Q4 2023 PowerFleet Inc Earnings Call
Participants
Steve Towe; Chief Executive Officer; PowerFleet Inc
David Wilson; Chief Financial Officer; PowerFleet Inc
Scott Searle; Analyst; ROTH MKM
Mike Walkley; Analyst; Canaccord Genuity
Jaeson Schmidt; Analyst; Lake Street
Gary Prestopino; Analyst; Barrington Research
Matt Pfau; Analyst; William Blair.
Presentation
Operator
Welcome to PowerFleet Fourth Quarter and Full Year 2023 conference call. Joining us for today's presentation are the company's CEO, Steve Towe, and CFO, David Wilson. Following their remarks, we will open up the call to questions.
Before we begin the call, I would like to provide PowerFleet Safe Harbor statement, which includes questions regarding forward-looking statements made during this call. During the call, there will be forward-looking statements made regarding future events, including PowerFleet, future financial performance, all statements other than present and historical facts, which include any statements regarding the company's plans for future operations, anticipated future financial position, anticipated results of operation, business strategy, competitive position companies' expectations regarding opportunities for growth demand for the Company's product offering and other industry trends are considered forward-looking statements.
Such statements include but are not limited to the Company's financial expectations for 2024 and beyond. All such forward-looking statements imply the presence of risks, uncertainties and contingencies, many of which are beyond the Company's control. The company's actual results, performance or achievements may differ materially from those projected or assumed in any forward-looking statements.
Factors that could cause actual results to differ materially include amongst others, SEC filings, overall economic and business conditions, demand for the Company's products and services, competitive factors, emergence of new technologies and the Company's cash position. The Company does not intend to undertake any duty to update any forward-looking statements to reflect future events or circumstances.
Finally, I would like to remind everyone that this call will be made available for replay in the Investor Relations section of the Company's website at www.powerfleet.com.
Now I would like to turn the call over to PowerFleet CEO, Mr. Steve tell. Sir, please proceed.
Steve Towe
Good morning, everyone, and thank you for joining the call today. We'll provide you with a business update, focusing on a review of the key milestones of our 2023 as a year, stellar transformation for the business, an overview of our strong financial performance in the final quarter second half of 2023, highlighting increased financial strength and growth trajectory and demonstrating highly effective results from the strategic operating plan for the year and a deep dive into the progress and momentum we're making in bringing together the PowerFleet and mixed businesses highlighting the value the combination brings to our shareholders.
In 2023, we embarked upon a bold and aggressive transformation plan designed to inherently change and accelerate the company's ability to elevate itself to a market leadership position at the very top table of the industry. It serves this plan required us to reshape the revenue profile of the business, fixed balance sheet issues that were major overhang on the Company, accelerate technology, pivot to AI and data science solutions create scale to truly give the Company the ability to compete with the global leaders in the industry, reignited EBITDA expansion and positive cash flow generation and drive a unique product and platform strategy to bring differentiated value propositions to the industry.
The outcomes achieved in the last six months in particular, notably fast-tracked by our strong Q4 performance, categorically underlying true world-class execution. The team has delivered with the undeniable achievement of the major business objectives we have communicated to our shareholders over the last 12 to 18-month period, starting with revenue where we embarked on a brave transformation early in the year based on improving the quality of our revenue streams.
Our strategy typically seen in the private equity space, but in our case, executed in the full view of the public market. We are grateful to our shareholders for the trust shown in the leadership team's capability to execute this bold plan. This pivot included making tough decisions to exit poor quality revenue segments, unprofitable contracts, low performing territories and non-strategic lines of business. It's deliberate pruning of approximately $8 million of annual revenue concentrated in hardware.
Sales has not only simplified our operations, but also redirected resources towards more SaaS-based revenue and business profitability. As we predicted publicly, we've reached a fast inflection point and a return to top-line growth in mid 2023 with second half performance, taking a clear picture of success where total revenue increased by 6% compared to H1 and gross profit follows suit with a 6% improvement.
Top-line success is built on our SaaS Unity platform strategy, as evidenced by Q4 2023 high-quality SaaS revenue growing by 16% year-over-year on a constant currency basis, total revenue performance in Q4 was our best performance in six quarters, growing 9% on a constant currency basis year over year and was particularly pleasing as we absorb the predicted $2 million revenue shortfall in the quarter to our Israeli business due to the current macroeconomic issues for the territory, the reshaping of top line performance in the full year to focus on high quality.
