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spk00: Good morning. Welcome to PowerFleet's third quarter 2022 conference call. Joining us for today's presentation is the company's CEO, Steve To, and principal financial officer, Joaquin Fang. Following the remarks, we will open the call for questions. Before we begin the call, I would like to provide PowerFleet's safe harbor statement that includes questions regarding forward-looking statements made during this call. During the call, there will be forward-looking statements made regarding future events, including PowerFleet's future financial performance, all statements other than present and historical facts, which include any statements regarding the company's plan 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 products, offerings, and other industry trends are considered forward-looking statements. Such statements include, but are not limited to, the company's financial expectations for 2022 and beyond. All such forward-looking statements imply the presence of risks and uncertainties, 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, demand 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 PowerFleet's CEO, Mr. Steve Tow. Sir, please proceed.
spk01: Thank you, Operator, and good morning, everyone. Thank you for joining PowerFleet's third quarter conference call. As you can see from our earnings release, the transformation of our business is being successfully executed as we delivered another quarter of very encouraging and healthy financial performance across the board. We grew revenue 17% year-over-year, gross profit by 20%, and generated strong adjusted EBITDA profitability. In fact, Q3 marked the fourth consecutive quarter of year-over-year revenue growth for our company. In addition to our top-line growth, our rationalization initiatives are enhancing our organization's efficiency and profitability. producing a 23% sequential improvement in loss from operations, totaling a 68% positive shift from Q1 to Q3 in 2022. Ahead of scheduled success, an unwavering determination for improvement in this area has positioned us well to cross over to profitability on an operating basis in the first half of next year, and is also supporting accelerated reinvestment in both go-to-market expertise and advanced software development. We have constantly communicated our goal of profitable growth. Our rebound and improvement in product growth margin by 78% since Q1, despite very challenging ongoing supply chain conditions, is a prime example of the skill and grit of the updated organisation to remove tough barriers in front of us and deliver outperformance against our competition and in turn exceeding market expectations. As you can hear, I'm extremely proud of the strides our team has made towards positioning PowerFleet for predictable and profitable revenue growth in 2023 and beyond. We promised in January and throughout the subsequent Investor Day presentation of PowerFleet Reimagined improved consistency, better quality from our operations, tactical and strategic execution of our plans, aiming to improve internal and external confidence, and frankly, credibility surrounding our future plans and expectations for the business. We are delivering our promises and building very solid foundations for high velocity, profitable growth on a global stage. Before I go further, I will now turn the call over to our principal finance officer, Joaquin Fong, to provide details on our financial results for Q3. Afterwards, I'll review our operational highlights and outlook. Joaquin?
spk03: Thanks, Steve, and good morning to everyone on the call. Turning to our financial results for the third quarter end of September 30th, 2022. Total revenue was $34.3 million, which is up 17% compared to the same year ago period. As Steve mentioned, we're encouraged by the progress we are making in shifting our revenue mix to our SaaS and high-quality recurring revenue. It is worth noting that in late September, we were unable to ship approximately $430,000 of product because we temporarily closed our Tampa facility during Hurricane Ian. Our facility was not damaged from the hurricane and was back online and fully operational in early October. High margin recurring and service revenue was 20.3 million or 59% of total revenue. This was an improvement compared to 19.8 million or 57% of total revenue in the second quarter of 2022. Product revenue, which drives future services revenue was 14 million or 41% of total revenue. This compares to 10.8 million or 37% of total revenue in Q3, 2021. Girls' profit was 17.2 million or 50% of total revenue compared to 14.3 million or 49% of total revenue in the same year ago period. Service gross profit was 13 million or 64% of total service revenue and improvement compared to 11.7 million or 63% of total service revenue in Q3 last year. Product gross profit was 4.2 million or 30% of total product revenue compared to 2.6 million or 24% of total product revenue in the same year goal period. The sequential improvement in product gross margin in Q3 2022 reflects our successful re-engineering efforts and management of PPV challenges. We continue to work against the backdrop of macroeconomic