Executive Summary

Record total revenue of $111.7M (+45% y/y; +7.3% q/q) and Adjusted EBITDA of $24.8M (+71% y/y; +23% q/q), with Adjusted EBITDA margin expanding to 22% .
FY26 revenue guidance raised to $435–$445M (from $430–$440M); methodology change removes Fleet Complete contract asset add-back from Adjusted EBITDA going forward, resetting FY25 baseline to $67.1M from $71.1M for 45–55% growth target .
Services revenue momentum (80% of mix; 77% services gross margin) and product rebound (+27% q/q; 31.5% product margin) drove margin expansion; net leverage improved to 2.9x with plan to ~2.25x by year-end .
Catalysts: Unity Innovation Showcase (Nov 14), Frost & Sullivan 2025 North America Product Leadership Award, and new CRO appointment to accelerate enterprise SaaS growth .

What Went Well and What Went Wrong

What Went Well

“A statement quarter”: double‑digit organic services ARR growth achieved ahead of schedule, with services now ~80% of total revenue .
Margin expansion: Adjusted EBITDA margin rose to 22% (from 19% prior quarter), Adjusted EBITDA gross margin to 68% (+400 bps y/y); services gross margin 77% .
Product revenue growth and margin recovery: +27% q/q and product margin improved to 31.5% supported by on‑site demand rebound after tariff headwinds .
Quote: “This quarter clearly demonstrates the shape of the future of Powerfleet: integrated, efficient, and built for profitable growth.” — CEO Steve Towe .
Quote: “Service revenue… grew 12% organically year‑over‑year… service revenue now representing 80% of total revenue.” — CFO David Wilson .
Quote: “Integration is complete with more than $30M in annualized synergies realized.” — COO Melissa Ingram .

What Went Wrong

GAAP net loss widened: $(4.3)M, or $(0.03) per share vs. $(1.9)M, $(0.02) prior year, driven by higher interest and non‑cash amortization .
Non‑GAAP methodology change removes Fleet Complete contract asset add‑back, lowering the FY25 Adjusted EBITDA baseline used for growth guidance (from $71.1M to $67.1M) and modestly reducing reported leverage trajectory (prior “below 2.25x” to “~2.25x”) .
Management flagged ongoing macro caution and indicated second‑half headwinds from deliberate revenue shedding at Fleet Complete to align the base with higher‑quality growth (NRR still positive excluding Fleet Complete) .

Financial Results

Consolidated Performance (oldest → newest)

Metric	Q2 FY2025	Q1 FY2026	Q2 FY2026
Total Revenue ($M)	$77.018	$104.121	$111.679
Products Revenue ($M)	$20.293	$17.657	$22.370
Services Revenue ($M)	$56.725	$86.464	$89.309
Gross Profit ($M)	$41.343	$56.481	$62.589
Gross Margin (%)	53.7%	54.2%	56.0%
Adjusted EBITDA ($M)	$14.477	$21.640	$24.777
Adjusted EBITDA Margin (%)	18.8%	20.8%	22.2%
Net Loss per Share (GAAP)	$(0.02)	$(0.08)	$(0.03)
Adjusted Net Income per Share	$0.00	$0.01	$0.02

Segment and Margin Detail

Metric	Q2 FY2025	Q1 FY2026	Q2 FY2026
Products Gross Profit ($M)	$6.364	$4.429	$7.052
Products Gross Margin (%)	31.4%	25.1%	31.5%
Services Gross Profit ($M)	$34.979	$52.052	$55.537
Services Gross Margin (%)	61.7%	60.2%	62.2%
Adjusted EBITDA Gross Profit ($M)	$49.561	$69.722	$76.151
Adjusted EBITDA Gross Margin (%)	64.3%	67.0%	68.2%

KPIs and Balance Sheet

KPI	FY2025 Year-End	Q1 FY2026	Q2 FY2026
Services % of Total Revenue	74% (y/y ref)	83%	~80%
Net Debt ($M)	$228.555 (Adj.)	$234.8	$242.631
Total Debt ($M)	$273.792	$270.4	$275.112
Cash & Equivalents ($M)	$48.788	$31.196	$32.481
Net Debt / Adjusted EBITDA (TTM)	3.4x	2.97x	2.9x

Note: Services % mix is cited from management commentary and period tables; ~80% in Q2 FY26 per CFO remarks .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Total Revenue	FY2026	$430–$440M	$435–$445M	Raised
Adjusted EBITDA Growth	FY2026 vs FY2025	45–55% growth on $71.1M baseline	45–55% growth on $67.1M baseline	Methodology reset (lower baseline)
Net Debt / Adjusted EBITDA	FY2026 Year-End	Improve from 3.2x to below 2.25x	Improve from 3.4x to ~2.25x	Maintained/implied slightly higher end-point

