Powerfleet — Second Quarter Fiscal 2027 Earnings Summary

Financial Performance:

• Total revenue increased 4% year-over-year to $115.7 million for the quarter ended September 30, 2026, compared to $111.7 million in the prior-year period.
• Services revenue grew 7% year-over-year to $95.2 million, representing an 82% revenue mix compared to 80% in the prior year.
• Product revenue decreased 8% year-over-year to $20.5 million.
• Gross margin was 53%, a decrease from 56% in the prior year.
• Net loss attributable to common stockholders was $6.9 million, compared to a net loss of $4.3 million in the prior year.
• Adjusted EBITDA was $24.9 million, slightly up from $24.8 million in the prior year.
• Profit from operations was $1.4 million for the quarter.
• Operating expenses increased 4% to $60.5 million, driven by a planned investment in selling and marketing.
• Net interest expense decreased to $6.0 million from $6.7 million in the prior year.
• For the first six months of fiscal 2027, net cash provided by operating activities was $4.8 million, down from $10.2 million in the prior-year period.
• Cash used in investing activities totaled $21.8 million, primarily for capital expenditures of $12.6 million and capitalized software development costs of $9.6 million.
• Cash and cash equivalents, including restricted cash, totaled $29.8 million as of September 30, 2026.
• Total debt was $291.4 million, with net debt (total debt less cash and restricted cash) at $261.6 million.

Guidance and Future Outlook:

• Powerfleet affirmed its fiscal 2027 revenue guidance of $468 million to $473 million, representing approximately 6% year-over-year growth at the midpoint.
• Adjusted EBITDA guidance for fiscal 2027 remains $111 million to $114 million, representing approximately 24% at the midpoint.
• The company expects free cash flow of approximately $20 million for fiscal 2027.
• Guidance assumes weighted-average shares outstanding of approximately 136 million, interest expense of $27 million, and taxes of $10 million.
• Revenue and profitability are expected to strengthen in the second half of fiscal 2027, supported by the South African National Treasury deployment and momentum across strategic growth engines.
• The company expects to exit fiscal 2027 at a Q4 annualized revenue run rate of approximately $495 million with an adjusted EBITDA margin of approximately 27%.

Business Segments and Product Lines:

• Strong momentum reported in On-Site, AI Video, and IoT & Connected Services segments.
• The South African National Treasury contract is progressing ahead of original expectations.
• Launched Unity Foresight, an AI predictive analytics solution designed to deliver enhanced operational insights and create opportunities for incremental recurring revenue.
• Launched Unity Asset Intelligence, extending capabilities beyond vehicles to pallets, containers, and equipment, targeting a total addressable market of over 100 million assets and $30 billion in potential connected services.
• The company is redirecting capital and operating resources, forgoing certain near-term revenue opportunities to support long-term growth.

Market and Competitive Landscape:

• Powerfleet operates in the artificial intelligence of things (AIoT) software-as-a-service (SaaS) mobile asset industry.
• The company is a global leader with a primary listing on Nasdaq and a secondary listing on the Johannesburg Stock Exchange.
• The new device financing facility is designed to fund the largest growth opportunity as the business scales, supporting a hardware-as-a-service model where rollout costs scale with customer demand.

Risks and Challenges:

• Forward-looking statements involve risks including the possibility of not fully realizing anticipated benefits of acquisitions and business transformation initiatives.
• Risks include significant losses, accumulated deficits, and the inability to achieve or sustain profitability.
• Exposure to global economic, political, and business conditions, including inflation, interest rate increases, foreign exchange instability, and geopolitical conflicts.
• Risks associated with operating across multiple geographies, including foreign exchange fluctuations and economic instability in emerging markets.
• Potential disruptions in the global supply chain, component availability, or reliance on limited suppliers.
• Risks related to the deployment and use of AI and machine learning technologies, including operational, legal, regulatory, and reputational risks.
• Risks associated with the company's level of indebtedness, debt service obligations, and ability to obtain additional capital.

Management Commentary and Tone:

• CEO Steve Towe stated that Q2 results demonstrate disciplined execution with record revenue and sequential margin improvement, reinforcing the company is on track to deliver full-year objectives.
• CFO Paul Lalljie highlighted that services revenue growth underscores the strength of the services-led business and confirmed the company remains on track to deliver full-year guidance and the targeted exit run-rate.
• Management expressed confidence in the device financing facility's ability to support growth at scale.

Other Key Points:

• Powerfleet agreed in principle to a device financing facility with Rand Merchant Bank (RMB) to support deployment under the South African National Treasury contract.
• Under the proposed facility, RMB will fund upfront device costs, which will be repaid from contracted customer payments, allowing the company to retain the customer relationship and continue billing services.
• The facility remains subject to definitive documentation.
• The company does not provide guidance for GAAP financial measures or a reconciliation of forward-looking non-GAAP measures due to the inability to predict the timing or amount of certain items like stock-based compensation and acquisition-related expenses.
• An illustrative annualized revenue run-rate metric is provided based on ARR under contract and assuming full deployment of the South African contract, though it is not GAAP and does not represent fiscal 2027 revenue guidance.