PowerFleet Reports Fourth Quarter and Full Year 2019 Financial Results

Thursday, 12. March 2020 12:30

Quarterly GAAP Revenue Totaled Record $35.1M, Up 17% Year-over-Year on a Pro Forma Basis

WOODCLIFF LAKE, N.J., March 12, 2020 (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 fourth quarter and full year ended December 31, 2019.

Management Commentary
“The fourth quarter was a strong finish to a transformational year for PowerFleet,” said CEO Chris Wolfe. “As our results for the quarter demonstrated, we are beginning to recognize the material financial benefits as well as operational efficiencies and deal flow as a larger organization. This was highlighted by the record $35.1 million in total revenue, which was up 17% year-over-year on a pro forma basis, driven by solid contribution in high-margin recurring solutions and services revenue. We ended the quarter with approximately 550,000 mobile subscription units on our platform, putting us on track to meet our target of at least 600,000 mobile subscriber units by the end of 2020.

“Our powerful portfolio of solutions spanning the industrial, logistics and commercial vehicle industries continues to differentiate PowerFleet in the market. The best companies in the world continue to choose our mobility platforms and full end-to-end solutions to power their asset and fleet monitoring and management needs, and this was again validated in the fourth quarter. We secured several major new wins with leading transportation companies in our logistics business and had similar success in our industrial business, highlighted by multiple wins through our dealer channel. Our sales through Jungheinrich continue to build momentum, as we are seeing an increasing volume of orders secured in Europe. In our connected car business, we continued to execute on our program with Avis Budget Group and are in the process of bringing Pointer’s products into the U.S. to pursue the class 1 through class 5 fleet management market.

“Along that line, the integration of Pointer is proceeding rapidly, with several milestones achieved in the first six months post-close, including the consolidation of our strategic and tactical plans and product roadmaps. The alignment of our sales and go-to-market motions are yielding early success, validating one of the core theses for the business combination. In addition to our growth and cross-selling initiatives, we’ve already eliminated duplicative corporate costs and have identified more than $3 million in supply chain savings that we expect to realize in 2020 as well as incremental cost savings expected in 2021 related to the platform consolidation currently underway.

“Today, we are a much stronger business with greater scale and resources, an industry-leading end-to-end IoT platform, significant cross-selling opportunities, and robust secular tailwinds working in our favor. Longer term, our vision of creating PowerFleet as a global IoT software and solutions provider is progressing, which we believe will generate significant shareholder value through global operational and financial scale, sustainable profitability and cash flow generation.”

Fourth Quarter 2019 Financial Results
Financial results for the quarter ended December 31, 2019 include consolidated results for both I.D. Systems, Inc. and Pointer Telocation Ltd., which was acquired on October 3, 2019. Financial results for the quarter ended December 31, 2018 include only financial results from I.D. Systems, Inc. prior to its acquisition of Pointer Telocation Ltd.

Total revenue increased to $35.1 million from $11.5 million in the same year-ago period. Services revenue was $18.7 million (53.2% of total revenue), compared to $4.3 million (37.6% of total revenue) in the same year-ago period. Product revenue was $16.5 million (46.8% of total revenue), compared to $7.2 million (62.4% of total revenue) in the same year-ago period.

Gross profit increased to $16.6 million (47.4% of total revenue) from $6.1 million (53.3% of total revenue) in the same year-ago period. Service gross profit was $11.6 million (62.3% of total service revenue), compared to $3.1 million (70.7% of total service revenue) in the same year-ago period. Product gross profit was $5.0 million (30.4% of total product revenue), compared to $3.1 million (42.8% of total product revenue) in the same year-ago period.

Selling, general and administrative expenses were $12.7 million, compared to $6.2 million in the same year-ago period. Research and development expenses were $3.0 million, compared to $1.9 million in the same year-ago period. Depreciation and amortization expenses were $2.0 million, compared to $387,000 in the same year-ago period. Severance expenses related to the Pointer acquisition were $1.7 million, compared to no severance expenses in the same year-ago period. Acquisition-related expenses were $462,000, compared to $428,000 in the same year-ago period.

