PowerFleet Reports Second Quarter 2020 Financial Results

Thursday, 06. August 2020 14:00

WOODCLIFF LAKE, N.J., Aug. 06, 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 second quarter ended June 30, 2020.

Second Quarter Financial and Operational Highlights

  • Generated $25.8 million in total revenue, including $16.4 million (63.5% of total revenue) of high margin, recurring and services revenue
  • Produced $4.4 million in operating cash for the first six months of 2020
  • Maintained healthy on-air subscriber units at over 550,000
  • Maintained solid liquidity position with $21.5 million in cash and cash equivalents and $28.9 million of working capital

Management Commentary
“Our performance for the second quarter was solid, especially given the headwinds and challenges presented by COVID-19,” said CEO Chris Wolfe. “We delivered solid top- and bottom-line results, including $25.8 million in revenue, $2.1 million in adjusted EBITDA and $1.7 million in operating cash flow, again demonstrating the resiliency of our financial model.

“Despite the slowdown globally in Q2, we signed several significant deals in our Logistics business, including wins with Rusken Packaging and Day & Ross, one of Canada’s largest fleets. These combined multi-million-dollar deals started shipping in June and July. We also extended and expanded our strategic partnership with Jungheinrich, which continues to exceed expectations. Since launching our white-labeled enterprise solution with Jungheinrich a year ago, sales were 40% higher than planned. We look forward to building on our partnership’s momentum by pursuing new market opportunities for both companies.

“While our business continues to operate according to our post-COVID plan, we are also encouraged by the strength of our financial foundation. Our subscriber base of more than 550,000 has remained very resilient. Our optimized cost-structure coupled with the $21.5 million in cash on our balance sheet, gives us confidence that we will not only weather this storm but come out stronger when the situation recovers. In the face of today’s uncertain and constantly evolving environment, we remain confident in our ability to extend our position as one of the leading global B2B mobile fleet and asset management companies.”

Second Quarter 2020 Financial Results
Financial results for the quarter ended June 30, 2020 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 June 30, 2019 include only financial results from I.D. Systems, Inc. prior to its acquisition of Pointer Telocation Ltd.

Total revenue increased to $25.8 million from $16.3 million in the same year-ago period. Services revenue was $16.4 million (63.5% of total revenue), compared to $5.6 million (34.6% of total revenue) in the same year-ago period. Product revenue was $9.4 million (36.5% of total revenue), compared to $10.6 million (65.4% of total revenue) in the same year-ago period.

Gross profit increased to $14.0 million (54.5% of total revenue) from $7.1 million (43.5% of total revenue) in the same year-ago period. Service gross profit was $10.7 million (65.2% of total service revenue), compared to $3.5 million (62.0% of total service revenue) in the same year-ago period. Product gross profit was $3.4 million (35.9% of total product revenue), compared to $3.6 million (33.6% of total product revenue) in the same year-ago period.

Selling, general and administrative expenses were $10.3 million, compared to $5.6 million in the same year-ago period. Research and development expenses were $2.6 million, compared to $2.0 million in the same year-ago period. Depreciation and amortization expenses were $1.8 million, compared to $443,000 in the same year-ago period.

Net loss attributable to common stockholders totaled $3.8 million or $(0.13) per basic and diluted share (based on 29.4 million weighted average shares outstanding), compared to net loss of $2.6 million or $(0.15) per basic and diluted share in the same year-ago period (based on 17.7 million weighted average shares outstanding). 

Adjusted EBITDA, a non-GAAP metric, totaled $2.1 million, compared to adjusted EBITDA of $129,000 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 $21.5 million in cash and cash equivalents. The company’s working capital position at quarter-end was $28.9 million.

