Powerfleet Reports First Quarter 2023 Financial Results
Total GAAP Services Revenue Grows
Total Company Gross Profit Increases by
Go-forward Core Business Gross Margin Expands to
Liquidity Improves with
WOODCLIFF LAKE, N.J., May 09, 2023 (GLOBE NEWSWIRE) -- Powerfleet, Inc. (Nasdaq: PWFL), a global leader of Internet of Things (IoT) software-as-a-service (SaaS) solutions that optimize the performance of mobile assets and resources to unify business operations, reported results for the first quarter ended March 31, 2023.
FIRST QUARTER 2023 AND RECENT OPERATIONAL MILESTONES
- Continued strong execution of SaaS growth strategy demonstrated by an increase in high-margin services revenue, which was up
9% on a GAAP basis and17% on a constant currency basis compared to Q1 2022, led by impressive20% recurring revenue growth in the U.S. - Go-forward core business (excluding Argentina, Brazil, and South Africa business units, and third-party hardware only business) gross margin expanded to
53% and core business services gross margin increased to71% . - Launched phase two of cost optimization plan and expect to hit the
$3 million annualized operating expense reduction target. - Secured several strategic Unity sales deals in Q1, with H2 pipeline growing by
47% . - Closed Movingdots acquisition, bringing solution advantage in the safety, insurance and sustainability strategic verticals, alongside increasing data science and AI talent.
FIRST QUARTER 2023 FINANCIAL HIGHLIGHTS (COMPARED TO FIRST QUARTER 2022)
- High-margin services revenue increased
9% to$20.4 million . On a constant currency basis, the year-over-year increase was17% . - Gross profit increased
15% to$16.6 million , with gross margin expanding from43% to51% . - Product gross margin expanded from
17% to27% with deal discipline and product re-engineering being the key drivers. - Loss from operations improved by
49% , or$1.9 million . - Adjusted EBITDA, a non-GAAP metric, improved by
$2.0 million to$1.4 million , compared to$(0.6) million . - Ended the quarter with
$25.1 million in cash and cash equivalents and a working capital position of$41.8 million .
MANAGEMENT COMMENTARY
“Our positive start to the new year reflects our unwavering focus on driving profitable growth and SaaS recurring revenue expansion despite the challenging macroeconomic pressures and highly significant FX headwinds,” said Steve Towe, CEO at Powerfleet. “On a constant currency basis, total revenue increased by
“Our transformation strategy involves divesting low-margin, low-growth, and sub-scale business units, allowing us to focus on our high quality, profitable business segments. We're making good progress in exploring strategic alternatives for our Argentina, Brazil, and South Africa business units while also ruthlessly rationalizing hardware-only revenue from the Cellocator sales channel and diminishing other loss-making contracts. This exercise naturally moderates our overall total revenue growth in the short term but allows us to focus on value enhancing recurring revenue expansion, which drives attractive gross margin expansion, improved cash flow and EBITDA.
“This was demonstrated with the Q1 performance of our go-forward core markets, which exclude non-core territories and third party Cellocator sales. We are proud to report a total gross margin performance of
“From a sales perspective, our new prospect engagement levels are much improved, and we are aggressively ramping up our cross and upsell activity to scale Powerfleet into a faster-growing SaaS company. We are confident that the growing Unity customer wins and increased pipeline proof points, through the shift to compelling data led integrated solutions, are key indicators of compelling growth opportunities for the business.
“As we integrate Movingdots, we expect incremental transitional investments in Opex, particularly to accelerate research and development. Although this will result in some fluctuation in our short-term combined cost base, we expect revenue growth and EBITDA expansion in Q2 from our core business, with an even stronger performance in the second half of 2023. We remain on track executing our transformation plan to deliver our strategic foundational pillars - sustainable top-line growth, increased profitability, and cash flow.”
