PowerFleet, Inc. (AIOT) Earnings Call Transcript & Summary

Greetings. Welcome to the PowerFleet, Fleet Complete Q&A call. [Operator Instructions] Please note, this conference is being recorded. Today's remarks will contain forward-looking statements. Actual results may differ from those contemplated by these forward-looking statements. Factors that may cause actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements are described in today's earnings press release. Any forward-looking statements made on this call are made only as of today, and PowerFleet assumes no obligation, nor does the company intend to publicly update or revise any forward-looking statements to reflect subsequent events or circumstances. During this call, both GAAP and certain non-GAAP financial measures will be presented. The company refers you to the press release issued earlier today for certain disclosures regarding non-GAAP financial measures. The press release is available on the Investors section of PowerFleet's website at ir.powerfleet. I would now like to turn the call over to PowerFleet's CEO, Steve Towe.

Good morning, everyone. Thank you for joining today's call. I'm excited to share the details of a further highly transformative step for our company, the acquisition of Fleet Complete. This acquisition is a major milestone for PowerFleet that will drive significant long-term value for our shareholders. We work in a highly fragmented and fast-growing market where the adoption and value of the software solutions we provide has evolved to mission-critical application status for our customers. The market has morphed in recent years to a 2-tier structure. A small number of consolidated growing entities have successfully migrated to focus on delivering best-in-class software and data services to their clients. This consolidating minority enjoyed rapid growth rates and is recognized in terms of valuation multiple and further seller value creation opportunities for their stakeholders. The second tier of many, many smaller providers are struggling for investment and scale to be able to compete with a highly evolving set of market needs, the pace of innovation of technology and the ever-growing demands of customers for best-in-class service. On joining PowerFleet in the first quarter of 2022, I set as an ambitious vision and strategy to offer a disruptive and differentiated proposition at scale to compete at the very top table of the global industry. We wanted a unique portfolio of products that would have depth and breadth to allow the company to be positioned as a world-class partner to the customer base it serves and over time, transform the value creation and investment opportunity for our shareholders. Now just 2.5 years later, we are now able to truly fight, compete and be able to be recognized as a highly credible global leader in the space. We're thrilled to announce the strategic acquisition of Fleet Complete for $200 million. Fleet Complete is a well-established leader in connected vehicle technology and fleet management, operating across North America, Australia and Europe. The acquisition positioned PowerFleet as one of the very top tier global players in the rapidly expanding AIoT market with a combined subscriber base of circa 2.6 million and projected revenue of over $400 million in this fiscal year. There are several compelling benefits from this acquisition: First, it enhances our revenue quality and scale by expanding our presence in North America, Europe and Australia, doubling the size of our operations in these 3 high-quality revenue markets. With Fleet Complete strong distribution partnerships with major telecommunication providers and market-leading OEMs, we gained significant cross-selling and upsell reach to highly expanded go-to-market channels. Additionally, the acquisition diversifies our revenue streams by integrating Fleet Complete's high-velocity mid-market business into PowerFleet's enterprise base. This provides balanced exposure across regions and business models, creating a more resilient foundation for growth. Furthermore, PowerFleet in-warehouse and Unity solutions open up concrete new avenues for us to expand revenues within Fleet Complete's customer base. A joint annual recurring revenue base of more than $300 million gives us an excellent opportunity to drive further wallet share and solidifies our ability to reach an accelerated double-digit growth rate in the coming years. Financially, this acquisition is highly accretive. Pre-synergy, we expect Fleet Complete's annual run rate to deliver $105 million in revenue and $25 million in EBITDA. With the identified revenue and cost synergies, we anticipate an additional $15 million in additional EBITDA within 2 years of close, bringing post-synergy EBITDA to $40 million. Importantly, this transaction is valued at an attractive 8x pre-synergy and 5x post-synergy EBITDA, which creates substantial value for our shareholders. This acquisition also significantly enhances our Unity data ecosystem by adding around 600,000 new subscribers. Fleet Complete's AI-powered video solution, FC Vision, further expand Unity's portfolio, especially in the growing AI-driven cameras space. Fleet Complete's state-of-the-art FC Hub software and data platform will add further capabilities to Unity's depth and breadth as an industry-leading data highway. As we have with the MiX transaction, Fleet Complete's customers and partners will be able to purchase and utilize the value-added solution Unity provides through a single pane of glass within 6 months of the transaction. Together, we will leverage these combined capabilities to accelerate innovation and deliver even greater value to our customers. In summary, the acquisition of Fleet Complete is a terrific transformative move for PowerFleet, setting the stage for substantial growth, enhanced shareholder value and leadership in the global AIoT markets. We expect the transaction to close on October 1, 2024, pending customary approvals. It is now my absolute pleasure to introduce you to Tony Lourakis, Fleet Complete's Founder and Chief Executive Officer. Tony?

