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PowerFleet Reports Third Quarter 2021 Financial Results

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PowerFleet, Inc. (Nasdaq: PWFL) reported Q3 2021 revenue of $29.2 million, reflecting a 6% year-over-year increase. Recurring services revenue rose 10% to $18.5 million, making up 63% of total revenue. However, the company faced challenges due to supply chain issues, impacting industrial sales. The net loss for Q3 2021 was $4.5 million (or $(0.13) per share), a deterioration from $1.7 million the previous year. Notably, PowerFleet secured a follow-on order for 10,000 LV-500 units, demonstrating strong demand despite external challenges.

Positive
  • Q3 2021 revenue increased to $29.2 million, up 6% year-over-year.
  • Recurring services revenue rose to $18.5 million, up 10% year-over-year, making up 63% of total revenue.
  • Secured a follow-on order for 10,000 LV-500 units, indicating strong demand.
  • Cash and cash equivalents totaled $33.8 million, supporting financial stability.
Negative
  • Net loss attributable to common stockholders increased to $4.5 million, up from $1.7 million year-over-year.
  • Gross profit margin decreased from 54% to 49% year-over-year due to higher costs and product mix.
  • Product gross profit dropped significantly, impacted by $400,000 one-time expense and supply chain issues.

WOODCLIFF LAKE, N.J., Nov. 04, 2021 (GLOBE NEWSWIRE) -- PowerFleet, Inc. (Nasdaq: PWFL), a global leader and provider of subscription-based wireless IoT and M2M solutions for securing, controlling, tracking, and managing high-value enterprise assets, reported results for the third quarter and nine months ended September 30, 2021.

Third Quarter 2021 Financial Highlights

  • Total revenue was $29.2 million, up 6% year-over-year.
  • High margin, recurring and services revenue increased 10% year-over-year to $18.5 million, or 63% of total revenue.
  • At quarter end, cash and cash equivalents totaled $33.8 million and working capital was $49.4 million.

Nine Month 2021 Financial Highlights

  • Total revenue was $91.8 million, up 9% year-over-year.
  • High margin, recurring and services revenue increased 7% to $54.1 million, or 59% of total revenue.

Third Quarter 2021 and Recent Operational Highlights

  • Selected by Hyundai Translead, the leading van trailer manufacturer in North America, to provide telematics for its HT LinkSense platform.
  • Expanded deployment of LV-500 solar-powered trailer tracking solution with Day & Ross.
  • Signed a follow-on order for 10,000 LV-500 and freight camera systems with deliveries starting in Q4 2021.
  • Received the 2021 IoT Evolution Asset Tracking Award for LV-500 solar tracking solution with the LV-710 freight camera from IoT Evolution World and IoT Evolution Magazine.

Management Commentary
“We delivered 6% topline growth and 10% recurring revenue growth in the third quarter despite the cargo ship container backup at the Port of Los Angeles, which severely affected new forklift builds and deliveries,” said PowerFleet CEO Chris Wolfe. “Our Logistics sales in the period were exceptionally strong and could have potentially supplemented the shortfall in Industrial sales, but we were unable to procure the necessary parts due to the industrywide electronic component shortage. However, based on our current visibility, we believe these external supply chain issues will normalize by early next year.

“Operationally, we had several notable successes in the third quarter, including our team in Israel shipping and installing over 7,800 of units in August, which marked a new monthly record. In the U.S., our Logistics team secured a follow-on order for 10,000 LV500 container telemetry devices and our Industrial team launched the first site at a major government agency, which served as a critical milestone towards moving forward with an additional 80 sites that represent a $20 million plus opportunity that we will start implementing in 2022.

“We entered the fourth quarter with a solid backlog in Logistics and Vehicle opportunities as well as implementations underway at Ford and the major government agency. We look to build on this momentum as we continue to close deals and launch several new products, which will add to our already robust opportunity pipeline.”