FIRST QUARTER 2023 FINANCIAL RESULTS
Total revenue was
Services revenues totaled
Products revenue declined by
Gross profit margin expanded to
Operating expenses increased to
Net income attributable to common stockholders, inclusive of a
Adjusted EBITDA, a non-GAAP metric, improved significantly to
Powerfleet had
INVESTOR CONFERENCE CALL
Powerfleet management will discuss these results and business outlook on a conference call today (Tuesday, May 9, 2023) at 8:30 a.m. Eastern time (5:30 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
Participant Access Code: 351317
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, adjusted EBITDA and total revenue and services revenue excluding foreign exchange effect. 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. These non-GAAP measures are not measures 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 | ||||||||
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2022 | 2023 | |||||||
| Net loss attributable to common stockholders | $ | (4,124,000 | ) | $ | 3,494,000 | |||
| Non-controlling interest | 1,000 | (3,000 | ) | |||||
| Preferred stock dividend and accretion | 1,196,000 | 1,275,000 | ||||||
| Interest (income) expense, net | 431,000 | 517,000 | ||||||
| Other (income) expense, net | 1,000 | (1,000 | ) | |||||
| Income tax (benefit) expense | (703,000 | ) | 397,000 | |||||
| Depreciation and amortization | 2,089,000 | 2,233,000 | ||||||
| Stock-based compensation | 457,000 | 832,000 | ||||||
| Foreign currency translation | (341,000 | ) | (580,000 | ) | ||||
| Severance related expenses | 379,000 | 134,000 | ||||||
| Gain on Bargain purchase - Movingdots | - | (7,234,000 | ) | |||||
| Movingdots Related Expenses | - | 317,000 | ||||||
| Adjusted EBITDA | $ | (614,000 | ) | $ | 1,381,000 | |||
| POWERFLEET, INC. AND SUBSIDIARIES | ||||||||
| RECONCILIATION OF GAAP TO NON-GAAP NET INCOME (LOSS) FINANCIAL MEASURES | ||||||||
| (Unaudited) | ||||||||
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2022 | 2023 | |||||||
| Net loss attributable to common stockholders | $ | (4,124,000 | ) | $ | 3,494,000 | |||
| Preferred stock dividend and accretion | 1,196,000 | 1,275,000 | ||||||
| Other (income) expense, net | 1,000 | (1,000 | ) | |||||
| Intangible assets amortization expense | 1,274,000 | 1,207,000 | ||||||
| Stock-based compensation | 457,000 | 832,000 | ||||||
| Foreign currency translation | (341,000 | ) | (580,000 | ) | ||||
| Non-cash portion of income tax expense | (706,000 | ) | 392,000 | |||||
| Severance related expenses | 379,000 | 134,000 | ||||||
| Gain on Bargain purchase - Movingdots | 0 | (7,234,000 | ) | |||||
| Movingdots Related Expenses | 0 | 317,000 | ||||||
| Non-GAAP net income (loss) | $ | (1,864,000 | ) | $ | (164,000 | ) | ||
| Non-GAAP net income (loss) - basic | $ | (0.05 | ) | $ | (0.00 | ) | ||
| Non-GAAP net income (loss) - diluted | $ | (0.05 | ) | $ | (0.00 | ) | ||
| Weighted average common shares outstanding - basic | 35,332,000 | 35,548,000 | ||||||
| Weighted average common shares outstanding - diluted | 35,332,000 | 43,702,000 | ||||||
ABOUT POWERFLEET
Powerfleet (Nasdaq: PWFL; TASE: PWFL) is a global leader of internet of things (IoT) software-as-a-service (SaaS) solutions that optimize the performance of mobile assets and resources to unify business operations. Our data science insights and advanced modular software solutions help drive digital transformation through our customers’ and partners’ ecosystems to help save lives, time, and money. We help connect companies, enabling customers and their customers to realize more effective strategies and results. Powerfleet’s tenured and talented team is at the heart of our approach to partnership and tangible success. The company is headquartered in Woodcliff Lake, New Jersey, with our Pointer Innovation Center (PIC) in Israel and field offices around the globe. For more information, please visit www.powerfleet.com.
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 Movingdots, 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 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 most recent annual report on Form 10-K. 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 Investor Contact
Matt Glover
Gateway Group, Inc.
