Good afternoon. Thanks for joining us for our fireside chat on Tuesday, I guess, still late morning, West Coast side. Thank you so much for joining us. My name is Scott Searle. I'm the communications, AIOT, and edge compute analyst with Roth. What we've tried to do within some of our fireside chats are really highlight companies that we think are differentiated, that are transformative or going through transitions and are really not being fully recognized in the marketplace. With that, at the top of my list is one of my favorite names, Powerfleet. Presenting on behalf of the company, we have Steve Towe, CEO, who is calling in via Zoom, and David Wilson, CFO. Steve, Dave, thank you so much for joining us. Yeah, thanks, Scott. Hey, maybe to start out, let's kinda go through a state of the union, if you would. Over the last couple of years, Steve, you came on board three years ago. You've done a couple of major transactions. You've integrated them, you've upgraded the product portfolio, and you've transformed the balance sheet. I'm wondering if you could kinda take us through basically a quick recent history of what's gone on, where we stand now, and what's next. Yeah. Apologies for not being there face-to-face, but doctor's orders was not to get on a plane with bronchitis. I will do my best to not cough my way through the presentation. As you said, Scott, we bought three businesses together. Two years ago, we merged with MiX Telematics, and then 18 months ago, we added Fleet Complete, which was a North American telemetry business, to the portfolio. We brought those organizations together operationally just under 1 year ago, so on April the second last year. The view was here that we'd created a differentiated and disruptive product strategy and uniqueness in that, and I think we've been rewarded from our customers and rewarded externally in terms of the innovation around that, particularly some AI innovation that we have and our use of the data that's available within the space. These were all businesses who had run out of steam, so in terms of organic growth, they were at best low single-digit growers. We saw the ability to bring these companies together to create scale, to unlock EBITDA, to be able to reinvest back into the business, into the growth of the business with the differentiated solutions. We sat in this room a year ago, and you challenged me, Scott. You said, "How realistic, Steve, is it that you're gonna take this to a double digit growth rate for the next fiscal year?" Q4 exit run rates, which we talked about for total growth and from an ARR and recurring services growth north of 10% Q4 exit run rate coming out this year. At the same time, still continue to unlock synergies. I think we took $16 million out in the first year of the MiX and Powerfleet transaction. That's hard to do, to build the plane and fly the plane at the same time. Fast-forward a year from there, I think we've executed that very well from an operational perspective. We have high level of confidence in terms of that exit growth rate for Q4 and the growth rates that David will walk through in terms of street expectations for FY 2027, which starts for us in a week or so from now. We've extracted more cost out of the business, so another, I think, $17 million within the last annual year. And ultimately, a lot of the transformation is now behind us. We've gone out of that integration phase into what we call our high growth and optimization phase for the business. And that's been, you know, so had some ups and downs. These things are never been linear. I think we've delivered on those operational metrics that we said we would go do. What we haven't seen, obviously, is the reflection of that in the share price. We believe there is a distinct dislocation between the price of our stock today versus the valuation. We'll talk through some of the reasons that we think that is. Our share price has obviously clearly been under pressure, largely a function of broader market dynamics with some things that we could have done better as well in terms of our communication. The ongoing reset in SaaS valuations is having a challenge alongside we have got some debt in the business and, you know, we're gonna talk through, you know, where that's gonna end at 2027, which will be below 2x levered, which we think is the right level for us. We're stuck in that kind of vacuum right now. We think with the addition of consistent, and meaningful free cash flow, that we'll get through the final hurdle, that's required, at this point to get a valuation that is at least relevant for the metrics that we have as a business today. Okay. FY 2027 is the year of free cash flow. It is the year of getting below 2x debt. At the same time, it's accelerating those growth rates. I think what's really exciting for the company has been the wins that we've got, the enterprise wins. We announced in February our largest ever contract, and that's with the South African government. We'll give more detail on that as we go. We're super pumped in terms of the reaction to our customers, the fact we're expanding