Context: Removal of the Fleet Complete contract asset add‑back in Adjusted EBITDA presentations following SEC guidance; recoveries still flow through operating cash but are no longer added back to EBITDA .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 FY2025)	Previous Mentions (Q1 FY2026)	Current Period (Q2 FY2026)	Trend
AI/Technology Initiatives	Transition toward AI‑driven Unity platform underway (company combination context)	Launch of AI automated risk module; ABI “7 most innovative” recognition	Deeper AI embedding across operations; upcoming Unity Innovation Showcase	Strengthening
Supply Chain/Tariffs/Macro	Tariff headwinds pressured product in prior periods	Navigated tariff headwinds; supply chain efficiencies	Product rebound and margin recovery post tariff impact	Improving
Product Performance	Softer on product near term	Products $17.7M; margin 25.1%	Products $22.4M; margin 31.5% (+640 bps q/q)	Improving
Regional Trends (North America)	Repositioning; channel build	Services mix shift and partner momentum	Double‑digit y/y NA growth; stronger enterprise pipeline	Improving
Partners/Channels	MTN partnership (Aug)	AT&T/TELUS momentum; pipeline build	Global channel bookings up; pipeline +32% seq; video pipeline +23%	Strengthening
Regulatory/Legal	SEC guidance context emerging	—	Adopted SEC non‑GAAP guidance for EBITDA presentation	Resolved/Compliant
R&D Execution	4–5% of revenue	R&D at 5% of revenue; gross 8%	Gross R&D ~8%; net ~4%; continued innovation in AI/safety	Stable
Enterprise Wins	Scaling into larger RFPs	New logos +14% seq; six‑figure ARR across 11 sectors	Fortune 500 deployments; 5–10x expansion runway	Strengthening

Management Commentary

“Q2 was a defining quarter for Powerfleet, marked by record revenue and strong performance… expanding momentum in our AI‑powered SaaS solutions.” — Steve Towe, CEO .
“Service revenue… grew 12% organically y/y… service revenue now representing 80% of total revenue.” — David Wilson, CFO .
“Integration is complete with more than $30M in annualized synergies realized… moving decisively into optimization and efficiency.” — Melissa Ingram, COO .
“Global channel bookings increased meaningfully… AT&T and TELUS momentum with a 32% sequential increase… video pipeline +23%.” — Jeff Lautenbach, CRO .
“Product margins improved 640 bps sequentially to 31.5%… rebound in higher margin on‑site demand following Q1 tariff headwinds.” — David Wilson, CFO .

Q&A Highlights

Organic services growth and outlook: Management targets ~10% organic growth in Q4; services grew 12% organically in Q2 excluding legacy Fleet Complete .
Fleet Complete adjustment: EBITDA add‑back removal per SEC guidance; cash recoveries continue but won’t be added to EBITDA; Q2 recoveries invoiced were ~$1.3M .
North America demand and macro: Double‑digit y/y growth; customers re‑accelerating purchases; caution persists but pricing/margins improving .
Warehouse/on‑site solutions: ~67% growth referenced by analysts; management emphasized broad‑based traction and video safety deployments .
Enterprise momentum and expansion runway: Fortune 500 beachheads with 5–10x potential nationally and internationally; strengthening global accounts model .
FX and leverage: Balance sheet hedging (ILS/ZAR debt tranches); net leverage improved to 2.9x; path to ~2.25x by year‑end .

Estimates Context

S&P Global consensus (EPS, revenue, EBITDA, target price, recommendation): unavailable due to SPGI request limits at the time of retrieval; as a result, we cannot benchmark reported Q2 FY26 results versus Wall Street estimates in this recap. Values retrieved from S&P Global were unavailable at time of request.
Given the guidance raise and upside in services mix/margins, near‑term estimate revisions are likely to center on FY26 revenue ($435–$445M) and Adjusted EBITDA growth on the updated $67.1M baseline, with methodology clarity potentially improving comparability across coverage .

Key Takeaways for Investors

Mix shift to recurring SaaS continues to drive margin expansion and cash conversion; services at ~80% mix with 77% services gross margin underpins durability .
Guidance raise to $435–$445M and net leverage trajectory (~2.25x by year‑end) reinforce execution confidence following integration completion and synergy capture >$30M .
Product recovery and margin uplift post tariff headwinds broaden the growth drivers beyond services, supporting sequential revenue growth .
Enterprise and channel momentum (AT&T, TELUS, MTN) plus video safety upsell suggest accelerating ARR and multi‑year expansion within Fortune 500 logos .
EBITDA methodology reset (SEC‑aligned) enhances transparency; while it lowers the baseline, underlying economics and operating cash remain intact .
Near‑term trading: investor day and award recognition provide narrative catalysts; focus on sustained q/q margin improvements and services growth consistency .
Medium‑term thesis: SaaS flywheel, device‑agnostic Unity platform, and cross‑segment integration create a differentiated position for profitable double‑digit growth into FY2027 .

Powerfleet, Inc. (AIOT)·Q3 2025 Earnings Summary