Termination of At-the-Market (ATM) Equity Offering Program
The Company has elected to terminate its “at-the-market” equity offering program (“ATM Facility”). The Company initiated the 10-day termination process of the ATM Facility with Canaccord Genuity on August 4, 2020, with the official termination to take effect August 14, 2020. The Company will make no further sales of shares under the ATM Facility. Upon the announcement of the initiation of the ATM Facility’s termination process, the Company had sold 809,846 shares raising approximately $4.2 million in gross proceeds. The Company currently expects to use the proceeds from the ATM Facility to pay down high interest-rate debt.

Investor Conference Call
PowerFleet management will discuss these results and business outlook on a conference call today (Thursday, August 6, 2020) at 9:00 a.m. Eastern time (6:00 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: 866-831-8711
International dial-in: 203 518 9865
Passcode: 92741

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 Six Months Ended
June 30,June 30,
 20192020 20192020
      
Net loss attributable to common stockholders$(2,585,000) $  (3,766,000) $(4,779,000) $  (8,315,000)
Minority interest -     (1,000)  -     (16,000)
Dividends on preferred stock -     1,140,000    -     2,263,000  
Interest (income) expense, net 18,000     625,000    (27,000)    1,360,000  
Other (income) expense, net 8,000     (5,000)  46,000     (7,000)
Income tax (benefit) expense -     460,000    -     653,000  
Depreciation and amortization 470,000     1,983,000    852,000     4,050,000  
Stock-based compensation 601,000     977,000    1,184,000     2,086,000  
Foreign currency translation losses 4,000     693,000    30,000     51,000  
Acquisition-related fees 1,613,000     -     3,062,000     -   
Impact of the fair value mark-up of acquired inventory -     (9,000)  -     124,000  
        
Adjusted EBITDA$129,000  $  2,097,000   $368,000  $  2,249,000  
        

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, 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 Six Months Ended 
 June 30,    June 30,   
 2019 2020  2019 2020 
        
Revenue:       
Products$10,643,000  $  9,394,000   $17,892,000  $  22,602,000  
Services 5,631,000     16,371,000    11,993,000     33,962,000  
        
  16,274,000     25,765,000    29,885,000     56,564,000  
Cost of revenue:       
Cost of products 7,062,000     6,023,000    11,301,000     15,325,000  
Cost of services 2,141,000     5,699,000    4,495,000     12,330,000  
        
  9,203,000     11,722,000    15,796,000     27,655,000  
        
Gross profit 7,071,000     14,043,000    14,089,000     28,909,000  
        
Operating expenses:       
Selling, general and administrative expenses 5,550,000     10,338,000    11,301,000     23,746,000  
Research and development expenses 2,024,000     2,582,000    3,684,000     5,754,000  
Depreciation and amortization expenses 443,000     1,828,000    802,000     3,523,000  
Acquisition-related expenses 1,613,000     -     3,062,000     -   
        
  9,630,000     14,748,000    18,849,000     33,023,000  
        
Loss from operations (2,559,000)    (705,000)  (4,760,000)    (4,114,000)
Interest income 8,000     17,000    73,000     31,000  
Interest expense (26,000)    (1,484,000)  (46,000)    (1,339,000)
Other income (expense) (8,000)    5,000    (46,000)    7,000  
        
Net loss before income taxes (2,585,000)    (2,167,000)  (4,779,000)    (5,415,000)
        
Income tax expense -     (460,000)  -     (653,000)
        
Net loss before minority interest (2,585,000)    (2,627,000)  (4,779,000)    (6,068,000)
Minority interest -   1,000   -   16,000 
Preferred stock dividends -   (1,140,000)  -   (2,263,000)
        
Net loss attributable to common stockholders$(2,585,000) $  (3,766,000) $(4,779,000) $  (8,315,000)
        
Net loss per share - basic and diluted$(0.15) $  (0.13) $(0.27) $  (0.28)
        
Weighted average common shares outstanding - basic and diluted 17,678,000     29,399,000    17,650,000     29,216,000  
        