our revenues, we're expanding margins, we're expanding our share of wallet, and we think there's a lot more to come. As we mature as an organization, we're very excited for the next phase. That's what I would say is a broad brush summary of the last 12 months or so. Well, Steve, thank you. That's a great opening. A lot to unpack there. Maybe let's start at a high level, right? In terms of one of the comments you just made related to what we've seen in terms of the software space and SaaS space in general over the past 6 months-12 months in terms of pressure, the fear of marginalization of what AI is going to do to the sector. Can you walk through both the pluses and the minuses of how you see AI impacting your business? Is there an ability to disintermediate you from the hardware? And do you see that actually putting pressure on both market share, your ARPU or anything that's negative, you know, for your business going forward? Our view is AI for us is an accelerant, not an inhibitor, and we'll talk about why that is. There's obviously naturally a lot of noise in the market, and there's a lot of disruption. Our platform is built on proprietary real-world fleet data at scale, and that data is exactly what AI models need to generate meaningful insights. We deal with physical operations. There is hardware involved. There's years and years of work gone into the depth and richness of data, and that gives us strong defensibility, you know, with the size of our install base, our data history, the level of integration that we do with customer operations. We're within the mission-critical workflows. We're not sitting above it. We understand a lot of the pressures, and we're not tone deaf in terms of, you know, the obliteration of white-collar SaaS that AI is gonna have. We're embedding AI and advanced analytics into our offerings, improving safety, optimizing routes, reducing costs, delivering tangible ROIs to our customers, and that's driving higher engagement and strengthening our competitive moat. Rather than being disrupted by AI, if we play this right, we see ourselves as a beneficiary of the AI wave. That gives us the ability to monetize it directly through enhanced products and premium capabilities. In terms of the ability for us to have almost good enough data that an algorithm can give you, that's not gonna wash in our customer base. You know, whether it's safety, compliance, efficiency, real-time decisioning for fleets, we have to be bulletproof. Having that proprietary data overlay, having the context and being a system of context and a system of record, that should put us in a strong place. There will be commoditization at the lower end, but the value that we drive for our customers will be enhanced. What we're doing both in our product set, you know, is making sure that we're, you know, we're really kind of driving that AI adoption for customers. One of the complaints has been for this industry, it's too difficult to understand the data to kind of work out what there is, what you can do in a meaningful way at speed. You know, the abilities for AI to support that is super strong, but it's not at kind of replacing us from that perspective. We're deep contextual and time series-driven in terms of the data that we provide. This should compound our data advantage with that mission-critical operation, and it helps kind of real-time decisioning and automation. If you think about the historical data depth we have, the hardware and software footprint, the customer relationship and integrations, that helps us to create more premium monetization opportunities and see us really as a kind of system of intelligence that kind of just not just takes kind of base data and information, but real-world happenings for a customer where AI can't just commoditize that. That's our view of the world on AI. Okay. That's perfect. It's basically an enhancer, and you're not seeing it as necessarily a competitive threat at the high end where you operate in mission-critical applications. Correct. Then internally, in terms of operating leverage and in terms of us using modernization with AI in our deployment service support, our interactions with customers, there's big unlock for us to have in terms of future expansion from a margin perspective as well. We have to spend a bit of money to get there. You know, this is all about that modernization and, you know, I think we were fairly smart. You know, you'll remember, Scott, three years ago, we bought a small company of AI and data science capabilities and, you know, God bless that acquisition because I think, you know, we started to embed it in our product. We started to get ahead of the curve and you know, now we look to compound that over the next months and years. Okay. Perfect. Now maybe let's move from concerns about software commoditization and AI commoditization to near-term fundamentals and demand, right? A lot of things going on from a macro environment right now. If we look back over the past, you know, several quarters, at this point last year, we were talking about getting to 10% SaaS growth. I