Thank you, Steve. It's an honor to stand with you on this transformational and monumental day for Fleet Complete. I couldn't be more excited about what this transaction means for our customers, employees and channel partners. For our customers, this transaction allows us to integrate our best-in-class FC Hub platform into PowerFleet's industry-leading Unity suite of products and services, delivering AI-driven insights to save lives, time and money. Additionally, we expect significant demand from our existing customers for PowerFleet's in-warehouse solution set, creating a single end-to-end unified offering to optimize fleet vehicles, mobile fleet assets and in-warehouse equipment. Together, these enhanced capabilities will provide our customers with the most advanced AIoT solutions available globally. For our employees and channel partners, this transaction positions us as a true industry powerhouse with a broader and highly differentiated product portfolio. With 2,500 employees, including a technology organization of 400 people, we're poised to drive innovation further and continue elevating the customer experience to new heights. Nearly 25 years ago, I founded Fleet Complete in Toronto, Canada. And with the dedication of my incredible team of over 600 employees, we've grown into a global success. While today marks the end of Fleet Complete stand-alone journey, it is the beginning of an exciting new chapter for the combined business. I'll now hand the call over to David Wilson, PowerFleet's CFO, who will walk you through the mechanics of the deal. David?

Thank you, Tony. Tony, we are thrilled to welcome you and the Board of Fleet Complete team into the PowerFleet family. So let me begin by walking through the funding details of the Fleet Complete acquisition with a specific focus on the sources and uses of capital. The total transaction value is $200 million, plus an estimated $10 million in transaction fees. We've structured the financing through a combination of new debts, newly raised equity and existing equity rollover. Specifically, $125 million from a senior secured term loan facility provided by an existing lender RMB, a division of FirstRand Bank Limited. This debt is priced at SOFR plus 5% and has a 5-year bullet maturity. $70 million were private placements or PIPE of common stock through a combination of existing and new shareholders. The PIPE will issue 20 million shares of primary common stock representing an approximate 24% discount to the $4.60 10-day volume-weighted average price per share. The securities sold in this private placement have not been registered under the Securities Act of 1933 as amended, and may not be offered or sold in the U.S. except pursuant to an effective registration statement or an applicable exemption from the registration requirements. The company has agreed to submit registration statement filing for the underlying common stock no later than 60 days after closing. In addition to the above, cash consideration, $15 million of primary common equity will be issued to Ontario Teachers' Pension Plan Board, an existing shareholder of Fleet Complete based on the terms provided to the investors in the PIPE. We expect the strategic acquisition to be accretive to our financials with Fleet Complete's integration, enabling us to unlock synergies and deliver enhanced value to our shareholders. I'll now hand the call over to Melissa Ingram, our Chief Corporate Development Officer, who will provide an overview of our integration and synergy realization plans. Melissa?

Thank you, David. Firstly, I wanted to give an update on the excellent progress we've made on the integration of the MiX business. With the luxury of the extended time between signing and closing, we have the opportunity to thoroughly plan our integration and EBITDA expansion programs, which enabled us to execute extremely well in the first quarter. From an operational perspective, we were able to bring the teams together seamlessly, which led to the excellent business performance the company was able to achieve. As part of that Q1 performance, we realized $8.7 million of annualized cost synergies ahead of schedule. Currently, we've surpassed $10 million in annualized savings, and we remain confident in reaching our $16 million cost synergies target we set for year 1 as part of the overall $27 million in EBITDA expansion, we're committed to achieving within the first 2 years of the combination. Turning to the Fleet Complete acquisition. The business has been private equity backed for 10 years and operates as a highly efficient, well-run machine. As we plan the scope and timing of our integration, we have the flexibility to adjust our pace based on the ongoing success and evolution of the PowerFleet and MiX business integration. This approach derisks any potential challenges for the combined organization and prevents us from overextending our operational teams or spreading ourselves too thin through this period. As always, we're executing against our tried-and-tested integration playbook, which has been instrumental in previous transactions, and we anticipate delivering $10 million in cost synergies, and $5 million of additional EBITDA from revenue synergies within the first 2 years. One of the largest drivers of these savings will come from reducing hardware costs. By sourcing hardware directly from PowerFleet instead of purchasing through third parties, we expect to capture in the region of $3 million in annualized savings. Furthermore, we believe there are efficiency programs in the areas of procurement, supply chain and distribution, which will net a further $1 million to $2 million in annualized savings. Naturally, there are a number of duplicated costs in the business that we'll be able to minimize or remove as a natural part of the businesses coming together. And finally, we expect to be able to realize efficiencies from overlapping geographies in Mexico, Europe and Australia, where we'll streamline operations, minimize redundancies and eliminate duplicative fixed costs. This will enable us to operate more efficiently across these regions, reducing overheads while optimizing our infrastructure and resources. Importantly, this transaction also allows us to accelerate and derisk the year 2, $11 million in cost synergies that we're targeting for fiscal '26 from our MiX Telematics combination. Focusing on our heavily bloated G&A functions, much of those synergies were predicated on the rollout of a modern global back-office system stack. Fortunately, Fleet Complete is already running the exact same system stack we have begun rolling out and their team who have successfully managed these systems for over 3 years will now take a key role in integrating it across the combined company. This immediate operational alignment will allow us to achieve those savings with significantly reduced risk. In short, this acquisition not only positions us to unlock cost savings sooner, but also sets the foundation for a more efficient and integrated business moving forward. I'll now hand the call back to Steve for closing remarks. Steve?