Fast revenue resulted in a 14% increase in service revenue year over year on a constant currency basis and a 3 million improvement in annual gross profit from a lower total revenue base, notably North America as a leader in adoption of our Unity data ecosystem solution delivered an excellent performance with annual growth of 16%. Adjusted EBITDA in the second half of '23.
So, a terrific 141% increase, a gain of $2.9 million versus the first half. It's important to highlight that this EBITDA expansion was achieved despite a full period of moving operating expenses, macroeconomic challenges in Israel and a $1 million one-off charge for inventory related items in the fourth quarter of 2023, 48% sequential adjusted EBITDA increase from Q3 to Q4 2023 and 110% year-over-year increase in Q4 is a satisfying reflection on the output of the aggressive transformation efforts we have completed throughout the year.
Moving on to technology. In 2023, we successfully tackled the dual challenge of aggressively ramping up investment in our next-generation new platform within the challenging landscape of managing near-term liquidity needs and addressing the financial overhang of the IP preferred note, the challenge was successfully addressed in very short order with the close of our rapid and strategic acquisition and moving data at the end of March.
As a reminder, this deal secured a cohesive and high-performing team of over 30 engineers and data scientists with deep domain knowledge, cutting edge IP in the automotive and safety insurance space, along with robust ESG reporting capabilities to enrich unity and was the source of an $8 million influx of liquidity versus a drain on cash. A key commitment we made to our shareholders at the close of the moving data acquisition was to ensure it became EBITDA neutral within two quarters of close, as David will share, we clearly met this commitment, posting a flat year on year spend in adjusted OpEx in Q4 '23 which included a $1.3 million have absorbed moving that spend.
Our greatest accomplishment in 2023 is unquestionably the successful signing of our business combination with mix, telematics this milestone not only empowers us to fully realize our vision and strategy, but also significantly transformed our balance sheet, including clearing the AP preferred instrument from our capital structure. The combined value creation opportunity. This presents makes us incredibly excited about the future of our business. The mixed deal is also a game changer in terms of scale. With 12 months trailing revenue increasing from $134 million to over $280 million, combined EBITDA increasing from $7 million to $[40 million.]
The combination also provides a clear pathway to realize more than $25 million in cost synergies within two years of close with resounding shareholder approval for the transaction secure for both traffic and mix. Our integration teams led by Chief Corporate Development Officer. Melissa Ingram will now begin to move from the planning phase to active execution.
In deploying a tried and tested business integration methodology with a track record for delivering tangible results. The program aims to expedite integration phase, enabling us to swiftly shift our attention towards driving increased shareholder value and enhancing our customer experience, underpinned by a highly robust EBITDA expansion program with a 100 day plans in place and the nonnegotiable deliverables defined our teams are ready to embark on implementing key elements of the integration plan.
The entire organization is firmly behind this effort, and we can already feel the collective strength of the combined team driving our integration success. We are committed to swiftly and effectively putting the integration state behind us emerging as a unified, stronger and more effective company.
Before I dive deeper into our future business opportunities and outlook, I'll turn the call over to David to walk you through our numbers in more detail. David?
David Wilson
Thanks, Steve, and good morning, everyone. We are delighted that our progress in transforming the makeup of our revenue base with growth in our differentiated sticky recurring service revenue, pulling through product sales where we have increased levels of pricing power. As Steve noted, we have actively shed approximately $2 million in quarterly revenue from the first quarter of 2023.
And it is great to see that market success from our next-generation offerings now outpacing the surgical cuts with fourth quarter revenue of $34.5 million, up 4.2% on an absolute basis and 9% on a constant currency basis versus the prior year period. As noted earlier, service revenue was the driver here, up 8.2% on an absolute basis and 16% on a constant currency basis, while our gross profit margin for the quarter reached 50%, reflecting a modest improvement of one percentage points over the prior year.
These figures only partially reflect the underlying progress we've achieved in expanding margins. It's important to note that within the quarter we absorbed $1.1 million in nonrecurring inventory adjustments. Without these one-time costs, our gross margin would have been 53% or four percentage points higher in the prior year. Improved margins were driven by the continued evolution of revenue with high-margin service revenue now comprising 63% of total revenue, up from 60% in the prior year and Absolute Service margins expanding to an historic high of 67% versus 64% in the prior year period.
Product margins were 22% on an absolute basis and 30% when adjusted for nonrecurring inventory charges up from 27% in the prior year period now and to OpEx, which was $21.3 million on an absolute basis and $17.6 million after adjusting for $3.7 million in transaction expenses and in line with the $17.6 million incurred in the prior year, flat year over year. OpEx provides a compelling proof point of meeting our commitments that moving dots would be EBITDA neutral within two quarters of closing, the transaction with category activities absorbing $1.3 billion of OpEx incurred by moving dollars in the quarter.