think in September you did 12%, in December you did 11%, and you're guiding to double-digit growth, you know, through the fiscal year. Take us through some of the near-term demand trends, the puts and the takes. Are you seeing customers push out or delay given some of the exogenous impacts that are going on in the global marketplace right now? Yeah. We're not at the moment. You know, I think you said to me on our February earnings call, you know, there was a confidence in your voice about, you know, the pipeline and, you know, our opportunities to expand wallets and both on new logo and existing accounts. I don't think the 45 days between then and now has in any way inhibited that. There's a real drive for safety and compliance. There is a real drive for real-time intervention in businesses, whether that be with, you know, video, whether that be just in terms of having predictive and, pervasive ability to drive change in, you know, meaningful change in businesses and the insights to be able to do that. Because people need the efficiency, they need the margin in their own business. They're under more pressures. You know, our pipeline continues to remain strong. I mean, again, if we went back a year ago, the names that we've kinda put out publicly, Caterpillar, Pepsi. You know, Pepsi was our largest ever single PO from a customer. They then doubled down on that with a second PO. Just as one example, and then obviously we've won this force multiplier account with the South African government in terms of, you know, again, safety, compliance and operations. We're seeing strong demand. You know, we're seeing in terms of, you know, that ability for AI and companies with the forward-thinkingness to bring modernization to our customers' environments. I think being a bigger company really helps. That scale play is really important. I think the mission criticality of what we do is driving that demand further. Now, you know, because we've kind of earned the right to sit at some of these higher tables in terms of, you know, the opportunities that are out there, we are winning more RFPs. We are having a bigger seat at the table. Our credibility operationally is improving as being a tier one provider, which all helps. As David would say, you know, the expand is much greater than the land. You know, we're seeing the success, the ROI, the deployments that we're doing is leading to more business within those companies, you know, whether that's nationally and domestically, or it's internationally. You know, we have a nice roster of accounts where international presence is key and, you know, having one set of solutions that's consistent, I think is also important to people. We feel really good about our opportunity. We're never arrogant to that, and we fight every day in terms of delivering that. Demand is good. Maybe just to follow up on a couple of items, or I wanna hit on the South African contract, was obviously very big, 100,000 vehicles. Wondering if you could just take us through basically the decision-making process. Who did you guys beat? Why did you win? And I think there are some expansion opportunities beyond that. And just from also kind of adding on to some of your high-level comments about demand in general, is the opportunity pipeline growing? Are any customers going away, or do things just continue to expand now as you've you know you got Unity rolled out and you've got new feature sets, you've got AI video, you've got warehouse capabilities. Is the pipeline, opportunity pipeline just continuing to expand? Yeah. In terms of the South African government contract, this had previously been chopped up into a number of different contracts that the government departments were able to go and buy independently. For a number of reasons, that hadn't gone particularly well. The National Treasury decided to run an RFP. It had lots of the global players that we play against today, plus broader organizations. The likes of, you know, MTN, our partner, were in the mix with us, and also as well, you know, those other folks, the likes of Vodacom, you know, larger organizations that are creating connected worlds for folks. I think we won for a couple of reasons. One was the solution set, so the Unity portfolio. I think secondly, you know, our customer sentiment in the region is strong, and we're a market leader there, and I think that was important. Our commitment to customer success and quality of product. I think the fact we're winning awards in terms of the robustness of our product, because, you know, these government departments, you cannot fail, and frankly, some of the previous deployments had failed. There was a lot of stress testing of our solutions, a lot of stress testing of referability for our customers. Ultimately, you know, it's about also as well that partnership and that scale with the likes of MTN, who, you know, are able to offer broader propositions, you know, in terms of that connected world. That brings expansion opportunities. From our perspective, it's a huge opportunity for us. You know, I think you've got and a couple of other