting news for our indirect sales motion.