Moving on to adjusted EBITDA, which more than doubled from $1.4 million to $2.9 million with a $1 million increase at the gross margin level and lower cash OpEx spend year over year key drivers' net loss attributed to common stockholders totaled $4.6 million or $0.13 per basic and diluted share, inclusive of an additional $1.5 million gain on bargain purchase arising from moving transaction.
Adjusting for transaction costs and the gain on bargain purchase net loss attributable to stockholders was $2.4 million, or $0.07 per basic and diluted share closing with cash. We exited the quarter with cash of $19.3 million on the back of strong generation, with cash from operations totaling $4.5 million in the quarter, inclusive of $1.2 million in cash settled transaction costs.
I'll now provide an update on closing the next transaction with the focus on funding and the underlying capital structure. We have finalized a $100 million credit agreement with Rand Merchant Bank in South Africa and renewing a $50 million credit agreement with Bank heavily in Israel in terms of timing and as a condition to the merger to be declared effective in South Africa on April second, we will drawdown $85 million of debt from RMB on March 13th.
In order to demonstrate we have unfettered access to the necessary capital to pay down the $90 million owed to agree at close. We also plan to draw down the full $30 million of term loan from happily and paid down $23 million of existing Kathleen debt on March 19th. In terms of the makeup and the cost of debt, $30 million in term loans from Hapoalim will be delayed in new Israeli shekel, providing a natural hedge for USD denies investors for cash flows generated in Israel.
$90 million will be generated from USC, which differs from our earlier intention to have $50 million tonight is resolved, while we will ultimately enable to obtain exchange control relief in South Africa to borrowings and remit to PowerFleet Inc. In USD, we are exploring entering into an FX swap to essentially obtain the same hedging benefit for USD-denominated investors by alternately, blended annual cost of debt is expected to be $11 million, an effective cash coupon of 8.8% with interest rates fixed on $85 million of USD-denominated debt.
This cash coupon is approximately 1.7 percentage points lower than the effective rate included in the January 2024. As full filing, we expect this saving to be effectively consumed by the contemplated FX swap. Total And net debt at close is forecast to be under $25 million and approximately $10 million respectively. Total liquidity at close is forecast to be approximately $40 million, inclusive of $25 million in undrawn revolver capacity.
In terms of the underlying business is performing in line with the numbers shared at our November Investor Day, with expected trailing 12 months revenue and EBITDA of the combined business at close to be approximately $285 million and north of $40 million respectively.
Some additional context here with an overriding focus in the first quarter has been on aligning both organizations. So we have a running start on aggressively realizing revenue and cost synergies at closing. But this is undoubtedly the right call from a shareholder value creation standpoint.
It necessarily requires taking some focus away from maximizing top-line performance in the first couple of quarters as well as investing back into OpEx to ensure we have the right team and skill set in place to meet and beat our prior guidance on the timing of synergies.
Building on this in order to provide investors with a comprehensive understanding about joint operations, our first quarter 2024 earnings call and release, we'll concentrate on the financial outcomes of the merged entity rather than just stand-alone figures for legacy PowerFleet, which will appear in the 10-Q filing.
A final note in the first quarter of 2024 Israel continues to be impacted by the challenging macroeconomic backdrop, which is more pronounced in the first quarter, which has historically been the strongest quarter for new business car sales and associated revenue. That concludes my remarks.
Steve?
Steve Towe
Thanks, David. 2023 has been a landmark year for the Company wholeheartedly meeting the objectives I pledged to achieve to the Board and our shareholders within the first two years of my tenure as CEO, I'm profoundly proud of the substantial progress we've achieved across vital areas on our operating vectors of the business was completed during the aggressive and extensive M&A activity and execution.
The transformation of our business from where it stood just a year ago is remarkable. We created an exciting foundation in 2023 that is poised to generate substantial value and rewards for our stockholders starting in 2024 and beyond. Signal from the market.
And our customers is crystal clear that our Unity platform effectively address these acute pain points and needs across a broad swathe of the mobile asset market, highlighted by our improved revenue performance from our North American market, which has been the number one priority for the go-to-market activities of Unity, the acquisition of moving dot in Q1 and the pending completion of the game, changing mix transaction massively expand our capacity to accelerate the further development and hardening of this comprehensive SaaS software platform and data ecosystem.