Thank you, David and Melissa, and a very warm welcome to the team, Tony. This is another super exciting step in our journey and a further strong statement of intent in the pursuit of realization of our goals for the company. However, this remains just the beginning of us realizing the full potential of the organization and the associated value creation opportunity for current and future investors. We will now hunker down and focus on maximizing the organic growth potential the market provides and achieve our medium-term goals of reaching SaaS Rule of 40 financial performance. We have everything we need to meet and beat this goal. It's all now about high velocity and high-class execution, something both the PowerFleet and Fleet Complete teams have an excellent track record in achieving. We will be holding a further deep dive into the combined organization and strategy on October 2, in the form of a virtual fireside chat with a broader set of leaders from across the new leadership group. That will be followed by our Investor Day gathering in New York City on November 21. Further information on both events will follow in due course. We look forward to continuing this exciting journey with our shareholders and stakeholders. Thank you, and we'll now open the floor to questions. Operator?

[Operator Instructions] Your first question for today is from Anthony Stoss with Craig-Hallum.

Congrats guys and nice job of moving quickly to get even more scale. Steve, I had two questions for you. For starters, how confident are you in your ability to integrate Fleet Complete following mix? And then secondly, I'll just throw this one out too. Love to hear about the opportunities you have to cross-sell Unity within that Fleet Complete channel.

That's great. So obviously, one of the reasons that we brought Melissa on the call was to articulate in detail the forensic plan and execution that her and her team help the leaders of the business deliver. And we have moved very, very quickly, but effectively to drive the hard change through the MiX and PowerFleet business. In reality, we've been able to plan and execute that through the last year. And I think if you look at our Q1 performance, we didn't skip a beat operationally, and it was a big undertaking. So we're now north of $10 million through the initial year 1. So we feel very good about what we have remaining for year 1. And I think it's important to understand that a lot of our $11 million from year 2 was going to be the rollout of new operating systems and being able to create a more efficient operating model as a result. And one of the -- not the initial drivers, but it's something that has become super important to us as part of this transaction, is those elite level operating systems that Fleet Complete has been through the maturation of and now has a scalability for us to integrate into. So first of all, that cements our ability to achieve the $27 million. And also it had speed and certainty to it. Then if you think about some of the other objectives we had, we wanted to scale go-to-market, particularly in North America. The channels with the likes of AT&T and TELUS give us real unprecedented scale and reach to go and play against the Samsaras and the Geotabs of the world with the level of go-to-market exposure that those guys have. So again, that brings us speed and certainty to support the efforts that we already have there. And as a result, you are aware of our great growth rates currently in the Unity safety solutions for our North American business. So we needed to scale up the operation. And obviously, with the Fleet Complete size and scale in North America, it allows us to do that well. And the answer is kind of -- how I've kind of articulated this internally and to the Board is we can go at the pace that we need. So if we do start to see any rumblings, which we're not expecting in what we're trying to achieve from our original plan, we can slow things down because the cost savings plan that Melissa described is not highly invasive into the organization. It's good solid efficiency plus it's adding value to the Fleet Complete organization. This is about enabling us to get to those double-digit 20% growth rates. And so we -- the first thing we're going to go do is get our solutions in the hands of the channel partners and the Fleet Complete customers. And as Tony articulated the combination of our solution sets and what FC Hub and FC Vision, the camera solution brings to our portfolio gives us by far the most formidable portfolio across all asset types, passenger cars, light commercial vehicles, heavy logistics trucks, warehouse vehicles as well. So we're very excited about getting that cross-sell, upsell opportunity going, plus then adding in Unity's unique capabilities. Tony and I, when we first talked about our platforms and our product strategies, we were trying to achieve the same things. And so the combination to be able to scale it together is super, super exciting. We've talked long and hard in our recent calls about the momentum that we're getting for the device agnostic capabilities, the third-party integrations, the requirement and need for extra applications with added AI and data science. And Tony fully believes that -- and we agree with him that his customer base is rich to take those solutions and plus it fills a gap in some of his channel partners where a more enterprise level set of functionality and requirements, we can now fulfill with those partners. So this is a win-win. And you can hear the excitement in all of our voices about what this means for both companies on a growth perspective. And from an integration perspective, I think we've now across two and probably three transactions really showing our capabilities of being making this a real positive journey, doing some tough stuff within the organization for sure, but not skipping a beat. And so I'm very, very confident in the team's ability to execute the integration plan and super excited about the accelerated growth opportunities that this is going to bring us.