headwind affecting our ability to procure electronic components at an attractive price. In order to deliver on our customer commitments, we're actively managing these constraints in short order. Going forward into Q4 in 2023, we expect to realize sequential margin improvements through our product and re-engineering initiatives. Looking at our expenses, total operating expenses were 18.4 million compared to 17.8 million in the prior quarter and 17 million in Q3 last year. Despite marginal increases in our operating expenses in Q3 due to FX charges and other one-time non-recurring costs, we remain confident in our ability to reduce our annual operating expenses by approximately 5 million over the next 12-month period. Looking at our profitability metrics, loss from operation improved by 370,000 or 23% to 1.2 million compared to a loss of 1.6 million in the second quarter of 2022. It is worth noting that a significant portion of our loss in the quarter was once again related to PPV and foreign currency impact. Looking at the progress we've made in trunk creating our cash usage and rationalizing costs, we still expect to cross over to profitability on an operating basis in the first half of 2023. Gap net loss attributable to common stockholders totaled 3.5 million or 10 cents per basic and diluted share. This compares to gap net loss attributable to common stockholders of 4.5 million or 13 cents per basic and diluted share in Q3 of last year. Non-GAAP net income, a non-GAAP metric, totaled $1.5 million, or $0.04 per basic and $0.04 per diluted share, compared to a non-GAAP net loss of $364,000, or $0.01 per basic and $0.01 per diluted share in the same year-ago period. Adjusted EBITDA gain, a non-GAAP metric, improved by $1.8 million to $2.8 million, compared to adjusted EBITDA of $1 million in the same year-ago period. At quarter end, we had $17 million in cash and cash equivalents and $36.7 million of working capital. That concludes my prepared remarks.
spk01: Steve? Thanks, Joaquin. Following my appointment in the beginning of the year, we evolved the business strategy to position PowerFleet as a global leader of IoT SaaS solutions that optimizes the performance of mobile assets and resources to unify business operations. Following this move, it was imperative that we aligned our branding with our new position and mission. So, during the third quarter, we unveiled a new brand identity centered around being the People Power IoT company, born from the knowledgeable, passionate, empathetic, and customer-centric qualities and values of our global team. As part of our brand evolution, the Poynter Operating Division and Innovation Center in Israel assumed an increased importance as the technology incubation hub and proving ground for advanced IoT solutions. We'll be announcing later this week a very exciting new partnership with a leading-edge innovation technology partner in the personal safety space. In terms of our key operating regions, we continue to deliver impressive and exciting double-digit growth in the U.S., During the third quarter, we generated 33% year-over-year growth in our U.S. business, bringing our total growth in the region for the first nine months of 2022 to 18%. More broadly, the high growth we've delivered this year is being driven by building demand from our industrial and logistics customers in the region, including Toyota, Nissan, John Deere, Georgia Pacific and Walmart. These enterprises are looking to power fleet solutions to drive improved safety and productivity across their business operations. As the industry changes in response to the continued challenges, our technology plays a vital role in modernizing our customer software in support of their digital transformations. We look forward to accelerating the innovation of our software and data solutions. Our ongoing success in the US not only validates our go-to-market strategy, but reflects the untapped potential in the area. We're driving consistency and enhancing the profitability of our US business and believe the region will be the key leading growth vector for PowerFleet in the years ahead. Our 2023 pipeline is looking strong, enhanced by the launch of our fleet and connected solutions in the region. We're excited by the early work of the new go-to-market team we've built for this market segment. Israel also performed well in the quarter, despite the 900,000 foreign currency revenue hit we recorded due to the strong US dollar. On a constant currency basis, revenue was up 22% compared to Q3 of last year. However, given the continued strength of the US dollar, we expect to be hit by approximately $1.1 million related to foreign currency translation in Q4. Operationally, our Israeli business is executing to plan and bringing to market some exciting solutions to the IoT arena. In Mexico, the region delivered another strong quarter also, highlighted by a major win we secured with FEMSA, a Mexican multinational beverage and retail company. FEMSA is the second largest company in Mexico and a good proof point of our go-to-market and technology strategy, as we were able to displace an established global competitor with the win. FEMSA are excited to develop a strategic relationship to