PowerFleet's Q2 2026: Contradictions Emerge on Services & SaaS Growth, Unity Ecosystem, Tariff Strategies, and Channel Expansion

Date of Call: November 10, 2025

Financials Results

• Revenue: $111.7M, up 45% YOY (organic growth 9% overall; services organic growth 12% YOY)
• Gross Margin: Adjusted EBITDA gross margin 68%, up 400 bps YOY; services gross margin 77%; product margins improved to 31.5% (up 640 bps sequentially)

Guidance:

• Q4 organic revenue growth expected to be ~10%.
• G&A expected to continue stepping down by ~1 percentage point per quarter in the second half.
• Expect to exit the year with net debt of approximately $220M and a net debt-to-EBITDA ratio around ~2.25x.
• Extended Term Loan A maturity to March 31, 2028.

Business Commentary:

* Revenue and Earnings Growth: PowerFleet, Inc. reported total revenue increased 45% year-on-year to $111.7 million in Q2 2026, including strong organic growth of 9% overall and 12% in strategically important services. - The growth was driven by the alignment of operations into a global enterprise, expanding revenue growth, and the extensive synergy programs executed, which positively impacted adjusted EBITDA.

• Adjusted EBITDA Expansion: Adjusted EBITDA rose more than 70% to $24.8 million, marking meaningful EBITDA expansion both sequentially and year-over-year.

• This expansion was due to the synergy programs executed, improved service and product margins, and disciplined reinvestment.

• Services and Product Revenue Growth: Services and annual services recurring revenue reached double-digit growth ahead of schedule, with significant improvement in gross margins, especially within the services line.

• The growth was attributed to the strength of the SaaS-led model, operational discipline, and effective actions to offset tariff pressures and broader macroeconomic challenges.

  

• North American Market Performance: The North American market showed double-digit year-over-year revenue performance, with a 26% increase in new logo wins.

• This improvement was driven by PowerFleet's growing visibility as a top-tier provider, strong demand for safety, compliance, and efficiency solutions, and strategic wins with large enterprise customers.

Sentiment Analysis:

Overall Tone: Positive

• Management called Q2 a "banner period delivering record top and bottom line performance," highlighted ARR reaching double-digit growth ahead of schedule, and reported adjusted EBITDA rising >70% to $24.8M, framing results as "accelerating profitable growth" and expanded margins driven by services strength.

Q&A:

• Question from Scott Searle (ROTH Capital Partners, LLC, Research Division): Congrats on the quarter. Great job in seeing the organic SaaS growth break through that 10% barrier to 12%. Maybe to dive in on that front, Steve and Dave, looking at the guidance for this year, I'm wondering if you could provide a little bit of color about how you're thinking about services and organic SaaS growth into the third and fourth quarter of this year. Also as part of that, it sounds like Fleet Complete has got some revenue recognition transition issues going on. So how you're thinking about that, particularly as we start to go into '27. And I think Jeff indicated sustainable double-digit growth as we get into fiscal '27. I wonder if you could give us some early thoughts on that front. And then I had a follow-up.
  Response: Expect ~10% organic growth in Q4; Fleet Complete IVD invoicing is cash collected post-close and not recognized as revenue (EBITDA add-back removed after SEC consultation); management is confident momentum supports sustainable double-digit SaaS and top-line growth into FY27.

• Question from Scott Searle (ROTH Capital Partners, LLC, Research Division): And as a quick follow-up, just I'm wondering if you could provide some more high-level thoughts in terms of North America. Obviously, it's a pretty dynamic environment from a supply chain perspective. I'm wondering how you're seeing sales cycles, the ability to close deals. It certainly seems like the pipeline is building on that front. And Dave, also just kind of in this current environment, how you guys are thinking about hedging policy for some of the international markets?
  Response: North America demand has rebounded with double-digit regional growth and improving product margins; customers are buying again for efficiency, safety and compliance. On FX/debt hedging, company holds ~ $30M in shekel-denominated debt and ~ $20M ZAR revolver, providing some natural balance-sheet FX hedging.

• Question from Anthony Stoss (Craig-Hallum Capital Group LLC, Research Division): The up 67% in your warehouse solutions, Steve, do you attribute that to -- or what do you attribute that to? Is it mainly one big customer? Is it across the board? And then also perhaps an update on all your channel partners, AT&T, TELUS and the European giant, where do they stand training and launch wise?
  Response: Warehouse growth is broad-based from better sales execution, combined on-site/over-the-road visibility and advanced video tech; channel partners (AT&T, TELUS, MTN) show meaningful pipeline and bookings improvement and further partner integrations are being ramped toward 2027.