Congrats again.

Your next question for today is from Scott Searle with ROTH Capital.

Congrats again, guys, on I guess, deal three at this point in time. Steve, just quickly to follow up on Tony's prior question. Unity availability, from a MiX standpoint, you talked about 6 months of being able to get up and running cross-sell those customers. Given that you got some sales synergies built in the second fiscal year, I'm assuming it's somewhere in the same ballpark, I wanted to confirm that. And what's been the organic growth rate that you've been seeing on the Fleet Complete side over the last couple of years, give us some sort of benchmark for how that business has been trending.

Yes. So 6 months, rinse-and-repeat in terms of not only getting the Unity capabilities into the hands of the Fleet Complete go-to-market environment, but also as well, getting Fleet Complete solutions into the hands of all the regions from a PowerFleet perspective. They have state-of-the-art best-in-class solutions that our general managers in our territory feel there is an opportunity in their local markets to go and sell. So we're super excited about that. Just remind me of your second question again, Scott?

Just the growth rate that you were seeing with Fleet Complete?

Growth rate, yes. Got it. Yes. So it's been a modest single-digit growth over the last couple of years, kind of similar to where MiX and PowerFleet has been. The gross growth rates have been higher, but there's been a couple of things in kind of 2022 and early 2023, which have stunted that growth, which we now believe we're past that ultimately will expand the growth rates. And those are, firstly, the 3G shutdown was a significant, I would say, enabler for -- lack of enabler to be able to grow strongly in some of their channels as that kind of hit. And then secondly, as Fleet Complete built out the FC Hub, they did do a full migration of their North America customer base to the new platform, which obviously, there's a period of time where you experienced a little bit more churn. We're now through both of those. And we're now starting to see growth rates pick up. And Tony, you may want to add to that, but we're very encouraged by what we're seeing for the future.

If I could just quickly follow up then. Certainly, in the Fleet Complete side, you get the Unity platform. It sounds like warehouse applications have a deep interest on that side, but you mentioned that they've got some best-in-class solutions. I'm wondering, from a module standpoint or vertical market standpoint, if you could just provide a little bit more color there. And then on the partner front, very exciting to hear a channel with AT&T and TELUS. I was wondering if you could expand on that a little bit.

Yes. So Tony, why don't you take those two?

Yes, sure. First -- thank you, Steve. And first, perhaps on the channel partnerships. These have been how we've built our company over the last 1.5 decade. These are long-standing, very deep channel partnerships. We've been partnered with TELUS for 17 years and AT&T for about 14 years, so very deep and long-standing channel partnerships. And it's what's been the main growth driver for us in the North American market. These channels provide massive access to the market with thousands of business sellers in each of them and various forms of distribution. So we're really excited to, in the very near future, enable the PowerFleet capabilities into those channels, specifically on the in-warehouse products and the Unity platform. I think these will be both very well received by our customers and our channel partners in these markets.

And Tony, just talk about some of your solutions in terms of FC vision and what FC Hub will bring to some of the PowerFleet regions.

Yes, sure. So FC Hub is, in essence, the completely new tech stack of our platform. We started the project about 3 years ago and brought it to market about 2.5 years ago. And it's a completely new tech architecture of our platform from the ground up. So although we're a 25-year-old company, we have a brand-new state-of-the-art best-in-class product platform. And the same thing can be said for our Vision product. Our Vision product is a video AI dash cam solution that coaches drivers in real time while they drive and captures video snippets of infractions that can be completely customized by the end user. So creating a very sort of powerful solution to drive improvements in safety and efficiency and so on. And we're increasingly winning in competitive situations against other players in the market, well-known players such as the Samsara or Lytx with these products. So these two products FC Hub and Vision have been very well received by our existing customer base and are enabling us to win more new logos. Thanks to them.

Congratulations.

Your next question is from Dylan Becker with William Blair.

Congrats here. It really sounds like a highly accretive transaction. I guess maybe starting for Steve, you ran through the gamut, right? You're adding product, data scale, geographic mix and distribution here, all key components and maybe that long-term financial profile you've called out. But can you give us some context on how that drives greater confidence in your ability to get to that double digit, maybe even 20% growth profile to not only get there, but also sustain that type of momentum throughout the business over the next several years?