see how PowerFleet can provide further data insights and integrations across their business operations. In other international markets, we're making steady progress introducing our IoT solutions in Dubai and the Arab Emirates, both of which are untapped markets that have expressed a deep interest in our technology. We're continuing to move upstream within the IoT ecosystem and cementing our position as a global mission-critical technology solutions company. PowerFleet makes a real and tangible difference to the organizations we serve in helping to save lives, creating more operating time, and increasing profitability through the business change management we help to deliver. Part of reimagining PowerFleet's brand is our new IoT platform called PowerFleet Unity, which we will release on time later this month. PowerFleet Unity brings people, assets, and data together on a single intelligent platform to transform business operations. PowerFleet Unity's cognitive data engine applies AI and ML to provide traditional operational benefits, as well as new data applications to solve some of the industry's most intractable challenges, such as safety and risk management, advanced fuel management, sustainability, the move to electric vehicles, optimized fleet performance, fleet compliance, and maintenance. And although the platform is just about to be released, we are already receiving very positive feedback and interest from our beta, current, and prospective customers. We also remain on schedule to release new AI and data science-led value-added modules throughout 2023, with the first module for safety and security to be released at the end of Q1 2023. We have high confidence the enriched solutions will be game-changing in the industry. None of our success today and in the future could be achieved without our dedicated and talented global team. Our new tagline, People Powered IoT, reflects the importance we place on our world-class team that is committed to our customer success, as well as advancing cutting-edge technologies and solutions that perform as promised. Aligned with our commitment to people-powered IoT, we're continuously building upon our existing tenured and talented team to drive towards sustained growth and profitability. Along that line, we recently made several additions to our leadership team, including the appointments of Ofa Lehman as COO, Josh Betts as SVP of Enterprise Sales, Andrea Hayton as SVP of Marketing, and Ranjay Kumar as VP of Data and Artificial Intelligence Engineering. Each of these leaders brings impressive track records of executing large-scale initiatives for leading global SaaS technology companies. I'm really confident their experiences will help to increase PowerFleet's role with customers and the broader IoT ecosystem. To be sure, we earmarked a portion of the savings from our cost rationalization efforts to build out our senior team, including the additions of Ofa, Josh, Andrea, and Ranjay. Even with these additions, we continue to expect to realize 5 million in cost savings annually. Looking ahead, we entered the fourth quarter with solid operating momentum. We expect to complete the final stages of our rationalisation efforts in Q4. These controlled actions are focused on shedding low margin business and customers and placing even greater emphasis on our highest margin solutions, customers and segments. Starting in 2023, these actions will help to drive higher margin revenue, profitability and greater business value over the long run. In parallel, our proactive go-to-market motions and sales pipeline will continue to fuel growth within new and existing territories. We are executing according to plan and are confident our strategic roadmap will generate sustainable long-term growth. Overall, we're encouraged by the speed and tangible delivery of our transformation strategy throughout 2022 and expect to deliver greater business success in 2023 and beyond. The enhanced leadership team has brought a strong execution focus, making accelerated and consistent headway, enhancing organizational efficiencies, and driving our SaaS transformation. Our transformation is enabling us to refocus the company's core go-to-market strategy, realize the benefits from fully integrating acquired companies, And combining our extensive technology capabilities, all of which we believe will translate to sustainable, high-quality top-line growth with expanding profitability and positive cash flow. The outlook for PowerFleet is strong. The board and executive team has a high degree of confidence we will be able to accomplish our goal of both obtaining and retaining a seat at the very top table of solution providers in the expanded global IoT market in the years ahead. We have much hard work in front of us, but our laser focus, tremendous desire, and world-class global team gives us every chance of success. That concludes our prepared remarks. Now I'll turn it back over to the operator for Q&A.
spk00: Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. And for our participants using speaker equipment, it may be necessary to pick up the handset before pressing the star key. Our first question is from Scott Searle with Roth Capital. Please proceed.