The Unity play is not only increasing our share of wallet with current customers, but also attracting new top tier enterprise accounts, which is highly encouraging. Unity will evolve over time into a platform, an ecosystem that extends well beyond telematics.
In the immediate term, we are scaling up our device agnostic data ingestion and processing and leveraging AI to empower customers to flexibly consumer insights feed via our own advanced applications or through integrations with other third party business operating systems they utilize the need for these capabilities is opening substantial market opportunities by positioning Unity as a central hub for a broad range of IoT applications and an all-encompassing data highway for our customers' enterprise feedback on our one-stop-shop strategy for providing rich data solutions that cover operations in both the warehouse and over the road is very positive.
As larger enterprises look for true mission-critical partners, it could help drive the digital transformation and business improvement. In addition to accelerating our technology and go-to-market builds we have achieved in a single step, the necessary scale and purchasing power to give us a much stronger ability to execute our long-term vision and strategy for the Company the deal more than doubles the size and the scale of our operations, increasing trailing 12 months revenue to north of $290 million and EBITDA to over $40 million, with active subscribers going from 700,000 to 1.8 million, resulting in an exceptional medium term cross-sell and upsell opportunity.
Early dialogue with customers focused on the broader value proposition. The combination presents has been extremely encouraging and provides us with strong confidence that we will accelerate the growth trajectory of the company in the medium term.
As the deal is set to conclude at the start of April, we will spotlight key indicators in our future earnings calls to demonstrate the trajectory towards significant enhancing EBITDA and propelling revenue growth in the forthcoming updates, we will focus on the cumulative annual run rate cost synergies achieved by the end of each quarter, advancements in transitioning mixes customer base to the Unity platform specific instance of how we're expanding our share of wallet with existing customers through cross-selling the comprehensive product lineup resulting from the combination and also progress in utilizing mix is extensive global network of 130 resellers to broaden the sales reach of our warehouse solutions and advanced safety solutions.
To conclude, we have a team that has undoubtedly proven that it is highly effective at executing brave and highly complex business improvement at pace or more, which will now be bolstered even further by the addition of the talented individuals join us through the mix transaction.
We have the clarity of vision and mission for the combined team, a disruptive and compelling data that software strategy and much improved global market opportunity to build a business centered on highly differentiated, sticky recurring SaaS revenue that gives us the ability to expect to meet and then beat Rule of 40 performance two years into the closing of the transaction as we begin to put a sharp focus on executing the next phase of our strategic plan to the highest level in the next two year period.
We anticipate rewarding our shareholders over time through a significant re-rating that trading value from today's pro forma valuation of approximately 1.5 times revenue towards the five to eight times revenue valuation, more typically enjoyed by rule of 40 public class company. The commencement of the new combined business is set to formally go live on April the second.
We naturally need some time to fully take control and fly the plane for ourselves in the coming months with the mission to successfully land the combined organization with a highly effective operating rhythm within six months, it is crystal clear, we now have all the ingredients we need to drive a very compelling value proposition for the near and long-term for our shareholders, our customers and our colleagues.
I'll now turn it back over to the operator for Q&A. Operator,
Question and Answer Session
Operator
At this time, we will be conducting a question-and-answer session. (Operator Instructions).
Scott Searle from ROTH MKM
Scott Searle
Hey, good morning. Thanks for taking the questions and nice job on the fourth quarter. It's nice to see the continued integration efforts seem to be tracking and everything as we go to, I guess, a April second launch, maybe for starters, Dave, wanted to get a little bit of color in terms of what you're seeing sequentially into the March quarter? It sounds like Israel continues to be some headwinds, but just kind of directionally how you're thinking about things.
And then from a broader picture, Steve, what are you seeing in terms of the total contract value, the opportunity pipeline, kind of ARR growth? What should we be thinking about going forward over the next couple of quarters here and how are sales cycles looking? It sounds like things are filling up and the industry broadly speaking, looks to be very healthy right now. But are you seeing that reflect itself in the current pipeline. Great.
Steve Towe
Thanks, Scott. And happy to start in terms of just some insight in terms of Q1, clearly, there's a huge opportunity set that we have. We're focused in terms of making sure we're building up a great head of steam in the first half of calendar year next year and a lot of our energy is really going in just to make sure things kick into place. So we have a running start for April.