Yes. So if you look at those that are achieving those growth rates in the industry. First of all, there's not many of them. And secondly, what they have is horsepower. So they have scaled organizations. They have a real pivot to software solutions. They're able to service multiple customers in multiple regions and different levels of customers from mid-market up to enterprise. So from a me-too perspective, the combinations that we've put together now really give us that horsepower to go and fight at that level. So I've always said scale is important, but we have to also come along with a level of disruptive and differentiated propositions, and we've now thoroughly tested out in terms of market receptivity, and we're seeing the growth in terms of Unity and what it brings. And adding into that, then the capabilities that Fleet Complete have, as I've said before, we have the most phenomenal stack of solutions for our customers to be able to enjoy. And from a go-to-market perspective, we now have diversification. So we have a strong enterprise direct business that is doing well that over the last 2 years, we've really kind of moved to real SaaS enterprise selling. And now with the ability to have channels at scale and bring the combined forces together, not only from a go-to-market perspective, but also from an innovation perspective, that is super, super exciting. When we talk to not only the channels in the telco space, but some of the OEMs, they're looking for a provider that delivers best-in-class service that they can go with internationally and has got the ability to be agile and move at the pace that they want to go. So whether it's on the direct side or indirect side, we create far more balance in the organization. We've got far more reach into customers and asset bases that we need to get to. Our product set, we're able to across market, across vertical, across geography. So it puts in a really, really strong position. So as long as we execute well and as long as we continue to move at the pace that the market wants to deliver, then we're highly confident this is very, very sustainable. And what I would say, finally, we've been very smart about bringing these companies together in terms of what type of companies we're looking for. We were looking for companies that took 1 plus 1 equals 3 in terms of they had all the key ingredients to create a global powerhouse. Maybe didn't have in single entities the abilities to get there, but have the skill and the will to move forward and to do that in a profitable way. So from a cash generation perspective, as we get these engines cranking, then we see an ability to really have a much improved cash generation function as well. So this is a super, super asset now. Obviously, we need a little bit of time just to bring these things together and get them into a highly well-oiled machine, but all the core ingredients there for a very, very sustainable long-term partnership relationship internally with our customers and with our new and existing shareholders.

Okay. That's great. I appreciate all the detail there. You hinted at it too on the channel side of things. I know this brings on the telecom side. Is there a way to get a sense of the additional scale or the incremental coverage from that channel, how you think about the synergistic value and efficiencies of leveraging that highly efficient motion with the existing enterprise base? And maybe again, the long-term opportunity to expand that channel network across different solution providers there as well over time.

Tony, do you want to take that one?

Yes, sure. Having worked with the channel for many years, it's all about differentiating yourself and winning mind share. And I think with these added capabilities that we will soon be enabling into the channel, it will help us gain more mind share with our channel sales folks on both sides of AT&T and TELUS. And for that matter, eventually even with Telstra in Australia and other carriers in Europe like COSMOTE in Greece and so on. So yes, it's all about just kind of working with our channel partners and attacking the right segments. Fleet Complete on a stand-alone basis has been very SMB and mid-market focused with some enterprise success, whereas with, I think, the PowerFleet capability, the Unity platform, the in-warehouse, we should be able, over time, to increase wallet share with our existing customers that have -- many of which do have warehouses and have those sort of in-warehouse assets that PowerFleet well serves. And we should be able to penetrate more into the enterprise segment with -- certainly with the Unity platform and integrating that into FC Hub. So we're quite excited about it.

And just to add to that. So obviously, we've done significant diligence and had a lot of discussion with the partners. And I think the excitement for this to fill in that enterprise gap from a Fleet Complete perspective, to give one partner who can really become a mission-critical partner, a part of their solution set is something that they're highly, highly energized. They can't wait to get going, which was super great for us to really understand their energy and excitement around it. And it's a very efficient model. So in one of my previous businesses where we've articulated before, we were able to get a 30% CAGR organically over a 4- to 5-year period, a lot of that was also driven through a similar relationship with a large global telecommunications provider. And there are also some stories where these things haven't gone well. And I think the difference in the example that I was able to experience, and I think the difference in terms of what Tony and the team have executed on in their strategy is, this gives you access to very, very large customer bases and very, very large sales teams, but the trick is here to see it as a business development engine, where the Fleet Complete and PowerFleet sales teams, customer success teams are alongside the sales teams to help execute the sale. And then the in-life management of those customers sit on very squarely on the shoulders of the likes of PowerFleet and Fleet Complete. And when you do that well, this is a pay-as-you-play model, so it's a revenue share model. And if you look at the gross margins that Tony and team are able to achieve, they're excellent. So as we put more scale through that model as we get more reach and as we are able to do this in more geographies with more customer-facing people. You're fully aware of our strategy where we're pivoting G&A and back-office spend into customer success and sales, this is going to be a real weapon for us in the market. So we have a lot of confidence around.