Third Quarter 2021 Financial Results
Total revenue increased 6% to $29.2 million from $27.6 million in the same year-ago period.

Services revenue was $18.5 million, or 63% of total revenue, an improvement compared to $16.7 million, or 60% of total revenue, in the same year-ago period. Product revenue, which drives future services revenue, was $10.8 million, or 37% of total revenue, compared to $10.9 million, or 40% of total revenue, in the same year-ago period.

Gross profit was $14.3 million, or 49% of total revenue, compared to $14.9 million, or 54% of total revenue, in the same year-ago period. Service gross profit was $11.7 million, or 63% of total service revenue, compared to $10.7 million, or 64% of total service revenue, in the same year-ago period. Product gross profit was $2.6 million, or 24% of total product revenue, compared to $4.2 million, or 39% of total product revenue, in the same year-ago period. The decrease in product gross profit was primarily due to a $400,000 one-time expense related to an incentive program to expand business with an existing customer, one of the largest chassis lessors in North America. In exchange, the customer placed orders for approximately 3,000 units to be delivered in Q4 2021 and committed to ordering 10,000 to 15,000 additional units in 2022. Product gross profit was also impacted by product mix, higher costs associated with supply chain issues and electronic component shortages and inflation.

Selling, general and administrative expenses were $14.0 million, compared to $13.4 million in the prior quarter and $11.6 million in the same year-ago period. Research and development expenses were $2.7 million, compared to $2.5 million in the same year-ago period.

Net loss attributable to common stockholders totaled $4.5 million, or $(0.13) per basic and diluted share (based on 35.0 million weighted average shares outstanding), compared to net loss attributable to common stockholders of $1.7 million, or $(0.06) per basic and diluted share, in the same year-ago period (based on 30.1 million weighted average shares outstanding).

Non-GAAP net loss, a non-GAAP metric, totaled $364,000, or $(0.01) per basic and diluted share (based on 35.0 million weighted average basic and diluted shares outstanding), compared to non-GAAP net income of $2.2 million, or $0.07 per basic and $0.06 diluted share (based on 30.1 million weighted average basic shares outstanding and 37.6 million weight average diluted shares outstanding), in the same year-ago period (See the section below titled “Non-GAAP Financial Measures” for more information about non-GAAP net income and its reconciliation to GAAP net income/loss).

Adjusted EBITDA, a non-GAAP metric, totaled $1.0 million, compared to adjusted EBITDA of $3.6 million in the same year-ago period (See the section below titled “Non-GAAP Financial Measures” for more information about adjusted EBITDA and its reconciliation to GAAP net income/loss).

At quarter-end, the company had $33.8 million in cash and cash equivalents. The company’s working capital position at quarter-end was $49.4 million.

Nine Month 2021 Financial Results
Total revenue increased 9% to $91.8 million from $84.2 million in the same year-ago period.

Services revenue was $54.1 million, or 59% of total revenue, an improvement compared to $50.7 million, or 60% of total revenue, in the same year-ago period. Product revenue, which drives future services revenue, was $37.7 million, or 41% of total revenue, an improvement compared to $33.5 million, or 40% of total revenue, in the same year-ago period.

Gross profit was $44.8 million, or 49% of total revenue, compared to $43.8 million, or 52% of total revenue, in the same year-ago period. Service gross profit was $34.3 million, or 63% of total service revenue, compared to $32.3 million, or 64% of total service revenue, in the same year-ago period. Product gross profit was $10.5 million, or 28% of total product revenue, compared to $11.5 million, or 34.3% of total product revenue, in the same year-ago period.

Selling, general and administrative expenses were $41.0 million, compared to $38.9 million in the same year-ago period. Research and development expenses were $8.3 million, compared to $8.3 million in the same year-ago period.

Net loss attributable to common stockholders totaled $10.2 million, or $(0.30) per basic and diluted share (based on 34.4 million weighted average shares outstanding), compared to net loss attributable to common stockholders of $10.1 million, or $(0.34) per basic and diluted share, in the same year-ago period (based on 29.5 million weighted average shares outstanding).