So I would definitely view Q1 as a bit of a stub period in terms of where we're focused. And there were also some benefits in the fourth quarter in terms of just lower expenses as we reacted to the events in Israel. So we're very much focused in terms of making sure we're in control there. So, there will be some sort of reinvestment back into the business from an OpEx standpoint.
Some of it just things that we just delayed doing others. There was certain savings in terms of people being called, for example, to the frontline. So there were certain costs in Israel that we avoided, and that certainly contributed to a pretty healthy EBITDA in the fourth quarter. But again, the goal is to really sort of get things in place in Q1. Obviously, we're focused on managing multiple things, including financial performance. But the overriding focus is really on getting off to a running start from it.
David Wilson
And to answer your question, Scott, about pipeline and market so both the quantity and quality of pipeline and is increasing. I think if you look at the trajectory where we took out the product revenue and Gino pivoted very quickly back to growth and with a much-improved output in recurring SaaS revenue, then that's a testament to the quality of the pipeline coming through and also as well the improved gross margins in the in terms of exit deal discipline.
And just overall, you have higher-quality deals that we are we are working through. So that trajectory will continue. And obviously on top of that now we are starting to have very early conversations with mixed clients and public clients about the comp, the combined portfolio, which is opening further doors.
So in general terms, I think the market is strong and I think we have an ability to take advantage of that one-stop shop capability I discussed earlier in terms of in warehouse and over the road and I think underpinning that the kind of Unity strategy where we're able to take multiple data sources and provide holistic inputs and outputs for customers is only driving that further.
And attractive pipeline for us in the future. What we have to do is invest as much as we can to develop sales and marketing, which is a part of our key strategies to unlock the ability to put more investment and more feet on the street. But the vectors are good and we feel really positive about the future trajectory of the company.
What we have stated in terms of revenue growth short, medium term. Yes, the first couple of quarters is very much a brand synergy unlock on the cost side, integrating the business and giving us the oxygen into the P&L. And then as we start to kind of come through that we get into the operating rhythm, then we'll see the revenue growth tick up over time.
Scott Searle
Good, very helpful. And two questions, if I could to follow up and I'll get back in the queue. But Steve Davis, or is there any change in terms of how you're thinking about the long-term targets at this point in time? I know it's not that far beyond the November analyst day, but you guys are hitting the ground with a running start here as we get close to, I guess, the launch in early April.
Is there any change of thought on that front? And then, Steve, just a follow-up on the Unity platform. I just wanted to get my hands around a little bit deeper the integration time lines of when you can really start getting out there and hitting them installed mix customer base, and you also referenced more IoT applications being incorporated into the Unity platform. I'm wondering if you could expand a little bit on that. Thanks.
Steve Towe
So, in terms of your first question, I think we remain confident, and we've had another two or three months to get under the skin of the combined business. We feel confident in the numbers and projections we proposed at Investor Day, we don't see any change to that. Obviously, when we fly the plane for ourselves, then we'll fully see the landscape that's in front of us.
But yes, overall, the indications remain strong and we think we put together a credible plan and an overview for for our shareholders of the journey that we're going to go on and in terms of mix and customer being able to enjoy Unity within three to six months maximum that the customers will have the ability to utilize the Unity services. We are obviously working hard as well to ensure that you have done the hardware and devices already installed can communicate bidirectionally.
And so we can also, from a pathway perspective, utilize the mix capabilities that don't exist, which we're obviously building the overall Unity composition plan in terms of kind of broader IoT, we're looking at all asset types, so that can be temperature and humidity it can be things from, as we've talked about previously, defibrillator solutions and just different monitoring systems that exist to in order to provide the customer with a holistic view of data that is relevant to their organization.
So, we'll expand those as we go. We have our core offering right now, but I think what we are seeing is customers saying to us look, can you take data from this type of asset from this type of sensor? And can you make sense of the portion that's all part of the strategy that we undertake.
David Wilson
Scott, just a quick add on the M&A numbers, just to confirm, I know we said it on the day, you need to think about those numbers as being the first full quarter after close. So it's not a calendar year projection is ready for that for the 12 months after close. So those numbers should be thought of in terms of the year ending March 31st, not December 31st Street.
Scott Searle
Thanks so much. Great job on the quarter and looking forward to the identity for.
David Wilson
Thanks, Scott.
Operator
Mike Walkley from Canaccord Genuity
Mike Walkley
Great. Thanks taking my question and congratulations on all you achievements in 2023. I guess first question, just for David on the on the gross margin services quite strong this quarter. Is this a good way to think about where it should go going forward or is there a mix shift in the quarter? And then also on hardware, should we expect to be sustained around that 30% level given the new mix of hardware?
