Powerfleet, Inc. Q1 FY2026 earnings call

• SaaS revenue momentum, profitable growth, and deeper customer traction through platform strategy. • Shifted go-to-market to emphasize bundle software-led solutions in high-value verticals, improving attach rates and service revenues. • Achieved 6% sequential increase in service revenue, with services at 83% of total revenue. • Service-adjusted EBITDA gross margin hit 76%. • Actioned $11 million of annualized savings in Q1 FY '26. • Added high-value deals over $100,000 ARR across 11 sectors, grew new customer logo wins by 14% sequentially. • AI video bookings grew 52% QOQ, pipeline with major channel partners in NA up 28% sequentially. • Strategic partnerships like MTM and SIXT Rental, with MTM selecting PowerFleet Unity platform for enterprise data intelligence solutions. • Holcim achieved 83% reduction in critical safety events with Unity platform. • Unified operations expanding ARPU by $2 to $8 per integration.

Services revenue grew 53% year-over-year and 6% sequentially to $86.5 million, accounting for 83% of total revenue. SaaS revenue was $104 million, a 38% increase year-over-year. Service-adjusted EBITDA gross margin was 76%.

• Net debt-to-EBITDA ratio at quarter end was 2.97x, down from 3.2x at end of FY '25, with guidance to be under 2.25 net leverage by year-end. • Expect product margins to remain in mid-20% range. • Sales and marketing expenses expected to run at approximately 18% of revenue. • Project $30 million net debt improvement in the back half of FY '26 driven by top line growth, reduced CapEx intensity, and improved working capital performance.

• Macro uncertainty and customer caution. • Intense need to manage tariff frameworks and exposures. • Potential impacts on CapEx deals due to macro conditions affecting sales cycles.

Q: Scott Searle asked about the MTN relationship, opportunity set in MTN basin footprint, timing of implementation, and updates on telcos in other geographies.

A: Steve Towe responded that MTN is a significant opportunity, with implementation in the second half of the year, pipeline up 28% sequentially in NA channel partners, and ongoing work with other telcos in Europe with results expected late Q4 into FY '27.

Q: Anthony Stoss inquired about AT&T enterprise product rollout, number of products per customer, and ARPU increase.

A: Steve Towe said AT&T is tracking well, with interest in AI modularity, and upsell/cross-sell program driving ARPU growth.

Q: Gary Prestopino asked about subscribers, ARPU, expense synergies, and product revenue mix.

A: David Wilson mentioned services ARPU was $15, Melissa Ingram stated focus on $18 million expense synergies goal, and Steve Towe explained shift to more SaaS and device-agnostic sales reducing product revenue reliance.

Q: Dylan Becker asked about capacity investment, AI intervention offering scaling, and differentiation.

A: Steve Towe talked about redeploying investment into go-to-market, and Mike Powell discussed AI risk intervention module delivering real-time action and ROI.

Q: Alex Sklar asked about indirect channel AI video bookings mix and timeline of other partners.

A: Steve Towe said AI video bookings strength across channel partners, with late Q4 launch and inflow over FY '27 for other partners.

Q: Greg Gibas asked about net debt improvement drivers, organizational rationalization, and SIXT Rental deal differentiators.

A: David Wilson discussed net debt improvement components, Melissa Ingram explained organizational structure alignment, and Steve Towe highlighted data quality, digital operations integration, and innovation as SIXT Rental deal differentiators