PowerFleet Reports Second Quarter 2021 Financial Results

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WOODCLIFF LAKE, N.J., Aug. 05, 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 second quarter ended June 30, 2021.

Second Quarter 2021 Financial Highlights

  • Total revenue was $33.5 million, a 30% increase year-over-year.
  • High margin, recurring and services revenue was $18.1 million, or 54% of total revenue.
  • At quarter end, cash and cash equivalents totaled $39.9 million and $53.3 million of working capital.

Second Quarter 2021 and Recent Operational Highlights

  • Launched ‘Vista’, an advanced vehicle video solution with artificial intelligence capabilities to analyze and proactively manage risky driving situations across fleets.
  • Entered into a reseller agreement with Mitsubishi Logisnext Americas Group (Logisnext) to introduce PowerFleet Enterprise Telematic Solution to their North American customers and dealer network.
  • Selected by White Oak Transportation to equip their 875-trailer fleet with PowerFleet’s LV-500 solution for better asset visibility, and operational efficiencies.
  • Chosen by the Israeli Police to provide technological services for more than 7,500 vehicles for the next four years.
  • Provided Comasco with an IoT solution for real-time tracing and inventory management of their rented crane parts.

Management Commentary

“The measurable pickup we experienced in new sales activity across our geographic regions was a key driver of the robust revenue growth we generated in the second quarter,” said Chris Wolfe, PowerFleet CEO. “The acceleration we are seeing across our end markets drove a 16% sequential increase and 30% year-over-year increase in total revenue, while our focus on building predictable revenue streams produced an 11% year-over-year increase in high margin, recurring and services revenue. Our financial performance also demonstrates the leverage in our business model, reflected by our expanding profitability metrics. Overall, our second quarter results reveal the continued execution of our long-term strategy to increase high margin recurring and services revenue by expanding our high-value solutions offerings and growing our business in our targeted markets.

“PowerFleet’s improving financial performance is a direct result of the building sales activity we’ve been seeing across our key geographic regions, which is also validated by our robust backlog and opportunity pipeline. Domestically, we secured several new wins and follow-on orders in the quarter, including adding a major North American moving company and White Oak as new customers as well as signing a major 3,000-unit follow-on order with a customer who we announced last year. Internationally, our sales momentum and customer traction were equally as robust. Our Israeli operations achieved two major milestones in Q2, including surpassing 200,000 monthly subscribers and installing 6,400 units in the month of June, which is the highest monthly installation count since the company’s inception.

“As our financial and operational performance indicate, we have entered the second half of 2021 with encouraging momentum, giving us confidence in our growth prospects. We are making meaningful progress on our financial goals and toward realizing our vision to be the leading solutions provider in the massive industrial IoT solutions space.”

Second Quarter 2021 Financial Results
Total revenue increased 30% to $33.5 million from $25.8 million in the same year-ago period.

Services revenue was $18.1 million, or 54% of total revenue, an improvement compared to $16.4 million, or 64% of total revenue, in the same year-ago period. Product revenue, which drives future services revenue, was $15.5 million, or 46% of total revenue, an improvement compared to $9.4 million, or 36% of total revenue, in the same year-ago period.

Gross profit was $16.0 million, or 48% of total revenue, compared to $14 million, or 55% of total revenue, in the same year-ago period. Service gross profit was $11.4 million, or 63% of total service revenue, compared to $10.7 million, or 65% of total service revenue, in the same year-ago period. Product gross profit was $4.6 million, or 30% of total product revenue, compared to $3.4 million, or 35% of total product revenue, in the same year-ago period.

Selling, general and administrative expenses were $13.4 million, compared to $12.2 million in the same year-ago period. Research and development expenses were $2.8 million, compared to $2.6 million in the same year-ago period.

Net loss attributable to common stockholders totaled $2.6 million, or $(0.08) per basic and diluted share (based on 34.9 million weighted average shares outstanding), compared to net loss attributable to common stockholders of $3.8 million, or $(0.13) per basic and diluted share, in the same year-ago period (based on 29.4 million weighted average shares outstanding).

Non-GAAP net income totaled $1.4 million, or $0.04 per basic and $0.03 per diluted share (based on 34.9 million weighted average basic shares outstanding and 43.1 million weighted average diluted shares outstanding), an improvement compared to non-GAAP net income of $789,000, or $0.03 per basic and $0.02 diluted share (based on 29.4 million weighted average basic shares outstanding and 36.6 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 $2.8 million, an improvement from adjusted EBITDA of $2.1 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 $39.9 million in cash and cash equivalents. The Company’s working capital position at quarter-end was $53.3 million.

Investor Conference Call
PowerFleet management will discuss these results and business outlook on a conference call today (Thursday, August 5, 2021) 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.

