Exchange: NASDAQ | Sector: Technology | Industry: Communication Equipment
Q1 2026
Published: Aug 11, 2025
Earnings Highlights
Revenue of $104.12M up 35.2% year-over-year
EPS of $-0.08 decreased by 336.4% from previous year
Gross margin of 54.2%
Net income of -10.23M
"The standard metric this quarter is our achievement of a 6% sequential increase in service revenue, underscoring our recurring SaaS growth momentum." - Steve Towe
PowerFleet reported a standout QQ1 2026 quarter, underscored by a sharp shift toward a SaaS-centric revenue mix via its Unity platform. Services revenue grew 53% YoY and 6% QoQ to $86.5 million, representing 83% of total revenue, as the company benefits from recurring software-enabled monetization and higher attach rates. The quarter featured a 6% sequential increase in service revenue, highlighting SaaS momentum and improved predictability. Adjusted EBITDA reached $21.6 million, up 58% YoY, with margins expanding 300 basis points to 67% driven by services mix and SYNERGY savings of $11 million annualized against an $18 million FY26 target. Management cited lean transformation, synergies, and platform consolidation as key enablers of profitability, while continuing to invest in growth through go-to-market expansion and indirect channels.
The quarter demonstrated commercial traction across both direct and indirect channels, including high-value deals over $100k ARR across 11 sectors, a 14% sequential rise in new logo wins, and AI video bookings up 52% QoQ. Strategic wins with MTN (Africa-wide white-labeled Unity deployment) and SIXT Rental Mexico, along with a Holcim safety-analytics case (83% reduction in critical safety events), validate Unity’s enterprise-grade value proposition and data-centric defensibility. While near-term product revenue faced tariff-related headwinds and capex moderation, the company remains confident in delivering a higher SaaS mix with 85%+ of total revenue from SaaS-related streams over the longer term.
On the balance sheet, PowerFleet ended QQ1 with a net debt/EBITDA of 2.97x and net debt of roughly $23.6 million, with a stated goal to stay under 2.25x by year-end. Cash flow remained positive from operations ($4.72 million), albeit with negative free cash flow (-$3.39 million) as investments and acquisitions continue to front-load platform and system upgrades. The roadmap emphasizes continued margin expansion, a higher services contribution, and selective reinvestment in go-to-market to accelerate top-line growth while maintaining disciplined cost management.
Key Performance Indicators
Revenue
104.12M
QoQ: 0.47% | YoY:35.19%
Gross Profit
56.48M
54.25% margin
QoQ: 3.14% | YoY:36.62%
Operating Income
-2.04M
QoQ: 70.79% | YoY:-455.85%
Net Income
-10.23M
QoQ: 17.73% | YoY:-442.06%
EPS
-0.08
QoQ: 14.67% | YoY:-336.36%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $104.121 million; YoY growth +38% (management highlighted strong top-line momentum driven by SaaS adoption and platform consolidation). QoQ: +0.47% (approx. $0.48 million sequential growth).
Services revenue: $86.5 million; YoY +53%; QoQ +6%; services as a % of revenue: 83% (up from 79% prior quarter, 75% year-ago). The elevated services mix supports margin resiliency and recurring revenue visibility.
Gross profit / gross margin: Gross profit $56.481 million; gross margin 54.25% (GAAP). Services gross margin was stated at 76%, contributing to overall margin dynamics.
Adjusted EBITDA: $21.6 million; adjusted EBITDA margin roughly 67% (300 bps expansion YoY in adjusted EBITDA gross margin). The company cited $11 million in annualized savings in Q1 toward an $18 million FY26 target, contributing to EBITDA upside.
Operating income: GAAP operating income of -$2.039 million; operating income margin -1.96%.
Financial Highlights
Overview of QQ1 2026 performance and YoY/QoQ trends:
- Revenue: $104.121 million; YoY growth +38% (management highlighted strong top-line momentum driven by SaaS adoption and platform consolidation). QoQ: +0.47% (approx. $0.48 million sequential growth).
- Services revenue: $86.5 million; YoY +53%; QoQ +6%; services as a % of revenue: 83% (up from 79% prior quarter, 75% year-ago). The elevated services mix supports margin resiliency and recurring revenue visibility.
- Gross profit / gross margin: Gross profit $56.481 million; gross margin 54.25% (GAAP). Services gross margin was stated at 76%, contributing to overall margin dynamics.
- Adjusted EBITDA: $21.6 million; adjusted EBITDA margin roughly 67% (300 bps expansion YoY in adjusted EBITDA gross margin). The company cited $11 million in annualized savings in Q1 toward an $18 million FY26 target, contributing to EBITDA upside.