Non-GAAP net income, a non-GAAP metric, totaled $1.1 million, or $0.03 per basic and $0.02 per diluted share (based on 34.4 million weighted average basic shares outstanding and 42.6 million weighted average diluted shares outstanding), compared to non-GAAP net income of $1.7 million, or $0.06 per basic and $0.05 diluted share (based on 29.5 million weighted average basic shares outstanding and 36.9 million weight average diluted shares outstanding), in the same year-ago period (See the section below titled “Non-GAAP Financial Measures” for more information about non-GAAP net income and its reconciliation to GAAP net income/loss).

Adjusted EBITDA, a non-GAAP metric, totaled $5.2 million, a decrease from adjusted EBITDA of $5.8 million in the same year-ago period (See the section below titled “Non-GAAP Financial Measures” for more information about adjusted EBITDA and its reconciliation to GAAP net income/loss).

Investor Conference Call
PowerFleet management will discuss these results and business outlook on a conference call today (Thursday, November 4, 2021) at 8:00 a.m. Eastern time (5:00 a.m. Pacific time).

PowerFleet management will host the presentation, followed by a question-and-answer session.

Toll Free: 888-506-0062
International: 973-528-0011
Entry code: 271464

The conference call will be broadcast simultaneously and available for replay here and in via the investor section of the company’s website at ir.powerfleet.com.

If you have any difficulty connecting with the conference call, please contact PowerFleet’s investor relations team at (949) 574-3860.

Non-GAAP Financial Measures
To supplement its financial statements presented in accordance with Generally Accepted Accounting Principles (GAAP), PowerFleet provides certain non-GAAP measures of financial performance. These non-GAAP measures include non-GAAP net income (loss), non-GAAP net income (loss) per basic and diluted share and adjusted EBITDA. Reference to these non-GAAP measures should be considered in addition to results prepared under current accounting standards, but are not a substitute for, or superior to, GAAP results. These non-GAAP measures are provided to enhance investors’ overall understanding of PowerFleet’s current financial performance. Specifically, PowerFleet believes the non-GAAP measures provide useful information to both management and investors by excluding certain expenses, gains and losses that may not be indicative of its core operating results and business outlook. Adjusted EBITDA is not a measure of financial performance or liquidity under GAAP and, accordingly, should not be considered as an alternate to net income or cash flow from operating activities as an indicator of operating performance or liquidity. Because PowerFleet’s method for calculating the non-GAAP measures may differ from other companies’ methods, the non-GAAP measures may not be comparable to similarly titled measures reported by other companies. Reconciliation of all non-GAAP measures included in this press release to the nearest GAAP measures can be found in the financial tables included in this press release.

PowerFleet, Inc. and Subsidiaries
Reconciliation of GAAP to Adjusted EBITDA Financial Measures
(Unaudited)

 Three Months Ended Nine Months Ended
 September 30, September 30,
 2020 2021 2020 2021
            
Net loss attributable to common stockholders$(1,749,000)  $(4,541,000)  $(10,064,000)  $(10,157,000) 
Non-controlling interest 6,000   (4,000)   (10,000)   (5,000) 
Preferred stock dividend and accretion 1,159,000   1,196,000   3,422,000   3,588,000 
Interest (income) expense, net 625,000   506,000   1,985,000   1,562,000 
Other (income) expense, net -   (7,000)   (7,000)   (5,000) 
Income tax (benefit) expense 529,000   161,000   1,182,000   701,000 
Depreciation and amortization 2,109,000   2,146,000   6,159,000   6,376,000 
Stock-based compensation 992,000   927,000   3,078,000   3,120,000 
Foreign currency translation (76,000)   620,000   (25,000)   (11,000) 
Impact of the fair value mark-up of acquired inventory -   -   124,000   - 
            