Congrats again here.

Your next question is from Gary Prestopino with Barrington Research.

David, could you just go over some of the parameters of that PIPE again? I could not write it down quick enough. How many shares, or whatever?

Yes. So it's 20 million shares and it's $70 million raise. So effective price of $3.50. In terms of the price versus the 10-day VWAP, it's about a 24% discount and just for the benefit of everyone in the call, we didn't have the ability to actually do a shelf statement. Typically, if you had a shelf, you typically trade or price it, may be 15% below market because of the lockup provisions on the PIPE, which essentially locks people up for probably 60 days plus. It's a little bit deeper in terms of the discount. So the effective discount is about 24%. So probably an extra sort of 10 percentage points of discount versus what we would typically have got with a shelf registration sale.

All right. So there's no -- you're saying there's no mechanism here that as the stock price goes higher, you can sell it at a higher price. It's locked at $3.50, is that what you're saying?

Yes, there's no -- yes, there's no [indiscernible] or anything. So yes, it is that price.

Okay. And then just a couple of questions here. It sounds like one of the areas that the legacy PowerFleet helps with FC is in -- on the warehouse side. But I'm wondering, Steve, what those the legacy FC bring to your side? I mean, is it more a deeper dive in the commercial vehicles, Class 8 trucks, et cetera, et cetera.

Yes. So it gives us more strength in light commercial, number one. Secondly, it gives us a lot more strength in the mid-market where we have highly engineered feature-rich solutions that I think what's very impressive about what Tony has done is the repeatability of those solutions to have a high-velocity revenue streams. I think that really helps us as well. I think in terms of packaging, if you look at the growth rates of the camera market, less than 10% of the market has been penetrated, particularly in North America. And if you look at the readings on our main competitors, they are growing very strongly in that space. So I think we certainly take an advantage there as well. So we are very, very enterprise-focused. We're market leaders in a number of territories in the enterprise space. This gives us the ability, and we've had the requirements for customers to have that kind of little -- a bit more package, a bit more commoditized, rinse-and-repeat model in terms of being able to do scale velocity sales and the Fleet Complete organization brings us that. And then in terms of FC Hub, as Tony shared, it's state-of-the-art, it's truly wonderful, it is brand, brand new. And as we -- you're all aware, we've been looking to scale out Unity's architecture. We've been looking to scale out its data capabilities to be able to take more and more customers with the capabilities we've got. And the way that Fleet Complete have architected the solution, it will fit nicely into some of the things that we were looking to scale out. So from a speed to market perspective, from ability to absorb more growth, it will, no doubt, enhance our abilities to do so from a technology perspective. And then I would say, finally, just from a customer success perspective as well because of the velocity of the sales and the number of customers, 40,000 customers in the mid-market space, the team have become high effective in transactional customer success, which will add value in terms of our ability to service our customers from a pure service side. And then if you think about the recurring revenue base of now $300 million with the ability to cross-sell, upsell both ways, that is a stellar seller opportunity on top of the already -- what we've talked about in terms of the opportunity with future sales in the enterprise space from a channel partner perspective.

Okay. And then just a couple of more questions here. One for Tony. I mean, prior to this transaction, as you are out competing for new business in the market was one of the harder issues to overcome was that PowerFleet has this Unity platform out in the market? And was that -- what put the puck in the net for you in terms of doing this transaction?

Yes, great question. So considering the segments that we've been focused on, I wouldn't say that we've come up much against like the PowerFleet Unity platform given that we've been traditionally more SMB mid-market focused and through channel. So I think that's just -- I think this is a great point of where we complement each other. The Unity platform with its ability to ingest data from a very broad set of devices and sensors and homogenize that data and cleanse it, add AI on top of it and analytics to drive insights for customers will be a compelling differentiator when we put that together with FC and enable us to really together win more upstream into the enterprise and through our channel distribution into the enterprise. So I see this as one of those great situations where 1 plus 1 equals 3, not where we're kind of cannibalizing or synergizing in a particular area where we're bringing some incremental capabilities.

Just to add to that, Gary. So I think as we've, said in terms of the light commercial space, and the kind of mid-market space that Fleet Complete has been in, their main 2 competitors have been Samsara and Geotab. When we think about the enterprise space and the market segments we've been playing in the over-the-road arena, it's Samsara and Geotab. So both of us now are going to have a stronger hand to go and slug it out at scale with the 2 largest providers in the industry.