PWFL@gatewayir.com
(949) 574-3860
Powerfleet Media Contact
Heather Smith
hsmith@powerfleet.com
(605) 203-0605
| POWERFLEET, INC. AND SUBSIDIARIES | ||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS DATA | ||||||||
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2022 | 2023 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Revenue: | ||||||||
| Products | $ | 14,392,000 | $ | 12,404,000 | ||||
| Services | 18,769,000 | 20,435,000 | ||||||
| Total Revenues | 33,161,000 | 32,839,000 | ||||||
| Cost of revenue: | ||||||||
| Cost of products | 11,978,000 | 9,002,000 | ||||||
| Cost of services | 6,784,000 | 7,219,000 | ||||||
| Total cost of revenues: | 18,762,000 | 16,221,000 | ||||||
| Gross Profit | 14,399,000 | 16,618,000 | ||||||
| Operating expenses: | ||||||||
| Selling, general and administrative expenses | 14,912,000 | 16,787,000 | ||||||
| Research and development expenses | 3,229,000 | 1,723,000 | ||||||
| Total Operating Expenses | 18,141,000 | 18,510,000 | ||||||
| Loss from operations | (3,742,000 | ) | (1,892,000 | ) | ||||
| Interest income | 13,000 | 24,000 | ||||||
| Interest expense | (444,000 | ) | (541,000 | ) | ||||
| Gain on Bargain purchase - Movingdots | - | 7,234,000 | ||||||
| Foreign currency translation of debt | 544,000 | 404,000 | ||||||
| Other (expense) income, net | (1,000 | ) | (66,000 | ) | ||||
| Net (loss) / income before income taxes | (3,630,000 | ) | 5,163,000 | |||||
| Income tax benefit (expense) | 703,000 | (397,000 | ) | |||||
| Net (loss) / income before non-controlling interest | (2,927,000 | ) | 4,766,000 | |||||
| Non-controlling interest | (1,000 | ) | 3,000 | |||||
| Net (loss) / income | (2,928,000 | ) | 4,769,000 | |||||
| Accretion of preferred stock | (168,000 | ) | (168,000 | ) | ||||
| Preferred stock dividend | (1,028,000 | ) | (1,107,000 | ) | ||||
| Net (loss) / income attributable to common stockholders | $ | (4,124,000 | ) | $ | 3,494,000 | |||
| Net (loss) / income per share - basic | $ | (0.12 | ) | $ | 0.10 | |||
| Net (loss) / income per share - diluted | (0.12 | ) | $ | 0.08 | ||||
| Weighted average common shares outstanding - basic | 35,332,000 | 35,548,000 | ||||||
| Weighted average common shares outstanding - diluted | 35,332,000 | 43,702,000 | ||||||
| POWERFLEET, INC. AND SUBSIDIARIES | |||||||||||
| CONDENSED CONSOLIDATED BALANCE SHEET DATA | |||||||||||
| As of | |||||||||||
| December 31, 2022 | March 31, 2023 | ||||||||||
| (Unaudited) | |||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 17,680,000 | $ | 24,780,000 | |||||||
| Restricted cash | 309,000 | 309,000 | |||||||||
| Accounts receivable, net | 32,493,000 | 31,442,000 | |||||||||
| Inventory, net | 22,272,000 | 22,649,000 | |||||||||
| Deferred costs - current | 762,000 | 523,000 | |||||||||
| Prepaid expenses and other current assets | 7,709,000 | 7,959,000 | |||||||||
| Total current assets | 81,225,000 | 87,662,000 | |||||||||
| Fixed assets, net | 9,249,000 | 9,953,000 | |||||||||
| Goodwill | 83,487,000 | 83,487,000 | |||||||||
| Intangible assets, net | 22,908,000 | 22,328,000 | |||||||||
| Right of use asset | 7,820,000 | 7,332,000 | |||||||||
| Severance payable fund | 3,760,000 | 3,684,000 | |||||||||
| Deferred tax asset | 3,225,000 | 2,496,000 | |||||||||
| Other assets | 5,761,000 | 5,984,000 | |||||||||
| Total assets | $ | 217,435,000 | $ | 222,926,000 | |||||||
| LIABILITIES | |||||||||||
| Current liabilities: | |||||||||||
| Short-term bank debt and current maturities of long-term debt | $ | 10,312,000 | $ | 9,359,000 | |||||||
| Accounts payable and accrued expenses | 26,598,000 | 27,682,000 | |||||||||