PowerFleet, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet Data

 As of 
 December 31, 2019 June 30, 2020
ASSETS  (Unaudited)
Current assets:   
Cash and cash equivalents$16,395,000  $  21,469,000  
Restricted cash 308,000     308,000  
Accounts receivable, net 27,016,000     22,842,000  
Inventory, net 16,381,000     15,337,000  
Deferred costs - current 3,720,000     3,568,000  
Prepaid expenses and other current assets 7,370,000     5,717,000  
    
Total current assets 71,190,000     69,241,000  
    
Deferred costs - less current portion 4,810,000     3,337,000  
Fixed assets, net 8,240,000     6,984,000  
Goodwill 89,068,000     88,872,000  
Intangible assets, net 36,639,000     33,941,000  
Right of use asset 7,024,000     8,490,000  
Severance payable fund 3,530,000     3,510,000  
Other assets 2,532,000     2,573,000  
 $223,033,000  $  216,948,000  
    
LIABILITIES   
Current liabilities:   
Short-term bank debt and current maturities of long-term debt$3,373,000  $  4,328,000  
Convertible note payable 5,000,000     5,000,000  
Accounts payable and accrued expenses 24,880,000     20,962,000  
Deferred revenue - current 7,687,000     8,036,000  
Lease liability - current 868,000     2,012,000  
    
  41,808,000     40,338,000  
Total current liabilities   
Long-term debt, less current maturities 26,515,000     24,001,000  
Deferred revenue - less current portion 8,544,000     6,534,000  
Lease liability - less current portion 6,371,000     6,676,000  
Accrued severance payable 4,062,000     4,200,000  
Deferred tax liability 3,722,000     4,506,000  
Other long-term liabilities 438,000     761,000  
    
  91,460,000     87,016,000  
MEZZANINE EQUITY   
Convertible redeemable Preferred stock: Series A 47,393,000     49,656,000  
    
STOCKHOLDERS’ EQUITY   
    
Total Powerfleet, Inc. stockholders’ equity 84,190,000     80,320,000  
Non-controlling interest (10,000)    (44,000)
Total equity 84,180,000     80,276,000  
Total liabilities and stockholders’ equity$223,033,000  $  216,948,000  
    

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

 Six Months ended June 30,
 20192020
   
Cash flows from operating activities (net of net assets acquired):  
Net loss before minority interest$(4,779,000)$(6,068,000)
Adjustments to reconcile net loss to cash (used in) provided by operating activities:    
Inventory reserve 93,000  126,000 
Stock based compensation expense 1,184,000  2,086,000 
Depreciation and amortization 852,000  4,050,000 
Operating lease right-of-use assets, net of operating lease liabilities -  1,437,000 
Bad debt expense 110,000  245,000 
Deferred income taxes -  653,000 
Change in contingent consideration 47,000  - 
Other non-cash items (11,000) (35,000)
Changes in:  
Operating assets and liabilities 222,000  1,921,000 
   
Net cash (used in) provided by operating activities (2,282,000) 4,415,000 
   
Cash flows from investing activities:   
Acquisitions, net of cash assumed (3,800,000) - 
Proceeds from sale of property and equipment -  35,000 
Capital expenditures (396,000) (822,000)
Purchases of investments (99,000) - 
Proceeds from the sale and maturities of investments 4,638,000  - 
   
Net cash provided by (used in) investing activities 343,000  (787,000)
   
Cash flows from financing activities:   
Net proceeds from stock offering -  4,041,000 
Repayments of long-term debt -  (991,000)
Short-term bank credit, net -  (356,000)
Proceeds from exercise of stock options 177,000  342,000 
Shares repurchased pursuant to vesting of restricted stock (245,000) (249,000)
   
Net cash (used in) provided by financing activities (68,000) 2,787,000 
   
Effect of foreign exchange rate changes on cash and cash equivalents (54,000) (1,341,000)
Net increase in cash, cash equivalents and restricted cash  (2,061,000) 5,074,000 
Cash, cash equivalents and restricted cash - beginning of period 10,466,000  16,703,000 
   
Cash, cash equivalents and restricted cash - end of period 8,405,000  21,777,000 
   

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