Steve Towe
Yes. So you're right, obviously, services gross margin was strong at 67%, it was unusually low. In Q3, it ran about 60% and normalized, it was sort of closer to [64%]. So what I think is most important is that we're seeing gross margin to service and expand over time.
But just a comment on the Q4 performance. As I mentioned earlier in the earlier questions, there was a benefit in Israel in terms of being able to pull costs out and there were fewer shifts, for example, working at a call center level. So there's probably sort of over a percentage point of benefit there. So I would say on a go forward basis, 65% is probably the right way to think about it from a services standpoint, again, with headroom to expand over time.
And then in terms of your question on hardware margins, yes, 30% is a good sort of baseline to look at as toward and the goal is to expand that over time. But as of now, I think 30% is the right sort of base to build from.
Mike Walkley
Thanks. And just repeat, with the $8 million in annual revenue pulled out. how should we think about just in terms of comparables when you're lapping that? Is it setting up for easier growth trends on the stand-alone PowerFleet business as the year plays out? Or was it mostly pulled out at the beginning of the year or end of 2022?
Steve Towe
Yes. So basically, the lapping becomes easier from two one 24 onwards, it was really initiatives that took hold it impacted the P&L from Q1 23 onwards.
Mike Walkley
Thanks. And just last question before I pass it on, we are excited about the combined entities in those targets. But as you look at your standalone power fleet business and and how much the margins have expanded, what do you think this business as a stand-alone area could could reach in terms of adjusted EBITDA margins trends play out over the course of the year?
Steve Towe
Yes. So in terms of the standalone business, the expectation has always been on a stand-alone basis, we can be a Rule of 40 company. Again, that would be EBITDA margins in the sort of a 30% range over time. There's a lot of efficiencies, we think we can continue to drive from an OpEx standpoint and to the earlier comments, we do see gross margins expanding over time. Two key drivers there. Firstly, from a services standpoint, the scale benefits as that grows and also from a revenue mix standpoint, the expectation is that services as a percentage of revenue will continue to grow as it has been growing. So that's always been expansion on a standalone basis. The joy of the next transaction is we get there a lot more quickly. And also we have certain elements of the P&L totally within our control. And obviously, the cost base being the key one is an expectation that efficiencies we can harvest there.
David Wilson
And I think, Mike, just to add so obviously, we've managed to make a huge technological transformation within the envelope that we have in terms of balance sheet and the restrictions. So we can. But what we committed to with getting through that those investments in place, but ripping out a bunch of costs and improving margins to move PowerFleet standalone to a path of profitability. And I think we can now we can all see those numbers start to flow, and that will continue to grow as we go right now.
Mike Walkley
That's very helpful. And I guess one last question, I'll pass it on just in terms of the deal closing, you get the debt in place if shareholder approval. Is there any other milestones that need to happen between now and then or you think it just smooth sailing from here until the closing date.
Steve Towe
So I mean, all conditions have been met in terms of all the regulatory approvals required. Obviously, the funding is fully in place and the shareholder vote was resounding. So now it is just a matter of time, and that is just time that has to passing on the legislative terms out of South Africa. So we at this point are highly confident that the April to date will be the launch for the new combined company.
Mike Walkley
Great. Thank you very much.
Operator
Jaeson Schmidt from Lake Street
Jaeson Schmidt
Yes, thanks for taking my questions. I know you called out Israel, but just curious from a geographical perspective, if there are any other areas that jump out either positive or negative.
Steve Towe
I think if you look at the positive growth of North America in the last 12 months, you know, that's where we focused our enterprise sales efforts. It's where we've launched unity and you know the and the response that we're seeing is super positive with proof points in terms of new logos, customer commitments we have shortly embarking on heart base in May, which is our second annual customer conference, where we have been customers talking about Unity and its effect on their business.
So I think overall, we're seeing strong vectors. And that's also considering in the U.S., we've seen some headwinds in terms of the supply chain industry with some of the traditional PowerFleet revenue. So the overriding, I think growth in our safety solutions, the combined solution of in warehouse and over the road is really kind of coming to bear.
But that's where we see kind of real strength. We're starting to plant some seeds, as we've talked previously in and European region. That's a midterm burn, but we're seeing some good pipeline starting to build out of Europe.
And I think you know, we have a new lease of life coming for our Brazil, Argentina and South African businesses, which obviously we put into almost maintenance mode and we kind of killed any growth pipeline with the decisions that we made when we look for strategic alternatives for it so that that region has got new life.