| Deferred revenue - current | 6,363,000 | 6,327,000 | |||||||||
| Lease liability - current | 2,441,000 | 2,481,000 | |||||||||
| Total current liabilities | 45,714,000 | 45,849,000 | |||||||||
| Long-term debt, less current maturities | 11,403,000 | 10,638,000 | |||||||||
| Deferred revenue - less current portion | 4,390,000 | 4,378,000 | |||||||||
| Lease liability - less current portion | 5,628,000 | 5,065,000 | |||||||||
| Accrued severance payable | 4,365,000 | 4,396,000 | |||||||||
| Deferred tax liability | 4,919,000 | 4,593,000 | |||||||||
| Other long-term liabilities | 636,000 | 623,000 | |||||||||
| Total liabilities | 77,055,000 | 75,542,000 | |||||||||
| MEZZANINE EQUITY | |||||||||||
| Convertible redeemable Preferred stock: Series A | 57,565,000 | 58,840,000 | |||||||||
| STOCKHOLDERS' EQUITY | - | - | |||||||||
| Total Powerfleet, Inc. stockholders� equity | 82,737,000 | 88,478,000 | |||||||||
| Non-controlling interest | 78,000 | 66,000 | |||||||||
| Total equity | 82,815,000 | 88,544,000 | |||||||||
| Total liabilities and stockholders� equity | $ | 217,435,000 | $ | 222,926,000 | |||||||
| - | - | ||||||||||
| POWERFLEET, INC. AND SUBSIDIARIES | |||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW DATA | |||||||||||
| Three Months Ended March 31, | |||||||||||
| 2022 | 2023 | ||||||||||
| (Unaudited) | |||||||||||
| Cash flows from operating activities (net of net assets acquired): | |||||||||||
| Net (loss) / income | $ | (2,928,000 | ) | $ | 4,769,000 | ||||||
| Adjustments to reconcile net loss to cash (used in) provided by operating activities: | |||||||||||
| Non-controlling interest | (1,000 | ) | (3,000 | ) | |||||||
| Gain on bargain purchase | - | (7,234,000 | ) | ||||||||
| Inventory reserve | 53,000 | 2,000 | |||||||||
| Stock based compensation expense | 457,000 | 831,000 | |||||||||
| Depreciation and amortization | 2,089,000 | 2,233,000 | |||||||||
| Right-of-use assets, non-cash lease expense | 658,000 | 658,000 | |||||||||
| Bad debt expense | 252,000 | 229,000 | |||||||||
| Other non-cash items | 556,000 | 46,000 | |||||||||
| Deferred taxes | (703,000 | ) | 377,000 | ||||||||
| Changes in: | |||||||||||
| Operating assets and liabilities | (2,558,000 | ) | (153,000 | ) | |||||||
| Net cash (used in) provided by operating activities | (2,125,000 | ) | 1,755,000 | ||||||||
| Cash flows from investing activities: | |||||||||||
| Acquisitions, net of cash assumed | - | 8,722,000 | |||||||||
| Purchase of investment | - | (100,000 | ) | ||||||||
| Capitalized software development costs | - | (680,000 | ) | ||||||||
| Capital expenditures | (610,000 | ) | (1,100,000 | ) | |||||||
| Net cash (used in) investing activities | (610,000 | ) | 6,842,000 | ||||||||
| Cash flows from financing activities: | |||||||||||
| Repayment of long-term debt | (1,497,000 | ) | (1,329,000 | ) | |||||||
| Short-term bank debt, net | - | (1,000 | ) | ||||||||
| Purchase of treasury stock upon vesting of restricted stock | (181,000 | ) | (44,000 | ) | |||||||
| Net cash (used in) provided by financing activities | (1,678,000 | ) | (1,374,000 | ) | |||||||
| Effect of foreign exchange rate changes on cash and cash equivalents | (1,480,000 | ) | (124,000 | ) | |||||||
| Net increase in cash, cash equivalents and restricted cash | (5,893,000 | ) | 7,099,000 | ||||||||
| Cash, cash equivalents and restricted cash - beginning of period | 26,760,000 | 17,990,000 | |||||||||
| Cash, cash equivalents and restricted cash - end of period | $ | 20,867,000 | $ | 25,089,000 | |||||||
