PowerFleet (NASDAQ:AIOT) executives highlighted what they described as another strong quarter of execution in fiscal third-quarter results, pointing to accelerating recurring revenue growth, expanding profitability, and a strengthening balance sheet as integration work from recent combinations largely moves into the background.
Quarter highlights: services-led growth and margin expansion
CEO Steve Towe said the quarter demonstrated “consistency of delivery” across the combined business, with the company emphasizing its operating model of disciplined execution and profitability alongside growth. Management reiterated previously stated milestones for exiting fiscal 2026, including a Q4 exit run rate of 10% total revenue growth and “north of 10%” growth in recurring revenue, saying performance exiting Q3 supports confidence in those targets.
Adjusted EBITDA rose 26% year over year to $25.7 million, and adjusted EBITDA margin expanded 4 percentage points to 23%, reflecting operating leverage and continued execution on integration and cost synergy initiatives, according to CFO David (last name not provided in the transcript). Net leverage improved, with net debt to adjusted EBITDA at 2.7x exiting the quarter.
Landmark South African public sector contract
A central focus of the call was a “landmark” win in South Africa. Towe said PowerFleet secured a major public sector contract to deliver AI video and visibility services to government fleets collectively operating more than 100,000 total assets. He described it as one of the largest deployments in company history, expected to generate meaningful recurring SaaS and services revenue over a multi-year term through a phased implementation. He added that preliminary department enrollments were “highly encouraging” and ahead of internal expectations.
Towe emphasized that a key differentiator in winning the contract was the company’s partnership with MTN, which he said provides scale, connectivity, and platform support for a deployment of this magnitude. During Q&A, management said multiple suppliers bid for the award and that it ultimately came down to a few tier-one providers, given the robustness, scale, and deployment requirements involved.
When asked about the contract’s financial contribution, Towe said the company was not allowed to provide specific financial details. He suggested investors consider PowerFleet’s typical bundled solution economics and ARPU levels “within our suite range” and multiply that by the vehicle count. He also characterized the agreement as a “material” contract and said five-year contracts generally continue if performance is strong.
On the mechanics, Towe said the program is led by the National Treasury, which sets commitment, cost, and pricing, and departments then enroll into the directive. He described early enrollment as strong, but said it is an enrollment opportunity rather than a mandate for all departments.
Commercial momentum: enterprise wins and pipeline growth
Chief revenue officer Jeff (last name not provided in the transcript) described accelerating commercial momentum driven by Unity platform differentiation and a more focused enterprise sales motion. He said PowerFleet secured multiple enterprise wins in the quarter with total contract values ranging from $500,000 to more than $5 million, including multimillion-dollar contracts with Fortune 500 manufacturing and food and beverage companies.
Jeff said customers are increasingly engaging around AI-based safety and compliance solutions, including on-site AI pedestrian proximity capabilities and the company’s “safety-as-a-service” AI video portfolio for on-road use cases. He argued PowerFleet’s ability to offer connected AI video intelligence across on-road and on-site environments on a single platform is becoming a key competitive advantage.
Management cited several pipeline indicators:
- AI video pipeline build increased 71% sequentially, driven by demand for safety, compliance, and visibility solutions.
- In-warehouse pipeline growth in North America marked a third consecutive quarter, tied to on-site safety and pedestrian protection use cases.
- ARR pipeline increased 13% sequentially, which management said supports confidence in subscription-led durability.
In response to an analyst question on revenue mix, management said there was “no real change,” with approximately 65%-70% of business coming from existing customers and about 30% from new customers. Towe also pointed to strength through M&O channels as a contributor to recurring revenue growth.
Strategy: “Data Highway,” integration with enterprise systems, and customer examples
Jeff outlined the company’s “Data Highway” strategy, describing it as connecting fragmented enterprise data, harmonizing it, and enabling it to be consumed and acted upon. He said Unity is being integrated with customer systems including ERP platforms such as SAP and Oracle, HR systems, learning and training platforms, maintenance systems, and IoT infrastructure, with objectives that include automating compliance, improving utilization, enhancing safety, and enabling digital transformation.
As an example of long-term expansion within accounts, management highlighted Origin Energy as a 14-year customer operating 2,000 vehicles. Jeff said a phased deployment from compliance to advanced AI video has produced consistent reductions in risky driving events and has improved the customer’s public reputation, with the relationship evolving into a unified data ecosystem for predictive and proactive safety management.
Costs, synergies, and updated outlook items
CFO David noted $2.3 million in one-time charges for restructuring, integrations, and transaction costs excluded from adjusted results, and $5.7 million of non-cash amortization related to acquisitions that impacted services gross margins by more than 6%.
Adjusted gross margin was described as stable at 67%, with product margins steady in the low 30% range. Management said G&A as a percentage of revenue declined by 4 percentage points, while sales and marketing spending increased “as planned” to support growth. R&D remained around 8% of revenue, or roughly 4% net of capitalized development costs, as the company continues investing in AI-enabled safety, compliance, and analytics.
For fiscal 2026, management said the South African tender should have a material positive impact on future revenue growth over time. However, the company updated adjusted EBITDA guidance to approximately 45% annual growth versus prior guidance of 45%-50%, citing operating expense investments to support business build-out. Management also updated its year-end leverage expectation to about 2.4x, compared with a prior expectation of around 2.25x, citing investments tied to the public sector win and working capital dynamics.
On synergies, management reiterated a target of $18 million and said it was effectively in place exiting the year, but added that given growth opportunities, the company chose not to reduce operating expenses as aggressively as it otherwise might have. Executives characterized much of the incremental support for the South African deployment as repurposing capacity rather than significant new spending, focused on “people, process, and systems,” including automation and on-the-ground support.
In Q&A, Towe said the business environment has improved versus six months ago, citing better positioning in markets and expanding enterprise momentum. He also said AT&T’s sales force would have an additional portion of the video portfolio “for the start of April” following accreditations that had taken time.
About PowerFleet (NASDAQ:AIOT)
PowerFleet, Inc (NASDAQ: AIOT) develops and delivers Internet of Things (IoT)–based telematics and asset-tracking solutions designed to help businesses monitor, manage and optimize fleets of vehicles and industrial equipment. Its core offerings include wireless sensors, GPS tracking devices and cloud-hosted software platforms that provide real-time visibility into vehicle whereabouts, usage patterns, fuel consumption and maintenance needs. The company’s systems also support regulatory compliance and safety monitoring, enabling customers to reduce operational costs, minimize theft and improve overall asset utilization.
The company’s hardware portfolio features RFID readers, active and passive tags, onboard diagnostics (OBD) adapters and temperature or motion sensors that can be deployed on trucks, trailers, forklifts, containers and other high-value assets.