U.S. dial-in: 888-506-0062
International dial-in: 973-528-0011
Passcode: 284878

The conference call will be broadcast simultaneously and available for replay here and in 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   Six Months Ended  
    June 30,   June 30,  
    2020     2021     2020     2021    
                           
  Net loss attributable to common stockholders $ (3,766,000 )   $ (2,633,000 )   $ (8,315,000 )   $ (5,616,000 )  
  Non-controlling interest   (1,000 )     (1,000 )     (16,000 )     (1,000 )  
  Preferred stock dividend and accretion   1,140,000       1,196,000       2,263,000       2,392,000    
  Interest (income) expense, net   625,000       598,000       1,360,000       1,056,000    
  Other (income) expense, net   (5,000 )     2,000       (7,000 )     2,000    
  Income tax (benefit) expense   460,000       67,000       653,000       540,000    
  Depreciation and amortization   1,983,000       2,089,000       4,050,000       4,230,000    
  Stock-based compensation   977,000       1,096,000       2,086,000       2,193,000    
  Foreign currency translation   693,000       388,000       51,000       (631,000 )  
  Impact of the fair value mark-up of acquired inventory   (9,000 )           124,000          
                           
  Adjusted EBITDA $ 2,097,000     $ 2,802,000     $ 2,249,000     $ 4,165,000    
                           

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

                 
                         
                         
  Three Months Ended   Six Months Ended  
  June 30,   June 30,  
  2020     2021     2020     2021    
                         
Net loss attributable to common stockholders $ (3,766,000 )   $ (2,633,000 )   $ (8,315,000 )   $ (5,616,000 )  
Preferred stock dividend and accretion   1,140,000       1,196,000       2,263,000       2,392,000    
Other (income) expense, net   (5,000 )     2,000       (7,000 )     2,000    
Intangible assets amortization expense   1,332,000       1,298,000       2,664,000       2,597,000    
Stock-based compensation   977,000       1,096,000       2,086,000       2,193,000    
Foreign currency translation   693,000       388,000       51,000       (631,000 )  
Non-cash portion of income tax expense   427,000       21,000       615,000       492,000    
Impact of the fair value mark-up of acquired inventory   (9,000 )           124,000          
Non-GAAP net income (loss) $ 789,000     $ 1,368,000     $ (519,000 )   $ 1,429,000    
                         
Non-GAAP net income (loss) – basic $ 0.03     $ 0.04     $ (0.02 )   $ 0.04    
Non-GAAP net income (loss) – diluted $ 0.02     $ 0.03     $ (0.02 )   $ 0.03    
Weighted average common shares outstanding – basic   29,399,000       34,898,000       29,216,000       34,083,000    
Weighted average common shares outstanding – diluted   36,583,000       43,083,000       29,216,000       42,403,000    
                         

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   Six Months Ended  
  June 30,   June 30,  
  2020     2021     2020     2021    
  (Unaudited)   (Unaudited)   (Unaudited) (Unaudited)  
Revenue:                        
Products $ 9,394,000     $ 15,466,000     $ 22,602,000     $ 26,886,000    
Services   16,371,000       18,082,000       33,962,000       35,653,000    
                         
    25,765,000       33,548,000       56,564,000       62,539,000    
Cost of revenue:                        
Cost of products   6,023,000       10,862,000       15,325,000       19,014,000    
Cost of services   5,699,000       6,641,000       12,330,000       13,010,000    
                         
    11,722,000       17,503,000       27,655,000       32,024,000    
                         
Gross Profit   14,043,000       16,045,000       28,909,000       30,515,000    
                         
Operating expenses:                        
    Selling, general and administrative expenses   12,166,000       13,421,000       27,269,000       27,029,000    
    Research and development expenses   2,582,000       2,779,000       5,754,000       5,524,000    
                         
    14,748,000       16,200,000       33,023,000       32,553,000    
                         
Loss from operations   (705,000 )     (155,000 )     (4,114,000 )     (2,038,000 )  
Interest income   17,000       12,000       31,000       24,000    
Interest expense   (679,000 )     (611,000 )     (1,429,000 )     (1,081,000 )  
Foreign currency translation of debt   (805,000 )     (615,000 )     90,000       412,000    
Other (expense) income, net   5,000       (2,000 )     7,000       (2,000 )  
                         
Net loss before income taxes   (2,167,000 )     (1,371,000 )     (5,415,000 )     (2,685,000 )  
                         
Income tax benefit (expense)   (460,000 )     (67,000 )     (653,000 )     (540,000 )  
                         
Net loss before non-controlling interest   (2,627,000 )     (1,438,000 )     (6,068,000 )     (3,225,000 )  
Non-controlling interest   1,000       1,000       16,000       1,000    
                         
Net loss   (2,626,000 )     (1,437,000 )     (6,052,000 )     (3,224,000 )  
Accretion of preferred stock   (168,000 )     (168,000 )     (336,000 )     (336,000 )  
Preferred stock dividend   (972,000 )     (1,028,000 )     (1,927,000 )     (2,056,000 )  
                         