| POWERFLEET, INC. CORE BUSINESS | ||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS DATA | ||||||||||||
| Three Months Ended | ||||||||||||
| March 31, 2023 | ||||||||||||
| Total Powerfleet | BASA / 3rd party Cellocator | Core Business | ||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||
| Revenue: | ||||||||||||
| Products | $ | 12,404,000 | $ | 966,000 | $ | 11,438,000 | ||||||
| Services | 20,435,000 | 3,109,000 | 17,326,000 | |||||||||
| Total Revenues | 32,839,000 | 4,075,000 | 28,764,000 | |||||||||
| Cost of revenue: | ||||||||||||
| Cost of products | 9,002,000 | 696,000 | 8,306,000 | |||||||||
| Cost of services | 7,219,000 | 2,124,000 | 5,095,000 | |||||||||
| Total cost of revenues: | 16,221,000 | 2,820,000 | 13,401,000 | |||||||||
| Gross Profit | 16,618,000 | 1,255,000 | 15,363,000 | |||||||||
| Product Gross Margin % | 27.4 | % | 28.0 | % | 27.4 | % | ||||||
| Service Gross Margin % | 64.7 | % | 31.7 | % | 70.6 | % | ||||||
| Total Gross Margin % | 50.6 | % | 30.8 | % | 53.4 | % | ||||||
CONSTANT CURRENCY
Constant currency information has been presented to illustrate the impact of changes in currency rates on the company’s results. The constant currency information has been determined by adjusting the current financial reporting period results to the prior period average exchange rates, determined as the average of the monthly exchange rates applicable to the period. The measurement has been performed for each of the company’s currencies. The constant currency growth percentage has been calculated by utilizing the constant currency results compared to the prior period results.
The constant currency information represents non-GAAP information. The company believes this provides a useful basis to measure the performance of its business as it removes distortion from the effects of foreign currency movements during the period; however, this information should be considered as supplemental in nature and should not be considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. See the section above titled “Non-GAAP Financial Measures” for more information.
Due to a portion of the company’s customers who are invoiced in non-U.S. Dollar denominated currencies, the company also calculates subscription revenue growth rate on a constant currency basis, thereby removing the effect of currency fluctuation on results of operations.
| Three Months Ended Mar 31, | Year Over Year Change | ||||||||||||
| ($ in Thousands) | 2022 | 2023 | $ | % | |||||||||
| Service Revenue: | |||||||||||||
| Service Revenue as reported | $ | 18,769 | $ | 20,435 | $ | 1,666 | 8.9 | % | |||||
| Conversion impact of U.S. Dollar | $ | 1,580 | $ | 1,580 | |||||||||
| Service revenue on a constant currency basis | $ | 18,769 | $ | 22,015 | $ | 3,245 | 17.3 | % | |||||
| Three Months Ended Mar 31, | Year Over Year Change | ||||||||||||
| ($ in Thousands) | 2022 | 2023 | $ | % | |||||||||
| Product Revenue: | |||||||||||||
| Product Revenue as reported | $ | 14,392 | $ | 12,404 | ($ | 1,988 | ) | (13.8 | %) | ||||
| Conversion impact of U.S. Dollar | $ | 175 | $ | 175 | |||||||||
| Product Revenue revenue on a constant currency basis | $ | 14,392 | $ | 12,579 | ($ | 1,813 | ) | -12.6 | % | ||||
| Three Months Ended Mar 31, | Year Over Year Change | ||||||||||||
| ($ in Thousands) | 2022 | 2023 | $ | % | |||||||||
| Total Revenue: | |||||||||||||
| Total Revenue as reported | $ | 33,160 | $ | 32,839 | ($ | 321 | ) | (1.0 | %) | ||||
| Conversion impact of U.S. Dollar | $ | 0 | $ | 1,755 | $ | 1,755 | |||||||
| Total revenue on a constant currency basis | $ | 33,160 | $ | 34,594 | $ | 1,434 | 4.3 | % | |||||