Adjusted EBITDA$3,595,000  $1,004,000  $5,844,000  $5,169,000 
            

PowerFleet, Inc. and Subsidiaries
Reconciliation of GAAP to Non-GAAP Net Income (Loss) Financial Measures
(Unaudited)

 
 Three Months Ended Nine Months Ended
 September 30, September 30,
 2020 2021 2020 2021
            
Net loss attributable to common stockholders$(1,749,000)  $(4,541,000)  $(10,064,000)  $(10,157,000) 
Preferred stock dividend and accretion 1,159,000   1,196,000   3,422,000   3,588,000 
Other (income) expense, net -   (7,000)   (7,000)   (5,000) 
Intangible assets amortization expense 1,332,000   1,282,000   3,996,000   3,879,000 
Stock-based compensation 992,000   927,000   3,078,000   3,120,000 
Foreign currency translation (76,000)   620,000   (25,000)   (11,000) 
Non-cash portion of income tax expense 525,000   159,000   1,140,000   651,000 
Impact of the fair value mark-up of acquired inventory -   -   124,000   - 
Non-GAAP net income (loss) $2,183,000  $(364,000)  $1,664,000  $1,065,000 
            
Non-GAAP net income (loss) - basic$0.07  $(0.01)  $0.06  $0.03 
Non-GAAP net income (loss) - diluted$0.06  $(0.01)  $0.05  $0.02 
Weighted average common shares outstanding - basic 30,143,000   35,019,000   29,528,000   34,398,000 
Weighted average common shares outstanding - diluted 37,579,000   35,019,000   36,940,000   42,612,000 
            

About PowerFleet
PowerFleet® Inc. (NASDAQ: PWFL; TASE: PWFL) is a global leader and provider of subscription-based wireless IoT and M2M solutions for securing, controlling, tracking, and managing high-value enterprise assets such as industrial trucks, tractor trailers, containers, cargo, and vehicles and truck fleets. The company is headquartered in Woodcliff Lake, New Jersey, with offices located around the globe. PowerFleet’s patented technologies address the needs of organizations to monitor and analyze their assets to increase efficiency and productivity, reduce costs, and improve profitability. Our offerings are sold under the global brands PowerFleet, Pointer, and Cellocator. For more information, please visit www.powerfleet.com, the content of which does not form a part of this press release.

Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning of federal securities laws. Forward-looking statements include statements with respect to PowerFleet’s beliefs, plans, goals, objectives, expectations, anticipations, assumptions, estimates, intentions, and future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond PowerFleet’s control, and which may cause its actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be forward-looking statements. For example, forward-looking statements include statements regarding prospects for additional customers; potential contract values; market forecasts; projections of earnings, revenues, synergies, accretion, or other financial information; emerging new products; and plans, strategies, and objectives of management for future operations, including growing revenue, controlling operating costs, increasing production volumes, and expanding business with core customers. The risks and uncertainties referred to above include, but are not limited to, future economic and business conditions, the ability to recognize the anticipated benefits of the acquisition of Pointer, which may be affected by, among other things, the loss of key customers or reduction in the purchase of products by any such customers, the failure of the market for PowerFleet’s products to continue to develop, the possibility that PowerFleet may not be able to integrate successfully the business, operations and employees of I.D. Systems and Pointer, the inability to protect PowerFleet’s intellectual property, the inability to manage growth, the effects of competition from a variety of local, regional, national and other providers of wireless solutions, and other risks detailed from time to time in PowerFleet’s filings with the Securities and Exchange Commission, including PowerFleet’s annual report on Form 10-K for the year ended December 31, 2020. These risks could cause actual results to differ materially from those expressed in any forward-looking statements made by, or on behalf of, PowerFleet. Unless otherwise required by applicable law, PowerFleet assumes no obligation to update the information contained in this press release, and expressly disclaims any obligation to do so, whether a result of new information, future events, or otherwise.