[Operator Instructions] Your next question is from Alex Sklar with Raymond James.

Steve and Tony, just a few more questions on Fleet Complete's go-to-market organization and how it's going to fit in with PowerFleet. Can you just talk about how much of the Fleet Complete business came from the indirect channel versus direct. Steve, you talked about adding kind of 30% rep capacity on the direct side in PowerFleet. Is that still the plan now with Fleet Complete being acquired, or does that solve it now having the indirect channel. And then, Steve, you kind of alluded to this, but any more color in terms of long-term contracts in place with those carriers or any commitments that they would continue to sell kind of going forward now post-acquisition?

Yes. So to answer the second one first, then we've been given a high confidence by those channel partners that they are very much looking forward to continuing their highly established and long-term relationship with Fleet Complete and adding PowerFleet as a broader entity into that just gives them more confidence to do so. Because as the market scales and as they look at their competitors, whether that's Verizon and Verizon Connect or whether it's Samsara in terms of who they see as those kind of folks that they want to face up in the market, they see having the scale and breadth of PowerFleet and giving to being able to give the -- I think the growth mindset to the Fleet Complete team, then I think that is something that they are highly encouraged about, and we feel very, very good about that future relationship. On your first point, we're going to continue to scale out our direct team. Over time, we will look at the model in terms of how we can maximize the efficiency, but right now, the demand that we have and the marketplace that we have, in the way that we go to market individually and now collectively, it's for us about getting more feet on the street, whether that is through the indirect channel supporting a broader proposition set with the channel partners or it's whether continuing our play where we've been very successful in the safety compliance space, in the enterprise space, the warehouse space and with Unity being a unique set of proposition in the SaaS space. So we'll continue that growth. It's an end-and-end right now. And Tony and I will continue to look how we make that more efficient over time. And Fleet Complete does have some direct sales as well, and we'll look to harmonize that team and work out how we can get more pipeline from both sides of the house. But obviously, a significant part of the revenue is though -- are those in direct channels. And we think that there is far more juice to squeeze within the go-forward go-to-market approach with those channels.

And Alex, just specifically to, it's 52% of their book of business is indirect, 48% direct. So I just close that one off, too.

Yes. And I would just add, that's on a global basis for our business, at least.

And maybe just one more follow-up for Steve or David, just bigger picture on M&A now. Can you just talk about how you're thinking about capacity as an organization to continue digesting more M&A? I know you can't control the timing of every deal. But should we think about your capacity to take on something like a Fleet Complete every year? Do you need to spend more time now firming up the foundation. We talked about some of the back office investments over the next 18 months before ideally being back to market. Just kind of curious about M&A capacity going forward.

Yes, I can be very direct. In terms of major transformational deals, we are done. What we wanted to do was create that horsepower, and we're going to hunker down, focus on creating a world-class global efficient organization and get to our 20% growth rate over time. And we've laid out, I think, very specifically the path for us to get there, not only in terms of the numbers, but also how we get there. We want to digest this. There isn't 2, 3, 4, 5 more we're going to do, we don't just want to be a consolidated that just plunks the company together through acquisition. I think we've been very smart in terms of how we've done it, the sequencing of it. I had 3 names on the list at the start of 2023 that I would look at in terms of doing this with. I wanted to get 2 from 3, I didn't want to get 3, and I'm very, very proud of what we've been able to achieve. And they have all the common symptoms. They have had great owner founder-led businesses. They have some unique and great technology. They have happy customers, and they have the ability to come together and pivot quickly to move on to become a growth story. Now it is very much about us executing, giving proof to our shareholders that we can maintain a very, very accelerated growth from here, which is, it's out there for us in the market, and we have the ability to do it. Over time, as we become more efficient, there may be other tuck-ins we could look at. But I can, hand on heart, say we have no intention of adding another one of any scale at this point in time and for the significant future.

Congrats on the transaction.

Your next question is from Greg Gibas with Northland Securities.

Congrats, Steve, David and Tony. I guess, first, kind of end market or kind of sector concentration, obviously, telecom has been market-focused. Anything you can share regarding industry breakdown and kind of how it diversifies from your existing subscriber base from that perspective?

Yes. I would say it's -- from an industry standpoint, we cut across many verticals. So that is common both for the PowerFleet business, the MiX business as well as the Fleet Complete business. From a concentration standpoint, there's no significant individual concentration across any of the businesses of any size and scale. So it is well diversified. And obviously, the benefit we have now is we have a broader and a deeper portfolio and just as investors benefit from portfolio risk, so does our business as well. So again, it ticks so many boxes in terms of both the upside as well as a derisk profile as well. So again, we have much to be happy about.