spk06: Hey, good morning. Thanks for taking the questions. Steve, nice to see you guys building momentum as we go into the end of 2022. Hey, first, just a quick clarification on the operating income comments for breakeven in 2023. I just want to clarify that's on a gap basis, correct? And then on the supply chain front, it seems like things are getting better, but there's still some constraints there. You had a really nice step up in terms of the product gross margin. Sounds like from a combination of reengineering, but also supply chain. I think you said you were expecting gross margins to sequentially tick up in the fourth quarter. I'm wondering if you could clarify that On the product side, as we go into the fourth quarter, what are the targets here for the gross margins on the product side over the intermediate term?
spk01: Sure. So thanks, Scott. Good morning. I'll ask Joaquin to take the first part of the question and then I'll take the second.
spk03: Yes. To answer your first part of the question, yes, it's on a U.S. basis. And, you know, the improvements that we're seeing in the margins is, you know, our ability to manage the supply chain issues right now and, you know, just analyzing our deals and making decisions. And we're in the middle of the re-engineering process on our existing product line. And that's all contributing right now to the improvement in the product margins.
spk01: So, I mean, look, we've made tremendous progress in two quarters. A lot of hard work has gone into that. We're ahead of schedule to be at 30%. I think, you know, it'll be a slight improvement in Q4, but, you know, I think longer term we'll be looking back into the mid to higher 30s in terms of the product gross margin. But we still face the challenges. But I think due to the hard work and skill and, you know, it's not just about the cost side, but also improving our pricing with customers, we're starting to see some good fruitful output.
spk06: Gotcha. And if I could just staying a little bit on some of the costs in the accounting side. Currency has been a bit of a headwind. I'm wondering if you could take us through quickly just your high-level policies in terms of what you're hedging or not hedging. I got a lot of different regional exposure, and it's service-generated, so I assume that's all in local currency. I just want to clarify that, and then I had one follow-up.
spk03: Yes, it's all in local currency. We're not doing any kind of financial hedging. So it's just the currency fluctuations that we're facing. Obviously, there's some natural offsets with, you know, with even though we're in local currency, you know, we're doing the transaction local currency. So there is, you know, and we have transaction US dollars. So there's a little bit of hedge, but we're not doing any kind of financial hedging, if that's what you mean.
spk06: Yeah, perfect. And then, Steve, from a high level, you've done a tremendous amount in about 10 months, I guess, 10 months in at the current time, in terms of platform, go-to-market. It sounds like there's a pipeline building. You've got some new modules coming. You're talking about data science modules kind of starting to filter into the mix as we get into 2023. I'm wondering if you could help us understand or quantify from a high level what the magnitude and the size of the pipeline looks like. Maybe what the opportunity set is within the existing customers as you grow the wallet or addressable opportunity within the customer base. And then the metrics we should be thinking about going forward. How are you going to be reporting the business? We've got services and products, but now you start to break down in a lot of different categories with logistics, fleet, industrial, different modules within that. So how should we be thinking about the business, and how are you thinking about the business that we should be measuring you against on those milestones going forwards? And then, and I apologize for the lengthy question, but just to kind of throw in early thoughts on 2023. And I think you've talked about the longer term targets of 200 million and 25% EBITDA margins. If that's still on track, it sounds like it is, but just to clarify that. Thanks so much.