Net loss attributable to common stockholders $ (3,766,000 )   $ (2,633,000 )   $ (8,315,000 )   $ (5,616,000 )  
                         
Net loss per share – basic and diluted $ (0.13 )   $ (0.08 )   $ (0.28 )   $ (0.16 )  
Weighted average common shares outstanding – basic                        
and diluted   29,399,000       34,898,000       29,216,000       34,083,000    
                         

PowerFleet, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet Data

               
    As of  
    December 31, 2020   June 30, 2021  
          (Unaudited)  
ASSETS              
Current assets:              
    Cash and cash equivalents   $ 18,127,000   $ 39,861,000  
    Restricted cash     308,000     308,000  
     Accounts receivable, net     24,147,000     29,656,000  
    Inventory, net     12,873,000     13,472,000  
    Deferred costs – current     3,128,000     2,800,000  
    Prepaid expenses and other current assets     6,184,000     6,909,000  
        Total current assets     64,767,000     93,006,000  
               
Deferred costs – less current portion     2,233,000     1,163,000  
Fixed assets, net     8,804,000     8,866,000  
Goodwill     83,344,000     83,344,000  
Intangible assets, net     31,276,000     28,678,000  
Right of use asset     9,700,000     9,451,000  
Severance payable fund     4,056,000     4,062,000  
Deferred tax asset     1,506,000     1,005,000  
Other assets     3,115,000     3,177,000  
    Total assets   $ 208,801,000   $ 232,752,000  
               
LIABILITIES              
Current liabilities:              
    Short-term bank debt and current maturities of long-term debt   $ 5,579,000   $ 5,918,000  
    Accounts payable and accrued expenses     20,225,000     23,563,000  
    Deferred revenue – current     7,339,000     8,048,000  
    Lease liability – current     2,755,000     2,190,000  
       Total current liabilities     35,898,000     39,719,000  
               
Long-term debt, less current maturities     23,179,000     20,015,000  
Deferred revenue – less current portion     6,006,000     5,421,000  
Lease liability – less current portion     7,050,000     7,416,000  
Accrued severance payable     4,714,000     4,672,000  
Other long-term liabilities     674,000     739,000  
               
   Total liabilities     77,521,000     77,982,000  
               
MEZZANINE EQUITY              
Convertible redeemable Preferred stock: Series A     51,992,000     52,327,000  
               
STOCKHOLDERS’ EQUITY          
Total Powerfleet, Inc. stockholders’ equity     79,213,000     102,364,000  
Non-controlling interest     75,000     79,000  
Total equity     79,288,000     102,443,000  
Total liabilities and stockholders’ equity   $ 208,801,000   $ 232,752,000  
               

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

     
    Six Months Ended June 30,
    2020     2021  
          (Unaudited)
Cash flows from operating activities (net of net assets acquired):            
Net loss   $ (6,052,000 )   $ (3,224,000 )
Adjustments to reconcile net loss to cash (used in) provided by operating activities:            
Non-controlling interest     (16,000 )     (1,000 )
Inventory reserve     126,000       135,000  
Stock based compensation expense     2,167,000       2,452,000  
Depreciation and amortization     4,050,000       4,231,000  
Right-of-use assets, non-cash lease expense     1,437,000       1,503,000  
Bad debt expense     543,000       531,000  
Other non-cash items     (35,000 )     160,000  
Deferred taxes     653,000       540,000  
Changes in:            
Operating assets and liabilities     1,542,000       (3,124,000 )
             
Net cash (used in) provided by operating activities     4,415,000       3,203,000  
             
Cash flows from investing activities:            
Proceeds from sale of property and equipment     35,000        
Capital expenditures     (822,000 )     (1,454,000 )
             
Net cash (used in) investing activities     (787,000 )     (1,454,000 )
             
Cash flows from financing activities:            
Net proceeds from stock offering     4,041,000       26,867,000  
Payment of preferred stock dividend           (2,056,000 )
Repayment of long-term debt     (991,000 )     (2,671,000 )
Short-term bank debt, net     (357,000 )     93,000  
Proceeds from exercise of stock options     342,000       142,000  
Purchase of treasury stock upon vesting of restricted stock     (248,000 )     (362,000 )
             
Net cash (used in) provided by financing activities     2,787,000       22,013,000  
             
Effect of foreign exchange rate changes on cash and cash equivalents     (1,341,000 )     (2,028,000 )
Net increase in cash, cash equivalents and restricted cash     5,074,000       21,734,000  
Cash, cash equivalents and restricted cash – beginning of period     16,703,000       18,435,000  
             
Cash, cash equivalents and restricted cash – end of period   $ 21,777,000     $ 40,169,000  
             

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