Net loss attributable to common stockholders totaled $5.2 million or $(0.18) per basic and diluted share (based on 28.6 million weighted average shares outstanding), compared to net loss of $2.8 million or $(0.16) per basic and diluted share in the same year-ago period (based on 17.6 million weighted average shares outstanding). 

Adjusted EBITDA, a non-GAAP metric, totaled $2.1 million or $0.06 per diluted share (based on 35.5 million weighted average shares outstanding), compared to adjusted EBITDA loss of $595,000 or $(0.03) per basic and diluted share (based on 17.6 million weighted average shares outstanding) 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 $16.4 million in cash and cash equivalents. The company’s working capital position at quarter-end was $29.3 million.

Full Year 2019 Financial Results
Financial results for the full year ended December 31, 2019 include financial results from Pointer Telocation Ltd., which was acquired on October 3, 2019. Financial results for the year ended December 31, 2018 include only financial results from I.D. Systems, Inc. prior to its acquisition of Pointer Telocation Ltd.

Total revenue increased to $81.9 million from $53.1 million in 2018. Services revenue was $36.5 million (44.6% of total revenue), compared to $16.2 million (30.5% of total revenue) in 2018. Product revenue was $45.4 million (55.4% of total revenue), compared to $36.9 million (69.5% of total revenue) in 2018.

Gross profit increased to $38.4 million (46.8% of total revenue) from $25.8 million (48.6% of total revenue) in 2018. Services gross profit was $22.9 million (62.8% of services revenue), compared to $11.5 million (71.4% of services revenue) in 2018. Product gross profit was $15.4 million (34.0% of product revenue), compared to $14.3 million (38.6% of product revenue) in 2018.

Selling, general and administrative expenses were $29.8 million, compared to $22.2 million in 2018. Research and development expenses were $8.5 million, compared to $6.9 million in 2018. Depreciation and amortization expenses were $3.3 million, compared to $1.6 million in 2018. Severance expenses related to the Pointer acquisition were $1.7 million, compared to no severance expenses in 2018. Acquisition-related expenses were $5.1 million, compared to $867,000 in 2018.

Net loss attributable to common stockholders totaled $12.0 million or $(0.59) per basic and diluted share (based on $20.5 million weighted average shares outstanding), compared to net loss of $5.8 million or $(0.34) per basic and diluted share in 2018 (based on 17.2 million weighted average shares outstanding). 

Adjusted EBITDA, a non-GAAP metric, totaled $3.2 million or $0.14 per diluted share (based on 22.3 million weighted average shares outstanding), compared to adjusted EBITDA loss of $23,000 or $0.00 per basic and diluted share (based on 17.2 million weighted average shares outstanding) in 2018 (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, March 12, 2020) at 8:30 a.m. Eastern time (5:30 a.m. Pacific time).

PowerFleet CEO Chris Wolfe and CFO Ned Mavrommatis will host the call, followed by a question and answer session where sell-side analysts and major institutional shareholders can ask questions.

U.S. dial-in: (877) 307-1379
International dial-in: (443) 877-4066
Passcode: 3989798

The conference call will be broadcast simultaneously and available for replay 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 adjusted EBITDA and adjusted EBITDA per basic and diluted share. 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 Year Ended
December 31,December 31,
 2018 2019  2018 2019 
      
Net loss attributable to common stockholders $(2,809,000) $ (5,169,000)  $(5,812,000) $ (12,047,000)
Minority interest  -  (18,000)     (18,000)
Dividends on preferred stock  -  1,084,000     1,084,000
Interest (income) expense, net  (22,000)  877,000   (89,000)  823,000
Other (income) expense, net  12,000  4,000   165,000  50,000
Income tax (benefit) expense  -  (75,000)   -  (75,000)
Depreciation and amortization  387,000  2,042,000   1,561,000  3,341,000
Stock-based compensation  505,000  801,000   2,163,000  2,533,000
Foreign currency translation losses  68,000  179,000   214,000  467,000
Litigation expenses and settlement  836,000  -   968,000  -
Acquisition-related fees  428,000  462,000   807,000  5,135,000
Severance expenses related to the acquistion  -  1,724,000     1,724,000
Impact of the fair value mark-up of acquired inventory  -  211,000     211,000
          