spk01: Thank you. And forgive me if I don't answer all those or I've missed anything and I'm working and I'll do our best. But I mean, in terms of our pipeline growth, I think we are very encouraged to by the coverage ratios that we're starting to obtain for the business. If you think about it this year, our growth has come from existing solutions through some pretty hard times and a lot of business transformation. And that for me is a key indicator on the business. How do you do through those difficult periods? In 2023, we have a lot of excitement for the new technologies that we will bring to bear. A lot of excitement in the go-to-market teams that we are putting on the pitch that haven't yet, you know, really kind of got going in anger in terms of creating deals. You know, we brought some new folks in, as we talked about in the U.S., in the connected car industry. scenario for um in uh you know kind of two quarters now so those guys are building their pipeline so we're expecting you know we've got a lot of anticipation that also as well with the new team in place uh having six to twelve months under their belts that you know we're going to have a strong 2022 2023 in terms of growth so both our short-term expectations i think for 23 and our longer term you know we remain confident that we're on track and ahead of schedule and to your point in 10 months we've made significant progress. I think in terms of how we measure the business, you know, we will be looking to, I'll just give you a couple of indicators I think that we should be looking at. One is the improvement in service and SaaS growth margins. I think that's something that we've got our eyes on for the future. Subscriber growth new logos. So, you know, we'll be putting more emphasis on those new logos. And as you talked about in terms of wallet share, you know, we think the new added value solutions will increase our overall ARPUs. and our overall kind of, you know, impact from our existing clients today. So, you know, as we start to formalize that, as we get a bit more visibility over, you know, the outcomes of those, we'll kind of give more information on them. But that's kind of where we see that, you know, we can really add growth because ultimately we want to create high profitable SaaS revenue. That is the aim of the company. You'll have seen from our shift, in terms of moving towards profitability, that doing that with a very weathered eye on high quality deals, good pricing and good margin is at the epicenter of what we do. So we'll continue to be judged by that kind of trajectory as well. But overall, I think, as I said, we believe the future is very strong. We've done an awful lot in a short space of time to improve the strength of the business. And we're excited by seeing some of the fruits of that work really come to market in 2023 and beyond.
spk06: Great. Thanks so much. Nice to see you getting a new team out on the pitch. I'll get back in the queue. Thanks, Scott.
spk00: Our next question is from Mike Walkley with Canaccord Genuity. Please proceed.
spk02: Great. Thanks. And my congratulations also on the strong results and progress in the transformation. I guess, Steve, follow up question to some of Scott's line of questioning. Just on Unity, can you remind us how this might be priced differently or how to go to markets differently? And what kind of ARPU uplift might this give to your installed base as you upsell this new platform?
spk01: Yeah, so great question, Mike, and good morning. So in terms of Unity, first of all, we're combining all our different platforms into one user interface. So whichever vehicle segment, as Scott alluded to, we have industrial, we have vehicles, we have fleet, we have logistics, we have IoT. So Having all of this viewed through one platform and giving the usability of that is going to be key to multinational and multi-asset type customers to be able to utilize the data from one place. So we're excited about that. Secondly, then, in terms of the modularization of that, there will be a base platform fee. And then depending on the business issue that you are looking to work on, there will be different modular charges for those different modules, as we alluded to, advanced fuel management, sustainability, safety and security, compliance, business effectiveness, business efficiency. So we'll start to see the ability for us to grow our ARPUs. I think a good range in the midterm, near to midterm, is a 10% to 15% improvement on the ARPUs that we get. But we think that overall, you know, the structure of our go-to-market will allow us to be, you know, allow people to take one module at a time, take the whole suite at the time, grow with our solutions. We can turn on some of the functionality to give people a taste of, you know, what those other modules can give. And that just brings a whole different, you know, upsell and cross-sell opportunity, inside sales, teams opportunities that the company's just not had today. So it will be a key part of our strategy moving forward.
spk02: Great, that's helpful. And then just on the solutions or services or higher area of gross margin, you said your goal is to get those higher. You talked about hardware gross margins, maybe you get into the higher 30s long term, but where could the software services gross margins trend to over time if you're successful?
spk01: Yeah, we'll be very disappointed if we don't get it above 70%. Trending towards mid-70s is where our ambition lies.
spk02: And what would that timeframe be?
spk01: I'm not going to be, I'm not going to put that in place yet. I think we've got too much work to do. All I would say is, you know, when we do say we're going to do something, then hopefully, you know, you've seen over the past year that we do it. So we need a little bit more time to kind of, you know, get that moving. And we'll update that as we, as we feel more confident in being able to give delivery dates.
spk02: Great. And last question for me, I'll jump in the queue. Just how is the hiring environment to get the right people in place? You've made a lot of hires, but you're also trying to reduce costs. So how should we balance those two? And do you feel like you have the team in place now to execute on your go-to-market strategy?