Yes. And if you look at kind of heritage PowerFleet, it was in warehouse cross vertical and logistics. MiX was logistics, Oil and Gas focused. I think Fleet Complete in the mid-market do a nice job across all of the on-the-road asset types. So from a quality of revenue perspective and opportunity to go after customer bases, we've got a much improved quality of revenue. From a market segment perspective, mid-market up to enterprise, we've now got more diversification and strength in both of those. And then when you look at Unity and FC Hub's capabilities, and where we're driving into key market drivers like safety, compliance, sustainability, they cut across verticals. And this is where the market remains highly fragmented. The biggest player in the world has 2% market share. So what we have the ability to do is pivot both by geography, by market vertical, by segment and really kind of focus on the market drivers. And not only that, but within businesses themselves, the pivot that we're able to make out of kind of fleet and operations, to safety, to compliance, to CFOs, to CIOs, to CTOs. This is a true SaaS sell that will become far more looking like a supply chain enterprise solution stack, data highway and platform. And that's where, from a valuation perspective, when you become that mission-critical provider, you really start to see the value that this company provides to its customers, and it becomes highly attractive in the marketplace.

I guess I just wanted to follow up to on, I guess, the $5 million EBITDA uplift opportunity that you see from revenue synergies, where do you primarily see that coming from? Is it mostly Unity cross-sell? And then I know you talked about opportunities with the FC Vision? Or would you say there's a good opportunity, I guess, sizable within that indirect channel relationships as well. How would you, I guess, characterize that uplift opportunity from revenue.

I'll let David weigh in. But what I would say is, first of all, that is very modest in terms of our true expectations. I think one thing that our shareholders have valued about our style and approach is our level of conservatism in terms of the numbers that we put out, and we'll continue to do that. But David, maybe you could just take -- your perspective because you've helped put these plans together from a business plan perspective.

Yes. So what I would say is, given the opportunity set that we have, given the momentum and the depth of the relationships that Fleet Complete has with the largest telco in the world and others, we would be beyond disappointed if all we got was a $5 million EBITDA pickup just given the opportunity specifically just from an indirect standpoint. And then in terms of just the complementary product set that we have in terms of selling a high-velocity mid-market solution that is best-in-class globally. We obviously have those markets. We have those relationships. We have those sales teams in place. So that is an aspect that is another pickup. There's obviously setting our in-warehouse into the Fleet Complete solution. And above and beyond all of that, there is a best-in-class AI camera solution, which is probably the fastest growing piece of the market. If you look at the largest player in the space, they're getting close to half of their growth from that market, and it's about 10% penetrated. So to my earlier point, there's so many different avenues we have to play in, so many sort of really promising path to pursue. We just have to be very hard-nosed and disciplined in terms of how we prioritize and how we execute.

Got it. Congrats again.

We have reached the end of the question-and-answer session. And I will now turn the call over to Steve Towe for closing remarks.

Well, thanks, everyone, for joining. Thanks for your continued support. As we stated, this is another highly transformative, highly accretive opportunity for the company. I think what this does -- we don't always have the best hand to play to get to where we need to get to. And I think we're very scrappy in terms of finding a way to hopefully delight shareholders, plus give us the capabilities to achieve our company goals, and this is a very significant step to that. And what I would ask shareholders and investors to take away our proven track record in terms of integration, our ability to not skip a beat operationally and produced solid results when we're going through change, I think is as good as it gets. And I think we feel very proud of being able to do that. The biggest question I've been asked, I think, over the last 6 months has been how are you going to get quickly, considering some of the competitors are growing so fast, how are you going to get to that accelerated growth rate? And I think this set of cards that we now have dealt really strengthens our capability getting Unity and its uniqueness into a broader go-to-market approach is going to be super accretive for us, getting our in-warehouse solutions to more customers is going to be a real driver of incremental growth. And then from a Fleet Complete perspective, bringing their state-of-the-art best-of-class solutions. I mean I have to really complement Tony in terms of what he's built from a technology perspective and an operating model perspective and an ability to drive growth. So being able to take some of the shackles off to be able to go on that growth mindset and to have ability for us to generate cash and remain profitable and invest in our business, we think this is a real supreme opportunity for us to move forward. So we'll talk in a lot more detail on October 2 in terms of bringing more leaders to kind of -- so we can go into a greater detail of how we get there and we really look forward to our Investor Day when we'll talk more about the longer-term company vision and strategy, and the excitement that we have for value creation. But we really do appreciate your support. And hopefully, you're enjoying our transparency and the level of detail that we go to in our straightforwardness. But we're really, really proud of what we've achieved. But I'll start -- I'll finish as I've kind of said, this is the beginning now of creating a high-velocity, high-growth company at scale. Thank you very much. Enjoy your day. We'll speak soon.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.