And if you look at. If you look at the fact that we've been able to grow this quarter and considering the challenges faced in Israel from October seventh onwards, it gives us a real strong indication in terms of the overall growth potential for the business. And here, I would say a big thank you to our treasury team who have done a tremendous job to protect revenues and find alternative revenue streams to continue that support moving forward during obviously what is challenging.
Jaeson Schmidt
Got it. That's helpful. And Steve, I know you just mentioned new logos in North America. When you look at that pipeline expansion in aggregate across your business, is that expansion are really being driven by these new logos? Or are you still expanding pretty significantly at existing customers.
Steve Towe
It's a mixture of both. And so I think we are even powerfully standalone doing a much better job of cross-selling and upselling where we had customers in the warehouse that we're now starting to getting to the assets that are on the road and vice versa.
And but what I think know is particularly intriguing and exciting is the view that we have is this kind of, you know, data highway play where you know, customers large enterprises in the US have multiple providers and they're struggling to make sense of the data and get it in a meaningful format and are looking for more mission-critical partner. I think that's the role that we're starting to play, and that's what is bringing new logo growth where maybe there's some frustration in key verticals with some of it more tactical competitor that in the month.
Jaeson Schmidt
Okay. And then just the last one, and I'll jump back into queue. I don't know if you disclose RPU, but at least directionally, is it trending and how you expected it to?
David Wilson
Yes, again, RPU is not a metric that were overly focused on increasing focus on sort of the book of business and recurring book of business. But the benefit of Unity is it really is adding an extra layer of value from a customer standpoint. And clearly, we get to earn our share of economic rent for that value delivered.
Steve Towe
And just to add to that kind of the stickiness of taking in different data sources it adds up to your standard three, expanding the enterprise applications and the AI capabilities and delivering premium applications at multi are prevalent.
Finally, integrating to third party business systems and sending data into the solutions allows us to do the same. So I think if you out if you look at kind of more of the commoditized revenue that PowerFleet had and some of the M, the non-profitable stuff and all the stuff we've kind of taken out of the business that's now been replaced with stronger RPUs and higher margin and better quality.
Jaeson Schmidt
Okay. Perfect. Thanks a lot, guys.
Steve Towe
Thank you.
Operator
Gary Prestopino from Barrington Research
Gary Prestopino
Yes, hey, good morning, Steve. David, a couple of questions here and I guess that you just answered the first one. The first one I was going to ask is in terms of are you giving a subscriber count or that just is not a metric that you're going to be focusing on.
Steve Towe
So I think I think we talked generically about the subscribers, we will provide subscriber numbers. And for us, it's about quality of revenue and RPU in terms of just the scale of revenue will get impressive driver rather than just attracting subscribers. And so I think that's something that is important to us. But I would say it's not the number one back to the minimum number one vector is the profitability of the revenue and the growth that we can. We can pull forward per customer and improving that wallet share, I think is another key.
Gary Prestopino
Okay. So just on the legacy business alone, PowerFleet, can you give us some metrics of where you are with the Unity platform in terms of your legacy customer base or legacy revenues on the services side? I mean, what percentage of these revenues are now being derived through being a part of the United plan?
Steve Towe
Yes, so I mean, Unity is an ecosystem and a platform. So all of the previous heritage functionality from the previous platforms reside in Unity. So it's not like we're migrating from platform to platform B and therefore, there is a unity revenue shift from one platform to the other. It's all part of Unity.
So it's difficult to break it out. What I would say, if you look at the growth that we are achieving and a strong proportion of that growth is because it is coming from the fact of the capabilities of what Unity just today and what it's going to do in the future.
So I think that's where if you take if you see the fact we've taken $8 million of annualized revenue and now we are tracking that in terms of growth, then I would say the majority of that is coming from the Unity play. And in line with that, I would say the safety solutions that we sell within.
Gary Prestopino
Okay.And then what as I recall, you said you were going to have five or six modules. Is that correct? Or are they all out in the market now.
Steve Towe
So we know per assay and the non-fuel and since the sustainability module we've permitted right now to and ensuring that we can integrate it. So there are capabilities that will enhance the overall modularity that we have that mix has today. And so that has been something that we've pivoted to, obviously off the back of the transaction and then secondly, the kind of I think excitement and desire for the device-agnostic piece of the platform has meant that we've accelerated our capability.
There should be able to do that at scale. So once those two things are done, then we'll start to release more and more IT capabilities and more modularity into the platform. But we think at the near term, bang for the buck is very much on focusing on the integration with mix and this kind of device agnostic patient being able to take multiple data sources into the platform.