• Question from Gary Prestopino (Barrington Research Associates, Inc., Research Division): Steve, in terms of great new business awards and all that, but could you maybe tell us how this is starting to shake out in terms of -- are the majority of the new business awards coming from Unity? Or is it products with services attached?
  Response: All sales are within the Unity platform (device-agnostic); wins are driven by Unity's single-pane integration and connected-intelligence value rather than standalone hardware.

• Question from Gary Prestopino (Barrington Research Associates, Inc., Research Division): I guess what I was just trying to get at, Steve, is your Unity is device agnostic. So I guess, is the traction pretty good with entities that are not using your products?
  Response: Yes — strong traction with customers using third-party devices and multiple data streams; Unity shortens time-to-value and many deployments reach breakeven within ~12 months.

• Question from Gary Prestopino (Barrington Research Associates, Inc., Research Division): And then just one last quick question. I mean, in feedback from your customers, I think you had 6 modules for Unity as you initially rolled out. Are you developing any further? And what -- with any feedback from your clients, what do you feel like you're missing in that Unity platform with the modules, if anything?
  Response: Focus is on deepening module capabilities (AI, data analytics, real-time interventions) rather than horizontal module expansion to drive faster, more granular safety and operational outcomes.

• Question from Dylan Becker (William Blair & Company L.L.C., Research Division): Maybe, Steve, starting with you, the 12% organic services, obviously, ahead of plan is quite impressive. I wonder if given kind of the pipeline strength that you guys are seeing, that's affording you the ability to kind of unlock some of that held back spend around go-to-market and maybe if that kind of shifts how you think about the model going forward given the vast opportunity here, kind of reinvesting maybe some of that incremental EBITDA growth or EBITDA upside that you would see traditionally back into go-to-market and product development initiatives.
  Response: They have resumed a previously held $4M go-to-market investment (sales, channel enablement) and will flex reinvestment based on momentum and confidence, keeping optionality to double down through '27–'28.

• Question from Dylan Becker (William Blair & Company L.L.C., Research Division): Encouraging to see some of the new logo momentum in the business... if I look at it to low single-digit millions for a Fortune 500 entity, feels like you're kind of just scratching the surface relative to that opportunity. Maybe reconcile how that breeds conviction to significantly expand within several of those accounts from a cross-selling perspective.
  Response: New logo traction validates large expansion runway; management sees 5–10x upside inside major accounts via global rollouts, site expansion and cross-sell from modular Unity offerings.

• Question from Alexander Sklar (Raymond James & Associates, Inc., Research Division): If you go back 1 to 2 years in time, can you just help put some context behind how incremental these enterprise opportunities have become for PowerFleet in terms of pipeline mix today? And then with that and kind of overall brand awareness, how much more room do you have to go on the brand awareness marketing side?
  Response: Enterprise opportunity and credibility are materially improved versus 1–2 years ago (stronger win rates and brand recognition); there remains upside in markets with lower presence and room to scale brand/awareness investments prudently.

• Question from Alexander Sklar (Raymond James & Associates, Inc., Research Division): David, maybe one for you on the back-to-base motion... directionally what you're seeing from the installed base through maybe end of second quarter, October? Where across retention, upsell, cross-sell, have you seen the biggest level of improvement? Where are you still pushing hardest?
  Response: Net revenue retention is a major driver of recent acceleration (selling more into existing customers); company has cleaned noncore revenue from MiX and Fleet Complete, which supports healthier ARR growth though Fleet Complete clean-up will be a modest H2 headwind.

• Question from Gregory Gibas (Northland Capital Markets, Research Division): Congrats on the results. Really nice to see that 23% increase in the cross-sell pipeline. Wondering if you could maybe provide some color on where you're seeing success or solid traction with your cross-sell efforts.
  Response: Cross-sell success is largely between in-warehouse and over-the-road solutions, notably video for safety/compliance, transferring traction both ways within customers and expanding addressable use cases.