Adjusted EBITDA $(595,000) $ 2,122,000  $(23,000) $ 3,228,000
          
Non-GAAP adjusted EBITDA per share - basic $(0.03) $ 0.07  $- $ 0.16
Non-GAAP adjusted EBITDA per share - diluted $(0.03) $ 0.06  $- $ 0.14
Weighted average common shares outstanding - basic  17,564,000  28,582,000   17,233,000  20,476,000
Weighted average common shares outstanding - diluted  17,564,000  35,511,000   17,233,000  22,305,000
          

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, I.D. Systems’ and Pointer’s filings with the Securities and Exchange Commission, including I.D. Systems’ annual report on Form 10-K for the year ended December 31, 2018, Pointer’s annual report on Form 20-F for the year ended December 31, 2018 and PowerFleet’s registration statement on Form S-4 filed with the Securities and Exchange Commission on May 24, 2019, as amended on July 1, 2019 and July 23, 2019. 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
 (Unaudited)
            
 Three Months Ended Year Ended
December 31,December 31,
 2018  2019  2018  2019 
 (Unaudited) (Unaudited)   (Unaudited)
Revenue:       
Products $7,171,000  $ 16,462,000  $36,897,000  $ 45,416,000
Services  4,320,000   18,684,000   16,167,000   36,499,000
            
   11,491,000   35,146,000   53,064,000   81,915,000
Cost of revenue:           
Cost of products  4,101,000   11,454,000   22,638,000   29,982,000
Cost of services  1,266,000   7,047,000   4,628,000   13,569,000
            
   5,367,000   18,501,000   27,266,000   43,551,000
            
Gross profit  6,124,000   16,645,000   25,798,000   38,364,000
            
Operating expenses:           
Selling, general and administrative expenses  6,246,000   12,682,000   22,243,000   29,807,000
Research and development expenses  1,882,000   3,032,000   6,863,000   8,540,000
Depreciation and amortization expenses  387,000   2,042,000   1,561,000   3,341,000
Severance expenses related to the acquistion  -   1,724,000   -   1,724,000
Acquisition-related expenses  428,000   462,000   867,000   5,135,000
            
   8,943,000   19,942,000   31,534,000   48,547,000
            
Loss from operations  (2,819,000)   (3,297,000)   (5,736,000)   (10,183,000)
Interest income  45,000   15,000   262,000   125,000
Interest expense  (23,000)   (892,000)   (173,000)   (948,000)
Other expense  (12,000)   (4,000)   (165,000)   (50,000)
            
Net loss before income taxes  (2,809,000)   (4,178,000)   (5,812,000)   (11,056,000)
            
Income tax benefit     75,000   -   75,000
            
Net loss before minority interest  (2,809,000)   (4,103,000)   (5,812,000)   (10,981,000)
 Minority interest  -   18,000   -   18,000
Preferred stock dividends  -   (1,084,000)   -   (1,084,000)
            
Net loss attributable to common stockholders $(2,809,000)  $ (5,169,000)  $(5,812,000)  $ (12,047,000)
            
Net loss per share - basic and diluted $(0.16)  $ (0.18)  $(0.34)  $ (0.59)
            
Weighted average common shares outstanding - basic and diluted  17,564,000   28,582,000   17,233,000   20,476,000
            



Powerfleet, Inc. and Subsidiaries 
Condensed Consolidated Balance Sheet Data 
       
       
 As of December 31, 
 2018 2019  
ASSETS  (Unaudited) 
Current assets:      
Cash and cash equivalents $10,159,000  $ 16,395,000 
Restricted cash  307,000   308,000 
Investments - short term  394,000   - 
Accounts receivable, net  9,247,000   27,016,000 
Inventory, net  4,649,000   16,381,000 
Deferred costs - current  3,660,000   3,720,000 
Prepaid expenses and other current assets  4,244,000   7,370,000 
       