analysts, we're not allowed to obviously put numbers out, but from a confidentiality perspective. You know, I wouldn't disagree with the ranges that you have and, you know, this should well be a 4%-5% ARR growth opportunity. We're very high level of engagement now to start deployments. This is a great opportunity and the first one of its size that we have won. I think that's everything. If we think about the thesis, we think about why we partner with telcos, we think about the size and scale. We wanted to bring three organizations together, the breadth of Unity solutions, you know, in various different asset types. You know, this was a real kinda humdinger in terms of bringing all of that together with good solid margins. This isn't business that, you know, in any way we're sinking margins. These are all standard margins and good price for our solutions. Excited about the times ahead for that. Then in terms of, you know, retention is improving. You know, we had to t ake some tough decisions to cut off some product lines, to retire some solutions, to stop doing some bad contracts. You know, publicly we came out, that's $15 million of ARR that we've taken out, you know, particularly in North America from these heritage businesses that will make us stronger for the future. Underlying churn is improving. You know, now that ability for us to sell, you know, two solutions, three solutions to the same customer. You talked about the in-warehouse solutions and the over-the-road solutions together, that is uniqueness for us. That in-warehouse solutions space is super interesting right now, where we have real differentiation, but then providing that single source of visibility across both operations, so safety across your whole enterprise is a real winning play for us. Just to give you a data point now in terms of video, 80% of our in-warehouse on-site solution pipeline has video attached with it. You know, the success of our abilities to manage to stop accidents and fatalities and reduce risk in those sites, I think is a real winner and something that's super exciting for the business. Okay. Very helpful. Now maybe we could translate that to some numbers in the outlook. As we start to think about we're concluding fiscal 2026 and thinking about fiscal 2027. We've gotten to that double digit SaaS growth, double digit ARR growth. Yep. What should we be expecting looking out to fiscal 2027, given how that pipeline has been forming, given how you've developed more channel relationships with the MNOs, how are you guys thinking about that early cut at fiscal 2027? Yeah. Double-digit growth, right? We've obviously demonstrated we can do that. We grew 11% most recent quarter. If you normalize for accounting, it was 9%, Steve said. We're talking about 10% organic growth for Q4. In terms of what's gonna work for us next year, there's clearly incremental growth vectors on top of that. Firstly, to your point, channel maturation is one. This large South African contract is another. In terms of where the street's at, I think there's, you know, a nice chance to beat where the street's at, which is sort of $482. We'll probably be closer to sort of $444 in terms of how we exit this year. The most important thing is demonstrating that there's really good operating leverage in terms of what we're doing. In terms of EBITDA growing at a faster rate than revenue, again, looking at the street, it probably has us growing 25% on sort of 10 percentage points of growth. Again, we're comfortable that we will demonstrate that EBITDA margin expansion will continue. The most important thing, and I think the thing that's weighing down the stock at the moment, is we have debt on the balance sheet. If you think about where we were when you bring businesses together, there is a cash cost to transform businesses. If you look to fiscal 2025, significant cash burn bringing these businesses together. Look at this year, we're getting much closer to free cash flow breakeven. In terms of next year, the street has us generating about $30 million plus of free cash flow. We feel very comfortable about that. In terms of actually getting rewarded for all the great work that we have done, it seems as if the last hurdle we have to get over is demonstrating that we can generate free cash flow, and we can manage the balance sheet, we can have absolute debt come down. To Steve's earlier point, we're in a situation where EBITDA to net debt will be sub two. Okay. The single largest challenge, the thing that people questioned us on, was bring these businesses together. We give you credit, you can take costs out, but demonstrate you can take costs out and accelerate growth. That was the hardest, most challenging thing to do. We've demonstrated we can do that over the last two quarters. Unfortunately, the market wants to do one more thing, which is now play this forward, demonstrate as EBITDA margin expands, as the upfront cost of cost synergies is behind you, demonstrate you can generate free cash flow. Dave- We feel good that we will do that, pay down debt, and we believe that is the key unlock. Dave, just