• Question from Gregory Gibas (Northland Capital Markets, Research Division): Can you maybe characterize the greater demand environment and I guess, demand trends as it relates to what you're hearing on pauses on purchasing? Like would you say that, that headwind has fully subsided at this point?
  Response: Customers remain cautious but purchasing decisions have resumed; product demand and pricing/margins have rebounded, indicating improving demand trends though management remains prudent.

• Question from Gregory Gibas (Northland Capital Markets, Research Division): As it relates to the accounting adjustment, you mentioned the $4 million impact on '25. How much are you guys taking out of '26 that was baked in?
  Response: The Fleet Complete invoicing/EBITDA adjustment recognized this quarter was about $1.3M (~just over one percentage point of EBITDA margin).

Contradiction Point 1

Services Revenue Growth Expectations

It involves differing expectations for services revenue growth, which is a critical component of the company's financial outlook.

How are you thinking about services and organic SaaS growth for Q3 and Q4? - Scott Searle(ROTH Capital)

2026Q2: We remain very confident in achieving double-digit services growth for the year. - Steve Towe(CEO)

How are you thinking about product contribution amid economic headwinds and tariffs? Are you more confident in achieving double-digit services growth? - Scott Searle(ROTH Capital)

2026Q1: We're confident in achieving double-digit SaaS growth by year-end. - Steve Towe(CEO)

Contradiction Point 2

Device Agnostic Platform and Unity Ecosystem

It involves the company's strategy regarding platform capabilities and integration, which could impact market positioning and customer acquisition.

Are new business awards from Unity or product-service bundles? Is Unity device-agnostic? - Gary Prestopino (Barrington Research Associates, Inc., Research Division)

2026Q2: All sales are within the Unity ecosystem. The platform offers device-agnostic solutions with a focus on safety, compliance, and efficiency. - Steve Towe(CEO)

What is the core of your transformation strategy and its current business impact? - Analyst

2025Q4: We have integrated our existing ecosystem to deliver management completeness. Our 2 newest platforms are global in nature and device agnostic. - Steve Towe(CEO)

Contradiction Point 3

Impact of Tariffs on Revenue

It involves the company's response to tariff pressures and their impact on revenue, which are crucial factors for financial projections and investor expectations.

How are you projecting services and organic SaaS growth for Q3 and Q4? What are your views on North America's sales cycles and hedging strategy? - Scott Searle (ROTH Capital Partners, LLC, Research Division)

2026Q2: Strong demand for efficiency and safety in North America is driving double-digit growth. Tariff pressures are offset by pricing and margin improvements. - Steve Towe(CEO)

How is your tariff situation evolving as you approach FY'26? - Anthony Stoss (Craig-Hallum Capital Group LLC, Research Division)

2025Q4: In the meantime, as we work on these issues, we will continue to execute on tariff mitigation strategies. This includes, but is not limited to, price increases on certain product lines. - Steve Towe(CEO)

Contradiction Point 4

organic SaaS Growth and Revenue Recognition

It involves expectations for organic SaaS growth and revenue recognition issues, which are crucial for assessing the company's financial performance and growth prospects.

How are you thinking about services and organic SaaS growth for Q3 and Q4 this year? - Scott Searle (ROTH Capital Partners, LLC, Research Division)

2026Q2: Guidance remains for 10% organic growth in Q4. The trajectory is up and to the right, not a smooth road. - David Wilson(CFO)

What was Fleet Complete's contribution in the December quarter? What is your outlook for organic growth in fiscal 2026? - Scott Searle (ROTH Capital Partners)

2025Q3: Strong organic growth of 7% and we continue to expect strong organic growth in fiscal year 2026. - David Wilson(CFO)

Contradiction Point 5

Channel Partner Growth and Integration

It addresses the growth and integration of channel partners, which are key to the company's sales and expansion strategy.

What drove the 67% increase in warehouse solutions? Can you provide updates on channel partners such as AT&T and TELUS? - Anthony Stoss (Craig-Hallum Capital Group LLC, Research Division)

2026Q2: Channel partnerships are growing, with strong pipeline growth and integrated solutions. AT&T, TELUS, and others are key to future innovation. - Steve Towe(CEO)

How active are channel partners in selling PowerFleet's solutions, and what is their feedback? - Dylan Becker (William Blair & Company L.L.C., Research Division)

2025Q3: Global telco partners are actively engaged, excited by high ARPU solutions. They see PowerFleet's offerings as a solution they've been seeking. - Steve Towe(CEO)