- Operating income: GAAP operating income of -$2.039 million; operating income margin -1.96%.
- Net income / EPS: Net income -$10.234 million; net income margin -9.83%; EPS -$0.0768 (diluted).
- Balance sheet / liquidity: Cash at end of period $35.643 million; cash at beginning of period $48.788 million; net cash provided by operating activities $4.721 million; net cash used in investing activities $(11.822) million; net cash used in financing activities $(6.769) million; effect of forex changes $0.725 million; net change in cash $(13.145) million; total assets $930.782 million; total liabilities $469.902 million; total stockholders’ equity $460.880 million.
- Leverage and capital structure: Net debt $23.6 million; total debt $50.385 million; net debt-to-EBITDA 2.97x; management guided to under 2.25x by year-end with an expected additional $30 million net debt improvement in the back half via topline growth, reduced CapEx intensity, and improved working capital.
- Cash flow guidance and margins: Product margins expected to remain in the mid-20% range; SG&A ~18% of revenue; R&D as a percentage of revenue around 8% (5% net of capitalized software); G&A down to 26% of revenue YoY; expectations of continued margin expansion as SaaS mix increases.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
104.12M
35.19%
0.47%
Gross Profit
56.48M
36.62%
3.14%
Operating Income
-2.04M
-455.85%
70.79%
Net Income
-10.23M
-442.06%
17.73%
EPS
-0.08
-336.36%
14.67%
Key Financial Ratios
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Management commentary and key callouts:
- Strategy and platform focus: Steve Towe emphasized Unity as the core platform for digital transformation and highlighted a 6% sequential increase in service revenue as a metric of SaaS momentum. Quote: "The standard metric this quarter is our achievement of a 6% sequential increase in service revenue, underscoring our recurring SaaS growth momentum." (Speaker: Steve Towe)
- Commercial progress and channel strategy: Towe noted growth in high-value ARR deals across 11 sectors and a 14% sequential rise in new logo wins, with AI video bookings up 52% QoQ. Quote: "Encouragingly, in Q1, we added high-value deals of over $100,000 ARR across 11 diverse sectors, evidence of the wide-ranging appeal for Unity solutions. We also grew our new customer logo wins by 14% sequentially, a healthy expansion driven by enterprise and mid-market traction." (Speaker: Steve Towe)
- MTN and indirect channel momentum: The call highlighted the MTN partnership as a force multiplier and noted ongoing pipeline strength in North America with AT&T and TELUS. Quote: "MTN serves nearly 300 million customers... they've now selected PowerFleet Unity platform as the foundation for their enterprise data intelligence solutions... This partnership opens a vast TAM in high-growth underpenetrated regions." (Speaker: Steve Towe)
- AI and innovation: Mike Powell described Unity’s AI-enabled risk intervention module, designed to automatically analyze critical safety events and drive real-time action, with real-world ROI. Quote: "We launched our new AI risk intervention module inside Unity, purpose-built to automatically analyze critical safety events and drive real-time action... 80-plus percent reduction in manual video review hours... measurable ROI to reduce incidents and claims." (Speaker: Mike Powell)
- ABI Innovation recognition and product roadmap: Powell noted ABI Research's recognition of Unity as a leading, enterprise-grade platform and signaled November investor innovation session to demonstrate Unity’s capabilities. Quote: "PowerFleet was named 1 of ABI Research's 7 most innovative global technology companies... Unity enabling true digital transformation..." (Speaker: Mike Powell)
- Transformation progress and savings: Melissa Ingram outlined $11 million in annualized savings for Q1 toward an $18 million FY26 target, driven by organizational redesign and vendor-spend discipline. Quote: "Q1 was another quarter of disciplined execution of strategic transformation initiatives... we realized $11 million in annualized savings this quarter, putting us firmly on the path to achieving the 18 million FY '26 target." (Speaker: Melissa Ingram)
- Leverage management and guidance: David Wilson indicated a path to deleverage with a target of sub-2.25x net debt/EBITDA by year-end and highlighted front-loaded investments to accelerate platform integration. Quote: "We exit Q1 with net debt-to-EBITDA ratio of 2.97x, down from 3.2x... Our guidance remains firm under 2.25 net leverage by year-end. Net debt at quarter end was $235 million... this increase is in line with prior expectations of front-loaded investments." (Speaker: David Wilson)
The standard metric this quarter is our achievement of a 6% sequential increase in service revenue, underscoring our recurring SaaS growth momentum.