PowerFleet Company Contact
Ned Mavrommatis, CFO 
NMavrommatis@powerfleet.com
(201) 996-9000 

PowerFleet Investor Contact 
Matt Glover
Gateway Investor Relations
PWFL@gatewayir.com
(949) 574-3860

PowerFleet, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations Data

    
 Three Months Ended Nine Months Ended
 September 30, September 30,
 2020 2021 2020 2021
 (Unaudited) (Unaudited) (Unaudited)(Unaudited)
Revenue:           
Products$10,914,000  $10,785,000  $33,516,000  $37,671,000 
Services 16,688,000   18,461,000   50,650,000   54,114,000 
            
  27,602,000   29,246,000   84,166,000   91,785,000 
Cost of revenue:           
Cost of products 6,700,000   8,172,000   22,025,000   27,186,000 
Cost of services 5,979,000   6,809,000   18,309,000   19,819,000 
            
  12,679,000   14,981,000   40,334,000   47,005,000 
            
Gross Profit 14,923,000   14,265,000   43,832,000   44,780,000 
            
Operating expenses:           
    Selling, general and administrative expenses 11,636,000   13,959,000   38,905,000   40,988,000 
    Research and development expenses 2,535,000   2,735,000   8,289,000   8,259,000 
            
  14,171,000   16,694,000   47,194,000   49,247,000 
            
Loss from operations 752,000   (2,429,000)  (3,362,000)  (4,467,000)
Interest income 10,000   11,000   41,000   35,000 
Interest expense (597,000)  (516,000)  (2,026,000)  (1,597,000)
Foreign currency translation of debt (220,000)  (261,000)  (130,000)  151,000 
Other (expense) income, net -   7,000   7,000   5,000 
            
Net loss before income taxes (55,000)  (3,188,000)  (5,470,000)  (5,873,000)
            
Income tax benefit (expense) (529,000)  (161,000)  (1,182,000)  (701,000)
            
Net loss before non-controlling interest (584,000)  (3,349,000)  (6,652,000)  (6,574,000)
Non-controlling interest (6,000)  4,000   10,000   5,000 
            
Net loss (590,000)  (3,345,000)  (6,642,000)  (6,569,000)
Accretion of preferred stock (168,000)  (168,000)  (504,000)  (504,000)
Preferred stock dividend (991,000)  (1,028,000)  (2,918,000)  (3,084,000)
            
Net loss attributable to common stockholders$(1,749,000) $(4,541,000) $(10,064,000) $(10,157,000)
            
Net loss per share - basic and diluted$(0.06) $(0.13) $(0.34) $(0.30)
Weighted average common shares outstanding - basic and diluted 30,143,000   35,019,000   29,528,000   34,398,000 
            

PowerFleet, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet Data

 
 As of
 December 31, 2020 September 30, 2021
     (Unaudited)
ASSETS       
Current assets:       
Cash and cash equivalents$18,127,000  $33,821,000 
Restricted cash 308,000   308,000 
Accounts receivable, net 24,147,000   30,151,000 
Inventory, net 12,873,000   16,197,000 
Deferred costs - current 3,128,000   1,298,000 
Prepaid expenses and other current assets 6,184,000   7,256,000 
Total current assets 64,767,000   89,031,000 
        
Deferred costs - less current portion 2,233,000   1,174,000 
Fixed assets, net 8,804,000   8,852,000 
Goodwill 83,344,000   83,344,000 
Intangible assets, net 31,276,000   27,397,000 
Right of use asset 9,700,000   9,850,000 
Severance payable fund 4,056,000   4,095,000 
Deferred tax asset 1,506,000   893,000 
Other assets 3,115,000   3,656,000 
Total assets$208,801,000  $228,292,000 
        