spk01: So first of all, I'm humbled by the level of talent that we've been able to hire. I think that's a real testament to the existing team. It's a testament to the strategy of the board and the support and the plan moving forward. You know, we are when we came into this, I think it may have even been you, Mike, very early on and said to me, look, it's very difficult to grow and also take costs down at the same time. You know, we are really reengineering our business fast. We're taking a lot of costs out. We are living within the envelopes that we have. And we've been able to hire this talent into the business and make improvement in our losses. And as we've alluded to, we'll continue to do that through 2023. So we feel very comfortable with where we're at. We feel very good about the new talent we've brought to bear. And I think the mixture now of the existing tenured experience that we have and then some new perspectives from people who've got proven track records of growing high-value SaaS companies is really, truly exciting. And you can probably hear it in my voice that, you know, we just can't wait to see what the team can achieve in the coming years.
spk02: Great. Well, congrats on what you've accomplished to date and best wishes for future success. I'll jump into Q. Thank you.
spk00: Our next question is from Jason Schmidt with Lake Street Capital Markets. Please proceed.
spk04: Hey, guys. You got Max on here with Lake Street. I just kind of want to first talk about the supply chain. I want to know, are you going to see any improvement in the supply chain in Q4? And then currently, what are lead times looking like?
spk01: So we've seen slight improvement, and we've seen big improvements in product gross margin since Q1. In terms of supply timescales, they're still elongated, and that is hard work for us. We're scrapping around to ensure we get the components right. But I still think we're kind of, you know, they're 30% longer than they were traditionally. But I think we are seeing slight light at the end of that tunnel. But we're, you know, we're very much making sure that we invest now to make sure that as we grow and as that pipeline comes to fruition that we're talking about, we can fulfill customer orders. So it's a constant balance. But, you know, we've got a very weathered eye on the component lead times.
spk04: And then just along those lines with inflationary pressures, have you guys instituted any price increases?
spk01: Yes, we have. We've started to. That's never easy. It's obviously easier on new business. But we are actively going out to our customer base and having conversations and, you know, and having very pragmatic conversations. And I think that's been very well received. We are, as we said in Q4, going to get a little bit tougher in certain areas and actually, you know, really focus on some unprofitable things that we have going on and, you know, make movements there. But overall, I think this is new for PowerFleet. I think it's a confidence that we now have in our technology and our value. And, you know, I think we're applying that. The go-to-market team led by Patrick Malley is applying that really well. And I think we'll punch our weight in the market in terms of the value that we give and what we get for our prices.
spk04: Okay. And then just my last one, I'll jump back into Q. Given we're about a month and a half into Q4, how have order patterns trended so far in October and early November?
spk01: So I would say similar to Q3, it's still early in the quarter, but similar to Q3, nothing dramatic either way.
spk02: Okay.
spk04: Thank you, guys.
spk00: And our final question is from Gary Prestapino with Barrington Research. Please proceed.
spk05: Good morning, Steve, Jacqueline. How are you doing?
spk01: Doing good. Thank you. You, Seth?
spk05: Good. Great. Thanks. A couple of questions here. Just to clarify, Joaquin, you said that you're still going to be looking for gross margin improvement on the product side going into Q4.
spk01: uh from you know where you were in q3 i just want to make sure i got that correct you got that correct yes we said uh we said that and you know i answered that on one of the other questions so we will see we'll see a slight improvement again momentum continue and longer term mid 30s is the range and maybe a little better over time okay and then are you starting to
spk05: see any benefit from what you said as far as the $5 million of expenses you've been able to take out of the equation from what you've done?
spk01: Yes, we are. Obviously, we have invested significantly in R&D, data science and AI capabilities. And we've also put more sales and go-to-market folks on the pitch. We've done the rebranding exercise and brought in a much, I would say, improved marketing and communications function, getting people to really understand what PowerFleet is. is all about and the broader scope that we have. We described ourselves as the best kept secret in IoT at one stage, and now we're starting to articulate that, the improved message externally. So we've reinvested some of that savings. You've seen some expansion in the gross margin lines as well. And we have some bigger wood to chop in terms of system integrations and efficiencies in the business. But we're very comfortable that on an annualized basis, that 5 million will be a net improvement over time.