— Steve Towe
We launched our new AI risk intervention module inside Unity, purpose-built to automatically analyze critical safety events and drive real-time action. Here's what it delivers: Real-time detection of fatigue, distraction and unsafe behavior, automated risk alerting and live driver coaching, 80-plus percent reduction in manual video review hours, structured export-ready data for insurers and regulators and most importantly, measurable ROI to reduce incidents and claims.
— Mike Powell
Forward Guidance
Outlook and management guidance:
- Leverage and capital allocation: The company targets net debt/EBITDA under 2.25x by year-end, with net debt approximately $230 million at quarter-end and an expected $30 million improvement in the back half driven by topline growth, lower CapEx intensity, and working capital improvements. This implies a deliberate shift toward deleveraging as the SaaS mix strengthens and operating leverage expands.
- Revenue trajectory and mix: Management emphasized continued SaaS mix expansion toward 85%+ of total revenue, with product margins expected to remain mid-20% and ongoing margin expansion as services contribute a larger, higher-margin portion of the business.
- Margin and profitability: The company described a 300 bps expansion in adjusted EBITDA gross margins to 67% and a plan to sustain or further improve margins through synergies and disciplined spend management (G&A at 26% of revenue; R&D 8% of revenue; SG&A ~17-18% of revenue). Near-term tariffs on product revenue may hamper product margins, but the SaaS-led model provides steadier long-term profitability.
- Growth catalysts and risks: Catalysts include MTN, AT&T/TELUS pipeline progress, SIXT, and Holcim use cases that broaden Unity’s industrial applicability. Risks include macroeconomic uncertainty and tariff volatility, potential slower-than-expected go-to-market execution in new regions, and execution risk in integrating acquisitions (Fleet Complete) and harmonizing systems.
- Investor watchpoints: Monitor the cadence of services growth (target double-digit SaaS growth exiting FY26), the rate of ARPU expansion via unified operations, channel partner onboarding timelines, and the sustainability of the AI intervention module’s ROI in real deployments.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
AIOT Focus
54.25%
N/A
N/A
N/A
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Strategic positioning: PowerFleet is transitioning to a software-centric, AI-enabled, data-driven platform with Unity at the core. The combination of a higher-margin services mix, significant ARR potential from enterprise deals, and strong channel partnerships supports a multi-year growth trajectory. The near-term path includes deleveraging toward sub-2.25x net debt/EBITDA by year-end, continued EBITDA margin expansion, and a push to sustain double-digit services growth as a foundation for durable profitability. Key catalysts include MTN’s multi-country rollout, AT&T/TELUS-driven pipelines, SIXT Europe expansion, and Holcim/Foley use cases that demonstrate ROI. Risks center on macro volatility, tariff risk, and execution of large-scale integrations. Overall, the QQ1 2026 results reinforce a constructive risk-reward balance for investors, with a meaningful re-rating potential as the SaaS and AI-driven platform matures and the deleveraging trajectory improves cash flow visibility.
Key Investment Factors
Growth Potential
PowerFleet’s pivot to a SaaS-centric Unity platform, coupled with AI-enabled modules (e.g., AI risk intervention) and strong channel partnerships (MTN, AT&T/TELUS, SIXT), creates a multi-year growth runway. Management-reinforced targets include 85%+ SaaS contribution, high-margin services, and expanding ARPU via unified operations with cross-sell opportunities across a diversified, enterprise-centric customer base. The Holcim and Foley use cases illustrate durable ROI and scalable value, supporting higher attach rates and stickiness.
Profitability Risk
Near-term tariff exposure and macro uncertainty could dampen product capex-heavy deals; reliance on large channel partners introduces execution risk and potential channel concentration. Integration of Fleet Complete and harmonization of enterprise systems pose organizational and systems-risk. Negative GAAP profitability in QQ1 2026 (net loss) underscores the need for continued operating leverage and execution of cost-savings initiatives to reach sustained profitability.
Financial Position
Solid liquidity with cash at period end of $35.6M and net debt of ~$23.6M, but total debt of $50.4M and net debt/EBITDA of 2.97x as of QQ1 2026. A deliberate leverage-reduction plan targets sub-2.25x by year-end, aided by disciplined CapEx, top-line growth, and improved working capital. The balance sheet includes goodwill and intangible assets totaling ~$658.4M, indicating a substantial intangible base tied to Unity and related software assets.
SWOT Analysis
Strengths
Unity platform with enterprise-grade modularity and device-agnostic integration
High-visibility SaaS revenue growth and elevated services mix (83% of revenue; 76% services gross margin)