Gary Prestopino
Okay. Thank you. That's great.
Your next question is from Matt Pfau, William Blair.
Matt Pfau
Great, thanks. Nice results. I wanted to follow up on the comments around the mix, customer base and discussions with moving them over to the Unity platform. Maybe can you just remind us the strategy around that? How long is that going to take? And how potentially disruptive is that to the existing mix customer base.
Steve Towe
So it's only additive to the mix customer base. So we are implementing a strategy at the moment like we did with PowerFleet platforms to bring all of the current mix platform capability into the Unity ecosystem and infrastructure. What it means within three to six months is that the customers will have the ability to utilize the value-added services that Unity brings. So whether that is more data ingestion points, whether that is the advanced applications that we've delivered already, all the more scalable and business system integration. So there is zero disruption to the customer base.
And what we have seen already in the dialogue is we have a lot of, I would say, excitement and put customers put us under pressure to get that stuff delivered, which is great. And then I think secondly, the other thing that from a mix perspective, the customers have the ability to Adobe being warehouse solution so where we're focusing on safety and sustainability, the folks that are usually responsible for that in an organization are both responsible for in the warehouse and over the road.
So this gives the ability to go sell to new new people in the organization and the broader propositions. And I think it's something that I'm extremely excited about it. They didn't have that strong capability and therefore, that was a bit of it on the flip side. And we also have some key mix technologies that the PowerFleet customer base has been. I've been wanting and desiring. So there's a bidirectional move. So obviously, the pathway customers to benefit from that mix technology again within the same period.
Matt Pfau
Great. And then, David, just wanted to follow up on the comments around the impact to top line growth from the integration efforts. How long should we expect that to continue? Is that something beyond Q1 and in any way to sort of quantify how you're thinking about that impact?
Steve Towe
Yes. So again, and the businesses are growing nicely, both on their side and our side. So we're not expecting that to be sort of a pullback in terms of sort of how we're performing there. Obviously, Israel is a headwind, so we have to work our way around that. So we do have those types of things. And as Steve said in his earlier comments, the logistics here in the US.
That's Unizan sort of headwinds in terms of that piece of the market. But I think the essence of what we're calling out here is if we really focused on top line, we would do better just because you know where we put our attention. We generally get to move the dial and we look to put our attention to the dollars that can create the most amount of value.
And I'd say over the next two quarters, it really is about getting this thing up and running. We have a massive focus in terms of expanding EBITDA through the benefits in terms of efficiencies from a cost standpoint. So we're going to put our minds and our efforts to work there. But obviously, we can keep more than one plates spinning at a single point in time. And so we'll be looking to be effective across all fronts, but we're going to prioritize those things that matter the most.
David Wilson
And just add to that, this is this is a big undertaking that an abrasive undertaking that the two companies are doing in the industry and broader industry related with and integrations and combinations that fail. What we are highly confident about is we have a team with a track record of doing this really, really well. And I think we know, even from investor day type people saw the similar cultures of the teams and the teams are actively working together.
What we want to do is make sure we land into a very, very strong operating with. In fact, you know, we've come out and make some bold statements in terms of projections over two-year period and the key parts of moving that for you to a getting everybody aligned internally so that we can then focus externally as soon as soon as possible, and we don't get that distraction.
The and the ability for us to realize those EBITDA expansion programs, I think, gives us everything we're going to need to propel top-line growth, but we're going to make sure we don't dilute efforts on both of those by folks trying to do too much in one go. So that first six month period. It's very much something that is key to us winning the hearts and minds internally and externally. And we have a great plan to do that.
And then once we're through that initial period, then we can start to put our foot on the accelerator.
Matt Pfau
Okay, perfect. Appreciate you taking my questions.
Steve Towe
Thanks, Matt.
Operator
We have reached the end of the question-and-answer session, and I will now turn the call over to Steve for closing remarks.
Steve Towe
Becky, or let's say a sincere thank you once again for the trust and confidence shown by our shareholders and the outstanding contribution from so many of our colleagues in both the powerful mix organizations that have allowed us to be able to complete a highly strategic and complex transaction. So effectively and seamlessly. We look forward, we look forward very much to New Beginnings for the evolved and highly energized PowerFleet family, and we look to continue to update our shareholders along the way.
Thank you, everyone. Have a great day, and we'll speak again soon.
Operator
Thank you for joining us today for our presentation. You may now disconnect.