LIABILITIES       
Current liabilities:       
Short-term bank debt and current maturities of long-term debt$5,579,000  $6,225,000 
Accounts payable and accrued expenses 20,225,000   24,655,000 
Deferred revenue - current 7,339,000   6,274,000 
Lease liability - current 2,755,000   2,508,000 
Total current liabilities 35,898,000   39,662,000 
        
Long-term debt, less current maturities 23,179,000   19,025,000 
Deferred revenue - less current portion 6,006,000   5,328,000 
Lease liability - less current portion 7,050,000   7,530,000 
Accrued severance payable 4,714,000   4,740,000 
Other long-term liabilities 674,000   711,000 
        
Total liabilities 77,521,000   76,996,000 
        
MEZZANINE EQUITY       
Convertible redeemable Preferred stock: Series A 51,992,000   52,495,000 
        
STOCKHOLDERS' EQUITY -   - 
Total Powerfleet, Inc. stockholders' equity 79,213,000   98,707,000 
Non-controlling interest 75,000   94,000 
Total equity 79,288,000   98,801,000 
Total liabilities and stockholders' equity$208,801,000  $228,292,000 
        

PowerFleet, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flow Data

  
 Nine Months Ended September 30,
 2020 2021
    (Unaudited)
Cash flows from operating activities (net of net assets acquired):     
Net loss$(6,642,000) $(6,569,000)
Adjustments to reconcile net loss to cash (used in) provided by operating activities:     
Non-controlling interest (10,000)  (5,000)
Inventory reserve 189,000   122,000 
Stock based compensation expense 3,195,000   3,380,000 
Depreciation and amortization 6,159,000   6,377,000 
Right-of-use assets, non-cash lease expense 2,129,000   1,839,000 
Bad debt expense 640,000   824,000 
Other non-cash items (55,000)  229,000 
Deferred taxes 1,182,000   701,000 
Changes in:     
Operating assets and liabilities (1,494,000)  (8,145,000)
      
Net cash (used in) provided by operating activities 5,293,000   (1,247,000)
      
Cash flows from investing activities:     
Proceeds from sale of property and equipment 55,000   - 
Capital expenditures (2,101,000)  (2,534,000)
      
Net cash (used in) investing activities (2,046,000)  (2,534,000)
      
Cash flows from financing activities:     
Net proceeds from stock offering 4,041,000   26,907,000 
Payment of preferred stock dividend -   (3,084,000)
Repayment of long-term debt (1,495,000)  (4,040,000)
Short-term bank debt, net (290,000)  94,000 
Proceeds from exercise of stock options 371,000   170,000 
Purchase of treasury stock upon vesting of restricted stock (298,000)  (383,000)
      
Net cash (used in) provided by financing activities 2,329,000   19,664,000 
      
Effect of foreign exchange rate changes on cash and cash equivalents (894,000)  (189,000)
Net increase in cash, cash equivalents and restricted cash 4,682,000   15,694,000 
Cash, cash equivalents and restricted cash - beginning of period 16,703,000   18,435,000 
      
Cash, cash equivalents and restricted cash - end of period$21,385,000  $34,129,000 
      

FAQ

What were PowerFleet's earnings for Q3 2021?

PowerFleet reported Q3 2021 earnings of $29.2 million, a 6% increase compared to Q3 2020.

What is PowerFleet's net loss for Q3 2021?

The net loss for Q3 2021 was $4.5 million, or $(0.13) per share.

How did PowerFleet's recurring revenue perform in Q3 2021?

Recurring service revenue increased by 10% year-over-year to $18.5 million in Q3 2021.

What challenges did PowerFleet face in Q3 2021?

PowerFleet faced supply chain issues that impacted industrial sales, attributed to a global electronic component shortage.

What are PowerFleet's future prospects following Q3 2021?

PowerFleet has a solid backlog in logistics and vehicle opportunities and plans to launch new products in Q4 2021.

PowerFleet, Inc.

NASDAQ:PWFL

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Software - Infrastructure
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United States of America
WOODCLIFF LAKE