spk05: So for next year, we shouldn't just be expecting a step down of 5 million in expenses overall, because you are doing things to add to your team and spending money on branding, etc. Is that kind of a correct assumption?
spk01: Yeah, so look, I mean, we are looking to maximize the opportunity that's in front of us in the market, re-engineer the company. There'll be a little bit of a hump in terms of getting that momentum, that engine really going at the level of top-line growth that we're looking to do, and we're investing in that. Fundamentally, you know, that will reduce over time. We'll become far more efficient. We'll have operating systems, a best practice. We'll be improving our business processes. We're cutting out a lot of the spend that, you know, we don't think is relevant for the future of the business. And we want to be far fitter. And I think we're proving that out, you know, in the progress that we're making and we'll stand by that and continue to do so.
spk05: Okay. And then just a couple more questions here. A couple of questions on Unity. You say where you're going to combine your platform into one user interface. So I would assume this, you know, the real benefit here is ease of use. But you also mentioned that it can give you a 10 to 15% lift in ARPU. Is that based on the clients taking some of the newer modules that you're going to be offering through Unity? Or is that just based on the fact that you're going to be charging more for Unity overall?
spk01: No, I think first of all, the usability is to your point will be far stronger. I think we are then much better placed to be a multi-asset type provider, which I think will improve business, you know, for larger enterprises. We've modernized the user interfaces as well. So, you know, it will look and feel like a, you know, 2024, 2025, you know, looking platform, the real ARPU growth will come from the modularity. It'll come from the improvement in the functionalities and ultimately the value that we're able to provide by the data insights that we give. And that's where, you know, if we look at this as, You know, we're first of all putting everything in one place. We're making it, you know, easy to use. We become, you know, we have the ability to work across multiple asset types at stage one. But the real value comes from the data insights and the depth of functionality in driving business change that we'll be able to provide our customer base in the future.
spk05: Okay. And then just lastly on the deal with the Mexican entity, was it Demsa you said is a beverage company? Yeah, I've heard of them before. Could you maybe just help us with some possible metrics or just the size of this agreement? Because I do believe they're one of the larger companies down there in the beverage area.
spk01: Yeah, we're not allowed to give out those metrics yet on behalf of the customer, but they are the second largest revenue company in Mexico. So very large enterprise with a huge distribution network. So it's a deal that we're proud of. And I think it's a deal that kind of, you know, they've had multiples of suppliers in the past and they're focusing very much on PowerFleet and very much want to grow that strategic relationship around their operating platforms, the data within their business and driving their change. So we're very excited.
spk05: Is this more or less, this is a logistics issue. or is this on the industrial side where you got this business, or both?
spk01: This is on the logistics side at the moment, but they are very excited about the other solutions that we have in our portfolio across their different asset types. Okay, thank you, Steve. Thank you.
spk00: We will now take a follow-up question from Scott Sir with Bloss Capital. Please proceed.
spk06: Steve, just to follow up on the competitive landscape, particularly looking at deals like FEMSA and otherwise, what are you seeing on the competitive short list and how are you guys faring there? What does the win rate look like and why are you guys winning? Thanks.
spk01: So I think I'm not going to mention names, but I think you'll see a consolidation really of what I would call global enterprise players. So a few larger entities that are doing well in the market. I think our win rate in those scenarios at the moment is around about 30 to 50%. I want that to be higher in the future. It's higher than it was a year ago. But this is all about people understanding the size, scale, experience, and credibility of PowerFleet as an organization, plus the huge range of solutions that we have on offer to our customers. And I think You know, our go-to-market approach has transformed a lot. You're seeing that in when born out in the numbers. And I look forward to slugging it out with our main competitors in the years to come. Great. Thanks so much.
spk00: This does conclude our question and answer session. I would like to turn the conference back over to Steve for closing remarks.
spk01: Thank you everyone for the insightful questions and thanks again to joining us this morning. I look forward to speaking to you again soon. Have a great day. Take care. Bye-bye.
spk00: Thank you for joining us for our presentation. You may now disconnect.
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