PowerFleet, Inc.

Good day, everyone, and welcome to Power Fleet's second quarter 2027 earnings call. At this time, all participants are placed on a listen-only mode. If you have any questions or comments during the presentation, you may press star 1 on your phone to enter the question queue at any time, and we'll open the floor for your questions and comments after the presentation. It is now my pleasure to hand the floor over to your host, Carolyn Capaccio. Ma'am, the floor is yours.

Thank you, Operator, and good morning. With me today are Steve Towe, Chief Executive Officer, Paul Lalljie, President and Chief Financial Officer, Jeff Lautenbach, Chief Revenue Officer, and Jonathan Bates, Chief Marketing Officer. Earlier this morning, PowerFleet issued its earnings release for the second quarter ended September 30th, 2026, which was furnished on a form 8K and is available together with a slide presentation for this call in the investor section of our website at ir.powerfleet.com. During this call, management will make forward-looking statements within the meaning of federal securities laws, including statements about the company's fiscal 2027 outlook, expected fourth quarter fiscal 2027 revenue on an adjusted basis and adjusted EBITDA margin, third quarter revenue mix and margins, expected capital expenditures, cash interest and cash taxes, leverage and free cash flow, the timing, pace, and contribution of the South African National Treasury contract deployment, The South African Device Financing Facility, including its completion, terms, and expected benefits, the recovery from the production constraint disclosed last quarter, the effects of foreign exchange, including the South African Rand, pipeline bookings and customer expansion, and estimated addressable markets and expected revenue from new products, including Unity Foresight and Unity Asset Intelligence. These statements are based on current expectations and are subject to risks and uncertainties that could cause actual results to differ materially. Important factors that could cause such differences are described in the cautionary note regarding forward-looking statements in today's earnings release and under risk factors in the company's annual report for the Form 10-K for the fiscal year ended March 31, 2026, and its subsequent quarterly reports on Form 10-Q. Forward-looking statements speak only as of today, and the company undertakes no obligation to update them except as required by law. We will also refer to non-GAAP financial measures including adjusted EBITDA, adjusted EBITDA margin, free cash flow, net debt, and adjusted net debt to adjusted EBITDA. These measures should be considered in addition to and not as a substitute for GAAP results. Reconciliations to the most directly comparable GAAP measures are included in Annex A to the earnings release and in the appendix to the slide presentation. I will now turn the call over to Steve.

Good morning, everyone, and thank you for joining us. Q2 was an important quarter to deliver effectively, following the deliberate decision we made to direct revenue focus, capital allocation and operating resources towards our largest ever contract win, expected to accelerate high-quality recurring revenue over future periods. Delivering against these strategic priorities, we demonstrated disciplined execution against our plan in Q2, achieving a solid top and bottom line quarter, reinforcing our confidence in the business trajectory for the second half of fiscal 2027 and FY28. I'm particularly pleased that the enhanced and energized leadership group evolved over the last few quarters is making an immediate impact on the performance and outlook for the business. Next slide, please. Let me start with our second quarter results. We achieved a record $115.7 million of revenue, representing 4.4% sequential growth. Services revenue was $95.2 million, an increase of 7% year over year, with an improved mix within total revenue to 82%. Adjusted EBITDA was $24.9 million, an increase of 16% from the first quarter, with adjusted EBITDA margin improving to 21.5%, from 19.4% in Q1. There are three specific items I'd like to call out. First, we are delighted to have agreed terms for a proposed device financing facility with RMB to support the rollout of our South African National Treasury contract, which will enable us to deploy a hardware-as-a-service model with the ability to scale our rollout costs with demand. Importantly, We expect this to improve working capital efficiency, support operating cash flow, and strengthen our ability to convert growth into free cash flow. Second, I'm particularly pleased with the recovery of our manufacturing operations following the specific component challenge on one high running item late in Q1. In Q2, we delivered a 25% sequential growth in product revenue. This was a key execution priority coming into the quarter, and we delivered against our plan. with the remaining portion of the recovery expected to be realized in Q3. And third, our second half plan remains firmly on track with strong growth in new logo and existing customer demand for the remainder of FY27 and exciting opportunities to compound growth in FY28. Next slide, please. Our South African government contract has naturally been a key focus within our recent communications. However, we want to spend time today highlighting growth we are seeing across the business. We're seeing significant traction in three high-quality growth engines, our on-site business, AI video, and IoT and connected services. Deliberately, these now account for 75% of our future pipeline. On-site brings AI-powered safety, compliance, and productivity into warehouses, facilities, and other complex on-site environments. The breadth of those applications create a differentiated proposition with major enterprises. AI video turns real-world video into actionable intelligence, helping customers run safer, smarter, and more efficient operations. This is an area where we're seeing stronger bookings, channel demand, and enterprise expansion. IoT and connected services builds on our differentiated value propositions to deliver operational intelligence, greater efficiency, and expanded recurring revenue opportunities. This is where we are choosing to concentrate resources and investment, differentiated solutions with proven customer value and scalable long-term opportunity. Jeff and Jonathan are going to give you more details after Paul's financial review. Next slide, please. Our South African National Treasury Program continues to progress ahead of schedule. In August, we reported that we'd reached mandates for 72,000 vehicle implementations, and as our first quarter update, we outlined a target for reaching 80,000 to 90,000 signed mandates by the end of Q4. Today, we've already achieved that target, with mandated installations now standing at more than 94,000, well ahead of schedule. As part of this, 40,000 units are now in aggressive deployment with the South African Police. The magnitude, velocity, and high-profile nature of this program is exactly the reason we took the actions to deprioritize less valuable business in the region. This progress demonstrates Powerfleet's ability to execute complex, large-scale programs and deliver ahead of our commitments, and reinforces our confidence in achieving our four-year objectives and medium-term outlook. Our focus remains on disciplined execution and activating the contracted services ensuring that deployment translates into strong referring revenues over future periods. I'll now hand over to Paul Lalljie, who will take us through the results, our affirmed four-year outlook, and his perspectives on the growth opportunity for the business. Paul, over to you.