to follow up on that though, there is some CapEx related to bundling- Mm-hmm. ...of hardware solutions, right? Yep. Some of that is coming along with the South African contract. Yeah. Once we get past a critical mass level, which we're gonna see at some point mid to early fiscal 2027, much more of your EBITDA will flow to your free cash flow. Yeah, absolutely. Correct? Okay. Correct? Okay. If you think about the South African contract, it's gonna take 18 months to get it up and running. Yeah. It's not like it's instantaneous. We wish it was instantaneous, but it'll definitely sort of come up over time. Scott, you're absolutely right. If you wanna have an annuity stream, there's an upfront cost to realizing that annuity stream. We're looking to work that as well in terms of, you know, how do we actually work the contract. We're active to see, for example, can we get paid annually in advance? Yep. If you think about that, there's ways we can sort of work the balance sheet in terms of working capital to sort of help absorb some of that upfront cash cost in terms of getting more IVDs out in the field generating revenue. I wanna tick down the list. Software AI, not a threat necessarily. Nope. You guys are well entrenched. A boon. Yep. Growth, you've got visibility, demand, and growth vectors to get to continue at double-digit SaaS growth. Yep. Free cash flow will start to reverse in fiscal 2027 as well. You got some visibility to that starting to occur, and that's gonna be some debt pay down. Yep. There's some other questions that have been out there. Board changes. Tell us about those. Some changes from your chairman. Why now? What's going on? Why that transformation? Steve's best placed to answer that one. Yeah. Yeah. I'll take that one. Mike Powell had been with us for 12 years and was one of the reasons that I joined this company and one of the reasons why I stayed in this company through, you know, 2022 and 2023 were hard, and Mike did a fantastic job. As we kind of, you know, get through that period of transformation, it's a good natural time for the board to freshen up. Twelve years is a long stint. You know, bringing in Andrew now, who's been a long-term holder o f the stock, you know, a major shareholder. He's got great energy, great foresight. He's very curious and thoughtful. You know, we're going to build the board out from here. The board will expand, looking to get, you know, some operational and technical capability alongside, you know, some great investor insight into the board. There's nothing here in terms of the fundamentals of the business. It's a natural transition at a time for the company. We're into the next stage. We just recently did our strategic meeting for 2027 and beyond, and there's great alignment within the board and the board members, and we're excited for the future. No more concern needed on that front. We've unfortunately reached the end of our 25 minutes. It goes quickly. Any final thoughts? Anything that we're missing, Steve, Dave? Not from my perspective. I think, you know, this fundamental dislocation has to get fixed. You know, we need to communicate sometimes a little bit more clearly, you know, why we're doing stuff. We know it's done from a point of strength, not weakness. You know, when we're kind of, you know, shifting a point of EBITDA to fund growth. I think in reality, David, it's hit the nail on the head, which is, you know, if this final hurdle now of consistent free cash flow, getting the debt down and continuing on the path we're on, then, you know, we should be trading at, you know, north of 10x-12x EBITDA, you know, is base and then ahead of that with the opportunity that's ahead of us. Just a final sort of quick add. In terms of AI and the change evaluation, that has been indiscriminate, right? It is across the board. We are getting hit as hard as if we were a white-collar SaaS solution, which is really in the crosshairs of change. The other thing that we face is with this change as well, the trading fundamentals of our stock are brutal. You have a situation where a lot of people are sort of moving out of the stock. Those who follow the stock closely, who would particularly take advantage of that excess supply, they've kind of maxed out their positions and nobody's really focused on it. You have this sort of trading dynamic where if people don't know why the stock's going down, they sell because they don't know, but someone else must know, and then there's nobody to catch that supply on the other side. You have this sort of horrible sort of trading dynamic that's driving down the price. Now, the flip side to that is there's opportunity there as well because we think in terms of how the stock's traded versus the fundamentals and what we've demonstrated over the last few quarters, there's a massive disconnect. Well, good. It's a chance to buy. On that note, Steve, Dave, thank you so much. Sounds like basically doctor's orders are to buy the stock. Guys, thank you so much and hopefully, Steve, I look forward to seeing you next year. We will do. See you soon. Thanks. Thanks, guys.