Total current assets  32,660,000   71,190,000 
       
Investments - long term  4,131,000   - 
Deferred costs - less current portion  5,409,000   4,810,000 
Fixed assets, net  2,149,000   8,240,000 
Goodwill  7,318,000   89,068,000 
Intangible assets, net  4,705,000   36,639,000 
Right of use asset  -   7,024,000 
Severance payable fund  -   3,530,000 
Deferred tax asset  -   2,475,000 
Other assets  1,431,000   2,532,000 
  $57,803,000  $ 225,508,000 
       
LIABILITIES      
Current liabilities:      
Short-term bank debt and current maturities of long-term debt $-  $ 3,475,000 
Convertible note payable  -   5,000,000 
Accounts payable and accrued expenses  8,027,000   24,880,000 
Deferred revenue - current  7,902,000   7,687,000 
Lease liability - current  -   868,000 
Acquisition related contingent consideration and payable - current  946,000   - 
       
Total current liabilities  16,875,000   41,910,000 
       
Long-term debt, less current maturities  -   26,413,000 
Deferred revenue - less current portion  9,186,000   8,544,000 
Lease liability - less current portion  -   6,371,000 
Accrued severance payable  -   4,062,000 
Deferred tax liability  -   6,197,000 
Other long-term liabilities  208,000   438,000 
       
   26,269,000   93,935,000 
MEZZANINE EQUITY      
Convertible redeemable Preferred stock: Series A  -   47,393,000 
       
STOCKHOLDERS’ EQUITY      
       
Total Powerfleet, Inc. stockholders’ equity  31,534,000   84,190,000 
Non-controlling interest  -   (10,000) 
Total equity  31,534,000   84,180,000 
Total liabilities and stockholders’ equity $57,803,000  $ 225,508,000 
       



Powerfleet, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flow Data
(Unaudited) 
     
 Year Ended December 31,
 2018 2019 
   
Cash flows from operating activities (net of net assets acquired):    
Net loss before minority interest $ (5,812,000) $ (10,981,000)
Adjustments to reconcile net loss to cash (used in) provided by operating activities:    
Inventory reserve  321,000   207,000 
Stock based compensation expense  2,163,000   3,794,000 
Depreciation and amortization  1,561,000   3,347,000 
Operating lease right-of-use assets, net of operating lease liabilities    (141,000)
Bad debt expense  31,000   319,000 
Deferred income taxes  -   (167,000)
Change in contingent consideration  169,000   54,000 
Other non-cash items  85,000   (40,000)
Changes in:    
Operating assets and liabilities  (220,000)  (3,661,000)
     
Net cash used in operating activities  (1,702,000)  (7,269,000)
     
Cash flows from investing activities:    
Acquisitions, net of cash assumed  -  (69,005,000)
Proceeds from sale of property and equipment  -  24,000 
Capital expenditures  (251,000)  (1,042,000)
Purchases of investments  (3,235,000)  (99,000)
Proceeds from the sale and maturities of investments  10,082,000   4,638,000 
     
Net cash (used in) provided by investing activities  6,596,000   (65,484,000)
     
Cash flows from financing activities:    
Net proceeds from preferred stock offering  -  46,309,000 
Proceeds from convertible note  -  5,000,000 
Proceeds from long-term debt  -  30,000,000 
Repayments of long-term debt  -  (2,010,000)
Debt issuance costs  -  (742,000)
Short-term bank debt, net  -  75,000 
Net proceeds from underwritten public offering  -  -
Borrowings under revolving credit facility  -  -
Repayments under revolving credit facility  -  -
Proceeds from exercise of stock options  721,000   330,000 
Shares repurchased pursuant to vesting of restricted stock  (652,000)  (317,000)
     
Net cash provided by financing activities  69,000   78,645,000 
     
Effect of foreign exchange rate changes on cash and cash equivalents  100,000   345,000 
Net increase in cash, cash equivalents and restricted cash  5,063,000   6,237,000 
Cash, cash equivalents and restricted cash - beginning of period  5,403,000   10,466,000 
     
Cash, cash equivalents and restricted cash - end of period$ 10,466,000 $ 16,703,000 
     



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